← Rich Habits Podcast
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- [00:00]
Austin
With the Venmo Debit card, you can Venmo everything. Your favorite band's merch. You can Venmo this or their next show.
- [00:05]
Robert
You can Venmo that.
- [00:06]
Austin
Visit Venmo Me Debit to learn more. The Venmo MasterCard is issued by the Bancorp bank and a pursuant to license by Mastercard International, Inc. The card may be used everywhere. MasterCard is accepted. Venmo purchase restrictions apply.
- [00:15]
Zade
This episode is brought to you by Greenlight. Get this Adults with financial literacy skills have 82% more wealth than those who don't. From swimming lessons to piano classes, us parents invest in so many things to enrich our kids lives. But are we investing in their future financial success? With Greenlight, you can teach your kids financial literacy skills like earning, saving and investing. And this investment costs less than that. After school treat start prioritizing their financial education and future today with a risk free trial@greenlight.com Spotify greenlight.com Spotify hey everyone.
- [00:46]
Christian
And welcome back to the Rich Habits Podcast Question and Answer Edition. These are our Thursday episodes where you guys ask us questions on Instagram at Rich Habits Podcast. Email us questions on rich habitspodcastmail.com or you ask us questions in Inside of the Rich Habits Network or any other way you can get a hold of us and we answer them. We answer your questions as if we were in your shoes going through what you're going through. And today we are joined by Zaded Moni. He is the host of Publix podcast called the Rundown. It's an awesome daily podcast that everyone should be listening to. I listen to it every day actually in the shower, which is kind of funny to admit, but it's really efficient if you think about it. Anyway, Zade, thank you so much for joining us my friend.
- [01:27]
Robert
Thank you guys for having me on again.
- [01:29]
Christian
Absolutely. So just like last time, Zayd's going to be that third person answering questions alongside of us. These episodes are a lot of fun and I think we have a lot of really really great questions teed up. Well before we jump in, got to give a quick shout out to public.com they're an investing platform for people who take investing seriously. No gambling, no day trading, none of that stuff. If you're serious about investing towards your financial future, it's time you learn more and start using public.com on public you can build a multi asset portfolio of stocks, bonds, options, crypto and more. Public's artificial intelligence isn't just a feature built into the platform, it's woven into the entire experience from portfolio insights to earnings call recaps, Public gives you smarter context at every touch point of your investing journey.
- [02:12]
Emil
For a limited time you can earn a 1% match on all IRA deposits, IRA transfers and 401k rollovers. Let me say that again. A 1% match on IRA deposits, transfers and 401k rollovers. And you know we love to give you guys those hacks to get the free money, fund your account and minutes or less only@public.com rich habits paid for by Public Investing Full disclosures in the.
- [02:38]
Christian
Podcast Description so our first question is coming from Jeff M. Via email. Jeff says hi Austin and Robert. I'm married. I'm 58 and I've been listening to your podcast for quite some time. I've learned so much from the both of you. I really appreciate the blend of Robert's wised, seasoned experience and Austin's cutting edge strategies. You both bring such valuable insights. Thank you. I've been maxing out my Roth for a few years now and for the first time this year I'll be maxing out my 401k as well. I built up a $40,000 emergency fund, have 1.3 million invested in all of our funds and aside from a 2 1/2% mortgage of a 180,000 and about $21,000 of auto loans at 2%, I am debt free. I've been investing into ETFs you guys recommend like the S&P 500QQI, things of that nature along with individual stocks, all in my Fidelity account. Now following your advice, I also opened up a public brokera to experiment with some fun money. My original plan was to use it as a cool car fund, maybe buy a Corvette in the future. But as I've learned more about investing, I've started exploring high yield dividend ETFs like BTCI and IWMI and they perform pretty well so far. Lately I've taken a closer look at Yieldmax ETFs like Ulty YMag and Big Y and I've been balancing them with SCHD and jepi. The distributions have been very impressive and so far, fingers crossed. I I haven't seen that much erosion of the net asset value. It's making me reconsider my retirement timeline. Maybe I could retire in five years instead of seven. That said, I'd love to hear your thoughts on how much of my portfolio would you consider reasonable to allocate toward these Yieldmax ETFs and other ETFs that use call option Strategies. And would it be wise to balance them with ETFs that incorporate put option strategies to help hedge in market downturns? Thank you again for your guidance and education. I really look forward to hearing your thoughts. So I'll kick this one off with just some definition, right? I think a lot of people are like, I just heard a lot of terms and I don't know what any of those things mean. So the first and most important definition to talk about here is net asset value or nav. Right? Nav. Essentially a mistake people fall for when it comes to them. Seeing These yield max ETFs that are paying 50, 75, 100% yield per year is not only is that ETF paying you a distribution, right? Which is kind of like what that yield looks like, but that distribution is coming from. Yes, the call option strategy they've used to generate some income, but it's also coming from the net asset value, AKA the money you invested to begin with. Which is why, depending on the yieldmax etf, I think TSLY is a pretty good example of one. If you just hit the max on that chart, I'll try and throw it up here on the screen as I'm editing this behind the scenes later, but you guys will see all time Since November of 2020 22, the yield max ETFTSLY is down 81%. That 81% decline is an erosion of the net asset value, right? So that's what you know, Jeff here is trying to say. He's like, I understand that erosion happens behind the scenes, but like, is it really that bad? How should I be thinking about this? Yada yada. So here's my answer. My answer is it is totally okay to have specific covered call option contract focused ETFs in your portfolio. In our instance, we think NEOS funds are the best way to do that. And that's for three reasons. One, they sell covered call option contracts out of the money, which means net asset value erosion isn't part of the equation. And on top of that, they only underwrite about 85 to 90% of the entire portfolio, which means you will see some price appreciation over time. And two, they hold all the underlying names that are inside that index. If it's the S and P or the nasdaq, they have that same exposure. Jeppy can't say the same. And then finally three, they are the most tax efficient covered call ETFs out there. They use section 1256 contracts, return of capital and everything. That is an incredible way to earn income without paying too much of taxes. Again, you can't say the same about Jeppy. So in my opinion, is it okay to have a lot of your portfolio in these income generating ETFs? Totally. Assuming they're NEOS funds and you're doing it correctly and you're not using some crazy yield max, you know, nav erosion stuff that we don't want. Because if you stay invested into those long enough, it's just going to be a trend down, down, down lower and you will lose money.
- [07:18]
Emil
Yeah. There's just a couple things that I would like to add to that of why I don't like these yield max properties and that is that you have such high expense ratios. I mean they charge right around 1% for their expense ratios, which I think is egregious. So I definitely don't like that about them. But also the inconsistency of your distributions because remember, with all of this NAV erosion there's a lot of volatility. And with Vol. As much as you see in these yield max ETFs, you're going to find that you're not going to be able to count on the income that you're looking for within this type of strategy of buying these ETFs because of the erosion in volatility. You won't know from month to month what you're going to be getting for your distribution. So those are the two things that I think are something you have to consider when looking at this type of etf. That is why I don't recommend them to anyone. I Prefer the NEOs ETFs 100%.
- [08:14]
Robert
Yeah, that's, that's my take as well because of all these sketchy yield max ETFs out there now that are like advertising all these different yields with different kind of covered call strategies or whatever. You have to be very careful on what you get yourself into because you might be paying an insane expense ratio and then not get the yields that you think. The inconsistency with the yields is actually a fantastic point. My take has always been to like be very, very cautious of these. A small part of your portfolio if you want. And there's other ways to generate yield from your portfolio as well, whether it's a dividend ETF and things like that. So if you're looking for just yield, there are other options to look at. And if you do want to do these yield max ETFs, just be careful at which one you're getting yourself into because of all these new ones that are popping up on a weekly basis at this point, you want to make sure that you're not accidentally just burning your money away from all the high expense ratios from these ETFs.
- [09:05]
Christian
Another thing to consider Jeff, as you're doing your research here, I use morningstar for this morningstar.com but look at the total performance, right? So I highlight highlighted the price performance of how it went down by 80% since I think it was November of 2022. The price performance, yes, went down by 80% since that period of time. So if you invested a hundred thousand dollars, that hundred thousand dollars is now only worth $20,000. But during that period of time you did earn income. So just look at the total performance. What does that income begin to translate as? You know, how are you either up or down during that period of time? And how does that compare to just owning Tesla stock or SPYI or QQQI or something of that period of time? Really great question and we hope you buy that Corvette. Our next question comes from Emil J. Emile says. Hey guys, thanks for your podcast. You all are crushing it. I'm 35, married and as of today I'm the only one working at the home with a stable job. My wife brings in about a thousand dollars a month, but that is temporary. I have a 401k with a 50% match up to 5% of my annual salary and I recently opened a money market account in Vanguard to park my emergency fund. I have about $9,000 in there there. Also I invested in an index fund from Vanguard that tracks the S&P 500. I have 2,000 in there. I have left about 500 of cash every single month after my expenses. So Here my quick two questions. Should I flip the $9,000 of Vanguard money Market into an index fund? So it's working for me. Bringing my two thousand dollar total now into eleven thousand and then two. Do I open up a Roth IRA and put the five hundred a month I have left in there? I'm afraid If I put 500amonth in there though, I won't me room to play with money if I go over budget for any reason. Thank you so much Robert. You want to kick this one off?
- [10:56]
Emil
I wouldn't worry so much about having play money outside of the Roth just yet because if you're only investing $500 a month, you're not even maxing out the Roth at this point. But if you're nervous about it, get the Roth component up and running and do what you said. Invest in these ETFs that we talk about in these index funds we talk about. And then maybe split it up. If you're nervous about having some money that's readily available, maybe do 250 into the RO every month and 250 into a traditional brokerage account. So you have the best of both worlds. But always understand how important the Roth IRA is in your investment journey, because at 35 years old, you don't want to wait until you're 45 or 55 to get that working for you because you're just leaving so much money on the table by kicking the tax man down the road. That's my take on it. I think everyone that follows along here should always have the Roth component working for them, no matter what age. As long as you're 18 and over.
- [11:52]
Robert
Over.
- [11:52]
Christian
Now, Zade, I'd love to get your take on their idea of cashing out their emergency fund in its entirety to invest into the S P 500, bringing their current $2,000 up to 11,000.
- [12:05]
Robert
So the 9,000 in the money market fund is the emergency fund, right? Yeah, I'd be hesitant to touch that. You know, I'm an emergency fund always guy. You want to have that in case of emergencies, so you don't put yourself in a situation where you're. You're strapped for cash in an emergency. So I wouldn't touch that, in my opinion. But I want to echo what Robert said. You know, Roth IRA should be like the second tier after you have your emergency fund. Roth IRA should be the move. He said he has $2,000 in the Vanguard fund. Why can't that money go towards the Roth IRA you got? You got to start maximizing the Roth IRA because that's like the best tool you have to. To invest compound money tax free so you can have it by the time you retire. So don't touch the emergency fund. Try to move some of that money that's in the vanguard to the Roth IRA and let that. Let that grow.
- [12:50]
Christian
Yeah, I love this situation because they have the emergency fund of $9,000. I'm assuming that it might be even underfunded at 9,000. Right. We want to have three to six months of expenses in there. So maybe what you should do is cash out that 2,000 that you have invested and start to beef up the emergency fund. Maybe set aside a couple hundred bucks a month for the next several months to beef that up to 15, $20,000, depending on your monthly expenses. Right. Three to six months of exp is where we want to have saved in that emergency Fund. But the good news is once that's saved and that's earning, you know, that 4, 4 and a half, 5% in this money market fund in Vanguard for you, you don't have to fund it anymore. That extra 500, to your point, Robert, you know, you could do 250 into the Roth, 250 into a traditional. All 500 can go into the Roth, whatever it might be. But what's most important here is that you have your three to six months of expenses saved as insurance against your investments. We talk about this all the time where it's like, well, why do I have an emergency? Why don't I just invest that money, right? I can make more with it. It, it's not an investment, it is insurance. It is ensuring that you get to stay invested elsewhere, right? Because if you don't have that 10, $15,000 saved in this emergency fund when disaster strikes and you need $4,000 in a moment's notice and you don't have anything saved, either you're going to swipe your credit card, which is high interest debt, or you're going to cash out a 401k or some other investment early, paying a penalty, taxes, fees, things of that nature. That's just going to make you move backwards in your financial journey. So the emergency fund having three to six months, you know, for you here, that could be 9,000 as it is, maybe that's closer to 10, 15, 20,000. Only you know the answer to that. But we think that we've given you some, some frameworks here to think about moving forward.
- [14:33]
Robert
Quick point on the Roth ira. The, the contributions into your Roth ira, you can take those out penalty free as well. So that's another plus for the Roth ira. So don't be too worried about if you put the $500 into the Roth IRA every month, if God forbid, you need to take it out, you can take that contribution out penalty free. Hopefully you never have to touch it. But there's that L element.
- [14:52]
Emil
I want to add one more layer to this because so many people skip this or just don't understand it. And Austin, you cover it so well every week. But I want to just click back on this for a minute. Everyone needs to have a retirement account. You need to have that Roth IRA, you need to have the 401k, you need to have those components in the mix because we get so many questions where people are like, well, I need to have this money available. Well, if you're looking at it from that mindset perspective, that it needs to be available for a Corvette or a boat or a house remodel. Then you're not thinking long term. You're thinking, I'm going to save this money so I can spend it instead of this portion of your money being put away for retirement. So you're not a Walmart greeter at 75 years old. So everyone needs to understand that distinction so they can have these several buckets of money to make sure that they retire with dignity.
- [15:45]
Christian
So our next question comes from Jacob B. Jacob says, hey, Robert and Austin. I'm currently in the process of saving up for an engagement ring for my girlfriend. The hope is to purchase two years from now. I'm investing 200amonth into the NASDAQ to help save up and I currently have a thousand dollars saved. I recently opened a high yield savings account for some of my emergency fund in savings. Would it make more sense to move the funds into a high yield savings account or to stay invested in the stock market over the next two years as I save for this ring? Thank you guys so much. Zade, you want to kick us off on this one?
- [16:18]
Robert
I might have a controversial opinion here. I say keep it at the stock market. And the reason I say that is because it's an engagement ring. Right? So if the stock market has a monster year back to back years, you might be able to afford an even nicer ring. And you know, if it has an underperforming gear, well, maybe the ring might be a little bit smaller and you can get a nice upgrade down the line. Keep it in the stock market. That might be controversial, but I don't know. What do you guys think?
- [16:41]
Christian
Actually, I never thought about it like that. You're kind of right because like whenever we think about people, you know, saving normally, this question is like, hey, I'm saving for a down payment on a home and I've, I want to have, you know, eighty or a hundred thousand dollars saved so I can go put down whatever percentage on this home. And the goal is to have it in the next, you know, two, three, four, five years. And so what we say is Normally at around 18 months or so before the purchase, you should start thinking of dollar cost averaging out of the stock market into a high yield savings account. So when that day comes and we experience a Trump tariff tantrum like we did in April, you know, yeah, your hundred thousand dollars that you were going to use to go buy your dream home with, is it now only worth 72,000? So in that situation, I feel like it's, it's a Little bit more rigid in black and white, like, oh yes, you now don't have enough money to put down on the home. But to your point, with an engagement ring, I would agree that there, there could be an argument. I'm still going to stay on that 18 month, but I could say that I could see the argument where if we do experience some outsized gains in the markets, like congrats, Jacob, you're now buying a headline light for her finger.
- [17:47]
Robert
Right?
- [17:47]
Christian
Where on the flip side, if we have more, you know, muted returns and you know, maybe you, you are not saving as much as you had thought then, you know, there's always a time to upgrade in the future. So you have a little bit more flexibility and fluidity when it comes to the situation. So, Jacob, I'm still going to stick to like that 18 month range. So maybe invest for the next 6, 9, 12 months and then leading up to it, start dollar cost averaging saving, you know, earning that 4, 4.1% that that Publix High Yield Cash account pays. But Robert, what's your take here?
- [18:14]
Emil
I'm gonna go even more on controversy side. For me, a lot can happen in two years. I love the fact that you have the option and you're thinking it this way. And what Zade said, I would invest it in the markets because let's say you put it in high yield savings, you make 4%. Let's say the markets don't do anything crazy and they at least make 8, 9, 10%. You're still going to have that extra money in your account, that positive arbitrage going your way. But then what if the market's really rip and you're up 20% over those two years, 30% over those two years, something like that. Then you have all this additional money to work with. And then there is the wild card that things change. You break off the engagement, something happens in the relationship, and then all of a sudden you have this big nest egg saved up that was kind of forcibly saved for this ring. But two years is a long time. I like investing it. I think it's the best way to go. And don't go too crazy. Invest in smart stuff that we believe are going to do well over the next couple of years. But I really like this strategy and the three different opinions we have on what to do here.
- [19:21]
Christian
Now here's a fun one for you guys. I ran the numbers. It's one thing to say and think, but let's actually talk about what the reality is. So the reality is he has $1,000 saved. Right now he's contributing $200 a month. So let's say that $200 a month month toward the thousand dollar saving at 4.1% on public's high yield cash account over the next two years is going to turn into $6,100. Now let's say that same $200 a month is invested in the markets and the markets go up by 10 and a half percent, which I would argue is a pretty good year for the markets. Now he has $6,550, so a difference of about 450 bucks if the markets go up like normal. Now let's say the markets rip, they go up 15% or something. Right now he has $6,900. So we' eight hundred dollar difference here or about a 12% extra buying power on top of the baseline of 6,100 or so. So Jacob, now that you've got some kind of parameters like baseline, you'll have about 6,100 bucks over the next two years if you invest it. And the market's average 15% you'll have about 6,900 or about 6,500 if they do kind of okay, so is a $900 $800 difference going to change the game for you when it comes to buying a headlight versus just a speckle of a diam knows maybe you're you've got some plans. I don't know what you're up to here Jacob, but want to make sure you have full information to make the best decision with you and your money.
- [20:47]
Robert
That's some good context there for sure.
- [20:48]
Christian
So our next question comes from Dave N. Dave says hi Robert and Austin, thank you for your excellent podcast. I've been listening for about a year and I found you guys very helpful and motivational. I'm planning to retire in my early 60s. In just a few years I plan to move to a more tax favorable state and pay for our new home fully with the equity we have in our current home. Our plan is to live off of our bridge account for the next 3 years before beginning to draw from my pre tax 401k and take Social Security. At that time I Conservatively expect the 401k to have over $4 million in it. Currently the investment mix is about 2/3 large cap mutual funds and 1/3 small to medium sized growth funds and about 1% in company stock. Now popular advice would have me shift to a much more conservative portfolio as retirement nears. Think 60, 40 or 7030 stocks to bonds. But here's my quote question. Is there a point where your retirement portfolio is large enough that you can or should keep it all in stocks because you'll be able to weather any contractions in the market better than if someone had a smaller balance with their portfolio? When I've put the number into a Monte Carlo simulator, it always comes out better with 100% invested in stocks. Also, I plan to roll my 401k over into something that gives me a little bit more options like maybe some Bitcoin ETFs in the future. Thank you and God bless you both. Dave. Robert, you want to kick this one off?
- [22:12]
Emil
Sure, I'll take this one. And congrats on getting to that $4 million mark in your early 60s. But here's where I'm at. I love ETFs and index funds and I believe everyone should have a large portion of their portfolio in it. Do I think you should be 100% into the stock ETFs rather than having a mix of bonds or maybe precious metals and other items in your portfolio? I don't agree with that unless it's highly diversified because at the end of the day you don't want to be in a situation where there is a big draw down. Even though $4 million is a lot. What if there was a 50% retraction in the S P 500 or the NASDAQ as a blended amount and then all of a sudden you're down to $2 million and I don't know your full story. So I don't know if that would be enough to recover from if you were willing to not have any knee jerk reactions and pull that money if there was a large drawdown. So I do like the idea of having some blended aspect of the portfolio, but I don't know, about 30 or 40% into bonds. I think that's too risk off for me and you're leaving too much money on the table. So I would at least consider being in a position where it's 70% equities and 30% diversified into other items, including bonds.
- [23:26]
Christian
I think it's a great answer. What do you think, Zed?
- [23:28]
Robert
I don't agree with the full 100% stocks either. And the main reason is the psychological element of it, right? I mean, you have $4 million. Congratulations. That's awesome. Yes, you could probably recover from a downturn, but man, and it gets real. It gets real tough in those moments where the markets drop 25% in a month or whatever the case may be and you start seeing that four, four and a half million go down to the three, two million. That's tough even for anybody, right? Just not having to deal with that stress. To me, just worth it to diversify across bonds and other low beta products, whether it's metals, what have you. So that's the reason why I wouldn't go 100% into stocks, even if in the long term.
- [24:05]
Christian
Yes.
- [24:05]
Robert
All the numbers and Monte Carlo stuff say it can recover cover. You want peace of mind at that age especially so I'd be in favor of diversifying across some low, low risk investments.
- [24:14]
Christian
I appreciate both those answers. I think my head to your point, I think Zade alluded to this a little bit, which is like that sleep well at night type portfolio, right? Of course, you can have a 60, 40 split and you can do the Trinity study and the 4% rule and you can do all that. Like that's fine. But this person Dave here, he's more aggressive. He wants to have some fun. He's got $4 million. He's done the studies, the Monte Carlo simulations, all that stuff. And so he knows, knows that if he invests his money correctly, it's going to grow tremendously over the coming decades. As he's only in his early 60s. I would agree with Robert's stance of like, you know, we talk about this core satellite portfolio structure, which is 65 to 85% of a portfolio should be invested into the index funds and ETFs we talk about. And the other 15 to 35% is diversified. Now if you want to diversify that into single stocks, assuming they're blue chip, be my guest. If you want to diversify that into bonds and real estate and precious metals and fine artwork and fine whiskeys and wines and whatever else you want to diversify your money into, be my guest. You know, cryptocurrency, like, like it's all part of that diversified portfolio. So, you know, to Robert's point, 70% of this could be invested into the index funds and ETFs that we talk about. The other 30% could include bonds, 5, 10, 15, 20%, depending on how risk on a risk off you want to be. But it could also include real estate investment trusts like VNQ or Real Income Corporation or VI CI properties. It can include silver and copper and platinum and gold. It can include some Bitcoin. It can include, you know, all these other different things that help round out a well diversified portfolio. So, Dave, that's how I would approach it. To your point. I 100% agree with you. You have a portfolio of $4 million. And I'm assuming between the Social Security, your $4 million portfolio and everything else that you've got going for you here, your very low cost of living because you don't have a mortgage. Right. You are going to have a wonderful retirement which means maybe you're only spending, spending eighty thousand, a hundred thousand dollars a year. A hundred thousand dollars of annual income off of a 4 million dollar portfolio is only 2 and a half percent which is well below that 4% threshold that we talk about. That same hundred thousand dollars. To your point, let's say that 4 million dollar portfolio contracts by 25% because we have another crazy something with a trade deal or war, whatever's going on. Now you have $3 million. That $100,000 on 3 million is still only 3 and a third percent. So you're still within that 4% rule. And so that vibes from if I'm correct, you're saying hey, I've got all this money. Like I know I'm going to have eighty, maybe a hundred thousand dollars a year of income. I can really withstand a drastic drawdown on this portfolio before I start digging toward the the rule not making sense. So you're thinking about this completely Correct. And I think between Robert, myself and Zaid, hopefully we answered your question.
- [27:00]
Emil
Listen up folks. You can lock in a 6% or higher yield with a bond account on public. But remember your yield isn't locked in until the time of purchase purchase. So you might want to act fast. Lock in a 6% or higher yield with a diversified portfolio of high yield and investment grade corporate bonds only at public.com forward/rich habits.
- [27:20]
Christian
So our next question comes from Christina L. Christina says hi Austin and Robert, my fiance and I bought a house, got engaged and had a baby within the past few months. Big summer for Christina. Let's go. Congratulations. That is all so exciting. Christina says now that we're finally beginning to feel like all the chaos has cooled down a bit, we're planning for our future in a few different aspects. Do you guys recommend combining financial accounts when we get married? Are there any true benefits to combining all of these accounts or is it okay that we just trust each other? Additionally, we want to set up our daughter and future kids up financially. We've heard about the 529, the custodial IRAs, but we don't really understand all the differences here. So could you give us some direction? And then finally we are happy paying for day care now. But when we have more kids, I Would consider taking a break and quitting my job completely to help raise them. Would you recommend doing so financially? And do you have any ideas on how I can minimize a career hit? For context, we're both 29 years old and have good jobs making 120 and $160,000 a year. I have health insurance. I've got a Roth 401k and we live right outside of Houston, Texas. Thanks in advance. We appreciate the knowledge you guys share. Well, Zade, you also live in Houston or right around Houston, so why don't you kick us off?
- [28:39]
Robert
I also, yeah, I live outside of Houston as well, in the suburbs and what. There's a lot to take in. First of all, congrats on the huge summer. I mean, married, baby. A lot going on right now as far as, you know, combining versus separate accounts. You know, I've always been in favor of having both. Right. So like me and my wife, we have separate accounts, but we also have one joint account where we contribute into for expenses and things like that. That's what I've been doing since I've been married 10 years, almost 10 years now. As for setting up your kids. 529s. I have two kids as well. 529s. That's what we do here. It's great. Contribute to that every month or so and then let that compound. Hopefully that's enough to pay for the kids colleges or whatever they choose to do later in life. And the tricky question though has to do with daycare versus career. And that's a very personal question. What my wife did when we had our kids was she did, she scaled back. She's a nurse, so she scaled back from working full time to part time. So it's a little bit less hit with daycare. We also have grandparents in the area to help us out as well. So that's a very, very personal question. It's hard to say because you're right, you do take a career hit when you take, you know, a decade off to raise your kids. So I'd like to get Yalls take on, on. On how to, how to handle that.
- [29:48]
Christian
Robert, you want to kick us off?
- [29:49]
Emil
I would love to. I think it's a little difficult for me to think about the numbers and the math of how it works to work towards retirement. Because, because remember in the question they said having more kids. So when I think about a one income house of, let's say the $120,000 and then all of a sudden after taxes, that's 90,000 net and that's with one child. I think that's fantastic. You can do just fine, live a great life, pay all your bills, have a nice car, nice house, all of that. But when you add kid number two and kid number three and you're a single family home home, my fear is that you're going to have bills that would, that are higher than what would allow you to put away enough for retirement. Because when you have kids and you add them in the mix, you always have to remember that that retirement amount has to be much, much higher because you want to be able to set them up well upon your passing. So the way I look at this is I think you could do this for three, four, five years and it would be just five. Fine. But my biggest concern would be is that you won't be able to put enough away for retirement. Because I think if we do the math, you're only going to be able to save 800 to $1,000 a month, which will still get you to a decent net worth. But it's going to get less and less over time as you add more kids and a larger home and additional cars and all of that. So that's my take on it. To make sure that you're looking at the totality of the single family income come and where it's going to go in three, four, five years as you add more children to the mathematical mix.
- [31:22]
Christian
Now, Zade, I know you've got a couple kiddos and I guess this question is for you. Now before I answer, but I've always heard, no, mom and dad are rich, you guys are kids, you guys are not rich. We are rich, but you're not rich. Right. And so like, that's the type of mentality I think I'm going to take whenever I start having children, which is like, like take care of what we've got going on. Of course, do what I can with the 529 and everything. Like I'll be able to afford all that stuff. But like, let's say in the situation with Christina, I would much rather see Christina and her husband prioritize investing for their own retirements and their own trajectory as human beings versus cutting that short, not doing anything for their own retirement, just to try and beef up some 529 accounts or beef up some, you know, other things of that nature. But how have you navigated that as a father?
- [32:13]
Robert
Great question. 529 and investing towards the kid future is definitely lower on the totem pole when it comes to like, priorities of investing.
- [32:19]
Christian
Right?
- [32:19]
Robert
So you got the Roth IRA, you want to maximize that, you got the 401ks, you want to take advantage of all the money match there. You want to invest as much as you can towards your retirement as parents and then whatever's left over if you have enough income, if you're, you know, if you've got a promotion, bonuses, things like that, that can go towards the kids future. So I, I've kind of thought about it the same way as you have. Essentially I want my kids to obviously have opportunities when they grow up. I want them to, to have as much money as they do, but I'm not kind of prioritizing that.
- [32:45]
Christian
In other words, you're not sacrificing your future for theirs.
- [32:49]
Robert
Correct? Correct. Absolutely. You know, I mean, obviously like I said, it's not like I don't want them to have a nest egg and whatnot, but you have to make sure the parents are set up for retirement. Because the last thing you want to do is if you're older and you're in your 60s and 70s and don't have enough money and then you're relying on your kids to then support you, support your lifestyle, whatever the case may be. So you want to make sure that you're set up as much as you can, can be. So then maybe down the line if your kids need help when they're in their 20s or whatever, then you can help them if they need that help. But you can't do that unless you're set up yourself.
- [33:19]
Emil
The biggest takeaway for me that I think you guys both nailed is setting yourselves up first. So many people, they get married, then they have kids, then they upgrade the house, then they upgrade the cars, all of that over a 10, 15 year period. And they're not investing towards their future futures and their retirements. Then all of a sudden they're 45 years old, the kids need to go to a private high school, the kids got sports, all of this. Once you do that cycle for 10, 15, 20 years, you're putting yourself in harm's way, you and the spouse rather than setting yourself up early. So Zade, I think you and Austin nailed it. Set yourself up first, then worry about the 529s and the other things for the kids down the road. Road. Once you have a solid nest egg that is put away for later, I think you guys absolutely crushed it. And it's such an important distinction that a lot of people miss along the way when building their family.
- [34:13]
Robert
Kids are definitely expensive, don't get me wrong, I think the fact that you live in Houston does help. It's a relatively low cost of living compared to other parts of the country. But I mean, you know, I, I know everybody says this, but you can figure it out, you know, with additional kids and things like that. Like you make cuts here and there. I know it's sounds scary to have a second kid or a third kid, but if parents, you can figure it out. And it's just one of those things where like parental instincts kick in eventually. Like you'll figure it out. But yes, don't forget to prioritize your retirement and health and, and long term future.
- [34:42]
Christian
So, Christina, to answer your questions, do you recommend combining financial accounts when you get married? I vote yes. I think that there's so much data and studies and there's so many things that point to if you guys have, you know, you can do what Zade does and have a joint account and you guys, you know, spend the household money out of that. Maybe you just have one joint account and you guys don't have any separate anything and there's full visibility. You mentioned trust. I don't think it's so much a trust thing that it's holding up, you know, holding each other accountable thing. I think that that's a lot to it as well. But having that we're in this together, we're, you know, planning, we're seeing the progress together. I think that's a lot of, that holds a lot of weight as it relates to the 529s, IRAs, things like that. If I were you, I'd start with the 529. You can go to vanguard.com which is what I did. I think you can fund a 529 with as little as 1500, maybe as little as 2000. I funded mine with 3000 two or three years ago because that was the minimum at the time. It's now worth 10,000. I just put in 150 bucks a month. The markets go up and to the right. I get to enjoy that. And again, I don't even have kids yet and I'm already investing toward their 529, which is great. You can do the exact same thing. And whenever that child turns 18 years old, assuming the 529 account has been building for X amount of years, I don't know the exact term here. I think it's 10 or 15 years, whatever it might be, you can begin to now transfer money out of the 529 into their Roth IRA at age 18, which is like a game changer. So. And that's up to $35,000. And then that invested throughout their life turns into a million, adjusted for inflation. So we're talking about generational wealth. And when it comes to this daycare stuff, I emphasize what Zade said. I feel like there's a we'll figure it out type vibe. But just also want to reiterate. Put on your oxygen mask before you help others. Right? That's what they say on the airplanes, right? Put on your mask before you put on other people's masks. And so I think you guys have to have that same mentality here if you only have so much money on a monthly basis. Yes, we want to give our children and I don't have children yet. Zade's, you know, obviously does, so he's able to talk toward that. But I want to make sure that I take care of myself and my spouse and we're trending in the right direction. So to Zade's point, we are not a burden, right. Whenever we're in our retirement age of 70s and 80s and we don't have to now be sort of, you know, taking money from our children when they're in their 30s and 40s and things of that nature. So. Great question, Christina. Thank you so much for listening to the show and we are rooting for you. So our next question comes from Jared H. Jared says, hey fellas, thank you for taking the time to read and answer our questions and course for all of the valuable insights each week. I noticed something in the episodes that I thought was awesome and interesting and I wanted to ask for Yalls input. In the early episodes, Austin was described as the young guy just trying to figure it all out. While Robert was a successful entrepreneur with hundreds of millions in company exits. Now just a few short years later, Austin is a multimillionaire. And of course Robert is still continuing to grow his knowledge and net worth as a seasoned entrepreneur. Obviously Austin has done a great job to position himself for all the success he has seen at such a young age and deserves all the credit in the world. But my question is how valuable has it been been to have someone like Robert in your corner? And do you feel like mentorship is essential in building meaningful and long lasting wealth? And for Robert, does having an up and comer who you may see some of yourself in help you stay motivated and continue growing as well? Thanks again, Jared. Jared, you noticed that we did change the intro of the show in the beginning. For the first two years it was, you know, I'm Austin, I'm in my 20s and I'm still figuring all out. And I'm still in my 20s, I'm 29 and I'm still figuring out life. But I would already argue over the last couple years since doing this show, I figured out a lot. My net worth was millionaire status when we started this show. However, that has grown dramatically since because of a lot of things that I've learned from Robert and have continued to implement in my daily life as it relates to having rich habits, being consistent, consistently investing, being a hungry entrepreneur, and always staying focused on what that long term trajectory looks like. But to your point, having a mentor like Robert and the other incredible mentors I have in my life, yes, they are the reasons that I have experienced such success at such a young age. And I definitely cannot emphasize enough how important it is to have someone that has gone through it before you and someone that you can openly ask questions to and get some real tactical, concrete advice from. And we hope that this show is that for a lot of people that might not have that network already, if it's myself, if it's Robert, if it's a guest we bring on, if it's Zade, we hope to have that sort of mentor, mentee relation relationship for, for some of you guys out there that are looking for that, that don't have that network. But Robert, answer the question about the, you know, being surrounded by someone who's younger and is, you know, do you have a lot of motivation because of, because of that?
- [39:24]
Emil
I want to unpack first the importance of mentorship, whether it's younger, older or whatever, because there is a message that's shared on the Internet all the time that you are and become the five people you're close, closest to. It's just such a great message because it's so true. Because if you hang around people that are always lack mentality or victim mentality or they're not growing and building along with you, you're probably going to get lazy in that scenario and not build yourself up as much. So in my situation, having Austin involved in my life and being an age gap of 30 years difference, it is incredibly motivating because we are always bouncing ideas off of each other for the podcast and for our community that are two completely different perspectives. So it is fantastic for me because he has a different skill set than I do. And therefore it's just so incredible to be able to have that between myself, Austin, Christian, to be able to bounce all these ideas off for how we can bring the most value to everyone. So the answer for me is yes. It's very motivational. Austin has a ton of energy, which a lot of people. People say that I have way too much energy. Well, Austin can definitely compete in that category. So it's just magical when you can really put your heads together with other people that you work with and that you care about and that you love and respect, because then you're always going to do more and really find the best solutions for life. Because personal finance is. Personal life gets in the way. And that is why I love our age gap as educators, to be able to help everyone figure it out from both, both perspectives.
- [41:01]
Christian
Zade, what's your take on mentorship? How did mentorship play a role in what you do now and what you. Well, we've been friends now for half a decade. We met like really early on in 2020 when we started doing this tick tock stuff back then. Have you leaned on mentors over this last five year period of your life as your career has just skyrocketed?
- [41:20]
Robert
Yeah, I mean, look, having, having other successful people to talk to is just incredible, right? They've been through the battles, they've been through the wars. You can learn from their experience. But not just that. Having someone that believe is such a powerful thing. So sometimes, like, you might not believe in yourself as much as your mentor or colleague believes in you. And just having that person is so powerful and they can unlock some stuff in you that you might not think that you had. And so just having that calming presence, having that person who's been through difficult times kind of coach you through it, just talk you through it, have someone to bounce ideas off of, is just invaluable. I do think though, like, the mentor content is a little too, you know, hustle culture, if you know what I mean. Like, people are like, oh, can you be my mentor? I'll get dms. Like, can you be my mentor? And I think the best way to like, get a mentor, though, is you have to first stand out yourself. Like, if you can kind of stand out, provide value, people will come to you. People are going to want to mentor you if you can already showcase that you're like someone who has that potential. So I do say that mentorship is awesome. But going about finding a mentor, finding someone you can balance ideas off of, you have to be careful in how you do that. I think sometimes people are just like, please come and mentor me. And it's like, dude, I got like a lot going on. So there you go. You gotta, you gotta be careful with that. But I do agree that there's a lot of value in it.
- [42:34]
Christian
I would, I'd like to reiterate that in the sense of, you know, I love, love, love, love finding content creators, newsletter writers, podcasters. Right. The Tiger Sisters podcast right now is sitting at number one on Spotify's business chart. Cherie is a good friend of mine. We've been friends for three years and I've spent the last two years sharing everything I've learned about my show with her and her sister so their show could grow as well. And now it sits at number one. And so like, I wouldn't say like, I'm officially a mentor or any. Like, once you learn something and like succeed in something, like you want to like share it with people and see other people win, like, the, the faster you realize that entrepreneurship and everything in this world is not a zero sum game and that we can all win together. And you know, the Tiger Sister podcast being number one on Spotify's business chart has nothing to do negative with our podcast not being or whatever. It's like, the faster you realize that, that we can all just like trend in the right direction together, the easier it's going to be to win and the more you will win throughout your life.
- [43:32]
Emil
Yeah, for me, it's a little bit of a touchy subject because I think coaching and mentorship is great because you're hiring for speed. When I came up, we didn't have the resources we have today. We didn't have the Internet, we didn't have coaching, we didn't have mentorship. You knew a friend that was ahead of you and you latched on to them hopefully and you could learn together and grow together. Now we live in an era and it's getting better every year with all of the technology in places like our rich habits, network, school community and places like that where you can pay a small fee and get access to incredible information of people that have already done it. To me, that is one of the keys to really be able to build a meaningful career a lot faster because you no longer have to pay the time and the cost of mistakes because everyone else is already already done it. And like you alluded to, Austin, sharing that information like we do in our content every single week, telling our stories of failures and triumphs, helps other people learn from the mistakes we've already made so they don't have to go through the trials and tribulations of making it themselves. I think that's one of the most important aspects of coaching and mentorship. As long as you find the right people. Because there are a lot of fake gurus out there that sell coaching courses. I don't think they're worth it. I don't think they're worth the $10,000 they charge. I would rather pay somebody that's done it, you know, on a one on one call or a consulting call to help me through a problem if I can't solve it on my own. Because you want the speed. That's the key for me.
- [45:07]
Christian
I am so grateful for the mentors I have in my life, including Robert, and the friendships I have in my life, including Zade. Zade, I know we've been on the phone for hours at some points in the past past, just talking about all things online, personal finance, content, podcasting, everything is just, it's really important to surround yourself with those types of people and have just a wonderful network to lean on. Ask questions. And that doesn't mean just ask, ask, ask. It also means give. Right? Give 10 times more than you ask. So that's the secret to success. Give way more than you ask and you're going to be just fine. Zade, thank you so much for joining us on this week's episode of the Rich Habits podcast, Question and answer Edition. I think you should just consistent presence, man. If it's once a month, once a quarter, yeah, definitely not as sporadic as it has been. You think you're. Dude, you're so awesome. We enjoy having you on the show and obviously shout out to the rundown and all the fun stuff we're doing over there as well, man.
- [45:59]
Robert
I appreciate you guys having me on any time. I'll be on anytime. Just, just make the call. And I mean, just doing these questions, answers is so fun because you're hearing from the community, you're answering people's questions, solving their problems. So I love doing this and also allows us to, you know, get out some hot takes as well. So it's fun. It's a fun time all around.
- [46:15]
Emil
Definitely. We love having you, Zade. And don't forget tomorrow to come back because we have our new Friday episodes. They are incredible. Whatever topical news is happening, the headlines, anything that's affecting our money and your money, we're going to be covering it live every Friday episode for you, so make sure you check it out. We again want to thank each and every one of you for stopping by, joining the Rich Habits Network, checking out the free trial and also giving us those five star reviews because it helps us grow and everyone needs a little boost here and there in their financial and their business and mindset journey. And we're here to provide that.
- [46:51]
Christian
Want to reiterate? Please, please, please. If you enjoyed this episode, if you enjoy the podcast and you've not yet left us a five star review on Spotify, we'd very much appreciate it. These reviews tell other people if our show is good, if it's bad, if it's mediocre, and the reviews so far have been very, very positive. So thank you so much for all of you who have left five star reviews. And if you've so on Spotify or Apple podcasts, specifically Spotify, please do so. As always, thank you all so much for tuning in to this week's episode of the Rich Habits podcast, Question and Answer Edition. And we'll see you tomorrow, Friday, August 1st, for our first new Friday episode. Thanks everyone, and we'll see you soon.