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Rich Habits Podcast
Q&A: Young & In Debt, Maximizing Cash Flow, & Buying Real Estate w/ Friends
00:44:10
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- [00:01]
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- [00:29]
Austin
You're about to make a trade, which you do you listen to. Is it get optioning those options.
- [00:36]
Or.
- [00:37]
Ad Voice
Let'S do a little research?
- [00:40]
Austin
Learn more@finra.org TradeSmart hey everyone and welcome back to the Rich Habits Podcast Question and Answer Edition brought to you by public.com if you're new around here and you're not too sure what these Thursday episodes are about, we'll break it down for you. Every single Thursday, Robert and I sit down and answer six, seven, sometimes eight questions straight from you all. You all send us Questions via Instagram, DMS via email@rich habits podcastmail.com or you ask us questions inside of the Rich Habits Network, which is our community for our biggest fans. I think we've got seven questions, Robert, and these are some good ones, right? Some guys trying to buy an assisted living facility, someone else is trying to sell a condo, side hustle ideas for dental hygienist. Right? There's a lot of really cool questions in this. So if you have a question to ask us, be sure to DM us on Instagram at Rich Habits Podcast or email us atrich habits podcastmail.com and don't.
- [01:36]
Robert
Forget we have a network. We have a private community of all of our listeners that really want to go deeper with their finances, their mindset, their business, all of the above. And we have a seven day free trial running. So if you want to get closer to us, learn more and be right in the thick of things investing alongside of us, you should definitely check it out. You deserve it for the holidays. And there's a seven day free trial.
- [02:00]
Austin
Now before we jump into the first question, we got to give a shout out to Public, the investing platform for those who take it seriously. Because on Public you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allows you to turn any idea into an investable index with artificial intelligence.
- [02:20]
Robert
I love this for Public because I feel like they are always have the sauce. They come out with all this cool stuff. And Austin, you and I played around with it a couple weeks ago when it launched and it was so Cool. And it all starts with your prompt. From renewal energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type in any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and and let you back test against the S&P 500, which I think is very very cool. All with just a few clicks.
- [02:56]
Austin
Generated assets are like ETFs with infinite possibilities, completely customizable and based on your thesis, not someone else's. So if you want to give it a try, go to public.com rich habits and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com forward/rich habits paid for by Public Investing.
- [03:18]
Robert
Full disclosure in the podcast description.
- [03:20]
Austin
All right Robert, let's now jump into our first question coming from Nestor C. Nestor does a wonderful job of hitting us with all of this information that is actually not that pertinent to the actual questions. We're going to skip a lot of it. We're going to jump straight to the question here because we'd be sitting here for 10 minutes reading this whole email, which we appreciate, we appreciate when you guys give us the breakdown. Not taking that for granted. But in Nestor's situation we're just going to jump to the question which is what? My goal is to buy one property by the end of 2026 with some of my friends. How would that work with four of us investing into this one property? I'm thinking of everyone bringing about $15,000 to the deal so a total of $60,000 will be used to purchase it as a down payment. We live close to each other and could definitely rehab the property if needed. But what is the best way to limit risk, maximize profit and limit confusion come tax time with a group of participants. Robert, you are real estate guy so I will let you kick this one off.
- [04:21]
Robert
Yeah, I like this idea especially starting out because you are spreading out the risk among you two or three friends and make it simple. So let's keep the math plain and easy. I would say get that LLC up and running. If you have the three, four, two, whatever it is, friends are going to participate. Figure out what they are going to do. Are they bringing in just capital? Are they going to have a day to day operational role in this company and then spell all of that out in the operating agreement. So let's assume you have you plus three friends. You each put in that $15,000 so that's $60,000 total and you own 25% each of the property and of that LLC. Because remember, in most instances you, you're going to want to have a separate LLC for every property. So you can define what is going on and define the roles. So with the operating agreement, you're going to have that set in stone that says each person owns 25%. Or you can adapt that depending on who is doing what. So for instance, if you, Nestor, are going to take on a larger role and let's say you're going to be, you're going to act as the general partner, then you might want to say, hey guys, I'm doing extra work, so I should get an extra 10% of the, the equity in this project. But to keep it simple, we're going to split it evenly. Then you all get your pro rata share of those taxes and the benefits of it and the income by doing it this way. I think it's very smart of how you're looking to do it. But make sure you have everything covered. You want to have the llc, you want to have the operating agreement with everything spelled out. Because at the end of the day, you want to make sure you're protected. So if somebody moves away and just doesn't help or, or somebody doesn't put in the additional money, let's say there's a capital call and you each have to put in $2,500 and that person does not do that. You want to make sure you're covered because you don't want to be in a situation where you're doing all the work and taking the risk, but you don't have equal duties to make sure that the project goes well. So that's how I do it. That's how I would recommend anyone listening does it is make sure you dot your eyes and cross your T's. So to make sure you're covered long term from a liability standpoint, but that you also enjoy the tax benefits and the income benefits from owning real estate.
- [06:40]
Austin
Yeah. Let's talk about how you do it. I think that's a really good segue. Right. So you've done flips before. You're doing a flip right now with a dozen investors or something like that. Right. So when it comes to limiting risk, let's do this step by step. Whenever you created that operating agreement and that llc, you know, did you work with a lawyer? What kind of verbiage did you make sure to include to ensure that, you know, if there was a capital call like, like how did you sort of structure your operating agreement knowing that you know, a dozen or so investors were going to be participating in this flip with you.
- [07:12]
Robert
Yeah. When it comes to me, I've been doing this for 25 years, I always am going to be the operator. So it's very easy from an operating agreement standpoint. They are passive investors, they write a check, they don't have any day to day operational duties and they don't have to partake in anything else. Now that's how it works for me. But someone starting out, I would definitely use a lawyer, but I would do a lot of the pre work myself. I would spell it all out in ChatGPT or Grok or Perplexity, whatever you use. And I would really get a handle on how to lay all that out. Get all the language in order so it works for you. Because every deal might be different. You might have somebody that is a contractor that hears what you're doing and says, hey, I don't have any cash but I'll come in and manage the project so you might have them. And you say, well this is great, we put up all the money, he does all the work, we're going to give him 10% of the total project just for putting up some sweat equity. That's what it's called. So that's how I do it. But that's how you should also do it as well, is just really figure out the language. And I would definitely use a lawyer for the first two or three of these because then you're going to have documentation built up so a lawyer can then just copy and rinse and repeat with the same documents. Changing the names, changing a few of the operating agreement stipulations. But then it gets really easy. And it's that way for me because I've had the Same lawyer for 20 years and I have documents on top of documents to help make sure everything goes well for me and my partners. But also you're not starting from zero every single time.
- [08:47]
Austin
Now talk about the tax implications. Right. So how I understand it is say the $100,000 of profits on this real estate endeavor that our friend Nestor is doing. I imagine that the LLC that owns the real estate that realized this hundred thousand dollars of profits, they would then distribute those profits to the owners and the owners have to realize that as 1099 income or some sort of income there. But I'm curious, what if they don't do a flip and what if they do some sort of, you know, rental duplex, triplex, quad plex and it's like a consistent cash flow thing how, how often do you think that they should be paying out their, their sort of owners? Is it a monthly payout? Is it a quarterly, a SEM? How have you navigated that in the past?
- [09:29]
Robert
Yeah, it's different every time. Definitely you don't want to be, get in a situation where you're paying out monthly. I don't do that. I don't think it's necessary. I think it's quarterly at minimum. But generally you want to be in a situation where you're doing it biannually or annually paying out that, those funds. So what I like to do, especially if it's going to be a long term hold, is try to set a base. How much money do we want to have in the LLC's bank account to make sure we don't do a capital call? Because what a lot of new investors do in startups and real estate is they start making money and it just all goes out to the investors. Then something happens and you're like, wait a minute, we need money to go back in. So I like to set a base where maybe you keep 10,000, let's say it's a duplex or something. You buy, keep $10,000 in there as your emergency fund, if you will. So then that way, if anything does come up, that is a larger than normal expense that wasn't budgeted, you've got the money there, so you're not doing capital calls. That's how I would do it. Because you want to make sure that you have that safety net without putting people in harm's way. But you also don't want to be paying out monthly because it's just more work you're adding. Especially because real estate in most instances, especially this one, aren't going to be cash flowing that much each month that you're going to do all this extra labor in, you know, doing the, the cash out and the distributions and the accounting for it and all of that. So that's how I do it.
- [10:54]
Austin
Nestor, we hope that this just kind of Q and A conversation between Robert, myself helped you and you're able to get this done. And we're rooting for you, man. So our next question comes from V. V says, hey, Robert Austin, Hope you both are doing well. I'm a big fan of the podcast for the last two years and always wait for your new episodes, just like I waited for the new episodes of Suits back in my 20s. That's hilarious. I'm doing that right now actually with Landman. Robert. I'm watching Landman with Ireland. Every Sunday we like, oh, I can't wait for the new episode of Landman. So, V, I appreciate you. That is, that's so cool to hear. V says, what's up, guys? I'm V. I want to stay Anonymous, but I'm 38 years old, I live in the Philly suburbs and I make about 110,000 a year. I'm married and I have a child. My wife makes about 45,000 annually. My main question is, when someone says they need to have an emergency fund of six months of expenses, should I also consider my monthly mortgage inside of that? That's a good question, V. So let's walk through it. We always encourage people to do a coup things. Part of that for us is having an emergency fund that is, let's call it three, four, five, up to six months of expenses. Now, what does expenses mean? Because in this situation, you seem like you get a little confused. Does that include the mortgage? Does it, is it groceries? Like, what is expenses? Robert? My goal, if I ever lost my job, if my income disappeared, my goal is for my monthly spending to stay pretty much the same, right? And so as someone listening to the show right now, when we talk about that emergency fund, we want to ensure that if you ever do lose your job and you have to go through sort of a period of drought financially, you're not running for the hills and having to sell your retirement and having to cash out your, you know, your car, and you're doing all these crazy things to keep things moving and kind of staying afloat here till you find the next opportunity, that emergency fund is going to cover you for that three, four, five, six months. And so when you ask, hey, does it include my monthly mortgage payments? V. It includes everything, right? So let's say, for example, my name's Austin. I spend, this is my real number. I spend about $7,000 a month living my life. I can be super comfortable at 7,000amonth in spending, which means three months of expenses for me is 7,000 multiplied by three or $21,000. Four months is 28,000. Five months is 35,000. Six months is 42,000. And this is, this is money that's not sitting in my brokerage account. This is money that's not invested into the index funds. This is money not in my four. This is money sitting in a high yield cash account on public.com. and so for me personally, right, I've got 30k four months plus a little bit more. Essentially, I keep 30,000 at all times sitting in a high yield Cash account on public rocking and rolling. So if anything crazy happens, I've got that to lean on to. Now, what happens when there is a drought? V. Let's say you lose your job and you got to spend some of this money. You spend it. Let's say you are going. Say you have the same thing I do. You keep four months at, at 28,000. Let's say you go through two months of a drought. Now you've got 14,000 left in your emergency fund, but now you got this new job, you're moving up to the right again, you're having fun. So you need to now go from that 14,000 in your emergency fund back up to 28 where you were, right? Because you don't want to be in a spot where, oh, I've got 14, but it'll be okay. It's a little less than normal, right? Only two months of expenses, but I'll be just fine. That's not, you know, how you build wealth over a long period of time. You want to ensure that you've got your three, four, five, up to six months. If you have a really volatile sales job, that's unpredictable income. I think four is a cool sweet spot. But Robert, what's your take on the emergency fund and how do you approach it?
- [14:32]
Robert
I think four months all in expenses is the best sweet spot there is. I think six months is too much, especially for people nowadays. It's always easy to find new jobs and side hustles and ways to supplement income or loss of income. I love four months, but want to back this up to the beginning. For anyone that doesn't understand and doesn't have their emergency fund built up, the first thing I want you to do is go download our honest budget document. Fill it all out completely. Include the makeup, the dog treats, the $9 lattes. Include it all so you know where you're at so you can calculate and build this emergency fund. And the emergency fund is not part of your investments because a lot of people get that mixed up. They're like, oh, Well, I have 60 grand in my IRA, so that's part of my emergency fund. No, the emergency fund is for emergencies. So when something happens, you don't have to go to the credit card, run up the credit cards, and then worry about paying them back down. So I agree. I keep three or four months. That is the sweet spot for me because I want my money working as hard for me as I work to get it. So I love your breakdown, Austin. I think three or four months is perfect. But Just make sure you understand it is the total of all of your bills per month. That is what you want to save. To be able to calculate that to three or four months.
- [15:57]
Austin
Yeah. Let me just also reiterate something Robert said, right? The definition, how we see it, of an emergency fund is it's insurance against your investments. It is not an investment. It is insurance against your existing investments. Right. So let's say to Robert's point, you've got 60, 80, a hundred thousand in your 401k or your Roth IRA or whatever and you have no emergency fund. Oh my gosh, I lost my job. I now need to, you know, float my lifestyle for the next three months and come up with 20 grand. So what am I going to do? I could either one, go $20,000 in credit card debt. Not a great idea. Not a great idea at all. Right. Or two, I can cash out my retirement. Also a terrible idea. Both terrible situations to be in. You got to choose between a rock and a hard place. And so by having this 20, 30, $40,000 in your own emergency fund, you now get to say, I get to ensure that that money stays invested. I don't have to, you know, endure penalties or taxes unnecessarily or, you know, anything that's going to derail my wealth building journey. From a retirement perspective. I get to lean on this emergency fund that I built many moons ago, hopefully because of a couple guys on the Internet named Austin and Robert.
- [17:02]
Robert
I love that Austin And I want to say one more quick thing and then we can move on. The emergency fund doesn't mean we want it sitting in your checking account. Austin alluded to public.com they have a great high Y cash account. So make sure you do that because keep in mind these high yield cash accounts are going to make you money by having that emergency fund. So you're ready to go if something does happen, but you're still making money on it, you're not going to make as much as you would in the S P500. But don't just leave these emergency funds. Sit in a savings or a checking account. Get them into a high yield cash account on public. Very important.
- [17:37]
Austin
And so what's so important about having it not just sitting in a checking account but also growing for you, making three, three and a half, 4% because you're earning on T bills and the treasuries and stuff that they do behind the scenes. September's personal consumption expenditures Price index. Right. The PCE, aka inflation. Right. Think about it like that. 2.8% year over year. So things are 2.8% more expensive this September than they were last September. Right. Think things like gasoline, housing, health care, food services, transportation. Right. I'm reading all the way through here. 2.8% more expensive this year than they were last year. And so if your money is sitting in a checking account, you just lost 2.8% buying power. Where if it's sitting on Publix High Yield Cash account, you're earning three and a half or four percent on it. Well, congrats. You're keeping up with inflation. Right? So that's why it's important to not just sit in a checking account, but actually, you know, moving and shaking for you in the right ways. Now our next question comes from Vicki F. Vicki says, hi, Robert and Austin. Thank you for all of your valuable information. I'm selling a condo that I've had for 25 years, and it's been a rental for about 16 of those years. I live in California. The condo is located in Colorado, and it's just been harder and harder to manage and maintain. It's only about 500 square feet, and rent has actually gone down the last couple years. Also, the last few years, it was riddled with maintenance issues both in the unit and the building. I paid $105,000 for it in 2000, and unfortunately, I'm only going to walk away with about $83,000 when I sell it after closing costs and paying off the mortgage and things like that. I'm hoping to reinvest this money in the next year or two into what will be my retirement home here in California. I currently own a condo, and that has appreciated nicely over the last eight years. So between the two property sales, I could get something that would actually be better as I approach my older age. So my question is, what do I do with this $83,000 until I'm actually ready to buy my home that I want to retire in? I can keep it in a high yield savings, but I feel like I'm not earning enough. I could put it in the markets, but it's kind of volatile right now. For reference, I'm 51, single, make about 100,000 a year, have half a million in a Roth, 401k, 40,000 in a traditional IRA, 100,000 in a Roth IRA, 26,000 in my bridge account, and I have a small crypto account. Also have a fully funded pension that will be over half a million when I retire in 15 years. Interesting situation here, Vicki. Robert, I'll let you get this One off.
- [19:58]
Robert
Yeah, I think Vicki's in a great situation. I like where her head's at. Here's where my brain goes. 51 years old, plenty of time. The markets are a little shaky right now. I think it's a buyer's market, so that's something to consider. But if you were going to put this off for one to three years, I like the idea of the high yield savings. You might leave a little bit of money on the table as far as growth and gains, but you're going to be safe because it's not going to go down in a volatile market. If you're going to push this off to 3, 4, 5, 6, 7 years before you buy the retirement home, I would definitely get these funds invested into that basket of index funds we talk about and get some income too, because you already own SPYI qqqi. I like those two as well. If you want to produce some income, but you don't necessarily need the income right now because you're doing so well. So for me, I would invest them if the timeline is further out to purchase the home, let's say past three years, because then I think you'd be leaving too much on the table just in high yield savings for that long.
- [21:03]
Austin
That's exactly what I was going to say. Right. Because if Your timeline is 3, 4, 5, 6, 7 years to buy this forever retirement dream home, then yeah, park it in the S&P 500, maybe split it up 50, 50 between the S and P and the Nasdaq, or maybe get some international, whatever you want to do there and just have this money growing for you at 6, 7, 8, 9, 10, 12% per year on average over that 3, 4, 5, 6, 7, 8, 9th, you know, period of time, and that's going to allow you to say, okay, cool, my 83 is now worth about 150. Rock and roll. I now have a bigger down payment. Or hey, this 83 is now worth 106. Like that's better than if it was earning, you know, 3% in a high yield savings. And now again, the key here is that three year time horizon because we have no idea what the S and P is going to do, you know, week to week, month to month, year to year, no one knows. Right? But over a long period of time, three years, four years, five years, I'm pretty certain the S P 500 is going to be trading higher in five years from now than where it is today. And so, Vicki, if you have that horizon of time where you can say, yeah, I'm Cool. Having my money invested for three, four, five years as I sort of save up for this down payment, you know, Rock and roll. Now, now, the thing you might be thinking about too, Vicki, is, wait a second, guys. What about taxes? What if I have this account that grows from 83 to 150? Aren't I going to owe taxes on those profits of about 70 grand? Yes, you will, but there'll be long term capital gains. They'll be taxed at probably around 15%, depending on how much money you make. You'll probably owe the state of California a little bit something as well. But I think people forget that owing taxes on an investment means that you made money on that investment. It's okay to pay taxes on an investment because congrats, you made money, right? Pay your taxes, take those profits and deploy them as a down payment into this forever retirement dream home that you're excited to purchase in the next. Call it three, four, five years. Our next question comes from Pete. Pete says hi. Please keep me anonymous by calling me Pete. All right, Pete. How's it going? Pete, I'm a big fan of your show. Love how you tackle financing and investing topics. I'm under contract to buy an assisted living property for 3.75 million. The seller is carrying $750,000 of that via a loan. My bank will finance 80% at about a 7% interest rate. I have a brokerage account with 2 1/2 million invested and another $500,000 in cash to increase the cash flow of this assisted living property. Does it make sense to put down a million dollars against this loan by using $500,000 of cash, plus $500,000 from a line of credit on my brokerage, which I can repay in a flexible manner. This will reduce my bank lo million with a cash flow of about 22,000amonth. If I don't put down any extra payment and I'm fully leveraged, my cash flow drops to about 15,000amonth. Given these options, what would you recommend to maximize cash flow and liquidity? What a good question. So let's talk through the. Let's talk through the math, Pete. All right, so I've got my calculator pulled up here. Pete's saying, hey, I could make an extra $7,000 a month if I essentially get rid of a million dollars out of my universe, right? So $7,000 a month, month turns into $84,000 a year in pre tax cash flow. But to do that, you're going to have to put down 500,000 of cash, which if that 500,000 was invested, earning 7, 8, 9, 10%, it's about 50,000 a year. So I think, okay, cool, we can talk about that. And take on $500,000 of a line of credit from your brokerage. You're gonna have a little margin loan, right? A, a loan against your investments of 500. So all in now, now we're talking about a million dollars of liquidity out of your universe that's going to be used to make an extra $84,000 a year, with half of that coming from debt. And I'd argue that debt's at about maybe four and a half, up to maybe five and a quarter, depending on the loan interest rate that your, your brokerage is going to offer you there. So let's say, for example, right, you've got this 84,000 that you will earn extra against this $1 million. That's 8.4% of a yield on your money. 8% yield. I'm not, I'm not mad at that. However, that's not all cash flow because half of that, right, half a million came from debt. And you have to finance that debt and you have to repay that debt, which means like again, that 5ish, 6ish percent, maybe four and a quarter, who knows where that's going to end up with your margin, you can probably negotiate those rates. But I'd say 5% is a pretty good place to be. You know, half a million dollars a year here at 5%, 25,000. So you got to take that from the 84. So 84 minus 25. So now you're at about 5%, 6% or so of a yield. I mean, it's a lot of, that's a lot of debt and risk and back just for 6% versus, you know, so if I were you, here's, here's how I'm thinking about this, Pete. If you've got 500 grand sitting in cash here, rock and roll, have at it. Deploy that against this 7% interest rate and it's, it's going to help you maybe bump your cash flow from 15 to 18 or 15 to 17, right? You'll have a little bit more cash flow because you won't have so much debt. But I don't think I'd take on half a million of brokerage debt to pay it down even more because you're trying to arbitrage the 4 1/2% interest rate on the brokerage against the 7% at the loan. That, that, that just doesn't make sense to me.
- [26:17]
Robert
I agree. 100. That was a great breakdown. Because so many people when they're doing a deal like this, they forget that they have debt, the cost of what it does to borrow the money to be able to make the new money. And a lot of times that arbitrage doesn't make sense. And in this instance, I think you covered the math perfectly. You would basically be trading this borrowed money for new money without any additional real gains. And I would rather see that money stay in his account, use the 500k, make the difference in the cash flow. Because keep in mind too, there's less risk in the money you have in your brokerage account that's making that 7, 8, 10, 12% a year than there is in buying an assisted living home, which has inherent risk. And so that's why I agree with you 100%, Austin. I would use the 500k, leave the money where it is in the brokerage account and rock and roll and just move on and do the deal.
- [27:11]
Austin
Now, Robert, I think it was last week's episode or maybe a week before, we talked about how someone took on a margin loan and their account blew up because they weren't smart about it. I would argue that, that Pete's situation is an instance where it might make sense if the numbers were just a little bit more in his favor, right? Like when people say, hey, I use margin, or hey, like I've taken out margin loans in the past for a short period of time to like, you know, from a cash flow crunch, you say, I gotta go buy this. Robert's example was, hey, it's two in the morning. I don't have the ability to move over money. So I'm just go quick margin, pay it back later. Like, I totally get that. But there are people like in Pete's instance, that have a business opportunity and if they can borrow against their assets, two and a half million here, there at a 5% interest rate, you know, like maybe it makes sense. So again, here the loan interest at 7%, you know, so we'd be arbitraging that 2% difference on half a million. That to me isn't material. But if maybe, you know, that loan interest rate was at 12% and he's borrowing at 5, and he could arbitrage that 7 difference there. Like that would make sense. Like that's in, in Pete's interest here to borrow against what he already has at a lower interest rate so he doesn't have to incur higher interest debt elsewhere. And, and I think it's it's, it's fun to kind of find these little instances where margin and you know, borrowing against your assets does make sense where again, 90% of the time people do it in an irresponsible manner. But that other 10%. Right. It, they definitely exist.
- [28:38]
Robert
Yeah, I see it all the time. And even at a situation the other day where someone was buying a piece of real estate, they didn't have the total amount needed for the down payment and the closing and everything and they were going to take it out of retirement and use some of their credit line to do it it. And I said, well, why don't you just borrow against your cryptocurrency because you can do that on Coinbase and some of these accounts and then you can use that as your escrow money without actually selling the cryptocurrency and then pay that back rather than having a higher interest debt situation. So I really like that breakdown and I think it makes perfect sense. And every deal is going to be different. But in this instance, I don't think Pete should do the extra 500,000. Thousand.
- [29:18]
Austin
Yeah. No, I'm right there with you. I think in this instance the numbers like they just don't come together perfectly. But I could see instances where they would. Now, before we jump to our next question, you guys, I know we just talked about it earlier, but you need to really go try generated assets. It is literally like chat GPT. You sit down and you say, hey, I want to invest in companies that are growing their free cash flow by 12% or more per year. Or for example, I'm going to go invest in companies that are still founder led. Like Mark Zuckerberg founded, you know, Facebook and Meta. Now he's still working for the company. Or Jensen Wong, right? He founded Nvidia. Or maybe, hey, I'm going to go invest in companies whose CEOs are older than 50. Or I want to go invest in company whose CEOs are younger than 40. Right. Like you can make up any idea you want. It's called generated assets. You generate up the idea. You can make up any idea you want. You can put it down and it'll pop right up for you. It'll give you a wonderful list of companies. Robert and I tried this. We did. We want to invest in companies that have the highest revenue per employee. Right? That's what we did. Revenue per employee, top 20 companies every single year. In the S P revenue per employee, it outperformed the S P by 2x over the last 10 years. That's just one strategy. Right. So it's like come up with something cool that's going to outperform and just rock and roll. So that's what we did. We're gonna, we're gonna play around with it some more and, and get invested ourselves. But it's really fun. It's really easy. We're excited to, to be using it now. And it's again, just come up with a fun idea to back test it, understand how this might perform, understand volatility metrics, things like that. Public does a wonderful job doing that. So go check out generated assets public.com rich habits or just Google generated assets. It'll pop right up.
- [30:59]
Robert
Yeah, I don't remember the name of it, but you talked about it a couple years ago and I feel like that's what generated assets is with public. You brought up a fund where it was all invested in companies where the founders and CEOs were worked out. Remember that?
- [31:14]
Austin
Yeah.
- [31:14]
Robert
And it was so crazy how well it performed by having these leaders that were in shape and took care of themselves, how people really like that. And so I think that's what makes generated assets so cool is because you can take a thought from your brain, put it in there and it'll build this portfolio for you and allow you to back test against the S P500 to see what would happen if you would have done it. And so moving forward, I can't wait to share mine publicly of what I'm building and then just see how it does 100%.
- [31:46]
Austin
So our next question comes from J.H. jay says. Hi Austin and Robert. My name is Jay and I'm a huge fan of your podcast. The information you share has genuinely changed the way I think about money investing and long term financial health. Jay, let's freaking go. That's awesome. So happy to hear that. So Jay says. I had a question about my specific situation. I'm a Canadian law student graduating in May of 26. I've accepted a position at a corporate litigation firm starting in June of 2026. With a starting salary of $80,000 which will gradually increase each year. I have $100,000 of student loan debt at three and a half percent interest. And I'm trying to figure out the best way to balance paying down this debt while still growing my finances responsibly. Up until a few months ago when I found your podcast, I wasn't the smartest with my investments. So right now I don't really have anything besides $6,000 in the ETFs that you guys mentioned. But one important note about my life is that I'm living at home and I will continue to live at working. And my mom gives me a free car to use. So this means that aside from about fifteen hundred dollars a month for personal expenses, I can invest or put everything else toward my debt. So given this setup, what do you guys think I should do? So something that Robert and I always say when it comes to student loans is especially if they're at low interest rates at three and a half percent. Jay, we always say if you are someone that finds yourself with a massive mountain of debt at a, a low interest rate like, like you have here, we would rather see you keep that debt around just for a little bit while you get invested. And here's why that's so important. Debt can only go to zero. But your investments theoretically could go to infinity, right? So if you had $120,000 of after tax money dropped into your checking account, that 120,000 theoretically j could one just entirely pay off your student loans. You're right. And your net worth would increase by 120,000 because of that. Or you could put that 120,000, you could invest it in the S&P 500 and every seven years it would double. So 240, 480, 960. Right. Like you theoretically could have the same amount of money and become a millionaire, or you could essentially use it, just pay off your loans. So what we like to say is have the same amount or more then your student loans invested via, you know, let's call it your Roth IRA, your 401k, your Bridge account, whatever, before you start making big chunks to pay it off. That's what we always say. We think it's a great way to build wealth. I just helped my friend, actually. Her name's Katie Ann. I think I talked about this a couple several months ago. She was dating one of my really good friends and she has her doctorate in physical therapy. She's making like eighty, ninety, a hundred thousand a year. And she's got a lot of student loans, like hundreds of thousands of dollars, dollars of student loans. And I told her, I was like, hey, you should do this save plan, which is like a way to pause your student loans for like a year or two. And the government pays the interest. Which is like cool because it's only specifically used for people that have like, you know, teachers and things like that. But I think she fell into that category as a, as a physical therapist, doctorate. But long story short, I told her, hey, pause your student loan payments, because you're doing about a thousand dollars a month, set that money aside and get it invested in your Roth ira, your bridge account, thing like, things like that. Because over a two year period of time, time, you're gonna have $25,000 that's gonna grow for you over your lifetime over the next 10, 15, 20, 30, 45 years. Right. Compared to that same 25, 000 just to pay off your student loans at a low interest rate. So I know that was long winded, Robert, but I think it's important people understand the difference between paying a student loan or any debt down to zero versus having that same amount of money growing for you exponentially throughout your life. Life.
- [35:29]
Robert
Yeah. The compound effect of money is so important, especially for people that are younger that have these student loan debts. And the only thing I'm going to add to that great breakdown, by the way, is that I always look at student loan debt, if it's lower interest, pay the minimums. Because we always have the opportunity where the government steps in and says, okay, this is ridiculous. We need to jumpstart the economy a little bit better. So we're going to do a new program for student loan debt where we're going to wipe out the interest or we're going to lower the interest rates or whatever it might be. And that is happening right now in the federal government in the United States, where they're talking about new forgiveness programs for student loan debt. So I like the breakdown, pay the minimum, build up that account. So it's compounding, like he said in his friend's reference of getting in the safe plan or whatever plan is available to you to pause those payments so you can get money saved in compounding, because over time it's just going to work out better for you. And we always have that, you know, ace up our sleeve that maybe the government cuts these debts down for people like yourself to help the teachers and the, the lawyers and the med students that have a lot of student loan debt.
- [36:39]
Austin
And Jay, let me be very clear, right? You're graduating law school. You're probably 24 to 26 years old, somewhere in that range. I'm all for you living at home, $1,500 a month of personal expenses, keeping the student loan debt around for, who knows, probably two years or so, three years or so. I mean, you're making 80,000, which means you should be saving, slash, investing about 3,500 to 4,000amonth, 120,000, let's call it divided by 3,850 is about 31 months. So just under three years, right? So in just under three years, in your current situation, you will have over $120,000 invested because that money will grow during that period of time as well. So here's my, here's my thing. I just don't want you living at home forever, right? You don't need to be hanging out at your mom's house driving her car. Like, you need to be your own person. You'll have well of a hundred thousand dollars invested. Like you can afford to go get an apartment. I'm sure by that time I'll be making 90, 100, 110, right? So, like, if I were you, I would live at home, live on nothing, and get as much money as humanly possible invested over the next two or three years. Once you have that 80, 100, 120,000 invested, and it's like, cool, I did it. I'm now exactly where I need to be. It's time for me to go live my life, pay off this debt, go find, you know, my, my spouse and go do the. I want to do as a, as a young adult in your professional career, moving out of mom's basement. I'm go buy my own car. I'm going to go get my own apartment. I'm going to go do these things because I'm a lawyer that's taking home six, $7,000 a month and I'm rocking and rolling. So let me just. I also always love calling it out because I, I love the idea of parents that are nice enough to let kids that are in their early 20s hang out at home while they're trying to get rid of debt or build some wealth or figure out their footing. I'm all here for that. But, but a eagle that never leaves the nest turns into a turkey, right? That's the phrase, right? An eagle that doesn't leave the nest turns into a turkey. And we don't want turkeys. We want eagles. Jay, you're an eagle and we believe in you. Just make sure that you approach it in a, in a responsible manner as someone that'll be in their mid to late twenties by that time. So our next question comes from Tyler on Instagram. Tyler says, hey, my name is Tyler, and I wanted to get your take on having exposure to precious metals like gold and silver, especially since they've already run up quite a bit over the last year. For Context, next. I'm 22, working in the film industry. I live at home, and I currently have about $42,000 invested across ETFs, single stocks, crypto, and about 7,000 in cash. Thanks for your time. Looking forward to hearing your thoughts. So, Tyler, real quick, build your base. A hundred thousand dollars invested into index funds and ETFs, before you start diversifying into other asset classes like single stocks, crypto, precious metals, and things like that. So I think you're actually getting a little ahead of yourself. But, but what's your take, Robert?
- [39:20]
Robert
Yeah, I agree. I love crypto. Precious metals have been a big winner for the last two, two and a half years. I've been in the precious metal space for almost 20 years. I love where your head's at. But let's get the base built first. And the base starts with getting three, four of these index funds we talk about like voo, qqq, aiq, maybe VUG or vti. Get that hundred thousand dollars under your belt so you're making money while you sleep. Then start getting into these other sectors like precious metals and cryptocurrency. Now, if you're not going to listen to us, at least do this as part of building your base. Take a small position in like gld, slv, icop, because those are at least funds. So you're going to have a little bit better management and understanding of what's happening to be able to make this money. But I wouldn't start there because we want to get that first hundred thousand dollars saved and invested it before you get out on a limb with some of these more volatile sectors of the market. That's my take.
- [40:23]
Austin
Our final question comes from Ms. Cherry. Ms. Cherry, let's go. All right. Ms. Cherry on Instagram says, what side hustle can I do if I am a dental hygienist? Robert, what's your take on this one?
- [40:36]
Robert
Doesn't matter. If you're a dental hygienist, you could be a dog walker, you could be a doctor, a neurosurgeon. It's all the same. It's what works for you. Do we live in an era where there are thousands and thousands of side hustle opportunities out there? So figure out what works for you that you would enjoy. So let's say you love animals and you want to go do something animal related. Well, you could be a dog walker. That could be your side hustle. You could go work at some of these, you know, veterinarian clinics or something like that. You're already in the kind of medical field, so that could be a good option for you. But also if you want to sit at home on the couch and enjoy that new blanket you bought off a TikTok shop. You could also find an online side hustle where you don't have to leave your couch in the comfort of your own home. The sky is the limit. There are thousands of options. Pick something. It doesn't have to be your passion. Pick something that you get the most movement of the needle from an ROI perspective to make the most money you can for the least amount of hours worked so you can stay focused on your main job job and use all of this side hustle money to invest and get ahead.
- [41:45]
Austin
I love that a side hustle I saw my friend Drew do online. He's a, he's a content creator. I think it's, it's money with Drew or something like that. He's awesome. He recently did the seasonal UPS support driver delivery person, right? So essentially I think he took like 15 or 20 packages in his, you know, Corolla and he sat there in his car, he drove to all the different, different places, he scanned him, he took a photo. He got compensated by UPS for being a seasonal delivery driver from the comfort of his own car. So maybe you can listen to the Rich Habits podcast while you're doing some delivery here. But yeah, it was cool. And I think he made just about 20 to 25 an hour doing it. Like, like 23, 24, 25 bucks. It took about two and a half hours for him to do this. That included the maintenance, the wear and tear on his car. Right? All that kind of set aside, as well as gas and things like that. So that right now, if you're looking for a side hustle in this busy season of holidays, go get yourself 25 bucks an hour by helping UPS deliver some boxes.
- [42:45]
Robert
I think the key takeaway for me, I'm going to click back one more time. When it comes to side hustles, you got to think roi. How do I make the most amount of money in the least amount of time? But also test a bunch. You might do one that does well, but you might find another one that's even better that you Enjoy more. Test 3, 4, 5 different side hustles, then narrow down to the one you want to do more full time. And that will be a great way to enhance your income and set yourself up for financial freedom that much sooner.
- [43:13]
Austin
Everybody, thank you so much for joining us on this week's episode of the Rich Habits podcast, Question and Answer Edition. If you enjoyed the episode, please consider sharing it with a friend. Please consider leaving us a five star review here on Spotify. Be sure to vote in the poll. Share a Comment we really appreciate it when you engage with us over here. And if you want more of Robert and I consider joining the Rich Habits Network Network. It's our community. For our biggest fans, we host two hour weekly live streams via a zoom call. There's eight hours of video coursework in there. You can connect with other listeners. Over 800 people are a part of the Rich Habits Network right now. There's just so much going on over there. So if you've not yet checked out the Rich Habits Network, we're still offering that seven day free trial.
- [43:58]
Robert
That's right. And so many of you reach out to us in DMS personally and in the Rich Habits Network and, and Instagram and all that, talking about the value you receive from our podcast or maybe it's our newsletter. So the way to give back to us is share it with friends. Share it with other people that might need a little nudge in the right direction financially or with business or mindset. And it doesn't cost you a dime. And it means the world to us when you share the message of the Rich Habits Podcast and the Rich Habits Network. So thank you all so much.
- [44:28]
Austin
Thanks everyone and we'll see you tomorrow.
- [44:53]
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