Rich Habits Podcast - 69: This Episode Will Save You Thousands (Seriously)

Episode Date: June 17, 2024

In this episode of the Rich Habits Podcast, Robert Croak and Austin Hankwitz talk about tax loss harvesting. They also welcome Mo, the CEO of Frec.com, to the show to break down direct indexing + tax loss harvesting in a more intricate way. ---Skip the waitlist and invest in blue-chip art for the very first time by signing up for Masterworks: https://www.masterworks.art/richhabitsPurchase shares in great masterpieces from artists like Pablo Picasso, Banksy, Andy Warhol, and more.See important Masterworks disclosures: https://www.masterworks.com/cd---Sign up for Blossom, the social investing app: https://blossomsocialapp.page.link/richhabitspodcast---Don't forget to subscribe to the new ⁠Rich Habits Newsletter!⁠ 2,600 of you already have since it's launch only 4 weeks ago :) thank you!---⭐ Download our FREE Budgeting Template – ⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⭐ Earn 5.1% on your savings with a High-Yield Cash Account – ⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⭐ Trade stocks, options, music royalties and crypto on Public – ⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⭐ Get a $35 bonus when you start saving & investing with Acorns – ⁠⁠⁠⁠click here⁠⁠⁠⁠⭐ Automatically buy stock where you shop with Grifin – ⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⭐ Protect your family with term life insurance from Suriance – ⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⭐ Use code “Spotify” for 15% off our 4-module video course – ⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⭐ Optimize your portfolio with Seeking Alpha – ⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠---👤 Explore everything Austin does – ⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠👤 Explore everything Robert does – ⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠❓ Ask us questions for our Q&A episodes – @richhabitspodcast on Instagram📬 Inquire about working together – [e-mail]---Hankwitz Group LLC has an existing business relationship with NEOS Investment Management LLC. The opinions expressed are those of the author, and the author owns several NEOS ETFs.

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Hey everyone and welcome back to the Rich Habits podcast, a top five business podcast on Spotify. My name is Austin Hankwitz and I'm joined by my co-host, Robert Croke. Robert is a seasoned entrepreneur in his 50s with lifetime revenues of over $300 million, and I'm an entrepreneur in my late 20s with a background in finance and economics. Since quitting my full-time job in corporate finance a few years ago, I've built a seven-figure media business and I actively advise some of the most well-known fintech companies around the world. Now, as the show name might suggest, every episode, we talk about rich habits as they relate to business, finance, and mindset. However, we try and bring you two unique perspectives, one from an industry veteran, which is Robert and the other myself, someone who's still in the process of building wealth and figuring it all out.

Robert, what are we going to be talking about in today's episode? In this episode of the Rich Habits podcast, we'll be talking about the boogeyman of money, the tax man. This episode is going to be the nitty gritty of what no one wants to talk about, no one wants to hear about, and most people never learn about, and that is capital gains taxes, tax loss harvesting, and laying out the blueprint of what everyone needs to know about that subject. This topic is just as important as picking out what you want to invest in. Remember, it's not what you make, it's what you keep. So Austin, kick us off with an intro into capital gains and what they are and what they are. me. Robert, I think you said it best, right? It's not what you make. It's what you keep. And this episode is titled, This episode will save you thousands for that reason, right? So we're going to be talking about

capital gains, tax loss harvesting, and different tax strategies to save you thousands of dollars on your taxes every single year. So Robert, let's kick off with capital gains like you said. So what are capital gains taxes? These are the taxes you pay on the profits when investing. That's pretty simple, right? So as an example, if you invested $10,000 into Nvidia stock and it's now worth $15,000 and you sell it, that $5,000 in profits that you made, that's what you would pay taxes on. That capital gain, $5,000 is what you pay taxes on, capital gains taxes. Now, there are two specific types of capital gains taxes. There are short-term, and there are long-term. Short-term capital gains taxes are unfortunately taxed at your ordinary income tax rate.

So like, let's say if your effective tax rates like 25 or even 30%, you're making hundreds of thousands of dollars a year from your job and other income sources, right, you'll be in that range. So you would then pay that same tax rate on that $5,000 in profit, assuming it was a short-term capital gain. Now, that title of short-term is defined as how long you held that investment for. So if you held that investment for less than one year, that $10,000 of Nvidia stock, you held it for less than a year, then you're going to pay that short-term capital gain at that ordinary income tax rate, which again is pretty high. But on the other side of the aisle, we have long-term capital gains.

Now, these are profits that you've realized on investments that you made more than one year ago. So the cutoff between short-term and long-term is one year. That's the cut-off. So let's say you invested that same $10,000 into Nvidia and it's worth that $15,000 we had alluded to, but you held your investment for 18 months, right, longer than one year. The tax rate that you're taxed at because it is now that long-term capital gain is directly tied to how much money in total you made as a human being during that year. So if you as a human being made less than $47,000, then you actually don't have to pay taxes on your

5K in profit at all, right? That's long-term capital gains and the cool things that come with it. If you made less than $518,000, you would only have to pay 15%, which is much lower than that 25, 30%. And anything above $518,000 of profits that you had made that year is taxed at 20%, which is, again, much lower than the 25 to 30% range that you would have at the short-term capital gains tax rate. So again, capital gains and understanding the taxes owed on those capital gains is very important because it's either short term, which is your ordinary tax rate, or long term, which is much more favorable. And something that I want to touch on Austin, that's a great way to break this down.

And I hope our listeners are taking notes here is a lot of times what people don't realize with the short term and long term capital gains is when they're selling in and out of stocks trying to time the market. You always hear us say, don't try to time the market, is they're not considering the short-term capital gains taxes they're paying every time they sell in that time frame. And I just think it's very important for them to understand. Every time you sell an investment like that, it is a taxable event. And when you're getting in and out and in and out trying to time the market, you have to take in that taxation amount against your profits. So make sure you really dig deep and understand the difference between short-term and long-term capital gains.

Yeah. So, you know, as you guys might probably have seen now on your tax returns or other documents you get from your brokerage account, it's actually done on an annualized basis. So to Robert's point, if you're jumping in and out of, you know, investments and let's say that you bought Nvidia, you bought Apple, you sold Apple, you bought Amazon, you sold Amazon, you're having a good time, you're making money, whatever it might be. And you now see on this report, It's got detail explanation of every single thing you bought and sold and how much money you made on each of those trades. And now it says, okay, at the end of the year, you made $12,000 in profits and now you owe taxes at that ordinary income tax rate on that $12,000. But, and this is something, oh my gosh, it's a mistake.

So many people make, Robert. I'm so glad you brought this up. So let's say that you made $12,000 in profits in 23 on your day trading. And you had a good time, whatever it was. But remember, tax day is not till April. And so maybe you've got that brokerage account with your $12,000 of profits in it, but you made one wrong trade and you blew up your account. Maybe you bought put options or you bought call options or you did some crazy risky investment

that did very, very poorly and you lost your money. You still owe taxes on that $12,000 of profits despite how much money you still have in this brokerage account after you made these trades. So what I'm trying to say here is you can have a great trading year. of 2023. But immediately, as the calendar turns to 2024, 2025, or whatever else, you need to take money out of your brokerage account and set it aside for those taxes that you owe on that calendar year. Because if you make silly trades over the next four months before the taxes are owed to Uncle Sam on that April date there, and you lose all your money, it doesn't matter. Uncle Sam's still going

to come knocking. He's going to say, no, no, no, I don't care what you have. This is what you said you had on these days and you should have known better to put money aside on those profits. I see it all the time, Robert. It's, oh my God. It's so important for everyone to understand these distinctions. Robert, let's now talk about how we'll be able to help our listeners save thousands of dollars every year on their taxes. Again, the name of this episode is this episode will save you thousands of dollars, seriously. And that's because there's a strategy called tax loss harvesting. We just talked about long-term capital gains, short-term capital gains, the taxes with that. But there's a strategy you all need to study up on that's going to help you optimize these taxes

to save when Uncle Sam comes knocking in April. So break it down for us, Robert. Simply put, this is a tax strategy that involves non-profitable investments and utilizing those losses to offset the gains from your profitable investments. Now, here's the key. The investment you sold at a loss is replaced or bought back again. Again, by a similar investment after a certain time frame. We want to always have our money working for us, but if we can sell our losing investments,

realize those losses, then buy them back after 30 days. Then we've gamed the system. So let's use an example. Lulu Lemon, everyone's favorite athleisure company. Let's say you're like Austin and you love the stock. You bought 10K worth of the stock during the beginning of the year. And unfortunately, you're down, let's say, 40% on your. your investment. So what you would do is sell your Lulu Lemon stock, realize that $4,000 loss on your

$10,000 investment. Then after 30 days, you take the remaining 6K and you invest it back into Lulu Lemon. Now you have roughly the same amount of shares in Lululemon, but more importantly, you have a $4,000 loss to offset any realized gains made elsewhere in your portfolio. And another important component is that while you wait the 30 days before you can buy the stock again, is that you park that $6,000 into T-bills, C-S-H-I, or even a similar investment like Abercrombie and Fitch, on Cloud Shoes, or even Ralph Loren. These names move up and down 5 to 10% during that 30-day period, and now you even have more money to invest back into Lulu Lemon. Now, I know that was long-winded, but I promise you it is well worth everyone listening to learn.

So, Austin, give us a little more color and depth on this so everyone can really understand what this means. You know, Robert, and I think what's really, really important about tax loss harvesting is that if you are someone like myself or Robert or the other several hundred thousand people that listen and follow this podcast, you are a net buyer of assets, right? you want to grow your portfolio over time and you're focused on investing more and more every single year. That's single stocks, ETFs, cryptocurrency, and even real estate. So if you're someone who is a firm believer that I got 5, 10, 15, 20 more years of investing more money into my portfolio before I even want to sell, right? I'm not even close to retirement. So if you're someone like that, tax loss harvesting is a wonderful strategy for you to implement. Because if you're like me and you have some single stock losers in your portfolio, it happens.

We're all human. Lulu Lemon happened to me, right? So I'm down 40% on my Lulu Lemon investment. I love the stock still. I think they're very undervalued from a long-term perspective. You look at their historical PE ratio. I don't want to nerd out on you all here. But I like the stock.

But because I'm down 40% on it here year-to-date, now is a great opportunity for me to sell that. Realize my loss on that investment, which is a couple thousand dollars, wait the 30-day period there and then buy back Lulu Lemon stock. Because if you think about it, since I sold it, waited a little bit and then bought it back, I now have essentially the same number of shares as I did when I first purchased it back at the beginning of the year. And so that's what we want people to understand, right? If you are a net buyer of assets and you have no reason to cash in on that crypto,

cash in on your Nvidia or your vital farms like Robert's doing, right? This guy is always right with his stocks. I love it. don't need to sell and realize those profits yet, then this is a great opportunity for you to begin to, Robert, remember back in the day when you had like minutes or I think like points and stuff with like AT&T and Verizon and like if you didn't use all your minutes that month, it would roll forward to the next month and you can use them. That's what people are doing with tax lost harvesting. They are realizing losses in the year of 2023, 2024, 2025, rolling those losses forward, year. And, you know,

year after year after year, until they have that big sale, they cash it on the Bitcoin, they cash it on the Nvidia or whatever it is. And if you have $20,000, $40,000 of losses, you've rolled forward year over year and you have $40,000 of profits that you would, you know, have to pay taxes on, the losses you've incurred over the last couple of years completely offset that $40,000 profit that you have just realized making it so you don't pay any taxes, right? That's why Robert and I are talking about this on the podcast because, one, it's going to save you a lot of money in the long term, but two, no one is doing this in a way that is meaningful, which is why we have Mo, the CEO of a company called FREC, F-R-E-C.com,

and FREC automates the tax loss harvesting process for you with the S&P 500. So if you are an investor in the S&P 500 like we are, and you're always going to be buying more and more of it, His company, freck.com, has automated the tax loss harvesting process. And don't just take our word for it, Robert. I mean, we put $20,000 into his platform so that we can see for ourselves how much we're saving on taxes, what the performance looks like. And it's been great. So stay tuned for that interview here in a little bit. Mo's going to hop on here. But it's just so important, Robert, I think for our listeners to understand this because, you know, this is what the wealthy are doing, right? This is what the family offices, the billionaires. This is how they keep more money in their pockets at the end of the year. That is why I love waking up every day and getting to do what I do. We're not gatekeeping here. We give it all away. We make sure everyone gets the best information because we want every one of our listeners,

everyone that's joined our Rich Habits community to win at the game of life and investing. And so this is a really great episode. And I hope everyone is difficult of a topic it is that they stick with this episode and really dig in because it is life-changing information that they can, implement into their wealth building strategies. But Robert, before we bring Moe onto the show, I want to tell all of our listeners about this episode sponsor, Blossom. They not only allow us to invest, but also share those investments with all of you guys. Yes, Blossom is a social investing app built around transparency.

Simply sign up for a free account, connect your existing brokerage account like Fidelity, Robin Hood, Vanguard, or Schwab, and get started. Unlike anonymous platforms, like Reddit and Twitter, Blossom users link their existing brokerage account to the app so that all of their holdings and portfolios are shared within the feed and verified by actual data. So leading to richer discussions and decisions, it's never been easier to join a community of like-minded investors focused on building long-term wealth together. Yeah, it's really cool, Robert, because when you sign up, you get to actually tell the app what you're interested in. So for me, I chose dividends, I chose passive income, and I chose options. And so whenever

any of the other community members, there's over, I think, 150,000 people that use this app every month, talk about dividends, passive income and options. It's right there on my feet. They also offer a one-stop shop dashboard for tracking all of your investments, right? They have a dividend tracker, dividend forecaster, sector breakdowns, and much more. Yes. And make sure everyone understands Blossom is not an online broker. You're not investing into stocks on Blossom. They're simply a social app network for investors that want to connect with other investors. And did we mention they have 120,000 active users across both Canada and the U.S. So go sign up for Blossom using the link in the description of the show notes and we'll see you there. All right. Let's hear from Mo. All right. Let's dig in. Let's bring

Mo on. Welcome to the show. Okay. So Mo, walk our listeners through direct indexing and what FREC does to automate this tax loss harvesting for its investors and what makes it different and special. Walk our listeners through that. Yeah, absolutely. So direct indexing is a strategy that gets you passive index performance, but with tax losses as an added benefit, right? So it's similar to owning and buying an ETF like SPI, for example, but you get spy performance plus tax benefits, right? Tax losses. Freck does that is unique is it provides that at the same cost as PY's expense ratio,

which is around 10 basis points. And the way it does that is instead of buying a piece of the fund, it's going in and buying the individual stocks that are underlying, you know, the index itself. So if Apple is at 7%, it would buy 7% of Apple, then it would buy some Exxon and Vedia and Costco and everything else. And now it owns all the 500 stocks in the index, right? And what it's doing is on a daily basis monitoring all those holdings. And any time it sees an opportunity to tax loss harvest, meaning to sell something by a correlated basket, wait 30 days, buy something else,

it will do that motion with automation and software. And it's doing that every single day. So it's always constantly looking out for tax loss harvesting opportunities and booking these tax losses for you. So at the end of the day, you get the performance of the index, but with the added benefits of tax losses that you can use at the end of the tax. to offset your gains. So this is amazing. Tell me so I understand, why aren't all the big houses doing this? You know, what makes you special and different that everyone isn't offering this? Because it seems like such an incredible strategy to get those added benefits of tax loss harvesting all the way through the cycle of owning that investment. So why? Great question. So the funny thing is this is a very

popular strategy with family offices. You go to family offices who are managing. billions and assets and a lot of them are tax loss harvesting and have been direct indexing for decades now. So it's sort of like an old strategy. What it required in the past was very big minimums. Just to try the strategy, you needed a million dollars, right? And, you know, it was very expensive. And there was trading fees. And just running the software every day was costly and, you know, it was very prohibitive to do this. And, you know, today it's kind of come down market from a family office a bit in terms of now you have you can access it through a wealth advisor if you have a wealth manager at fidelity you've got one at Goldman Sachs they'll probably talk to you about this this is again

super common and growing as a category growing really fast sometimes you refer to this as an sMA account separately managed account so what happened was everything's changed in the past couple of years now you can do fractional share trading right we've all seen now on robin hood you can buy 1.5 shares of apple for example or whatever so now this has become common so we can do a direct index with the SMP 500 with $20,000. You don't need a million bucks anymore. You can do it with $20,000. The fees have come down. There's no commissions every time you buy and sell, right? That was a big piece of friction in the past. So now that has, you know, there's zero commission trading so we can trade all day long. And then, you know, finally the cost of compute has come down. So to run these

optimizations every day, we take that for granted, oh, it traded this and that. But, you know, that operation to figure out what to buy and what to sell at the tax slot level, you know, is quite expensive. And so now with the cost of commute come down, that can happen for everyone quite easily. So those are kind of the forces that made this strategy now more accessible to everyone else. Again, that is such a powerful technology. And that's why Robert and I took $20,000 of our own money and deposit it into the FREC direct indexing platform. We're now tracking the S&P 500, as well as, you know, enjoying the tax loss harvesting automation that you guys are doing for us behind the scenes. I mean, we're already up a couple hundred bucks because the S&P is up today.

And we've already tax loss harvested like $12. How fun is that? Like, it's just all happening behind the scenes. You guys are doing it for us completely automated. And we're really excited about that. And also want to encourage our listeners to consider doing something themselves with their own portfolio, right? If you are investing in the S&P 500 and you have tens, if not hundreds of thousands of dollars parked in these index funds, why not just transfer that over to a platform that's going to do it

for you, just like you're doing it already, but tax loss harvest on your behalf behind the scenes. Mo, is there any additional information you want to share about or anything you want to encourage people on as it relates to FREC and the tax loss harvesting and direct indexing, anything like that? Awesome. I'm so excited that you all are trying out direct indexing on FREC today. So one of the more popular features that we have is we have got a self-directed account on FREC that you can borrow against.

So we have a lot of credit that you can sort of like borrow up to 70% of your portfolio value in both your direct index account and your self-managed account on frack and it's priced very competitively at the fed plus 1%, which is 6.33%. And if the Fed starts cutting the rates, those rates will come down. And so that's a feature that exists today. Think of it as borrowing against your stocks is similar to borrowing against a house like taking a he lock or taking a mortgage, right? And we give our customers a bunch of tools around understanding the risk by doing so, seeing how far they are from a potential margin call. There's ways to do this in a way that is risk-averse. We sort of want to be very transparent with our customers and how to use that product responsibly. Obviously, you can

trade on Fract just like you would anywhere else without any commissions or fees from our side. There's the SEC standard fees that you do get when you trade a stock or an ETF, but you can do that as well today on track. Very cool. Well, Moe, thanks so much for joining us on this episode of Rich Habits podcast and breaking down for everyone, tax loss harvesting, direct indexing, and why it's so important for our listeners to consider these strategies as they build wealth over the coming years and decades. Hopefully, we'll have you back here very soon. Thank you so much. It was a blast. Thanks for joining, Mo. See you soon. Wow, that was an amazing conversation. I think I learned some, and we really got down to the nitty gritty on tax loss harvesting, and I love it. So, so cool.

So I am ready to jump into the rest of the episode, but that was awesome. I definitely learned a lot. And again, I want people to know here, Robert and I took $20,000 of our own money and we opened up a direct indexing account on FREC. We'll include a screenshot right now if you want to see it. We've made about $10, $12 of tax loss harvesting. We're up about $200 because the market's up today. Pretty cool. But just want people to know, like, we are doing this. We're not just endorsing it.

We're not just having them on the show. Like, we're taking our hard-earned money and we're putting it to work with this platform. So major shout out to FREC for not only sponsoring a webinar we had with them before, but also this episode and coming on to the show and educating our listeners as to how important direct indexing and tax loss harvesting can be. All right. Our first question comes from Jeannie. We got this question via email at rich habits podcast at gmail.com. If you have a question, send us an email or a DM on Instagram at Rich Habits Podcast. Which, by the way, Robert, there's some scam Instagram accounts trying to be our podcast. We are never going to DMU asking

if you like the show, ask for money. Like, we're not doing any of that. So please, please, please, please, do not ever send money to anyone on the internet, especially if they're pretending to be me or Robert. Ask for a FaceTime video. Ask for a selfie. Hop on a call. These people are so good at scamming, so please do not get scammed. Definitely be careful out there. Our first question comes from Jeannie. Jeannie says, Hi, Robert Nosson. I love the podcast. I have officially now listened to every single episode and it has really changed my outlook on life so much. So I'm excited to submit my first question for the pod. My name is Jeannie. And I'm 20. I make $105,000 a year from my W-2 salary job, and between $20,000 and $35,000 a year with my side hustles.

I do marketing and communication consulting. My husband makes around $145,000, however, we treat our finances separate, and we just kind of split expenses. Now, I personally have $80,000 in my 401K, $30,000 in my Roth, and individual accounts with a blend of dividend-yielding ETFs that you guys talk about, specifically SPYI, and QQQI. I have $12,000 in an emergency fund. I own my home with my husband. We put over 20% down last year. We have no debt besides the mortgage at a 5% fixed interest rate and we have no car loans. It's nothing. Now, here's the thing. We have our $100,000 base. What do we do next? I really want to diversify and invest in something that's going to increase my monthly cash flow. So what are my next steps to getting there? Wow. Oh my gosh. Jeannie and Jeannie's husband. 26. I don't know how old

your husband is here. Crushing, crushing it. Gully. I hope you guys realize how blessed you are. I'm sure you worked very hard to be where you are. And you obviously are very focused on investing, which is very disciplined. And you guys have all the right characteristics. But you guys are very, very different and weird and not normal, right?

Normal's broke. You guys are not broke. So, Robert, I think, you know, the real thing here that I'm seeing, two things. One, combine your finances. You guys are married. You're not roommates. Stop pretending like you guys are roommates. If you guys both want to retire early, you guys should both be working toward that.

That's my philosophy. Of course, if it's an abusive relationship or if drugs and alcohol in the picture, keep them separate. But it doesn't seem like that's the case here. So with that being said, you know, Robert, they want to retire early. They want to increase their monthly cash flow. How do you suggest Jeannie and her husband achieve that? Yeah, they've got their base built. They're doing pretty well with their 401ks and everything else.

I would just start getting more diversified. I would look at maybe some more real estate, maybe buy a duplex or a quadplex. I would definitely get a well-balanced cryptocurrency portfolio wedged in there because I didn't see anything there. I would look at maybe doing some small business venture investing where they get involved with some of these syndications and investor groups. And I just think the key here, especially wow, at 26 years old, is getting more diversified and building up on all of them. And that's where I would start right away. Yeah, I like that answer. I also think, you know, there's like kind of three ways that anyone can begin making passive income. One, real estate. We all know that. And you guys, of course, already own your house, 20% down. You have a great interest rate on that.

If you do want to do some real estate investing, be my guest. I think there's better ways, though. I would wait until you probably have a little bit more money because the numbers make more sense, the more money you have with real estate. I'd argue when you only have a little bit. It's just like so hard to get things to cash flow, at least with. interest rates at 7,8% right now. So if I were you, it seems like you guys have a lot of money in your 401k and in your Roth IRA. That's great. You can't touch that until you're 59 and a half years old. So you have another 40 years, 35, 40 years here until you're able to actually touch that money. If you want to retire early and increase your monthly cash flow, you have to be doing investments inside of a normal taxable brokerage account. If you want tax-efficient income, We always suggest SPYI and QQQI. These ETFs are very tax efficient.

And so, Jeannie, if you want to have tax efficient income, this is probably a good way to do that. Another thing to consider is I liked Robert's idea about investing into cash flowing businesses. I'm not a investor into any. Obviously, Roberts doing a couple is a lot of other different people that do some online too. But that's more active, right? So I think, Jeannie, ask yourself, do you want to be active? which it seems like you're active with your side hustle, right? It seems like you're crushing it over there.

So maybe you don't even have time to be an active business owner, right? So it's like if you really want to double down on the passive side of the equation, what Robert talked about with sort of the small business investing could be a good idea, assuming it's a syndication and you're not running the business. What I also talked about with the ETF's great idea, super, super passive. You literally do nothing. And something else, Jeannie, if you want to really nerd out, check out covered calls. I've made over $16,000 selling covered calls.

on my Tesla stock over the last, oh, it's now been, what, nine months, 10 months? That's, you know, over, yeah, it's over $1,000 a month I've been making with these, you know, covered call option contracts. And so if you want to really kind of get in the weeds there, it's not as passive because you have to learn and you have to kind of study it and get up to knowledge, but you're not, you know, actively building a business. It's just trading. So check that out. It might be a good idea for you, too, Jeannie. But you've done such a great job and we're really proud of you guys. Our next question comes from Rob. Hello, Austin and Robert. I'm at the beginning. stages of a product idea and I think it could be huge. The product idea is very inexpensive

and it's marketable to almost everyone. Any race, older young, big or small, we can market it to you. I've been an entrepreneur for many years and I currently co-own a successful environmental services company in Las Vegas. I've got 30 full-time employees and I've owned and operated a chain of gyms and indoor tanning salons before. My point is I'm pretty good at running a service-based business, but I've never put a product to market before. Now, I currently have secured a domain for the product's name. I've submitted the application for a trademark of the name, and I've established an LLC using that trademarked name. I've not yet seeked help or advice from anyone yet, so I figured you guys would be a really cool starting point, specifically because of Robert's experience.

What advice do you have for me at this point in my entrepreneurial journey? I love this question, and obviously it's right in my wheelhouse. I've been developing products and bringing them, to market for over 30 years. And I would say first and foremost, before you go spend a ton of money, you know, getting trademarks, getting patents and do all of that, really, really do your research and make sure the market is big enough. Make sure you can protect the product because knockoffs are the way of the world now in products, consumer products, businesses, and just really understand how much it's going to cost you to successfully bring the product to market. and market the product because a lot of people think they only need the money to build the

website, form the LLC and get the first, you know, 100 or 1,000 units of the product. And that couldn't be any further from the truth. You need a substantial amount of money for operations, marketing, and really flushing out the product to get it to come to fruition. Now, we have TikTok shops these days. That is awesome. TikTok. Maybe you can go viral quickly.

That would save you a ton of. of money if you can get the eyeballs that way. But I just want to make sure you understand those things. But also, if you're interested in hearing my thoughts on the individual product, let's get an NDA signed. Let me take a look at it. Maybe myself or Austin and I would even invest in it if it's good enough. And then I can walk you through all of the pitfalls to make sure you cover your bases for a successful launch of the product. Now I know, Robert, we only have limited information because this guy obviously doesn't want to like share too much. But, you know, let's say, you know, what are some of the pitfalls that you avoided with Paragon puzzles when you launched that product about six months ago?

Yeah, I mean, sometimes you can't avoid the pitfalls. Like when COVID happened, I had already designed a silicone bracelet that had a three quarter ounce pocket built into the bracelet. And I designed it for the National Park Services so they could sell them or give them away so people could have bug spray on their kids' wrist. make sure their kids were protected. We pivoted that product and called it sanitizer bracelets.com, right? You would think millions and millions of dollars are coming into my pocket. It was incredible. I think in the first 60 days after launch, we did a half million dollars in sales.

Within six months of being live in COVID when everyone needed this bracelet, there were over 20 knockoffs on the web. So what it became was a race to the bottom. I was selling the bracelets at 1499 apiece. which I thought was very reasonable. And then a knockoff would go to $9.99. Then someone would go to $6.99. Then $5.99.

And so it just became a race to the bottom where no one can win. So there are so many different hurdles you're going to have to overcome. And that's why you need to make sure that it is fully branded and you build a community around the brand. So you can have some protection because getting patents and getting trademarks don't work as well as they used to. because people don't care anymore. They will launch a knockoff, get it from China, from Alibaba, and in 30 days be stealing market share from you,

and it's just really, really heart-wrenching. But that's just one of them. You also have to look at who's doing your distribution, because if you hire out all the distribution, sometimes that can be expensive. If you go Amazon, FBI, they take a large chunk of your money, so you might just be trading money

and not have the profits needed to grow your business. So there is just a ton of, things to look out for. And that is why I say, let's get an NDA in place. I'll take a look at it for you and give you my opinion on the product as a whole. Double click on sort of your experience with sanitizer bracelets when it went from zero to half a million, a couple million dollars in sales. How were you fulfilling that? Were you prepared for that? And what lessons did you learn from selling a individual product that is so marketable, similar to how Rob's product is claiming to be so Markable. What sort of lessons did you learn along the way that allowed you to, you know,

not only make more money, but maybe save time and be more efficient? Yeah, we could spend hours on that, but I guess to touch on it is understand the product market fit. So you know how to market the product. I always tell people, I would rather you be running behind on orders than buy too many at the beginning. So many people fall in love emotionally with their product and think it's the next silly bands. So they go out and buy 20,000 units when they should only start with 2,000 units. So be careful there. I see it all the time where people launch a new product. They buy way too many units and it takes them 18 months to get momentum. And they had all that cash tied up in those units. Those are just a couple quick things that can really help you launch successfully without

burying yourself and tying up a ton of capital because also remember this. When you're launching that product, there's going to be iterations. So why have a ton of your first model, your first skew when you might find right out of the gate you want to make changes to the product? And so that's why I always tell people to bootstrap it early. You'd be better off telling customers, hey, we're on a two-week delay right now than having 10,000 units sitting there that you can never sell. That makes sense. That makes a lot of sense. Now, Robert, before we jump into our last question, let's take a moment to hear from our favorite way to invest in find artwork, which is MasterWorks. Despite the stock market hitting new all-time high, something Robert and I are very excited

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Art forward slash rich habits if you want to skip the wait list. I've got thousands of dollars invested on their platform. Robert does as well. We think it's a great way to diversify. So back to you, Jeannie. Maybe this is your diversification answer. Oh, Robert, before we go to the next question, I want to remind our listeners, too.

There's a cool website I found called dupe.com. D-U-P-E-D-U-P-E.com. I love dupe. Oh, do you use it? Yeah. Dup is dope. I can't wait to use it more when I get my forever home. Yeah, man, I've seen some TikToks about it.

And I was like, no way this is real. I poked around a little bit. I didn't purchase anything yet. But essentially what it does is it allows you to take a existing, very expensive piece of furniture or, you know, desk or cabinet or something that you've seen in the real world that's expensive, thousands of dollars, you copy and paste the URL into their website. And then it uses artificial intelligence to find other pieces of furniture that are like nearly identical. I mean, nearly identical, but instead of paying $2,000, you're paying $47 or $400 still, right? But it's

way cheaper. So yeah, check those out. Our last question here comes from My Rec. My Rec says, Hi Robert Nostin. I'm riding to seek your advice as I feel uncertain about my next financial steps and I worry that I may not be investing enough. As background, I'm a 27-year-old nurse currently pursuing a nurse practitioner degree. I live with my fiance in her condo, which she owns. I have one rental property that generates net income of $400 a month. I'm debt free. I have no student loans. I have no car payments. I have no credit card debt and I pay for school out of pocket. I've saved $50,000, which is currently sitting in a high-yield savings account. And I'm a $1.000. I have a $1.000. I have I invest through my Roth IRA and my employer's 403B.

I max out my Roth IRA every single year, which now has a balance of $27,000. And my 403B has $31,000 in it, which I contribute 15% of my income while my employer matches 3%. I feel like I should be investing more, but I'm unsure about the best course of action. I'm debating whether I save up to purchase another rental property or if I invest more into my brokerage account instead, I would really appreciate your guidance. Now, Robert, I think, now let's just assume this, call it $50,000, carve out $15K for a emergency fund. The other $35,000 is probably what My Rieke is using here to pay for his nurse practitioner degree. But I guess what I'm trying to say here is, one, you have $27,000 at 27 years old. Congratulations.

That's awesome. You also have $31,000 at 27 years old. That's awesome. And you're sitting on $50k, of which I'm sure some of it's going to go to pay for school. but like give yourself some more credit here. I can't tell you how many 20-something-year-olds I know that are up to their eyeballs in credit card debt are completely broke, have no career aspirations,

they have no idea what's going on. They're living paycheck to paycheck because they don't care to, you know, increase their income or start any side hustles or a side business, right? There's a lot of people out there that are in their 20s that are absolutely dumbfounded broke, where you, My Rique, are on the other side of the equation. You have career goals. Nurse practitioners make 120, 140, 180,000.

in a year depending on experience. Congratulations. That's a big, big, big income you're going to have here very soon, especially with no debt. Oh my goodness. So here's what I would do. I'd give yourself some grace. I would graduate. I'd get your nurse practitioner degree. Continue, of course, doing this 15%, max out the Roth IRA. But, you know, once you do graduate and you start making 120, 15, 180 as a nurse practitioner, then you can start squirreling away at $20, $40, $50,000 a year to really up your investing. Go buy that next rental property. Go dump it into, you know, a taxable brokerage account into SPY or QQQI and start making some passive income. Go put it in the index funds we talk about, V-O-O-Q-Q-Q-Q-G-T, V-T, V-I-I and Mo. You know, that's when you are getting excited about investing. I wouldn't beat yourself up. You're in school,

you're 27, and you've got a great head start on all of your peers. Yeah, I mean, when I look at these types of questions, it just gives me goosebumps because I know 47-year-olds and 50s. seven-year-olds that aren't in this position. And so like Austin said, give yourself a break. But if you want to add some other things to get more diversified, get a balanced portfolio of cryptocurrency. Maybe start with just Bitcoin, Ethereum, chain link, and maybe XRP. Get that going.

Maybe look at getting a Fundrise account set up so you can get some money recurring into Fundrise, into the Innovation Fund. I think is going to do great over the coming years through Fundrise. So there's a lot of ways to really start diversifying. maximize your gains. But I just love this where you're at. You're off to a great start. And I would really give yourself some credit because you were way ahead of the curve. Marique, you're doing a great job. Robert said it best. You're way ahead of the curve. Keep your head up. Keep listening to the show. And stay educated, right? That's why you listen to the show. You're ahead of the curve because you

listen to the Rich Habits podcast. Another awesome podcast out there. Everyone, thanks so much for hanging out with us on this episode of the show. Don't forget, we have a newsletter called the Rich Habits newsletter. I'll tell you exactly how many people. Let me look it up real quick, Robert. have 42,102 of you subscribe to this newsletter, 48% open rates. So nearly half of you guys are opening up our emails. You must care about them. And you're clicking on nearly everything. Okay. You guys are loving these newsletters. A new one comes out every single Thursday. We have a chart of the week. Roberts call out, my call out. We've got headline news as it relates to the stock market and investing, inflation, the Fed, interest rates. It's all in there, guys. This is a once a week newsletter you need to add to

your rotation. The other thing I want to mention is that Robert and I are working behind the scenes right now to build out a rich habits community. This is going to be the coolest thing anyone has ever seen as it relates to building wealth while having the guidance needed on a weekly, monthly, and daily basis to help you do that. It's going to be the coolest. I'm so excited about it, Robert, and it is coming out in the next couple months. So stay tuned for that. You definitely don't want to miss that. And again, thank you all for joining us each and every week for these episodes. We are so blessed to have all of you keeping us at the top of the charts, helping us grow, and to always just be part of this journey with Austin and I. We love it every day, and we're glad

you do as well. And remember, share it with a friend. Maybe someone has a mindset issue. Maybe someone is down on the dumps as far as their career or whatever. Share it with a friend because it can always maybe help lift them up by giving them some insight of maybe how they can fix their issues as well. And we thank each and every one of you for joining us every week. Thanks, everyone, and have a great start to your week.