Rich Habits Podcast - Q&A: $1.2M and "Broke," the Rat Race of Leasing, and Finding Balance w/ Investing and Spending

Starting point is 00:00:00 This spring, denim gets a softer, lighter update. Introducing Old Navy's drapey denim wide leg, a new fit that moves with you. It's everything you want denim to feel like for summer. Easy, breathable, and effortlessly cool. With a fit that creates natural movement and a wide leg that feels modern, not overwhelming. Plus, that signature... Wait, for this price? Moment.

Starting point is 00:00:24 Old Navy's drapey denim wide leg. Twizzlers keep the fun going. Yeah, I know. I just stopped whatever you were listening to to tell you that Twizzlers keep the fun going. Well, irony isn't my forte, but twisty, chewy, yummy Twizzler sure is. So think of Twizzlers as a little pallet cleanser for whatever's queued up, which, by the way, should be coming very soon. Like any second now. Okay, Twizzlers, time to keep the fun going. Hey, everyone, and welcome back to the Rich Habits podcast, question and answer edition. These are our Thursday episodes where you're You send us via email, Instagram DMs, or through the Rich Habits Network, your questions, and we answer them live here on the show. And we cannot be more excited to answer the, I think Robert now, seven or eight questions we've got banked up for this episode.

Starting point is 00:01:14 Yeah, I'm excited. It's going to be a really good episode. I love how detailed the questions are getting. So it's awesome that, you know, everyone in the Rich Habits Network is really digging in and understanding the word network and that we're trying to really build this awesome, awesome community where we can just help so many. people across so many different sectors of business, mindset, investing, personal finance and all of that. So it's super exciting for me as well. Totally agree. If you've not yet signed up for the Rich Habits Network, there's going to be a link with more information in the show notes below. We also have a completely free once per week newsletter that went out this morning. Those go out every Thursday mornings as well. It's called the Rich Habits Newsletter. We've got about 45,000 people that have signed up for it,

Starting point is 00:01:55 and you guys are absolutely loving the things we share inside of that. So that's going to be linked out in the show notes below as well. And just a quick heads up, time might be running out to lock in that 6.7% yield at public.com. Right now, bond yields are at their highest level since 2009 and you can take advantage of it with a bond account. But here's the thing, Robert. The Fed has signaled potential rate cuts in September and there will probably be more this year to come and into 2025.

Starting point is 00:02:22 The good news is that with a bond account on public.com, you can lock in a potential 6.7% yield until 2028. And when the Fed lowers interest rates, your yield remains the same. But you must act fast to take advantage of some of the highest bond yields in years. Discover how you can lock in a 6.7% yield until 2028. The new bond account only at public.com forward slash rich habits. Robert, I remember four, five, six weeks ago, we were reminding people lock in this 7.3% yield and then it was 7.1, then it was 6.8, now it's 6.7. If you want to lock in a yield above that 6% range, time is definitely running out. So go check out public.com's new bond account. I want to make sure everyone's on the same page here too. A bond account is a self-directed brokerage account with public investing.

Starting point is 00:03:10 They are a member of FINRA and SIPC, so they have that insurance. Deposits into your bond account are actually used to purchase a set of 10 fractional investment grade in high-yield bonds. Now, the yield represents the monthly average that's then annualized before fees as of September 16, 2024. The yield is subject to change daily and yield at the time of purchase may actually differ. Don't forget, all investing carries risk, not investment advice, but be sure to visit public.com to learn more about the bond account. All right, Robert, our first question comes from Everett. Everett says, Robert Nostin, I love your podcast. Thank you so much for taking the time to put out such great information.

Starting point is 00:03:47 Here's the deal. I own two properties outright with no mortgage on them. One is worth 350,000, and the other is worth 1.2 million. However, I've spent all of my savings renovating the $1.2 million property, and we now have nothing in our emergency fund. Our monthly expenses for my family are on $15,000, and I'm sort of in this desperate situation where I do not have any access to money because it's all in equity in my homes or tied up in my retirement accounts.

Starting point is 00:04:16 I'm really desperate right now to find some options. What do you guys think about my situation? Do you have any advice for me? Robert, you want to kick this one off? Everett, Everett, Everett. I have been there. I remember back, this was like 2015. I had the big house in Vegas.

Starting point is 00:04:32 I had the big house in Ohio. I had the rental properties. I had all this, everything going on. Everything was great. And then the bottom fell out of my cash flow. We just had some lost clients. We had a couple businesses go awry. So Everett, I've been there.

Starting point is 00:04:47 I know this sucks. And you are in a very difficult situation because you're cash poor. right now. I would say you do have some options. You could maybe go looking at taking out a loan against one of the properties. You know, we talk about that all the time. You could sell the $350,000 property to give you the cash right now to sustain this situation. But it is not pretty and it is something you have to make sure you don't ever do again. Because when you get in these situations where your cash poor and equity rich, it can be a killer of your financial situation for a very, very long term. And speaking from experience, it is tough to get out of. So my opinion would be

Starting point is 00:05:26 either get a he lock because it's quick and simple, a little bit painful, or I would sell the one property because you have to do something because you don't want to be in a situation where you drain all of your retirement accounts and you find yourself just with these two properties because in the end, you're going to end up having to sell one or both anyway. All right. So here's my perspective. Everett, you claim that you don't have any mortgages on these two properties. That's awesome. How are you spending $15,000 a month? Just on what, utilities and groceries? Like what, like car payments?

Starting point is 00:05:57 I can understand maybe let's say it's some crazy outlandish car payments. $15,000 a month is still a lot of money, assuming you don't have any mortgages. So the first thing I'd want you to do is really audit your spending. Everett, I want you to go listen to episode 80. It's called How to Be Intentional with Your Money. We just published it a couple weeks ago. But to me, it just seems that your budget is way out of whack. I don't know how you're spending $15,000 a month, not having any housing cost.

Starting point is 00:06:24 I mean, I could understand if your mortgages, you know, a $1.2 million house, you had a mortgage of $45,000, $4,000, $7,000, that would make total sense. But you don't have any mortgage payments and you're still spending this much money. So the first thing I would do is audit my spending. I would download our budgeting tool in the show notes below, really build out your honest budget and figure out where your money is going. Assuming that this $15,000 is real and you cannot cut down on it, any which way. The other option to Robert's point is to sell the $350,000 house. If you wanted to take out a very

Starting point is 00:06:56 small helot to help you make ends meet, which I think is just unreal to even think about with someone that has so much millions of dollars. But, you know, if you did want to do that, I could understand that, but please don't overdo it. Please don't do it and use it as a way as like a crutch for your spending patterns or your spending habits. But I do want to really, really encourage you to kind of audit that 15,000 a month. I don't know how you can't bring that down maybe to 10, 12,000 at least, right? It just doesn't really make sense to me. But the core problem here, Robert, is that this couple is spending a lot of money, $180,000 a year just to live their lives, and they have all their money tied up in real estate and these IRAs. And so the only way you are going to be able to sort

Starting point is 00:07:40 of build that buffer again is if you cut back on the budget, allowing you to save the difference. or you pause the home renovations, which is what you were alluding to, spent all your money on, pause the home renovations for a little bit, build up that emergency fund, there's no shot clock on these home renovations, and allow yourself the flexibility to begin to add some breathing room into your monthly budget and build up that emergency fund, three, six months of expenses. So for you, maybe that's $30, $45, $60,000, depending on how conservative you want to be. But this situation is really weird to me. And if things don't turn around, I would consider selling that $350,000 property.

Starting point is 00:08:18 And I would use that money, one, to finish those renovations, and also two, beef up that emergency account again. And then three, perhaps begin investing even more now, but inside of a bridge account where you actually have access to the money. Yeah, you hear me talk all the time that I no longer put myself in these situations. I always have a very substantial cash reserve that would be in high yield savings, treasury bills or one of my brokerage accounts that I can easily access it. And I think this is an important learning lesson that sometimes people go, oh, we're going to do this $500,000 renovation. That's fine.

Starting point is 00:08:52 We have the money. And then they end up exhausting all of their free cash flow and put themselves in harm's way. And we just want to make sure everyone listening understands. Don't do that. Don't overstep what you have the ability to handle. So many people take on too much and find themselves in trouble. And we just don't want to see anyone in harm's way. Our next question comes from Susan. Susan says, I'm new to investing in the stock market. I listen to your podcast and you all talk about single stocks that you're excited about. But how do I actually add these to my investment portfolio?

Starting point is 00:09:22 Am I supposed to set aside a specific amount per month to invest in them? What's the strategy? Great question, Susan. Here's how I like to explain it. I want personally to have 65, 75, 75, 85% of my investment portfolio invested into these long-standing index funds that we always talk about, the S&P 500, the NASDAQ, you know, VTI or MOT or things like that, right? So I really want to have great diversity with a vast majority of my investment account. With that being said, I also like single stocks. It's one of my passions is doing the research and owning equity in companies I

Starting point is 00:09:57 really believe in. So to your point of how do you approach investing into single stocks, it's pretty simple. If you want to carve out 5, 10, 15% of your total investment portfolio and allocate that to single stocks, I think that's a pretty healthy consideration. The way that you could do that is every month, let's say that you invest $1,000 or $500 into your brokerage account, just take out 10% or 15% of what that number is and allocate that to your single stocks. So for round numbers, if it was $1,000 a month, 850 that would go to the index funds we talk about. And the other 150 could go to buying some single stocks, maybe like Amazon or Google, for example, right? Want to make sure, though, that you're not confusing single stocks with penny stocks. I think a big mistake people make

Starting point is 00:10:42 earlier in their investing careers is they get really excited about finding the next Amazon or the next Google or the next Microsoft or the next Nvidia. And so they go in and they allocate too much of their portfolio into a risky single stock that goes down 30, 40, 60, 80 percent in a short period of time and all of their investment vanishes. So do not make that mistake. If you are going to buy single stocks, be sure you buy them in big blue chip companies that are operating in secular growth trends, like Amazon, like Google, things like that. And you're not over allocating to single stocks. I agree. Austin and I talk all the time about building your base first. And I think most people, they don't really want to listen until they get dinged around a little bit. You know, they get into

Starting point is 00:11:23 investing. It feels good. They get their first five, 10, or $15,000 going. But then they go off the rails. and they listen to Billy down the street or Bob at the Barbershop or Susie at the nail salon and they've got a hot stock tip and unfortunately that is not being an investor. That is being either a gambler or a speculator and you need to know what you are as a person because if you're a gambler you're going to see a lot of highs and a lot of lows. If you're a speculator, it means you want to learn a little bit and you're going to know what you're doing somewhat but you're still taking higher risks. And if you're an investor, you're going to likely just follow the rules.

Starting point is 00:12:03 You're going to learn along the way. Your financial education is going to improve. And you're going to do very well over time. So just understanding that is important. And I don't think anyone on their investment journey should start out picking individual stocks. Now, if you love Amazon or you love Alta Beauty or you love Costco, great, go buy their stock. Buy what you know. This is a very important part of investing.

Starting point is 00:12:28 But for the most part, until you get up and running and you're making money passively, we want you to build your base in those ETFs and index funds that we talk about and keep it safe because guess what, the pros are going to do a better job than you are. I couldn't have said it better myself, Robert. Now as a quick heads up, time may be running out to lock in that 6.7% yield at public.com. When you invest in a bond account, you can lock in your rate until 2028. And with potential rate cuts on the horizon by the Federal Reserve, you might want to act soon. Discover how you can lock in a 6.7% yield until 2028 using the new bond account only at public.com

Starting point is 00:13:05 forward slash rich habits. All right, Robert, our next question comes from inside of the rich habits network from Erica. Erica says, I love the rich habits podcast for its uniqueness and for having Austin and Robert collaborating on some monetary motivations for the masses. That is a really cool phrase. I like that. We're going to steal that. That is getting trademark.

Starting point is 00:13:26 Thank you so much. So Erica says, here's my bare-bone story. I'm 54 years old. My spouse is 56, and we own a struggling restaurant in which all of our monetary income seems to fall into. We're either constantly paying off debt and then accruing more of it. I recently, though, unearthed an old traditional IRA which has $14,000 into it, a really cool start to a nest egg. A couple months ago, my brother and I sold our rental property at about $300,000, and after paying off the home equity loan that we had against it, my takeaway from that transaction was $105,000. The other $76,000 sits in a high-yield savings account paying 4.2%. I'm keeping in mind that capital gains tax will be around the corner, so I'm

Starting point is 00:14:07 setting aside a heart-crushing $20,000 for the IRS. So here's my question. I've got $80,000 after the IRS is paid between this high-yield savings account and the CD. What is the best way to put this money to work so that hopefully in 10, 15, 20 years, I might have the opportunity to retire. Robert, want to kick this one off? Yeah, I mean, I think you're on the right track. And with having 80,000 that lump sum, I think if you play your cards right, you can definitely get into a good situation. Obviously, at 54 years old, you've got some, you know, time to make up and you've got to hustle

Starting point is 00:14:44 and be smart with this money. So first and foremost, I would look at getting it into the markets. You know, it's okay to have these high-yield savings and CDs, but you're just not going to perform as well as the overall markets would do. So I would look at that first and foremost. At 54 years old, you could do a traditional account. You could do a Roth IRA even still and get some benefits for it. But I would do that first and foremost and use a substantial chunk of that, maybe $50,000 or $60,000 and put it into these ETFs that we talk about all the time like the VOOs, the QQQs, the VTIs. and I would look at getting a basket of these index funds up and running so you can have some

Starting point is 00:15:25 good gains to look forward to over the next 10 or 15 years until retirement and then keep some in an emergency fund in a high yield savings or like you said the CD. I think that's a great place to start. I would agree, Robert. Now, I think the first step to retirement is knowing what it's going to take to retire, right? Not just blindly investing or blindly kind of doing whatever I can here to just maybe I'll have money in 15 years. I don't know, right? Maybe. No. Erica, I want you to have full understanding of your situation as well as where you want to be headed over a specific period of time. So what I want you to first do here is figure out, you know, we're looking at about 15 years until retirement, maybe 10 if you're lucky. Let's call it 10, 12, 15 years. It'll be that

Starting point is 00:16:10 65 to 70 range, right? Let's call it 67. At 54 years old, I'd imagine you have a pretty good understanding of what specific milestones need to be accomplished before you can retire and let's call it 12 to 15 years. Do you have a mortgage on your house right now? Is that something that you can pay off over the next 10, 12, 15 years? You mentioned that you've got this $80,000. Can you use this 80,000 to again then max out that traditional IRA of 14,000? So add another 7 to that. And then maybe you mentioned you have a restaurant business. Maybe there's a world where you can open up a solo 401k. And through that solo 401k, you can start to begin aggressively investing into these retirement accounts. I guess what I'm trying to get at here, Erica, is if I were you, I would really sit down and begin running the

Starting point is 00:16:54 numbers. I would understand, okay, I want to give myself the goal of retiring at 67 years old. So for you, that's going to be 13 years. The stock market doubles every seven years. So let's call it two doubles right between now and then. So if you invested all $80,000, or let's call it this $94,000, if you include the traditional IRA into the stock market, that would be a potential $376,000 in a retirement account. That's a really great place to be, especially if you have a paid off mortgage. Now the other thing, Erica, I want to encourage you and your husband to do is to begin to rethink what retirement looks like. You mentioned you have a restaurant. Maybe owning a restaurant isn't something you want to do in retirement, but potentially working or consulting local restaurants could be something you want to do.

Starting point is 00:17:40 I guess I'm trying to get out here is a lot of people make the mistake of, okay, I'm 65, I'm now just going to sit at the beach all day, or I'm not going to do literally anything. I'm just going to watch sports and play golf and, you know, go on vacation every single day. That's what retirement looks like. I'd argue that's not what retirement looks like, right? And so for you, retirement might mean doing some passion projects that make you an extra up $30,000 or $40,000 a year to supplement some social security income and supplement the income you're going to pull from this retirement account.

Starting point is 00:18:08 So I think, Erica, there's a lot to look forward to here. a lot to be excited about. And having this $80,000 windfall can really help push you in the right direction. And I want to add one more thing. And that was a great hot take, Austin. But I want to add one more thing, Erica, as someone that's been in the restaurant business my entire life, just be very, very careful here because if you say you have a struggling restaurant, then you need to be careful that you're just not hanging on to it for all the wrong reasons. If it's struggling and it's bleeding you guys dry and causing a lot of financial stress, you might want to consider can it be fixed? Are you not marketing correctly? Do you not have the right website? Is it a bad

Starting point is 00:18:45 market fit? Has the neighborhood changed? Whatever the reasons may be that it's struggling? Because a lot of people in small business will struggle for years and sometimes decades because their pride overrules their sense when it comes to finances. And so just be very, very careful there and maybe doing an internal audit on the restaurant as well and say, okay, how long have we been struggling? Obviously, it's been a while or you wouldn't have mentioned it. And so look at that and say, all right, is this worth it? Can we get out of it? Can we sell it and have some positive arbitrage in our favor? And really do an internal audit regarding the restaurant as well because you don't want it to be a drain on your finances for too long. I couldn't agree more, Robert. And that just made me think here,

Starting point is 00:19:30 sometimes, you know, to your point, do not fall in love with investments. Do not fall in love with occupations, do not fall in love with how you're generating income for your family. It is simply a means to an end. And if you guys can sell the restaurant, even break even on it by selling it, and then you go get a job for $45,000 a year, your husband gets a job for $45,000 a year. Congrats. You now have household income of $90,000. Let's call it $78,000 after taxes. That's now $75,000, $78,000 of take home pay. We're talking about $6,000 a month. You invest $1,200 of that every single month. Now you guys, this $376,000 investment retirement portfolio is worth hundreds of thousands of dollars more because you decided to get rid of the restaurant, have your normal nine to five jobs,

Starting point is 00:20:16 making maybe less in the grand scheme of things to your eyes because you're like, oh, the restaurant, I get paid this much more. I'm going to make this much, right? But there's so many other factors that you're juggling and not taking into account. It's okay to be a cog and a wheel. It's okay to be a worker bee. It's okay to work that nine to five because at the end of the day, it's a means to an It's just a way to sack money over to the side so we can retire happily one day. And I really think that's something you guys should consider. So our next question comes from Danish. Danish says, what are the signs that you're focusing too much on saving that it's now limiting your potential for happiness today or even earning more in the future?

Starting point is 00:20:49 Are there any guidelines, percentages, or signals that help you figure out when to save versus when to invest in yourself or experiences? Robert, I'll let you take this one first. I love this question. and it is the hardest thing to figure out because personal finance is personal. And I'm going to tell a quick story about a dear friend of mine. He is a wonderful, intelligent, 60-some-year-old guy. He's a great guy. He has millions and millions of dollars.

Starting point is 00:21:16 And I yell at him every time I see him, which is every couple of years, because he will not upgrade his living. He will not take vacations. He has an old beat-up truck. And he even had the last time I was at his house, tube TV. It was a big TV, but an old style tube TV. And to me, that is taking it too far. You have to enjoy life and enjoy the fruits of your labor along the way while still making sure that you set yourself up for retirement. And he has done that 10 times over, but he just doesn't know how to do the balance of living a great life and then also saving for retirement. So I think this question is

Starting point is 00:21:54 fantastic. And it is different for every single person. We're not saying don't buy the jet ski along the way or don't upgrade the kitchen or get that hot tub that you want so badly for the new house. We're just saying make sure that you're doing it in balance. Make sure you're saving along the way because so many people live beyond their means for decades and then try to play ketchup. I assure you I get a million DMs and emails a month of people saying, hey, I'm 54, I'm 46 and I'm running behind. So this question is great. It's different for everyone. we always tell you that in a perfect world, you would be putting aside 15% of your net disposable income per month towards retirement and investing.

Starting point is 00:22:35 But everyone is different. Some people save more. Some people save less. It all just comes down to your personal goals because we want you to have fun along the way, but not so much fun that you become a Walmart greeter at 75 years old. I really like that, Robert. And he asked for guidelines. So I'm going to give him my guideline.

Starting point is 00:22:54 And I've mentioned this on the podcast a couple times. Every $100,000 that I invest into the stock market, my retirement accounts, whatever else, I purposely set aside $10,000 over the next however many months to just enjoy. That might be a vacation. For me recently, in May, that was a jet ski. It could be whatever else. But I think what's more important about this, like, oh my gosh, Austin, I don't have 100,000 to invest.

Starting point is 00:23:16 I don't have 10,000 just throw. You're right. Use a percentage. For example, Robert, let's say that someone makes $100,000 a year. And they're investing $15,000 a year, right? that 15% savings rate into their retirement accounts. How about every single time that you invest that 15% or however much you feel is adequate to you, you set aside 10% of the number that you invested and that is now all you money. So for example, if you max out that 401k and that's what,

Starting point is 00:23:44 23,000, you can now say, okay, I'm giving myself permission to spend 2,300 on that vacation, on that new pair of shoes plus the this and I want to do this, like whatever it might be that makes you happy. But, you know, a good maybe just general guideline is say, let's say 10% of what you're investing over, you know, an annualized basis can be used to say, all right, this is just fun money. I want to enjoy this. I know I'm doing everything right as it relates to retirement investing, but I need some near-term motivation to keep me up at this pace. So I'm going to set aside 10% of whatever I invested and use that as my rule of thumb. I love this and how you break that down because to me it's so important as the elder statesman of the rich habits network.

Starting point is 00:24:27 And that is, I've been through it all. And that is one of the beauties of having age and wisdom. And too, too many people, a huge percentage of society, they literally kick the can down the road forever. And then one day they wake up. And it's usually after a big financial scare. And they go, oh, shit. What are we going to do?

Starting point is 00:24:48 We only have $87,000 for retirement, $112,000. thousand dollars for retirement how on earth are we going to retire and then they try to unravel that 20 or 30 years of living beyond their means and it's so important to spell it out because if you can be vigilant and just put aside something every single month i did a tic-tok yesterday actually about it of how you can turn 250 a month into one million dollars guaranteed if you stay focused and you just do the work and it doesn't have to be this huge amount of money every month as long as you stay consistent, then you can live a life with balance of both fun, but also making sure you're set up for retirement.

Starting point is 00:25:29 I also think, Robert, and now this is something that I struggle with this. I admit it, right? That's why I gave myself this rule of like, you know, I have to spend money because if it up to me, I'd invest everything. My girlfriend would leave me. We wouldn't be doing anything fun on the weekends and I'd invest on my money. I know that about you for sure. And I used to be that as well.

Starting point is 00:25:46 You have to find the balance. And so, Robert, how I've kind of begun to flex this spending muscle, is by giving money as well. I am charitable. And so seeing money just be given and the positive impact that can have makes me feel more comfortable about taking money out of my account and just letting it go. And so I think maybe for Danish Thier, if he is someone who has trouble spending money, maybe there's another world where you could practice this muscle or kind of flex this muscle a little bit more maybe with charity. You know, go to your local waffle house and tip someone 100 bucks. do what makes you feel really good about money leaving your bank account and then kind of use that

Starting point is 00:26:23 as like a little gateway towards spending it a little bit more irresponsibly if that makes sense. Yeah, I definitely love that because, you know, there's a difference between being cheap and being frugal and you just have to find the balance of what works for you. Everyone is different. And we talked about this and I forget what episode that so many people think that rich people don't budget and they just spend frivolously. And it's actually the opposite. Most of the wealthy people that I know and have known for decades are very, very cost sensitive and they're very budget friendly because they just want to make sure that they stay on track.

Starting point is 00:27:00 Because the good and the bad thing about building wealth is in many situations, and especially this one, it's never going to be enough. You know, we all hear the stories of, man, if I could just make 100K a year, I'd be rich. Then you start making 100K a year. Your lifestyle creeps up. than 250 and then it just keeps perpetuating. So just keep that in mind. You'll find the balance and I hope this helps. Our next question comes from Daniel. Daniel says, hello, I'm new to the podcast and I love what you guys share. It's helped me and my family be better with our income and pay off our debts.

Starting point is 00:27:32 I have two questions. All right, Robert, lock in here. We've got two questions from Daniel. The first question is, I'm getting into the habit of reading good books to help me develop a better version of myself. Right now, I'm reading the seven habits of highly effective people. and I'm loving it so far. What books do you all recommend for me to read? What are your top three? And he has a second question, but let's answer this one first, Robert.

Starting point is 00:27:52 The three books I would want you to read are Atomic Habits, The Little Book of Common Sense Investing, and Zero to One by Peter Thiel. I think those are my top three books that I feel like if you understand and read all three of them, if you have an itch for entrepreneurship, zero to one's going to help you scratch that itch. If you have an itch for learning more about investing,

Starting point is 00:28:13 the Little Book of Common Sense investing will do that. And then back to the idea of atomic habits, this guy obviously wants to be better version of himself. So atomic habits is definitely going to help him do that. Yeah, I wish I'd have went first because you took two of mine. So I'm going to add, think and grow rich. So let's do think and grow rich to this. And then a book that no one seems to ever talk about. But I think it combines kind of financial literacy and mindset is the richest man in Babylon. I think it's a really cool book. You can probably find it used somewhere. And those two are great additions, but definitely I love yours. Peter Thiel, he is a godsend in investing and

Starting point is 00:28:52 entrepreneurship and everything in our society. And he should get more accolades for his knowledge and how he does things. But that book is incredible. I've read it multiple times. And then I just love think and grow rich. I think it's a classic that everyone should own and everyone should read. Totally agree. Yeah, Peter Till, I mean, I would argue he's the best technology investor of our generation for sure. Now our second question from Daniel's this. I have a car loan, which is a loan for seven years now, and I'm paying $600 a month on it. I am two years into this loan, which means in five years I'll have a paid off car. Here's my question, though. I now want to go lease a new car, and I think I might be able to get a lower monthly payment, but I can use the equity from the car I

Starting point is 00:29:36 have today and use that as the down payment on the lease. What do you all think about this strategy? Is it a good idea, especially if I can get the payment down to $500 a month instead? I'll take this one. I'm the car guy. You're in a difficult situation, but you do have options. We don't have the total information on this, but let's assume you've done your homework and you have equity in the vehicle after two years of payments. I don't think you do, but we don't know if it was a brand new car, if it was a used car as a luxury car.

Starting point is 00:30:05 But let's assume you do have equity. If you could trade out of it with the car, this positive equity and use those funds towards a lower price lease, then I think it's a good idea. I personally, if you could trade out of it and keep the money out and put zero down on the lease, I think would be a better idea because you could take whatever that equity is and invest it into the markets so you could be making some gains because any of you that have followed along with the rich habits and me for a long time, you know my status and my thoughts when it comes to owning a car. I think the only time you buy a new car is if you're going to

Starting point is 00:30:40 drive it into the wheels fall off any other time you either buy used by two three years old or you lease because the depreciation of a vehicle is always front loaded in that first three or four years and so for me in this instance i would see if you could trade it in take the equity out use it for your own personal good and just do a zero down lease and lower that monthly payment if you want to roll the equity over to get the payment down even further that's great but i like where your head's at It's just a slippery situation. So I'm going to take the other side of the aisle on this one, Robert. Let's say that Daniel gets this lease and it's $500 versus $600.

Starting point is 00:31:19 Fast forward three years because that's the lease term that he mentioned here. He's locked in for three years. Now he has to get another lease for $4, $600. So now he's back to where he started. And if he had just stuck to his original monthly payment, he would have no car debt. And he would have a paid and free car that now freed up $600 a month to begin investing more aggressively. So I guess what I'm trying to get at here, Daniel, is if you want some short-term gain of $100 a month for a long-term paying, then do this lease option. But if you want to just

Starting point is 00:31:51 get to a point in your financial journey where you have a paid for a car, you know, call it five years from now, maybe paid off really if you want, but in five years from now, that'll free up this $600 a month payment. And now you can invest all $600 a month toward the stock market. I mean, that's the place to be. And in my opinion, too, it's like, are you really that strapped for cash where a $100 per month, $100 per month is what we're talking about here. That's all you're saving, right? Because you mentioned you want to find a payment lease for $500 a month. So we're talking about $600 to $500. Is $100 a month really going to move the needle for you every single month in a personal finance perspective? If that's the case, you've got bigger problems than

Starting point is 00:32:28 leasing a car, dude. I would just say, dude, drive DoorDash or drive Uber or whatever for $100 a month or whatever your side hustle is, right? You know, I think this is a bad idea and I don't think that you should put yourself on the hamster wheel of having to have a car payment now every single month, every three years for the rest of your life. Now, the only difference, again, I'm going to take the other side of the fence with Austin on this one. And that is, I'm personally that guy. I lease a new vehicle every two to three years for my primary vehicle. Now, I have fun toys that I own. I have classic cars that I own. But for my daily driver, I just don't ever want to deal with going to the mechanic shop. I don't ever want to break down, especially if you're married and you have kids

Starting point is 00:33:07 and this is the primary vehicle for the family, I want to have a car that's under warranty that I don't have to touch every two or three years, and it's just so much easier at the end of that term just to hand them the keys, grab the keys to the new one and be out the door. So for me, it's safety, it's convenience, and it's a cheaper monthly payment for a higher-level car.

Starting point is 00:33:29 Now, point number two, and then we can move on because Austin is right, but I think I'm right as well, is that once you pay this car off, assuming you're two years in, you have five more years to go, you have a seven-year-old car. So there's issues there as well. Is it going to be breaking down more? What's the cost per month going to cost you an upkeep? Because one $1,200 bill a year is $100 a month, like Austin alluded to.

Starting point is 00:33:52 But also, you might be in a position where you're a lawyer, you're a doctor, you're an engineer, you're whatever it may be where the perception of what you drive does matter somewhat, especially if you're a small business owner or you're a realtor where you can't come rolling up in some old beat up 8, 10, 7 year old car because it could affect your income based on people's perception. And I know that's an unfair thing, but it's real. And so just keep in mind all of the variables that come into play here. And I hope that helps. What a good question, Daniel. Our final question comes from Carly. Carly says, Hey, you all. Thank you so much for making this world a better place with your podcast. I love

Starting point is 00:34:33 tuning in with my husband every single week. My husband and I are both 27. We're in the military and each bring home about 5,000 a month. We own an investment property at 2.5% interest with $100,000 in equity that we currently profit $700 a month on, which we invest into QQQ, SPI, and VGT. We're debating whether we sell our investment property and take the $80,000 in proceeds and park those into the ETFs you mentioned, or if we should keep the investment property and just continually invest the $700 of profit we make from the rental income every single month. We do not have our base built. However, we each have $30,000 invested into our government TSP and we put away $3,700 a month into the ETFs that we had mentioned before. Thank you both for what you do. I've shared your podcast with

Starting point is 00:35:19 my entire family, good friends, and so many military members. You're changing the course of so many lives and we're lucky to have you keep killing it. Oh, what a nice message from Carly. That is so sweet. Thank you so much. So first off, thank you and your husband and everyone else that you talk with. in the military for your service. We are always forever indebted to our veterans. So very much. Thank you. Thank you. Thank you. Okay. So here's my perspective. Keep the property. You guys are investing $3,700 a month. So the math on that is $45,000 a year. In two years, you all will have this $80,000 that you're thinking you could just take and dump it to the markets. Two years' time of investing. Right. Just stick with it for two more years and have both, right? Have this awesome

Starting point is 00:35:58 rental property that's spitting out $700 a month and have $80,000 that's invested in to the markets, right? That's how I think about it. I don't even think I have to explain myself any further. Just keep on investing. You guys are crushing it right now. $3,700 a month is massive. That is a, what is it, Robert, 37% here on their monthly take-home pay that they're investing into the markets. Unreal percentages here. You all have some financial mutants, just crushing it. That's what I would say. Keep the property, keep investing, and in two years' time, you'll have both. I agree. I love this. It's a great situation. Congrats to you. And I really like the idea of keeping the property here because we don't know where it's located,

Starting point is 00:36:35 but let's assume that it has decent capital appreciation. And that is one of the things a lot of people don't consider when they look at the value of the property. So many people just talk about the cash flow. What's the cash flow? You're not going to get rich off of the cash flow in most rental properties, especially single-family home rental properties. But where you do get rich and build wealth is in the capital appreciation over top. So let's assume this property brings in 700 a month, but the capital appreciation every year in this area is 6 or 7%. Well, you're crushing it because you're building this equity and you're building up this capital

Starting point is 00:37:13 appreciation in the property and your cash flowing. And so it's just a really win-win situation for you. So I love it. Keep crushing it. You know, I believe everyone should own real estate as part of their investing journey. And it's just a really, really good thing to see someone like you guys that has this first property under your belt and you're doing well with it. This is, I mean, what seems like the playbook. I mean, this is just unreal. You're all going to be multi, multi-millionaires in your lifetimes. 160,000, 200,000 now invested into the markets between this 80,100,000 over the next two years and this 80,000 in equity. I mean, you all are going to be so, so wealthy throughout your lifetimes. You should feel good about your situation. You're also going to have so much invested before you

Starting point is 00:37:55 guys are even 30. I mean, oh my goodness. Y'all are crushing it. And I'm just, so excited where everything is going with the rich habits network we're growing it's awesome everyone is really engaging with each other in the community i love school as a platform wow i mean it's just so intuitive and i'm just so excited for what's going to happen with the rich habits podcast and everything we have in the works coming up in the next few months so it's going to be an awesome fall i totally agree the rich habits network is growing tremendously the rich habits newsletter is growing tremendously the Rich Happens podcast is still growing tremendously, and we are super, super grateful that each and every one of you, not just tune in, but to Carly's point, share it with your friends, share it with your family,

Starting point is 00:38:38 share it with other people that you know are trying to build wealth, right? That just want to, you know, instead of sitting in a car for that 20-minute commute, listening to whatever's on the radio, maybe they want to start tuning into the Rich Habits podcast so they can learn a little bit more about how to approach their own personal finances in a smart, discipline, but also enjoyable manner. I love it. And just make sure, follow along, join. Join the newsletter if you haven't. Check out the Rich Habits Network. Follow us on Instagram. We put out a lot of great clips there and we just have so much more to offer in the coming month. Thanks, everyone. And have a great rest of your week.

Rich Habits Podcast - Q&A: $1.2M and "Broke," the Rat Race of Leasing, and Finding Balance w/ Investing and Spending

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.