Rich Habits Podcast - Q&A: 1.5% Advisor Fees, Becoming a Pilot ($340K in 4 Years) & Healthcare Costs

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Starting point is 00:00:30 Hey everyone and welcome back to the Rich Habits Podcast question and answer edition brought to you by public.com. These are our Thursday episodes where every Thursday we answer your questions as if we were going through whatever you might be going through. You can DM us your questions on Instagram at Rich Habits Podcast. You can email us your questions at Rich Habitspodcast at gmail.com or if you're inside the Rich Habits Network, our community for our biggest fans, you're getting your questions answered anyway, you're in the DMs, you're in the community, you're in the Zoom calls, you're in the office hours, you are getting your questions answered because that's the point of the Rich Habits Network. But for everyone else here who's hanging out with us with these Q&A episodes, welcome, and I can't wait to dig right in.

Starting point is 00:01:11 Definitely, this is going to be a fun episode, some really, really good questions we got from multiple platforms, so I'm ready to dig in, let's go. Our first question comes from Kenneth on Instagram. Kenneth says, hey Austin and Robert, I'd love your take on my situation for a Q&A episode. I'm 40 years old. I'm a dentist slash practice owner. I've been practicing for 15 years and I pay off my student loans within six years. My practice collects about 1.5 million a year and I have 60% overhead. I have $510,000 in investments with Northwestern Mutual, 156,000 in a personal brokerage account at public.com, 100,000 in a business brokerage account at public.com,

Starting point is 00:01:50 69,000 in fundrise and $300,000 liquid. I own a townhome home. that I'm renting out, it makes $3,500 a month in rent, and my mortgage is $1,600, and I recently bought a $950,000 primary home. My advisor charges a 1.5% AUM fee. At what point should I ditch the advisor, simply go all in on these low-cost index funds, and pay a fee-only CFP-Slas-CPA when needed? And would you keep fund-rised in this situation or simplify that, too? Love the show, thanks in advance. Robert, what's your take here? Yeah, my first take before we got to the bottom of what the question is, is I would be very careful with Northwest Mutual. They are very well known for having people in a lot of mutual funds, target date funds, and expensive funds in general.

Starting point is 00:02:37 So when should you ditch the AUM fee and the advisor? 1.5% is pretty typical for that size portfolio. But as you inch up towards a million, million five, you should be able to see those fees get down. under 1%. Normally it's once you cross a million five, you're going to be under 1%. So when should you ditch? I think you're doing a fantastic job at 40 years old, but you are paying a lot of fees. Now here's the rub here from my opinion and I know Austin's going to have some really good takes. At 40, you're building your wealth. At some point you're going to need some fiduciary wealth advisory help. You want to have somebody to help you, you know,

Starting point is 00:03:19 figure it all out with taxes and retirement and what you're going to do for your family and all these other things. So you have to consider that. But could you shy away and manage it all on your own from 40 to 50? Maybe. But I would just look at maybe shopping around and finding someone else that says, hey, this is a smaller account right now, but it's going to be a big account because you're a high earner, and find a way to get those AUM fees down to 0.85 up to 1%. And then then I think you're fine to have someone's shoulders to lean on because like with Crowe Capital, we have a team of 18 people. And even though we charge similar fees, they charge similar fees.

Starting point is 00:04:00 You get so much help that I think it's worth it for higher net worth people. So that would be my take. Everything else I love about what you're doing. But my take would be either shop around, keep going, or go back to them and say, hey, I'm not happy with these fees. I'm going to move all my money to public.com and I'm going to self-manage. What can you do? because they have different tiers of fees and see if they'll bump you down a couple tiers

Starting point is 00:04:23 because your account is growing so much over the coming years, they might be willing to do that. It's good take. You know, Kenneth, you're in a great situation. You're 40 years old. Your practice is making, let's call it, I don't know, $600,000 a year of profit. You have $500,000 invested with Northwestern Mutual, $150 in public, another $100 in a public business brokerage account, which I guess that's new. That's really exciting.

Starting point is 00:04:46 I'm assuming that's invested maybe in like a cash thing so you can earn some interest there. I'm not sure. Funrise is cool. 300K in cash. Like you are just rolling in it here at 40 years old. In my opinion, I think that you're smart enough. You are capable enough. You are educated enough.

Starting point is 00:05:03 And if you aren't at this moment, you're capable of putting in the work to become smart enough and educated enough to understand that low-cost index funds like V-O-O and QQQQM and some of these other, you know, Jones Industrial Average and VX, US and all these like low, low, low cost things are pretty identical to the stuff that you would be put in if you were using a financial advisor. Except the financial advisor is paid by wholesalers. Those wholesalers say, hey, we over here at XYZ fund creators are essentially going to pay you as a financial advisor to put your client's money in our funds that are half a percent, 75 basis points, percent annual expense ratio. And the whole goal of those funds is essentially the same thing, the S&P 500, the NASDAQ, the Dow Jones, some international stuff. But instead of going with the

Starting point is 00:05:57 low-cost stuff, the Northwestern Mutuals of the world, work with these wholesalers and put your money into their funds, their mutual funds, their ETFs, things of that nature. And those funds are charging such high fees that not only are you paying a one and a half percent fee to Northwestern Mutual on your assets, but you're also paying an expense ratio. that's 40, 60, 80, 100 basis points, right? 1%. So actually you're paying, you know, 2%, 2 and a half percent on your money. Here's what I would do. If you want to self-manage, which I think you are absolutely capable of doing, rock and roll,

Starting point is 00:06:32 there are plenty of ways that you can get connected fee only with certified financial planners and CPAs and things of that nature. What it comes to mind is hello necterine.com. We actually have a referral code in the link in the show notes below. hello necturine.com slash R slash rich habits and you will get some sort of discount thing going on over there if you use that. But we've been big believers in this fee only fiduciary rock and roll where you might not have millions of dollars where you need a whole team of people to like help you think about taxes and estate planning and these like big investments, which in the situation you kind of don't. You have, you know, several hundred thousand and it's like enough where it's worth like paying someone to help you. navigate the situation, but it's not so much where you need to have a team of people surrounding you.

Starting point is 00:07:19 So that's what I would do is I'd work with a fee-only fiduciary in this situation. And the other thing, I'm kind of like, what's going on here is this $300,000 of liquid cash reserves. Maybe something's going on with a real estate down payment or maybe something to do with your business that I'm not aware of. That's cool. Just make sure you're using a high-yield savings account. If that's on public, maybe it's Waldo.a.i for your business. like who knows what's going on here.

Starting point is 00:07:44 But I think that Northwestern Mutual money, the 510, should get pulled out and should be invested on your own. You can do that on whatever platform you want to do it on. If it's public, if it's Vanguard, if it's whatever's going on with your retirement accounts. You know, it's kind of different there. But at the end of the day, I would self-manage this and just park it in the S&P, the NASDAQ, the Dow Jones and some international stuff. And you're going to be just fine. Yeah, I like that take. It's just, it's, you know, personal finance is personal.

Starting point is 00:08:09 No one loves to have AUM fees. I'm from a different ilk because I believe as long as you have enough money and enough things going on, you have businesses and real estate and all that, it definitely helps. But I get it and at that one and a half percent plus what Austin alluded to with all the additional fees because they're going to put you in more expensive mechanisms and products that just charge you more for doing the same thing if you self-manage. So I love that take. And I think it's really important just you're smart enough to do it like Austin said and just do the research because personal finances personal. Yeah, I want to linger on that because I think. you know, as people have a portfolio that gets built out, it's cool to have like a money guy, a money team, people that are in your corner that can, you can call, you can email, they can tune in and, you know, help navigate and figure out what's going on. But I have a weird feeling that Northwestern Mutual is not that for him right now. I got a feeling that Kenneth has a Northwestern Mutual login that he clicks and he meets with his advisor once a quarter and it says, yeah, your performance is pretty good. We've got you in this stuff. Like, good job. Kenneth and they're charging him 2% all in from expense ratio and this AUN fee, which means you're

Starting point is 00:09:17 now paying $10,000 a year to be parked in some mutual funds and target date funds and whatever else. So it's like you have to understand the difference between there's my money getting invested and they're just investing it. I'm not getting anything but like access to the stock market, which like, congrats, you can do that yourself. And the difference between that and like, oh, They've got a team of like all these people and I've got millions of dollars and I need an accountant that has visibility to my investments and my real estate. And like that's a different thing. And I don't think Kenneth has that or is there just yet. And I would be willing to bet you a really nice lunch that he does not talk to that Northwestern advisor every quarter.

Starting point is 00:10:01 It's probably more like once a year or once every two years and he gets a quarterly email. Hey, you're up. This is a percentage and this is what we've done. And so yeah, I love it. great question and great coverage, Austin. But you know what? He is getting that Christmas card from his Northwestern Mutual Advisor. That's the most expensive Christmas card on the face of this planet, Robert.

Starting point is 00:10:19 It really is. Our next question comes from Evan B. Evan says, Austin, Robert, hello. Been listening from the start, and I believe I profited off your knowledge immensely. Let's go, Evan. Cool, cool.

Starting point is 00:10:30 Evan says I'm 31. I'm a male and I'm married. Our net worth is 940,000. We have 300,000 of real estate equity between our primary residence and a rental. 62,000 in precious metals, 140,000 in some cryptocurrency, 300,000 in ETFs, a $40,000 emergency fund on public, in 60,000 in some paid-off vehicles. Now, for the last three years, I've been doing real estate sales, making some good money, you know, 180 to $220,000 a year from that, but I recently took a dream career as an airline pilot, which has a large pay cut. Now I'm making $100,000 a year.

Starting point is 00:11:07 My wife also took a year off of work as a flight attendant to raise our new baby, so she'll be returning in a few months. In the months, I do not have real estate closings. I'm losing around $1,500 to $1,500 through just simple cost of living. I'm also maxing out my Roth IRA at the first of every year, and I invest $1,200 a month into the ETFs you both discussed, so really we're burning $2,400 a month. This pay will not change for the next 18 months. Starting out as an airline pilot is low pay, but the upside is significant, as I anticipate. making $340,000 a year in the next four years. So my question is, is it wise to continue

Starting point is 00:11:42 investing as I was, even on months we are in the red? Or should I lower the amount invested every single month? I feel like we can weather the lost income month over month for a short duration. Now, anytime I get a real estate closing, I replenish my accounts and I dump the remainder into the markets. I think we're in an okay situation. I'm tracking my money and I would just really appreciate any insight you guys have. Thank you. Robert, you can kick us off. This is one of the coolest breakdowns, questions. I think I can remember in recent history for a 31-year-old married person. This is just incredible. I mean, this is the proverbial, all my ducks are in a row. And I think this is simple. I would cut back on the investments during the lean months until you get to that

Starting point is 00:12:26 next step. I think it's a tremendous move on your part because being an airline pilot, one of my dear friends' sons just became an airline pilot. I think he's 28. And he's a lot of you. And he's a he is going to make hundreds of thousands of dollars a year doing something he loves. So I think it's really simple. Cut back while you're in the red, boost it back up when you get out of the red because you don't want to be in a situation where all of a sudden you're having to sell investments or put things on credit card and then just keep rocking and rolling because you are absolutely crushing it.

Starting point is 00:12:54 And who cares if you cut back for six months or a year while you're in the red making this transaction? I love this situation though. And I love the fact that we have people out there that follow along in the rich habit podcast that we've helped along the way that are absolutely crushing it at such a young age. So this is an incredible situation. No, I completely agree. So doing some math here, right?

Starting point is 00:13:15 Our friend is saying, Evan, Evan saying, hey, this pay is not going to change for the next 18 months. So starting out with a low pay, but then it's going to get boosted up here in the next, call it 18, 24 months. Just by looking at Evan's $40,000 emergency fund, Evan mentioned he's burning about $1,500 a month with cost of living. that's 26 months until that entire emergency fund is burned through. And then you also have 300,000 of ETFs and 140,000 of, you know, cryptocurrency and 62,000 in precious metals. So at the end of the day here, you could theoretically completely burn through this emergency fund and still have

Starting point is 00:13:54 two months left of like $1,500 of spending that you have to do. That's 24 months in the future. You should be earning enough to like kind of make all of this come together if you're still not earning that much. You have 300,000 of ETFs, you got some crypto, you got some precious metals you can lean on. Like, I'm so positive that just by pausing these investments that Robert was talking about, burning through this $1,500 a month while you are going through this lower season of your life where everything's a little bit lower for a little bit, until you start back up on that trajectory, you're going to be just fine. Now, we're talking as if your living, your cost of living is fixed. And I got a weird feeling that that $1,500,

Starting point is 00:14:35 a month that you're burning with the cost of living, you could pull some strings and get that down to 900, right? You can do some things here and there and get that down to five, six, seven, eight hundred hundred bucks. Like you mentioned that, you know, right now you're making around $100,000 a year. And so making $100,000 a year, let's say you're taking home about 75% of that. So you divide that by 12. So you're saying that you're spending right now $7,800 a month. You didn't tell us where you live. So that's definitely like depending on where you live, that could be true but for a family 31 married just had a baby like $7,800 sounds a little expensive to me. Personally, I spend less than that per month. And I mean, I don't have a baby, but like I'm kind of like,

Starting point is 00:15:17 I'm in your same age bracket, right? I think $7,800 is a lot. So maybe you can pair up this. I'm going to pull money for my emergency fund and hopefully not my investments. But if I have to, I can because they're accessible and you've done so well over the course of your life doing that and building them up. So I'm going to pull down from those until my actual income begins to skyrocket like you alluded to in the next four years while simultaneously cutting back on my living expenses. So it's not the $7,800 a month, but maybe it's, I don't know, $7,000 a month. Right. So that that $1,500 that burn you're talking about turns into 900 or 700 or something that's going to help you get a little bit further. Yeah, I think that's very tactical and just incredible insight, Austin. But

Starting point is 00:16:04 either way, they're going to be fine. I mean, they're absolutely crushing it, lots of opportunities. You know, having all of these funds in crypto and in the ETFs and everything else gives them other options as well. So I think it's just a great situation and they're going to kill it and do just fine. And making $300, $400,000 in a couple of years is going to be awesome. Yeah, I think it's important to come to the realization that it's okay to pause your investing if it's like, hey, we got to do this, right? Like, hey, I got to go all in on being. this airline pilot because I can see a light at the end of the tunnel of making, you know, several $100,000 a year, but it's going to cost me two years of Roth IRA contributions or a

Starting point is 00:16:45 year and a half of Roth IRA contributions. Like the risk to reward ratio there, Robert, is way better to hit the pause button and that's okay. So our next question comes from Anthony. Anthony says, hi, Austin and Robert. My name's Anthony. I've been listening since the beginning, and I really appreciate the way you approach personal finance, not just looking at individual investments, but looking at larger picture and helping people make decisions with their money. I'm hoping you can help me think through one of those larger picture decisions. I recently turned 35. My wife is 39 and we have two young children. I'm a public school teacher in New Jersey and I've been teaching for 13 years.

Starting point is 00:17:18 We've tried to build a strong financial foundation. Before I get into the question, thank you for being a public school teacher. I feel like they don't get enough recognition. You're a rock star for teaching our youth. That's awesome. Thumbs up for me. So Anthony says, I have a 4.03, with about 132,000, a Roth IRA with 34,000, a taxable brokerage account with 108. My wife's 401k has

Starting point is 00:17:40 175,000, and her Roth IRA is continually being built up. We're still contributing over there, so not much of going on. We're putting 200 bucks a month into our 529s. We have a $250,000 mortgage at 3% interest, and the reason I'm laying all that out is because I'm considering a major career change. My cousin and his wife recently purchased a coffee roasting slash coffee shop business a year ago and I've been working alongside him during the summers and whenever my teaching schedule allows. The business itself has been profitable since late 2020 before we took it over and the revenue has remained consistent while even gradually growing. The plan over the next year is for me to leave education, work in the coffee business full time, invest capital into it, and ultimately own one third

Starting point is 00:18:24 of the company. My starting compensation will be about $100,000 a year. My cousin and his wife view that compensation as an investment in growing the business rather than simply adding another employee. There's only so much he can do operating it full time by himself and with another owner working on the business, we believe we can expand beyond what the shop currently generates. We've already begun establishing an online presence and we're looking at other ways to grow our sales. Long term, maybe there's an opportunity to purchase a commercial building and all that fun stuff. Now, the non-financial component matters a lot as well because I really enjoy working in the business and believe the transition would make me happier. The traditional argument for staying and teaching,

Starting point is 00:19:00 of course, is my pension, the job security and the benefits, but I'm not trying to let those become my golden handcuffs if the alternative gives me an opportunity to build business equity, own some commercial real estate, and most importantly, improve my quality of life. I'm already vested in the New Jersey pension system. I can leave what I've accumulated in the pension system and collect a reduced pension beginning at 65, so I'm not walking away from my pension entirely, but the health insurance is what I'm struggling most with. My wife's employer-sponsored plan isn't attractive for anyone here. We're paying almost $2,000 a month.

Starting point is 00:19:33 So given our existing financial foundation, would you view this as a financially reasonable, calculated risk? And how would you determine whether we are truly ready to make this transition? All right. So here's my take, Austin. Obviously, this person's in an incredible situation. 35 years old. Wife is 39.

Starting point is 00:19:51 They have about $500,000. in these accounts already. So it makes it a little easier for me to digest what to do here. If they only had $100,000 or $150,000 and they were going to go backwards because of the cost of the health care, then I would be a little bit more nervous. But the way I would look at it is if going out on their own, the only downfall right now is the health care cost, then I think that's easy because I think they can handle that health care costs, but also talk to the cousin and wife and say, hey, with me taking this risk

Starting point is 00:20:26 and coming on board, we're super excited long term. Is there a world we can go out and try to get a company health care program for the coffee shop and the surrounding business with the coffee shop? Because that might be a way where you get all of you on the right program and lower your overall cost, because that is one big consideration. A lot of people that are in the school system, or government works, stay in those jobs, even though they do have the golden handcuffs, because the benefits are so good. So I think that's the main consideration for me. Obviously, I feel like the way this is written, though, you're ready to rock and roll and do this.

Starting point is 00:21:04 So I think you're in a good enough spot that you can take the risk, especially because the coffee shop has been around for years, and the growth has remained steady. If it was a new coffee shop and you're going to quit everything and it wasn't proven and you didn't know what the profits were going to be, I would say, Don't do it. Keep doing both for a couple more years. Get yourself in a better position. Then take the risk after the coffee shop and that brand has proven itself. But it sounds like you're already making a lot of money with a coffee shop. It sounds like there's growth to be had. Maybe you can open multiple locations by the building to open up more

Starting point is 00:21:37 profits. So I think I would say go for it. As long as you understand, there are going to be some setbacks in the beginning while you make this adjustment. But if it's going to give you a better quality of life and give you more upside potential in the long term than I say go for it. Yeah, I like that. I think too, right? It's like if your whole thing here is healthcare that you're focused on, which is like, you call it $2,000 a month and you're like, okay, we'll have to pay $2,000 a month to get comparable health care. I would just, and y'all are going to laugh at me, y'all are going to disagree with me, and that's okay. But it's, I hate health care in America so much. So much so that I don't have a traditional health insurance policy.

Starting point is 00:22:18 myself I have a catastrophe health care policy. I pay a hundred and twelve dollars a month for my catastrophe health insurance policy here and it is coverage up to two million dollars of like something terrible happens if I get in a car accident I'm life flighted to vaneerbilt right like that whole thing covers that that entire situation up to two million dollars and it's a hundred and twelve bucks a month it's not dental it's not vision it doesn't include any of that stuff I pay for all of that out of pocket and you know what Robert and this but makes me so upset. And I really want to encourage our friend Anthony here to do his own research.

Starting point is 00:22:52 But like, for example, I had a mole on my face. Like, I don't know, 18 months ago that I thought was like kind of weird. And so I was like, hey, Ireland, you have a, you know, dermatologist. Like, can you share your info? Like, I want to go check it out with the dermatologist and see what's good. So I went to the dermatologist and I was like, hey, I don't have health insurance. I'm willing to pay cash. Like, but I want this mole checked out.

Starting point is 00:23:10 And can you remove it? They're like, sure. And so they're like, yep, we'll remove it. All good. And it happened. I paid $72 because I paid $72. because I paid cash. Right.

Starting point is 00:23:18 I asked her, I was like, hey, do you have health insurance? Like, no, I'm just going to pay cash. Like, oh, good. We get people 50% discounts when they just pay cash because health insurance is such a nightmare for us, getting people to, like, you know, all this money. And the same thing with my dentist. I pay about $120 to get my teeth cleaned. I had a tooth that chipped, you know, a month or something ago.

Starting point is 00:23:35 That got fixed for like $200 bucks. I go to Warby Parker. They've got an optometrist in the back at the Warby Parker in my mall. Yeah, exactly. And I pay them $180 every, what is it, year or two? years to get my prescription updated. And so it's like if you start sitting down, Anthony, and start thinking about, okay, what are the benefits that I'm getting for this $2,000 a month? $2,000 a month? I can't even imagine spending $2,000 a month in cash on actual health care that I'm receiving.

Starting point is 00:24:02 Now, I did have around 4th of July, I had an accident and, you know, I cut my finger and I had to like go get it all checked out. And I did end up paying $600 at the urgent care for that. But like, cool, I have an emergency fund, right? Like, that's what that's for versus, like, hitting a deductible and like max cash out of pocket, like all this stuff. Like, I just truly believe that health care, health insurance, it's all broken right now. And the way that I've approached it myself is I've got a worst case scenario, catastrophe health insurance plan where like if something bad happens and I truly, truly need to have a surgery or a helicopter flight or something ambulance ride, I've got that part covered. it's $112 a month. It's $112 a month and for that it's also a $10,000 deductible

Starting point is 00:24:46 which guess what? I have an emergency fund. That's in that emergency fund. It's all good. Like that will just be a really bad month for your boy. I had an ambulance ride, whatever. It's all good. But on the flip side,

Starting point is 00:24:58 after just five months of this $2,000, you know, monthly premium going on, that's the equivalent of the entire deductible of this plan that I'm talking about. And so Anthony, like, I just really want to encourage you to do more research about how you can pay and think about health care as a family of four that doesn't include $2,000 a month,

Starting point is 00:25:18 but maybe there's a massive like umbrella type catastrophe insurance, maybe pay cash for some specific things and just there's got to be a better way than paying $2,000 a month. I've also heard Robert of things like crowd health. You know, there's a lot of this like crowd sharing health care stuff going on. I've heard really good things about them. I actually have a friend that does that and their wife is pregnant right now. I think it was like a total out-of-pocket cost of like four, five, six, seven thousand dollars for for delivery and like it's, you know, there's a lot of different things.

Starting point is 00:25:47 Because unfortunately, how I realized is, is that healthcare is like this big blanket. And it's like, yeah, for 2000 a month, you're getting all this stuff. And I was like, wow, it's really expensive. Like, do I need all that stuff though? And then Anthony hears his family can kind of reflect upon that. And it's like, well, what do I really need? And how often do I get sick? And when I get sick, do I go to urgent care and pay $90 or do I have to go to a primary

Starting point is 00:26:09 care physician that went to medical school that's just going to prescribe me the same medication that someone, a nurse practitioner at my local urgent care would. And then does that prescription medicine, when I go and get that filled at Kroger, is that a $30 thing or is it $300? Because maybe something, you know, maybe I do need, you know, some medicine going on. So like just health care is very personal. I mean, I'm not trying to get all the nuances here, but what I do want to encourage Anthony to do, because I think you answered the question. Great. On the health care side is think about your entire situation. Think about do you really need this $2,000? premium, all the benefits that it gives you and the different things that you can activate and do and

Starting point is 00:26:43 get coverage for and things like that. Like Ireland's got health insurance through IHeartMedia. She had like an ear infection. She went to the doctor. They took her health insurance and she still had to pay $240. It's like, what in the world is the health insurance for then? So I just, I get really riled up about this stuff because I don't think there's a good solution for everyone. But Anthony, I hope this is going to help you get inspired to do more research and figure out how you can put the puzzle pieces together from a health insurance side so you can go follow your dreams here when it comes to this this coffee roasters. I am so glad. I love that you're so passionate about it. I am as well because I think health insurance and car insurance, insurance in general,

Starting point is 00:27:22 is the biggest scam perpetrated on American citizens. I remember having this conversation with my CPA back in the day when my mother passed away. And my mother had auto insurance. Her and I had this conversation when she was still healthy. she had auto insurance for 56 years of her life and never made one claim. Never one claim. So think about that. 56 years of her just paying and paying and paying and paying and paying because the law says we have to have all these insurances.

Starting point is 00:27:49 And I've self-insured many, many decades and years of my life because I agree with you, Austin. I think it's a scam. And I remember I had an accident with something from the jet ski. I went in. I'm like, I got this great insurance. And it cost me a fortune outside of the insurance because they fought at every step of way. So I love your passion for this. Everyone should really research. Is there a better way? Because there's so many cool new tools out there. Like I heard about ADP is now doing this. Amazon now has

Starting point is 00:28:19 this health insurance program you can get involved. So Anthony and everyone else listening, just like all your other bills, go out, do the research, get chat GPT involved and figure out ways to do it better for less because it's just ridiculous how much they charge. 100%. Now before we jump to the next question in this episode, shoutoutpublic.com, Robert, because public is the investing platform that y'all need to know about if you take investing as seriously as we do here on the Rich Habits podcast. You've already heard people talk about it a couple times in these questions, and that's because Public is awesome. On Public, you can build a multi-asset portfolio of stocks, bonds, options, cryptocurrency,

Starting point is 00:28:58 and now they have a product called generated assets, which allow you to turn any idea that you can come up with into an investable index using artificial intelligence. Definitely. Generated assets are incredible, and it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put AI to work. It screens thousands of stocks, builds a one-of-a-kind index for you, and even let you back-test it against the S&P 500, all with just a few clicks. Generated assets are like ETFs with infinite possibilities.

Starting point is 00:29:35 They are completely customizable. They're based on your thesis, not someone else's. So go to public.com slash rich habits and transfer your portfolio today. That's public.com slash rich habits. Paid for by public investing, full disclosure in the podcast description. Robert, I'm so riled up about this health insurance stuff. I know you are. I can tell.

Starting point is 00:29:55 I just get, it just, oh my gosh, man. I just know people like our friend Anthony here, like there's so many people out there that are in that same situation where they're like, I need health insurance because like we have a family or we have a baby on the way or like, you know, I just, I've been, I'm not going to say the word tricked, but I've been, you know, kind of directed my whole life into thinking I must have this big health insurance policy and they've got some good propaganda and some, you know, marketing going on, all these big companies to fool us into thinking we have to pay two, three thousand dollars a month for health insurance and like all the stuff that it covers. It's like, I don't know. I'm not saying that. but you know a crowd health or some of these others are like right for everyone or what i do is right for everyone i'm a healthy 30 year old that that stays out of trouble and doesn't you know find themselves in the emergency room all that often and so like what works for me might not work for you but i do think that there's a world where you should start to think wait a second i just spent 24 000 last year on health insurance or i will spend 24 000 is it smarter for me to spend 24 000 and actually have

Starting point is 00:31:01 this or take 10,000, put it in a high-guiled savings account for a $10,000 deductible and then have some sort of like catastrophe coverage and then whenever I have to go to the dentist or the dermatologist or the optometrist or whatever. I need my children. I pull it from that $10,000 bucket. Like, I don't know. There's a bunch of different ways to think about it. But it's frustrating, Robert. Someone's got to fix it. Whoever fixes this, I take my money. Like, I will, I'll invest. I'll invest, Robert. Well, that's the thing they're finally starting to do with the car insurance as well where I have cars that I barely drive, but I still have to pay full coverage. I'm like, why do they not have just a simple plug-in and say, we charge you by the mile per diem?

Starting point is 00:31:39 But let's go back for a second and linger on this. Think about it. We always talk about building wealth and we talk about all the problems with people paying high interest and credit card debt and student loan debt. But I feel like health insurance is a big one too, because if you were to take, let's say, for 15 years of your life, from 25 years old to 40 years old, you were getting charged $200 a and you put that in the S&P 500 while you're young and healthy and likely nothing is going to happen. Then all of a sudden you could have millions of dollars in retirement from avoiding these exorbitant fees for health care. So it's a tough one for me too because I see so many people that just tow the line and they pay it and they don't ever research it. So I think you're definitely right.

Starting point is 00:32:22 Someone needs to fix the game. And let me be very clear. You should have health insurance. you should have some sort of insurance on if something terrible happens to my health, I'm covered. Like there's some sort of coverage there. Like we're not saying to just run around without health insurance. I think it's very dangerous because a medical disaster can happen and it can bankrupt you. Right.

Starting point is 00:32:44 It's like we're not saying that. But what we are saying is what is offered to us today, I don't think is the best combination of coverage when it comes to price. And we want to encourage you to think about different ways to find that. the same coverage for cheaper. So just think about that. I'll leave it there. Let's jump to our next question from our anonymous listener. They say I'm a big fan of the show and it's been immensely helpful for my wife and I, so thank you, number one. Number two, wanted to reach out and see if you guys had any insight or advice on my situation outlined below as we look to purchase our first home.

Starting point is 00:33:15 Husband and wife, we're both 31 years old. Our household income is 188,000. We pay for rent. It's $4,000 per month, and it lasts until February of 2028. And we have zero in debt. hopefully we'll be having our first child next spring slash summer. Congratulations. That's awesome. Our down payment fund is $105,000 right now sitting in a high yield savings account earning about 3%. We've minimized all of our retirement account contributions for the moment so that we can stack a high down payment as homes in the New York City, New Jersey area start for about $850,000 for what we would be targeting. So we have $410,000 as our retirement nest egg. I also have a Roth for K with 150,000 in it. My wife has a traditional 4-3P with 75,000. I have a Roth IRA with 110. She has a

Starting point is 00:34:05 Roth IRA with 76 and an emergency fund of 20,000. We have a good problem. We both saved a ton of money for retirement early in our careers, but we didn't leave much in the way of accessible cash for something like a down payment. So we're putting every extra penny each month right now towards a down payment, which at the moment is about $4,500 a month that we can save. Now the goal is to either one purchase our home in February of 2028 when we would have that down payment of about 180,000 saved, or to renew our lease for another two years at that $4,000 rate. And during that time, continue stacking cash until February of 2030 when the amount would be somewhere around $310,000. Home values are likely going to be around that $850, but we're an expensive area and who knows what they're going to be in 2030. So,

Starting point is 00:34:51 is saving every extra penny of that $4,500 per month in this high-yield savings, until our leases up in February of 2008 the right way to approach our saving strategy, or should we invest? Like, how do I think about this when it comes to buying a home in February of 2020? This is a cool breakdown, Robert. I really like this.

Starting point is 00:35:11 So, anonymous listener, shout out to you. Holy smokes, right? 31 years old, you guys have several hundred thousand dollars saved and invested for retirement. You got a great emergency fund, great Roth IRAs, like you all are doing awesome. I love the plan. I love the strategy. I wouldn't change a thing. You have $105,000 right now in this high yield savings account for a down payment,

Starting point is 00:35:32 which means at $850,000, you have a down payment of about 12%. You mentioned you want to have $180,000, or about a 20% down payment when the time is right. Something I've learned, as I am at the moment, going through the house selling and buying process and building and stuff, have more set aside than you might think, because you're going to have moving costs or some furniture stuff, or some closing costs or interest rate point stuff. Like there's going to be a lot of things to consider. And I hope that that 180 includes some extra here so that when things do kind of blindside you in the process, you're going to be doing it from a place of strength. I love the high yield savings account here. I would not invest this money. It's only a year and a half away, right? February of 2020.

Starting point is 00:36:20 Who knows that the stock market's going to be by then? Yeah, maybe you might make a little bit, but you also could lose a little bit. Could lose a lot. So I like the high yield savings account. approach, but Robert, what's your take? I mean, I think that there is another way that isn't mentioned here that works really well with this. And that is as a first time home buyer, they said purchasing their first home, I would look at going after the Fannie Mae or Freddie Mac 3% down mortgage, because there are programs for first time home buyers where you cannot have to have all this money. I like that you've done that and you've set aside this money and I would continue to do so. And I would say I would renew the lease. Get one more year on it so you can save more.

Starting point is 00:36:57 But if you didn't want to keep going in the rental, you already have enough for the down payment for an $800,000 home. If you were to take one of these other programs, which only require 3 to 5% down. But I also want to add, Austin, that with the 3% down, if they were to go that route with the lower down payment, they are going to have a substantially higher payment than if they went 20% down. And with that, the payment with the 3% would put them north of $6,000, which really means. messes up their debt to income ratio because it would be around 50% of their net earnings per month. But even with the math on the 20% down, I still think the $800,000, $850,000 house is too much, given their current income because it's still going to put them at around 35, 38% of their total

Starting point is 00:37:45 monthly income. And so I think that's still too high given the fact that we don't like people to be housebroke for the long term because then they can't continue investing. So I would say my outtake for this would be look for a less expensive home. Maybe you need to be 10 minutes further outside of the neighborhood you'd like to be in and get that down because we just don't want you to buy something that just prevents you for long periods of time from being able to continue to invest and grow your wealth. Yeah, that makes sense. It really comes down to one, do you think your income, I guess, in the next two years is going to be more than 188? Is it going to be 208? Is it going to be $212, you know, is it going to be so much that that 34, 35% debt to income ratio on this specific

Starting point is 00:38:31 mortgage is going to go from 3435 to 28, 26, right? Like, can it come down by making more money and keeping that the same? Only you all know the answer to that question. But yeah, 3% down, that would just blow up this whole situation. They would, their monthly payment would be $6,000 before property taxes and, you know, all that other stuff. So I would, I like the down payment move of 180, maybe more than that if you have it. But I don't know if I'd want to spend four more years, right? You mentioned 2030 saving for that $300,000 down payment. That just seems like an exuberant long period of time. But I love where y'all are at. And I also love, Robert, that despite them saving $4,500 a month, they said we've minimized our retirement account contributions. Not we

Starting point is 00:39:15 we stopped investing. Not it all went away and we just hit pause and zero. It's we minimize them, I think is up to the match, you know, put what you can in the Roth IRA. Like, they're still investing. They're still building wealth toward their futures, but they're not going all in on these retirement accounts like they did in much of their 20s. Yeah, the other thing that I want to add, too, is when you think about it, and I don't know the area that they're buying in, so I'd have to do the research given the zip code. But even if that $850,000 house was to appreciate 5% a year, which is pretty common in nicer

Starting point is 00:39:47 areas, that's $42,000 a year roughly of appreciation on that home. So by waiting three more years, the house is going to be another $120, $130,000 in cost. So it's a game that only they can figure out what works. But in my, with the math we've done here today, I think they should just try to figure out a better way to buy less home to start rather than just going all in for the dream home as their first purchase. Another awesome episode of the rich, podcast question and answer edition in the books robert everyone please join us inside the rich habits network here's here's a fun fact robert we did a survey for the rich habits network to see who actually is in the rich habits network 48.2 percent of people in the rich habits network are millionaires

Starting point is 00:40:36 wow 48.2 percent of people inside the rich habits network are millionaires essentially one in two people that are in the network are millionaires. And I'm not saying that we did anything for that to happen, right? Like, I'm sure people joined as millionaires. I'm sure people became millionaires as they've been in there over the last two years. But it just shows you the type of people that you're surrounding yourselves in on these Zoom calls, on these office hours, inside of the community tab, in the DMs, right? Like, chances are you can go DM, 10 people or, you know, reply to some people's post or whatever. You're talking to someone who's a millionaire. Right? So, like, do you want to surround yourself with people who have net worths north of a million dollars. I think the stat, Robert,

Starting point is 00:41:18 was 23% have a net worth over two and a half million dollars. So one in four. That's the people inside the rich habits network. And I think that that's what's so cool about what we've built is it's a network of people. It's not come hang out with Robert and I and like it's just, like, no, Robert and I are cool and it's part of it. But the other fun part is you're surrounding yourselves with other people who care about personal finance, who care about investing, who care about entrepreneurship. Robert, 60% of them are either business owners or plan to start a business in the next three months. 60%. So it's like there are people here who are ambitious, who are learning, who are trying to better themselves throughout the next 5, 10, 15, 20 years

Starting point is 00:41:59 of their lives. And they're doing it by surrounding themselves with like-minded individuals. So if you're that person that's like, I don't have people in my life that, you know, have these cool ambitions and ideas, like, join the network and start networking and hanging out with some people on these office hours or these Zoom calls. And like, it's not just Robert and I, but it's the network of people, the over thousand people now that we've built and have sort of, you know, curated inside the Rich Habits Network that are these millionaires, these multi-millionaires, these business owners, these entrepreneurs, these ambitious individuals. And we cannot be more proud of that. Yeah, I think it's just really cool the stats, but also being in there

Starting point is 00:42:35 every week in seeing all these incredibly smart people like you said that are ambitious. And, you know, the age old saying is that you are the people you hang around, the top five people you hang around. And so if you feel you're missing being around driven people that are going to level you up, the Rich Habits Network is definitely that. I get pumped up every time we do the call because there's just so many smart people bouncing ideas off. And they really lean on Austin and I to help guide them because a lot of them have been.

Starting point is 00:43:05 become millionaires in the last few years, and it's so cool to see that. So if you've been on the fence, check it out. There's a seven-day free trial. We'd love to have you. Thanks, everyone, and we'll see you tomorrow for our episode of the Rich Habits Radar.

Rich Habits Podcast - Q&A: 1.5% Advisor Fees, Becoming a Pilot ($340K in 4 Years) & Healthcare Costs

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