Rich Habits Podcast - Q&A: $320K of Student Loans, Broke Boyfriend, and $300K of Google Stock

Starting point is 00:00:00 The ride that steals the spotlight every time it hits the road, that's the Volkswagen Tiguan. Its sleek exterior makes a first impression you can't ignore. Step inside to find available full leather seats and wood accents. Under the hood, the available 201 turbocharged horse power engine gives it a fun to drive edge. The refined Tigwan, you deserve more style. Visit vw.ca to learn more. SuvW, German engineered for all. Hey everyone and welcome back to the Rich Habits podcast question and answer edition. As always, this episode of the show is us answering your questions. Questions we get from Instagram, Rich Habits Podcast. Be careful. There are scammers and impersonators out there. We're never going to DM you. Or questions you send us via email at rich habitspodcast at gmail.com. Robert, speaking of emails, we sent out an awesome email newsletter last Thursday talking about investing at

Starting point is 00:00:58 all-time highs. We love the newsletter. We think you guys love it just as much. But Robert, how much do you love this newsletter? What's your feelings about it so far? We're about a month in. It is up there as one of the things I'm most proud of in my lifetime. I'm going to say it now. I think it's going to be one of the biggest newsletters and most enjoyed newsletters in the country within the next six, eight months. I'm so proud of Christian in the team and you and everybody that's worked on it. And it's just so awesome because some of the highest level people that I engage with in business and in finance around the country have made the time to DM me or call me or text me and say, your newsletter is incredible. Congratulations, et cetera, et cetera.

Starting point is 00:01:41 So it's really, really cool for me that we've taken the time to build it out and behind the scenes we're putting together the school community and all of our tools and all the things we're putting together. So I'm very excited about the coming months and just can't wait to dig in more to everything we're building. Well, the cool thing about the newsletter is it's completely free. We're never going to charge you a penny to subscribe to the newsletter. It is always a free newsletter with free information. We take the headline news, the biggest things that are moving the markets and moving your portfolio, more importantly for the week, and we break it all down for you. Last week, we talked about

Starting point is 00:02:14 the Federal Reserve, a little bit of Open AI, Apple's developer conference. I mean, we're digging deep in everything. So if you've not yet subscribed to the Rich Habits newsletter, Google, Rich Habits newsletter, it's going to pop right up, or use the link in the show notes below. to subscribe. Already, I think now over 2,700 of you have subscribed us in the last week. It's kind of bonkers. But before we jump into the first question of this episode, Robert, introduce this episode's sponsor. Yes, I am so excited. If you trade options, you've got to ask yourself, why wouldn't you choose an options trading platform that puts investors first? At public.com, there are no commission or per contract fees. And more importantly,

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Starting point is 00:03:27 Go check out public.com forward slash rich habits to learn about all the fun things public's doing and go get yourself some free stock when you use the promo code, rich habits, all one word, all uppercase. Again, that's public.com slash rich habits. This was paid for by public investing. Options are not suitable for all investors and carry significant risk. Full disclosures are in the podcast description below. So Robert, our first question is from Sophia. And I think Sophia is in a spot that a lot of people in the 20s and 30s find themselves. So let's dig in. Sophia says she's 26 and has no credit card debt, no student loan debt and is almost done paying off her car. She has $25,000 in a CD at 5%, $20,000 in a high yield savings account for an emergency fund and $28,000 in Robin Hood in stocks and ETFs. She's also contributing to her 401k and claim she'll make a high yield savings account for an emergency fund, and $28,000 in $28,000. She's also contributing to her 401K and claim she'll make a

Starting point is 00:04:20 $230k a year at 65. She might be alluding to an annuity. We'll talk about that in a second. But here's her question. Her boyfriend is on the opposite side of the aisle. He has $17,000 in credit card debt, $20,000 in student loan debt. Was unemployed for a while, started a business, it failed, and now he's looking for another job. Sophia asks, what can we do now to ensure that we live financially healthy lives when we get engaged and married over the next three to four years? Well, Sophia G, we're going to be a little hard on you today. So what I would do first and foremost in this situation, it's not a rare situation. It's very common, actually, where both sides of the relationship are not on the same page.

Starting point is 00:05:02 Don't have the same habits and don't have the same level of financial literacy. So in my opinion, your next step financially is to have the hard discussion. You've obviously figured things out. You've dug in over the years. you've really set yourself up with a wonderful situation and your boyfriend, who we don't know the name of as of yet, has not. Doesn't mean he's not trying. Doesn't mean he hasn't made an effort by starting the business. It could have gone the other way.

Starting point is 00:05:28 But that does not dismiss the fact that you're on one side of the financial fence and he's on the other. So in my opinion, your next step is to have a very, very difficult conversation with him. And it has to be handled now rather than later because the last thing you want to do is get into the marriage where you combine your efforts and then all of your hard work gets sucked out the window because he is not on the same page with you about saving and building for retirement. So that's where I'd start. And Robert, when Sophia has that conversation with her boyfriend, you know, what are maybe some main talking points that you'd encourage her to share? For me, I think the credit card debt

Starting point is 00:06:10 is probably the biggest one because if you are $17,000 in. credit card debt, right? It's one thing to be a couple hundred, maybe even a couple thousand dollars in credit card debt, something bad happened, emergency came up and you just kind of fell behind. But $17,000, Sophia is a habit, right? This much credit card debt only comes when someone spends more than they make. And I get it. This guy has been unemployed for a little bit, maybe a lot of that credit card debt was startup costs for his business that failed. I kind of give him some leeway on that, But if it is because maybe he's overspending every month, he does have a spending problem, you know, if it's because of that, that is going to be a hard line in the sand that I'm going to

Starting point is 00:06:49 draw Sophia and say, listen, if you want us to move forward relationally toward engagement and marriage, for me, I need you to be on the same page with money. Sophia, you probably have a budget. You're obviously very good with money. You've got all the stuff figured out. So it's time for him to do the same. And again, I give the guy some grace, you know, being unemployed sucks. I've been there. I get it. I think we've all been unemployed at some point in our lives. It's tough. But,

Starting point is 00:07:13 you know, having $17,000 of credit card debt and student loan debt, I mean, the guy obviously went to college. Does he have a degree? Did he drop out? If he dropped out, why did he dropped out? Is that a character trait? Does he always like start things and fail them? We have two kind of back-to-back instances now. Like, I don't know, right? I'm not trying to beat up the boyfriend here, but I just really want to get to the root cause of why he has such bad financial decisions. And only when this man will say, I am sick and tired of being sick and tired. Look myself in the mirror and just disgusted with the financial situation I'm in is the time that he's going to actually start moving forward in his life, both relationally, monetarily, and hopefully career-wise. Yes,

Starting point is 00:07:51 it's a very difficult situation to be in, but you have to look at it this way. If he's willing to live beyond his means by himself, he's going to live beyond his means with your money, too. And I know that's not what you want to hear, but that's normally what happens. in these relationship situations. So you have to be protective. You may be completely and utterly in love with this person, but you still have to protect yourself. And so I would think long and hard of how to have this conversation

Starting point is 00:08:20 and put together some guidelines, whether you go through his financial situation with him, which he's not going to want to do, get him on a budget. There's a free budgeting tool in our show notes. Get that figured out first. You can get a plan together and say, look, if we're going to get married or get engaged in a year or two, all of this needs to be resolved

Starting point is 00:08:40 first and foremost because the last thing you want to do is get married and then all of a sudden your years and years of work goes out the window because it's not figured out. So that's what I would do and I wish you the best of luck because this happens all the time so he doesn't need to be beat up on. It's just a matter of getting it right so you can both live happily ever after without you going broke to support his habits. Yeah, Robert, I think you said something that was really powerful, which is, you know, got to look out for yourself. Sophia, under no circumstances, under no circumstances, will you co-sign a loan with this person before you guys are married? Under no circumstances, will you just be like combining finances and paying off his debt?

Starting point is 00:09:21 And like, don't do any of that until you guys are married. My girlfriend and I, we are as close as it gets. We're not engaged yet. We certainly will be very soon. But like, we have not combined finances despite being very on the same page with money. And so, I mean, we need. know where we're going and we still haven't done it. And we're on the same page. And you guys aren't on the same page. So, Sophia, please watch out for yourself. You're 26 years old. You've worked very hard to get to where you are. And again, we're not trying to beat up on this guy too much. But it's very important for things to stay separate until you guys are actually married courthouse. You sign the paperwork and then you can begin to combine things because at that point, you guys

Starting point is 00:09:54 are a unit. Good question, Sophia and best of luck to you. Our next question comes from Jerry. Jerry says I'm 34 years old and I have $100,000 in an old 401k. It's been returning between 5% and 7% per year over the last six years. I earn too much money now to contribute to a Roth IRA, so I'm thinking about doing a backdoor Roth IRA. Should I roll over the $100,000 into an IRA going forward and then do the backdoor every single year? Jerry, I think you should.

Starting point is 00:10:22 If 34 years old, assuming you're making all this extra money, that means you probably could take the tax hit and have it not impact your life all that much. You could, of course, you know, pull some money aside from that 100K and hold on to it until next April. But, yeah, I mean, you're young. You have 30 more years of investing to you have that, you know, 65 sort of age for your retirement. The only thing that's really concerning, though, to me, Robert, is 5 to 7% per year return over the last six years. The market did, you know, 30-ish percent last year. We're up 14% this year. I'm sure we had a COVID year of 2020, but before that, I mean, the markets were averaging between 8, 10, 12%. So, you know, as you move this $100,000 over into a Roth IRA and you

Starting point is 00:10:59 actually have control of it. Robert, tell Jerry some of the ETAPs that we really like that we encourage our listeners to have in their Roth IRAs. Yeah, I love this. And it's a good question, Jerry, and great explanation, Austin. It really just comes down to you hear me say in Austin say all the time is that you want that positive arbitrage in your bank account, not somewhere else. And so five to seven percent might seem good for this 401k. But at the end of the day, you're still leaving quite a bit of money on the table just because you're not optimizing your gains because of what you're invested in. So for me, we always talk about a basket of index funds. What that basket looks like can vary. But for the most part, it's VOO, QQ, VGT, maybe M-O-A-T. If you want to have some

Starting point is 00:11:44 AI exposure, AIQ is one that I like. But this gives you a well-rounded portfolio and you're going to have generally higher gains than that 5 to 7%. So that's why I agree with Austin and I would definitely look at getting some money into that basket of index funds. Just don't make the mistake of rolling it over from a normal 401k to a Roth IRA and not saving money for taxes because that 100,000 will now be considered taxable income because you have to write it off for the last I guess 10 years you've been contributing to a 401k. So you have to set money aside for taxes. Think about that now, budgeted out, plan it out. Maybe it comes from the Roth IRA itself. Who knows? But please, please, please don't get surprised by Uncle Sam when you have a tax bill for 10, 15, maybe $20,000 in April of next year.

Starting point is 00:12:35 Like we always say, especially at a younger age, it's better to get it out of the way now and have all of that money building tax free into retirement and for the rest of your life because you can kick the taxman down the road, but guess what? We don't know what's going to happen 10 or 20 or 30 years from now. So we want to get as much money in that type of tax-free environment as we can early on. And that's why we are big proponents of telling people to get into the Roth IRA as soon as you can. A hundred percent agree. Our next question comes from Daniel H. Daniel says, we're parents in our 40s and just started our Roth IRAs a few years ago. We have $120,000 invested into ETFs and single stocks, but we've only begun to make a dent on our mortgage and our two cars. So here's our thing.

Starting point is 00:13:21 Our daughter's going to Northwestern College and it costs $80,000 a year in tuition. Do we try and pay for her college as much as we can, which would mean selling our stocks and ETFs? Should we encourage her to sign up for student loans? Do we get parent plus loans and take on those loans ourselves? What's the wisest choice in this matter? You know, Daniel, when Robert and I were picking some questions for this. We were talking about your question beforehand. And Robert brought something up that I wasn't even thinking about when we were brainstorming on the answer for this because, you know, we like to prepare for these episodes a little bit beforehand. But the thing Robert brought up that completely took me off guard that I didn't even think about was who's going to take

Starting point is 00:13:59 care of Daniel and Daniel's wife in retirement. If Daniel and Daniel's wife have to sell all of their investments they work so hard for to pay for their kids college partially. So Austin, yeah, you're right. it's just something that bothers me and I see it all the time. So Daniel, you really have to think this through. Four years at $80,000, $320,000 that you're going to put out for this degree. If that were the case, and I don't think it is, this degree would have to be directly tied to law, engineering, or maybe medical. Otherwise, I just don't think it's worth it. I think the days of having and needing a college degree that's generalized are coming to a end and I just don't see a situation based on the information you've provided where you financially can give them that money. Because if you have the $120,000 in your ETFs in single stocks,

Starting point is 00:14:53 who's going to take care of you 10 to 20 years down the road if over the next four years, you're trying to build your wealth, but you're spending it all on their college degree. So that's where it gets tricky because you want to help the kids, but who's going to help you? So for me, it's a big no. I wouldn't do a parent plus loan either. If you look at those right now, they're 8, 9% interest and we always say you can't out invest high interest debt. Well, guess what? That's high interest debt. So I think you're backing yourselves into a corner and unless there is a specific degree with a specific job attached to it or if the kids are going to pay you back a low interest amount on your money, maybe instead of getting student loans, they're going to pay you back

Starting point is 00:15:35 three, four percent on your money when they get the degree and get the job? I just don't think this is a scenario that's right for you or right for them. Yeah, I just, I hate this scenario too. Like, let's pretend you're 45 years old and this 120,000 is invested in the S&P 500 until you're 67, right? Retirement age. We're talking about $1.8 million, right? This 120 turns into $1.8 million if you don't touch it. But if you do touch it, it turns to a half paid for college education from your daughter who's wanting to go somewhere that's $80,000 a year, Northwestern College, which I think is a Christian college in Iowa. If you're in the state of Iowa and you live there, maybe you could get in-state tuition at Iowa State University. So I just looked up the in-state tuition for Iowa State University.

Starting point is 00:16:21 And for 2024 and 2025, tuition and fees are $10,800 per year, right? And that's semester per year. So we're talking about, let's call it, $45,000 versus $320,000. I just, Daniel, please believe me, As someone who was 28, I had to go through paying off my student loans. My girlfriend's 25. She's paying off her student loans. Like, I am right there in the weeds. Do not do this to your daughter. Do not have her hundreds of thousands of dollars of student loan debt in her early 20s.

Starting point is 00:16:51 She will be constricted financially. She will be just burdened with this mountain of debt that doesn't even feel like you can pay it off. It's this constant monkey on your back that you can never get rid of. of until you actually get rid of it. And at $320,000, it just doesn't seem attainable, right? This is a three to $4,000 a month payment after she graduates college, $3,000 to $4,000 a month that she's going to be paying now. It's just, please don't do that to her. So if I were you, I really would look at alternatives. Iowa State University here is literally an eighth of the price. I'm sure there's other cool universities in the state of Iowa or colleges in the state of

Starting point is 00:17:30 Iowa that are much, much cheaper. And I really hope that your daughter is studying something that she can go earn $60,000, $80,000 a year in the marketplace when she graduates in three, four, five years. I don't know how long she is now in college or whatever it is. But just don't do this. This is a terrible idea. I'm telling you, Daniel, do not do this. Yeah, that was a great response and very heartfelt, obviously. And Daniel, you know, one last thing to look at is so many people, this is not a unique situation. So many people out there really struggle with paying off their student loan debt for decades. It's not something that goes away generally in four or five years after college. Some people are stuck with it and saddled with it for decades. And then they try to out invest it by

Starting point is 00:18:15 investing over here when they still have high interest debt on the student loans. So just be careful. I don't think it's a good move. Austin doesn't think it's a good move. I would rethink the entire strategy and find a way to do this in a more cost-effective way. So you're not hurting later on and your kid isn't hurting later on either being saddled with this debt for decades. But Daniel, I will tell you, if she does still go to Northwestern College, do not take out a loan for her. Let her take out the loans. Let her go into the debt. Let her live her life because you have your own life in retirement to worry about. Okay. She's a grown woman.

Starting point is 00:18:56 She's in college, right? You ever heard the term of in case of an emergency when the plane, the mask comes down, put your mask on before you help the others around you? Daniel, you have a $120,000 mask that's going to grow to a $1.8 million mask. And if you, you know, don't put it on, you don't take it seriously, it's going to be a $0 mask, okay? So if she does do this still, despite us really trying to convince her not to hear, do not help her, let her do this on her own because you have a retirement to worry about,

Starting point is 00:19:23 you have a wife to worry about. and you have to worry about yourself. You really do. And hopefully she makes a lot of money out of this, right? And becomes the best doctor, lawyer or whatever she wants to be in the world. And she can pay this off super quickly. Like, I hope that's the case. But if that's not the case, the last thing I want you to do is be starting over at 50 years old. You have no money now in retirement because you took the whole 120K to help her pay for it. And now you're starting from scratch. And you only have 10 or 20 years of compounding ahead of you. You don't want to do that. So make sure that if she does do this, let her do it on your own. Watch out for yourself and your wife.

Starting point is 00:19:54 We are definitely answering the hard questions today. We're killers today, dude. We really are. But we are here. I don't want anyone to think we're being harsh or negative. We are here. You guys all know we don't gate keep. You all know we tell the truth.

Starting point is 00:20:10 And we're here to make sure that these decisions don't fall on deaf here. We are here to help you figure these things out because a decision you make today may affect the rest of your life or your kids' lives. And we just want to make sure we get. you our best shot from all the information and items that we study and have experience in to be able to help you figure it out. So don't take it harshly. I promise you it's because we care and we want to make sure you make great decisions. Thank you for the clarification, Robert, because I think the people are starting to hate me after some of these answers. No, we have to

Starting point is 00:20:44 because if we tell everyone what they want to hear, we can't make a big enough difference in their lives. Mic drop. There's the quote right there, everyone. Okay. So our next question comes from me Yi. Ye says, my husband and I work in tech and we just sold $300,000 worth of our Google RSUs. We want to diversify this money into other big tech companies, i.e. The Magnificent 7, Microsoft, Amazon, Tesla, Nvidia, Apple, things like that. So, Robert, Austin, what's the best way to buy these stocks without having to worry about maybe some lofty valuations in the stock market as well as other volatility? Robert, I'll let you take this one. Yeah, Austin. And, you know, we talk about this quite a bit where people are so afraid of a market being at the top, buying at all time highs. And, you know, we do a lot of research. We're just not throwing darts at walls here. And I just don't worry about market tops. I don't worry about Navidia being at all time highs. There's always going to be a new all time high when a company is growing at the rate of Navidia or even Microsoft meta, some of these companies that have just been crushing it for the last couple of years. So I don't worry about it.

Starting point is 00:21:53 it as much. I more am concerned about dollar cost averaging and being consistent with my investing in these companies. I just put more money in NVIDia and I've been talking about NVIDia for years. I just put more money in MU, AMD, Microsoft, Tesla, all of these companies that are in and around the MAG 7. So I wouldn't worry about it as much if you're fearful of trying to time the market, then dollar cost average and break it out over six months if you want. But I wouldn't leave the money if you decide to do this just sitting in a savings account. I would at least have it in a high yield savings account during that dollar cost averaging period. But for me, I don't worry about market volatility or lofty valuations simply because I feel like I am good enough at selecting the companies

Starting point is 00:22:42 that I believe are going to continue to crush the markets and beat the benchmarks. So for me, I don't worry about it. So, I think some tactical advice here is put that money in a high yield cash account on on public.com, get your 5% plus over that six month period. And if you do want a dollar cost average over a six month period, that'll be about $7,000 to $8,000 of interest that you'll accumulate on this $300,000 or so. And maybe you can start, you know, deploying $10,000, $30,000 a month, maybe $60,000, $70,000 a month into some of the names that you are excited about.

Starting point is 00:23:18 Another way to think about this that I just kind of thought about Robert here was, you know, instead of buying Mag 7 specifically, maybe you just really like tech. And so you could buy VGT, which is Vanguard's like big tech ETF, which their top 10 holdings are Microsoft, Apple, Nvidia, Broadcom, Salesforce, AMD, Adobe, Cisco, Ascensure, and Oracle. And those top 10 holdings make up 60% of the ETF's waiting. So that's another sort of strategy there as well. I just don't see Tesla in there. But yeah, there's a bunch of ways to sort of skin this cat. Obviously, dollar cost averaging is going to be the way to go. I understand you're like, oh my gosh, stocks are trading at all time highs. Microsoft's up here in videos like a vertical,

Starting point is 00:23:59 you know, just parabola. All these different things are kind of spooking you out. And I get it. We all get spooked as investors. But the way to go about deploying this capital in a responsible manner, in our opinion would be to dollar cost average it over the next six, 12, maybe 18 months, depending on how conservative you want to be, ye. But just make sure, again, put it in a high-yield cash account or high-old savings account on public.com to make sure that this money is not just dead money over that six, 12, 18-month time frame. And one more thing for me that I think helps people a lot from an illustrative perspective. Type in any one of the stocks you love that are tech stocks that might be in the mag seven or not, and then go to the chart when you look at the stock

Starting point is 00:24:40 chart and click on five years or 10 years depending on the stock chart and then look at the chart. And you're going to see a lot of volatility, but generally it's going to be going up and to the right if it's one of the companies you're talking about. And that's what I try to get people to do. And I say it all the time is when in doubt, zoom out. And I don't think you'll be as afraid of that market volatility because two years ago, you know, Navidia was really starting to move and people like, oh my God, AI is in a bubble. Oh my God. And every single three, four months, Navitya is up another 30 percent. And imagine if you utilized your own thought process by not buying those tech stocks two years ago, a year ago, six months ago, three months ago, you'd be sitting

Starting point is 00:25:23 on the sidelines still making five or six percent in some mutual fund when you could have been making 30, 40, 50 percent if you weren't so afraid of the all-time highs. So that's the way I look at it. And this is just me being a optimist of my own portfolio, but I love Amazon. So I think you should definitely get yourself some Amazon. Of course, it's a Mag 7 name, but I'm a little overweight in my Amazon waiting here in my own portfolio. I really like what they're doing. Amazon and Google both, but Amazon more specifically. Are you paying too much to trade options? If you're not trading on public.com, the answer is yes. Public is the only platform where you can earn a rebate on every option contract traded. And that's in addition to no commissions or per contract fees. There's no one

Starting point is 00:26:08 else out there paying trading rebates so you won't find a better deal. Bottom line, if you're paying more than zero on an options trade, then you're paying too much. Switch to public and start getting rebates on every single contract traded only at public.com paid for by public investing. Options not suitable for all investors and carry significant risk, full disclosure and podcast description. Again, major shout out to public.com. Public.com slash rich habits. We love you. Go check them out. They are our favorite. Using them now for four years. I got Robert on them last year. You're going to love the platform. Go check them out. All right. Our next question comes from Vin T. Vin says, I currently own a condo worth $350,000, but I found a single family home that I would love to

Starting point is 00:26:55 buy worth 600,000. This single family home is my dream home and definitely be my forever home if I bought it. But here's the question. Do I keep my condo and rent it out and be a landlord? Or do I sell it, use the proceeds, and make this new home more affordable for my monthly payment? If I keep the condo, I'd definitely be able to rent it enough to cover the 1% rule. But if I sold the condo, I would definitely be off better per month from a new mortgage perspective as if I buy this and keep the condo, I'll be spread pretty thin. Robert, what do you think? This is a tough one. I think you could do either way. I don't ever like seeing people be house broke. And it sounds like to me, when you say spread pretty thin, you'd be house broke. And to me, that's a big no-no because it really does

Starting point is 00:27:41 stall your wealth-building journey. I had a conversation with Austin earlier and also a client earlier about how they saving for years to get the down payment, to get the money for the renovation, to buy the dream home and then all of a sudden you're on the sidelines for years because you saved all that money and put it into one entity, one property that you can't see that money or pull it out of unless you get a helock or sell the property. So I never like to see people do that and be in a situation where their house broke. So for me, I think you could do either, but you have to look at it this way. And we don't have complete information, Vin, because we don't know what area the condo's in. We don't know what the capital appreciation is. But for anyone listening, you have to look at depreciation. What have you

Starting point is 00:28:28 been doing with the property thus far? Is your accountant having you depreciated over time? Did you do bonus depreciation? Number two, capital appreciation. Are you in an area where capital appreciation is 3 or 4% or in an area where it's 12 or 14%? Because if it's 12 or 14%, that I would say keep the property, utilize the 1% rule for that rent, and then figure out a way to buy the dream house without putting yourself in a cash strap situation. But there's a lot of variables here. I don't think any wrong answers are here. It's just a matter of where you want to be and that you understand that if you are spreading yourself thin, you're probably going to be housebroke and not be able to continue on your investing journey. And then you'll be relying on the equity and the two properties as your net worth.

Starting point is 00:29:16 And that's a slippery slope. You know, Robert, I was on the fence with this one because, you know, it's cool to be a landlord. It's cool to have, you know, especially if he's able to do the 1% rule and he's making the passive income and the condo keeps going up in value, right? Like, that's cool. But it's also correct of what you said. It's cool to also not be house broke, right? No one wants to have to be spread thin because of their monthly mortgage payment. And then, you know, you mentioned how you would definitely get this 1% rule as a landlord, which tells me that you have a really low interest rate on this mortgage and your monthly payment's probably pretty low, which means you also probably bought it in like 2020, 2021. So,

Starting point is 00:29:51 you're probably up 50, 80, maybe $100,000 on this condo in capital appreciation. So after fees, maybe that is $40, $60,000, $80,000 that you could, if you sold the condo, roll that now into the $600,000 dream home as a down payment, plus the other down payment you already have saved because you said you could afford this anyway. So now if you do that, I just wonder what that math would look like on a monthly basis from a payment perspective. Because if this is your dream home and you love this house, right? And you want to be here and you you want to spend the rest of your life in this home and raise a family here and all the fun stuff, right? If that's the case, you don't want this house to be a nightmare or a burden because of the payment's too high. And if you're emotionally excited about this as much as your email to us sounded like,

Starting point is 00:30:34 you should probably do that, right? Sell the condo, take your capital appreciation. What's the thing, Robert, that he can do with the taxes, it's the exchange, what is it called? 1031 exchange? Yeah, what is that? Yeah, so basically what we would say is he could sell the condo, do a 1031 exchange to the new property, and then that way he could offset his capital gains tax. But also, we don't know the whole situation here is been married, is been single, because then there's also tax benefits if you sell the property to offset your capital gains. So there's a lot more to this.

Starting point is 00:31:07 But overall, you're probably on the right track. If it's that emotional and this is the one time only dream home that you see for yourself, go for it. I did it when I bought my house in Ohio. It was this incredible waterfront home, and it was a lot of money at the time, but it was just the dream, and I never look back and never regretted a day of it. So it really just is kind of informationally and situationally dependent on your current situation and what you dream for. Everyone has different dreams. Let's say he does do this 1031 exchange, has sort of a bigger down payment.

Starting point is 00:31:42 So his monthly payment on the mortgage is smaller, which means he now has an extra $8, $1,300 a month to deploy. into the capital markets, right? So not only does he have a sizable portion of equity as a down payment in this home, but now this extra $1,000, maybe $1,500 a month that he can begin to invest toward the stock market over the next 10, 20, 30 years is going to allow his portfolio as a human being to be diversified between real estate and stocks grow exponentially over time. I mean, I think that's probably the way to go, Vin. Unless you really want to be a landlord, dude. If you want to be a landlord, I'd be my guest. Well, but that's also, let's talk about it a little differently here. And that's also why I talk about capital appreciation so much. I ask people every single day that own real estate,

Starting point is 00:32:28 what is the average capital appreciation cops in your market of where you have this property? And I bet you the rate that people know the answer to that is less than 3%. And that is terrible. Because if you don't understand because you've just been sold this American dream that that house may only be appreciating two, three percent a year, you are not even keeping up with a treasury bill. And yes, it's okay, it's cool, you own that property. But again, you own a property that is not making you money. It is just giving you a place to live. So you have to be able to separate the emotion from the financial part of it. And that's why there's so many arguments of renting versus buying. It can be great for both parties, but most people need to understand the numbers and the

Starting point is 00:33:19 benefits, the pros and cons of both before they make these decisions. I love that answer. Now, our next question comes from Matt. Matt says, I'm just getting started in my investment journey after landing a new job that pays a lot better than my last one. Since listening to your podcast, I've opened up a public.com high yield cash account. I rolled over my underperforming target date fund from a previous employer to a Roth IRA. I purchased the ETFs you guys all talked about. I'm so excited and I maxed out my 2024 Roth IRA. Robert recently talked about a cryptocurrency called Chainlink being something to own in a well-diversified portfolio. I'd like to start investing $100 a month toward it, but it seems like chain link is not available on public.com. So how do I best add crypto like

Starting point is 00:34:02 this to my diversified portfolio? A little bit more about me as I'm 36. Married, I make $120k a year, but I'll making 150K a year in December and we have no debts besides our home. My wife is in law school, but she's on a full scholarship. Let's go. What a cool question from Matt. It's so fun to see that, like, Robert, people actually take action from what we're talking about. I mean, we say, hey, go open that cash account. Boom. Matt did. You know, roll over that underperforming target date fund into a Roth IRA and buy the ETF so you can actually move with the markets. Boom, Matt did it. You know, it's just so cool to see. It's one of my favorite things daily when someone says, hey Robert, I've been following you for a year and a half. And since meeting you and finding you on the

Starting point is 00:34:43 internet, here's what I've done different. And oh my God, look at my returns. That's the coolest part. So Matt, congrats. Because so many people go to, you know, conferences and they follow podcasts. They they read books. They follow us. But they don't take action. And that's why my signature phrase is take notes and take action because if you're just taking notes in your learning, I think you just get this educational fatigue because you're not taking action. And the coolest thing for people is when they do take action and it actually works and over time they see the growth, all of a sudden they're making 8, 10, 12, 15, 18 percent returns. That's the coolest part because this isn't an overnight solution. People want to think they're going to put 10 grand into something and then have 20 grand in a month.

Starting point is 00:35:32 That's not how it works generally. That's gambling. But it's cool because now that we've been doing this for a long time, the Rich Habits podcast is over a year old. So people are starting to see some meaningful change from all the efforts and all the things that we educate on. And that's the best part of my day when I get these types of questions and get the people that DM me or email me about it.

Starting point is 00:35:55 So Matt, to answer your question, I think it's fine to totally have multiple crypto accounts. You can buy chain link on Coinbase. You can buy it on Uphold. You could try Crypto.com if you wanted. Public and Coinbase are my favorites. So that's definitely where I buy most of my cryptocurrency. But there's always a way to buy ChainLink. It's one of the biggest cryptos out there. And Austin and I both have pretty large bags of ChainLink. Austin's is substantially larger than mine. But definitely, I think everyone should own some ChainLink in their balanced crypto portfolio. I love it.

Starting point is 00:36:31 Yeah, I think Coinbase is a great answer here. Also, I started buying some chain link on Robin Hood, just considering how dependable, you know, because, you know, Coinbase sometimes gets like glitchy and like it just, you know, too much volume and the servers crash sometimes. I've seen that happen in the past. So Robin Hood, I haven't seen that happen yet. So I started doing a little bit on Robin Hood. But yeah, Coinbase, Robin Hood, uphold. You know, there's a bunch of different places to check it out. Good question, Matt. And congratulations on all your progress. Start tracking your net worth. I think you'd be surprised, man, because again, we talked about this, Robert. I think it was our last episode or episode before it, people should really begin tracking their net worth on a

Starting point is 00:37:05 monthly or quarterly or by annual basis, depending on how much money you make and the difference moves you're sort of making there because it's kind of tough to see, oh, I just spent all this and money and energy and oh, I'm investing. What the heck is this? This is so hard for me. But then, like, wait a second, all that sacrifice directly correlated with my net worth going up $20,000. That was amazing. How do I put it up another 20, another 30, another 50, right? By seeing the progress. made and you kind of continue to move forward in your investing journey and watching that tick higher over time, it's a good motivator. At least it is for me. I love seeing that number go up. So our last question comes from MOV. Mob says I'm 70 years old and I'm still learning. I have

Starting point is 00:37:44 $300,000 in my traditional IRA and it's all in dividend stocks. I believe, though, that we're overdue for a market correction. I actually think a lot about selling my dividend stocks and putting all that money into short-term treasury ETFs like CFs. S-H-I and then buying the dip when it inevitably happens. I know this is timing the market, but with interest rates this high, I feel like I should be taking advantage of them and it won't exactly be dead money to hold cash, especially at my age. What do you guys think?

Starting point is 00:38:15 Mov, this is a tough one. Part of me says no one can time the market. And what I think back to is Q3 of 2022. So many people were coming from me on TikTok and Instagram, oh, you're crazy. heading into a recession, you're crazy, the markets are going to crash, we're long overdue. And now we're in Q2 of 2024. My accounts are up gazillions. And it's just crazy because you have to do what you think is best for you. I tend to not worry about market corrections. Are we long overdue for a market correction? Probably. Are a lot of our favorite investment vehicles at all time highs? Definitely.

Starting point is 00:38:59 but does that mean you know when the dip is going to happen and to get out? So before you do it, ask yourself this question because you know what's best. You're 70. So you want to be able to maintain your money rather than grow it if the 300K is enough for you to retire with. But you have to ask yourself this question. What if I sell it all and sit on the sidelines and I make 4% or 3% and the market keeps ripping for another 18 months. Then what happens? How much money did you leave on the table?

Starting point is 00:39:35 So that's what you have to consider when making a bold move like this. But then also I would back up and say, why do you have all 300,000 in dividend stocks? Because I too feel that is negligent because there's better yields to make than just dividend stocks alone. So I definitely get where you're coming from. I personally feel it's a mistake to fully get out of the markets and go that safe just because you think a correction is overdue. Many, many economists that are trained in this have been wrong for the last two years. And I think they're going to continue to be wrong where I think we'll see a pullback, but I don't think we'll see a pullback big enough or a correction big enough that it's going

Starting point is 00:40:18 to offset all the gains that I've made over the past two, three years being full steam ahead. That's my opinion. Yeah, I just kind of think back here to. 2022, the stock market talking about the S&P 500 went down 25% and the NASDAQ went down 35%. And that obviously proved to be a buying opportunity. You know, Mav, in my humble opinion, if you do have literally all of your money in dividend stocks and you want to sell that because you think that we're going to have a correction, a 10, 15, 20, 30% pullback over the next who knows how long, be my guest, dude, you're a grown man. You've obviously done a great job building a small fortune for yourself.

Starting point is 00:41:00 Like, that's incredible. And if you feel like this is how you want to preserve it and just keep it safe, that's fine. You know, park it in CSHI. It's a short-term treasury ETF. They do one to three-month T bills and they sell covered call option contracts on top of them, allowing you to get about a five and a half percent distribution yield, which is not that bad. So if that's the case, like park your money there. But something I'd encourage you to do because you did say you wanted to buy the dip. I would encourage you to not be so conservative about buying that dip. So, for example, here's what I would do. I would take $300,000, put it in the CSHI, cool, you're out of your dividend stocks, all your

Starting point is 00:41:35 exposure's gone, you now have this like flat line on your portfolio. Start taking $10,000 of that every single month and redeploy it back into the market systematically, which means over the next two and a half years, you will have redeployed all $300,000 of that. And if you're right about some sort of correction, if it doesn't come the next two and a half years, you were wrong to begin with, dude, right? So you're definitely going to buy this dip inevitably, right, over the next two and a half years in this case. And so if you have it parked in CSHI and you redeploy it 10,000 a month at a time, right, it's going to take you 30 months to redeploy $300,000.

Starting point is 00:42:11 So you'll have hopefully this dip. You're going to buy it. You're going to be fun. Maybe that's what you wanted to do, right? But that is, I guess, a decent strategy to go about it. I'm just not someone who tries the time to market, I know I can't do it. But I am someone that recognizes sky high price to earnings ratios, right? Very high sort of bubbles as it relates to some of these names. I'm sure we've seen some that just go vertical and drop right back down, right? Game stop, right? We've seen it. So I do recognize that. But what I do want to encourage you, Mov, is that dividend stocks tend to be less volatile than other names, right? Because they are massive companies. They've been paying a dividend for several years, if not decades. Right. So they're not as

Starting point is 00:42:49 volatile. So you might be scared by seeing the headline news of, you know, this stock went down 7% in a day. This stock went down 14% in a day. Game stops all over the place. It's time to get out. Know what you have in your portfolio, Mov, because it is not those names. You've got some big dinosaur names that are probably going up 1 or 2% a week on average. So just take a deep breath and maybe consider the strategy I shared, but Robert was right. I mean, no one can time this market and if you want to be thinking about that dollar cost averaging is the best way to try. I agree because at the end of the day, it really alludes to the fact the difference between speculating and gambling and investing. If you're investing in these tried and true

Starting point is 00:43:33 behemoth companies or the S&P 500 or the NASDAQ, are there going to be corrections? Yes. But over time, as we say, when in doubt, zoom out, are you going to go up and to the right? Yes. That has been the case for decades and decades. That's why we don't worry so much. Right now, there's a lot of people talking, sky is falling, sky is falling. I just don't see a catalyst for that. And maybe I'm wrong. I'm not usually wrong. So for me, I think it's the best play for you is do exactly what Austin said. That way you can feel like you have the preservation in place, but you don't sit on the sidelines trying to time market. I love it. Good question, Ma. Everyone, thanks so much for hanging out with us on this episode of the Rich Habits podcast. Go check out public.com slash rich habits.

Starting point is 00:44:20 Go sign up for some of their products. Go check out their music royalties, their T-bills, their options trading platform, anything on their platform we love. And also, don't forget to check out the newsletter, the Rich Habits newsletter. There's going to be a link in the show notes below or just Google Rich Habits newsletter. And Robert alluded to it a little bit beforehand, but we are working on a community that will be the best, coolest, most comprehensive value-packed community on the internet, right? This is the rich habits community. It's coming over the next six to eight weeks. Be ready for it. We're only going to let in a small amount of people in the beginning. So you better be ready because it's going to go out fast and we're

Starting point is 00:45:04 going to sell out really, really quickly here because we can't help thousands of people at once, but we can help a couple dozen. So just be ready for that when it comes. Again, that'll be in the next six to eight weeks. And don't forget, leave us a five-star review. If you like the episode, we have now over, Robert, can you believe this? Four thousand six hundred people on Spotify have left us five-star reviews. I'm surprised it's not 40,000. I'm really shocked. So people, you're willing to go on Yelp and give a bad review to somebody because they didn't make your old-fashioned correctly. The same thing should happen when you're happy and excited about something. take the time to do the review because most people only do reviews when they're mad and we need

Starting point is 00:45:45 when you're happy and you go, hell yeah, that was a great episode. Give the damn review. All right, everyone. Thank you so much. Have a great day.

Rich Habits Podcast - Q&A: $320K of Student Loans, Broke Boyfriend, and $300K of Google Stock

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