Rich Habits Podcast - Q&A: $850K in SpaceX Stock, Building a Barndominium & $50K in Credit Card Debt

Starting point is 00:00:00 Spotify, it's Jay Shetty. Are you one of those media strategy people? Scrolling through spreadsheets, searching for an audience that pays twice as much attention to your ads than they do on social? Let me introduce you to fans. And they're here with me on Spotify. Trust me, I know fans. They don't skip. They stay for hours.

Starting point is 00:00:21 They don't move on. They manifest. They're not a demographic group. They're fans. Spotify advertising. You're among fans. Hey everyone and welcome back to the Rich Habits Podcast question and answer edition. This is our Q&A episode, which means we take your questions via email at richhabitspodcast at

Starting point is 00:00:40 gmail.com or via Instagram DMs at Rich Habits Podcast or even from inside of the Rich Habits Network. And we answer them as if we were in your shoes going through whatever experience you are going through. Now, Robert, before we jump into this episode, volatility is on everyone's minds. I think it was, I think it was a late December episode, maybe like maybe. December, we gave our biggest market predictions for 2025. And we talked about volatility. We alluded to the fact that 2025 is going to be a year of volatility. You know, we didn't really experience much of volatility in 2024 nor in 2023. And we predicted multiple double digit percentage pullbacks in the S&P 500, the NASDAQ, things of that nature. We very well might be going

Starting point is 00:01:25 through something like that right now. I think the S&P is off about 5% from its recent all-time high in early December. And these tariffs are on the top of everyone's minds. Yeah, I couldn't agree more. But, you know, again, it goes back to we preemptively warned everybody. We told everyone what the landscape was going to look like. This is not new. Whenever we have a new president take office right after the inauguration, especially with

Starting point is 00:01:52 what Trump is doing, he is coming out swinging. He is not dancing around and tiptoeing his feet in the waters. he is just going at it for all the things that are top of mind that were on his list of things to do. So we're going to see volatility because as Canada fights back and Mexico fights back and all of this kind of negative sentiment enters the market and enters the mindsets of everyone, we're always going to see this kind of negative market conditions that cause pullback. So I'm not too concerned with it. We've been ahead of it the whole time.

Starting point is 00:02:24 And I think it's just all about people when in doubt, zoom out. and make sure that they understand this happens with almost every election cycle in the beginning, and especially right now at these tariffs, it is shaking the ground and causing a lot of people to lose their footing and get nervous about it. I'm not too concerned. I think we're going to find a lot of opportunities through this volatility moving into the coming months. To that point, Robert, I think I saw a statistic throughout this week that said that February, the February after an inauguration of a new president is always the worst performance. month of that following year, with May and June being some of the best performing months. So

Starting point is 00:03:04 if you are, you know, enduring this volatility like the rest of us, don't forget dollar cost averaging is your friend. This is a very short-sighted type mentality to have to think, oh my gosh, volatility got to sell, got a trade, got a gamble. We're not doing that this year. We're building wealth. We're net buyers of assets. And we know in three, five, ten years time, the Amazon's of the world, the Teslas of the world, the Googles of the world will all be doing. just fine. I love it and that is exactly that. We always say when in doubt, zoom out, and this is the time to do that. I talked a lot of people off the ledge in the last few days, and I will continue to do that just like you will in the Rich Habits Network. We just want everyone to calm down and just look at it as business as usual.

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Starting point is 00:05:04 Again, that's Rich Habits Podcast at gmail.com coming from Achilles V. Akeel says, Dear Austin and Robert, I'm a 15-year-old high school student trying to get into finance and building wealth. I'm currently reading Rich Dad, Poor Dad, but I'm having some trouble interpreting it. I wanted to ask you for your advice on the best steps for a high school student who, is looking to build wealth and what I should be doing right now to help achieve that goal. I also wanted to ask, how could I make money work for me while living in a popular tourist spot? Thank you so much. I look forward to hearing from you. Robert, do you want to kick this one off? I would love to. This is fantastic. And so, Akeel's, you're already doing it. You said, what can you do to help your steps to

Starting point is 00:05:45 building wealth? You're 15. You're watching our podcast. You're reading finance books. You are so far ahead of the It's unbelievable, and it makes me so proud to be able to do this and attract someone like you to this podcast. So right then and there, you've already started the process because you're thinking like an investor, not a consumer. All of your friends, everyone in high school, all they're thinking about is what they can get, what they can talk about, what they can buy. And they're not thinking at all about their futures, and you are. So I love that. How it relates to how you can build wealth in a tourist spot, I think it's just a wide. open platform for you to figure out what is missing in your area for tourism go around go to all the

Starting point is 00:06:31 small businesses if it's a beachfront town or whatever type of tourism area it is go talk to all the small business owners the cafes the restaurants and say hey what have you found that works what's missing what service is not here you know maybe it's fish cleaning or it's you know surfboard repair or whatever it could be. It could be charging batteries for the scooter rental business that's there in the e-bike rental business. There's so many different side hustles where there are kind of holes in what is needed in the demand. And you could find something that could make you a ton of money at 15 years old to put towards your investing future. I like that perspective. I think for me, a couple like just big tips that I'd share. The first one is I wouldn't fall victim or like, you know, don't fall for those

Starting point is 00:07:20 people who are going to try and tell you that at 15 years old, you need to be making a million dollars a year doing some drop shipping type weird stuff, right? So I think that's the first part is at 15, there are real no expectations. And if you are trying to make money or, you know, side hustle or whatever you can do, going and like getting back down to like first principles and like basics, I think is a great place to start. What does that mean? I had a friend when I was in high school that made $10,000 one summer cleaning the gutters of houses in his neighborhood. Right? He'd have a ladder and he had a truck. And he'd go door to door and say, hey, I notice you've got leaves in your gutter. You got mold. We got all these like gross things going on around your

Starting point is 00:08:02 house. I don't care about getting dirty. I've got nothing but time on my Saturdays. Let me charge you 50 bucks. I will get up on your roof and I will clean out your gutter. Now, if it was a 25 year old, that 25 year old person would have to think about rent, gasoline, groceries, all these different things that would say, okay, I need to charge $100 or $150 or $200 to make this worth my time. We're on the flip side, you're 15 years old. I would imagine you have very low expenses. So any money you make is just like money you can now have. So having that mentality when it comes to pricing, I think, is really important because you can undercut your competitors dramatically if need be. So again, don't forget, you have time on your side. You have the ability to get physical, get dirty, different side hustles and weekend work that will allow you to do. things that, quite frankly, other people don't want to do. Maybe it's cleaning out garages. Maybe it's

Starting point is 00:08:51 landscaping. Again, maybe it's cleaning these gutters. Just doing the dirty hard work that people don't like to do. You're 15. Go do it. Go make the money. Like, go figure it out. I love that. And so the other piece of advice I'd share is on the tourist stuff. I think his name's Ryan Trahan. He did like this, you know, go across the country by selling water bottles and like random little things in tourist towns. Like he started, I think, like in Los Angeles and made it all the way to New York and like only use the money he generated from flipping like gatorades and water bottles at the beach and like in different tourist areas he was over on broadway here in nashville like selling water bottles that is a wonderful idea you can go to a walgreens you can go to you know walmart buy a massive call it 30 pack of water bottles for like three or four dollars sell them for 50 cents or a dollar each high traffic areas get yourself a 10 dollar cooler you're off to the races i mean you have again nothing but time so if you're standing there or sitting there in a chair saying, hey, I'm selling water bottles for 50 cents or a dollar or whatever.

Starting point is 00:09:49 Or maybe it's gatorades. Maybe it's snacks. Maybe it's lunchables. Like, I don't know what you're selling, but like you're doing these things that no one else wants to do because they think that their time is worth more. You're 15. You have all the time in the world. It is okay to sit on a Saturday on the side of a, you know, busy Broadway in Nashville selling water bottles for a dollar because by the end of it, you'll have made $44. And that's pretty cool if you ask me, especially at 15 years old. Yeah, this reminds me of one of my favorite side hustle stories of all time. Every year I would go to this festival in Ann Arbor, Michigan,

Starting point is 00:10:21 because it was this big art and entertainment festival. And then I noticed, like, the second or third year, there was nowhere to get water. And I wanted to buy a bottle of water because it was really hot out. And you had to go into the restaurants to buy the water. So I reached out to the people that ran it. I said, why is there not a water booth in the middle of the street where thousands and thousands of people are passing?

Starting point is 00:10:41 and they said nobody's approached us about that. So I literally paid the $185 fee, got a table, got a little banner, and got a big cooler, and did exactly what Austin said. And I think back then, and this was 15 years ago, probably, no, 20 years ago, I think we made like $8,000 on a three-day festival in profit. And that's after our travel and having helped people do it. So there's a million ways to make money and you just have to solve a problem. And at 15 years old, you don't have to make. a ton because guess what time is on your side and compound interest is on your side so as soon as

Starting point is 00:11:16 you get that first chunk of money i don't care if it's 50 or 100 dollars get your parents to open you up a brokerage account and get moving with your money you can have them open it because you're not 18 yet and turn it over to you when you turn 18 and you will be already up and running and building wealth and back to this idea of like getting dirty and like doing the things that people don't want to do i pay my neighbor who i think is like 12 years old $10 a week to pick up poop in my backyard. $40 a month to pick up the poop because I don't want to pick it up. She has nine different customers, right? Like that's hundreds of dollars a month that she's making at 12 years old for picking up poop in people's backyards in the neighborhood. And it's not

Starting point is 00:11:58 because she's spending so much time doing it. She walks around here like once a week. It takes like 20 minutes. But she's figured out a system, right? So it's like just think outside the box. There's a ton of ways to make money in this world. Do this stuff people don't want to do and charge just a little bit of money for it, money that people are so willing to pay for something like that and you're going to be just fine. I love it. What a great question. So our next question comes from Tray D. Tray says, Hi, Austin and Robert. I love your podcast and I have a few questions for you. For some background, my wife and I are 19 years old. We make a combined income of $110,000. We have $13,500 saved for our home plans. We found an amazing piece of property in Alabama next to Tallinn.

Starting point is 00:12:38 It's in a beautiful mountain and we plan on buying it and building a barn dominium at the bottom and then cash flowing a house on the top. My question is on the land and the construction loans. Should I try to finance it separately or in one packet loan? Are there any neat tricks to properly set us up in the future? What can I ask my realtor before purchasing the property? The goal is to have it fully paid off within the next 10 years. Any advice would be greatly appreciated. Robert, I don't know much about construction or land loans.

Starting point is 00:13:05 So I'm going to let you take this one. Yeah, I love this question. And let's first define what you're asking. And I think it's important for everyone listening to understand as you venture in if you're looking to build that first home or buy a piece of land that you want to put your forever home loan on is you can find products, mortgage products out there that combine the land purchase and the construction purchase all in one loan. So for instance, you can get an FHA construction loan.

Starting point is 00:13:32 And those are great because they're a little more flexible. They're not as stringent on credit score down payment so you can use a lower down payment, which is great. But there's also construction to permanent loan. And it's exactly what you think it means. You can buy the land and you can build the property and they want it to be permanent. So it has to be your primary residence. It cannot be an investment property. Those take a little bit more work because the paperwork process is longer.

Starting point is 00:14:00 You have to put 20% down or higher. and you have to have a 680 credit score or greater for those. But those are two really, really good options you can look at for brand new builds, but also kind of a pro tip. Go to your local smaller banks and your credit unions because sometimes they have phenomenal, really, really competitive rates and deals to bundle the whole thing for you in a way where you can still get that 30-year mortgage and be able to pull this off because building is great because, you know, they always say in real estate, especially newer real estate,

Starting point is 00:14:38 is the person that makes the most is the second owner. And there is some truth to that, but I like being the first owner because then I'm not paying someone else's profits. So in a good market, you want to be the first owner if you can be because then you are building it for what it costs. There's no 10, 20, 30 percent markup to the builder. And then you get to enjoy all the capital appreciation over the coming years if you were to ever sell it. So you're suggesting that Trey should finance it in a one packet loan? Yeah, if you can, a bundle loan is great. I would go for the FHA if you've never had a loan before on a new home, especially a new build. The FHA construction loan is incredible, but always shop around. And are there any neat tricks to properly set this up for the future?

Starting point is 00:15:25 You know, I don't know any off the top of my head as far as like a cool trick or whatever because, you know, I think you're already off to a good start by building on your own. But just make sure I would say probably the biggest hacks I could tell anyone in a new build, whether it's a home or a business, is kind of these three things. Day one, as soon as humanly possible, let's say you've got the foundation and the framing done, get Wi-Fi. If you can't get Wi-Fi, make sure you have Bluetooth cameras on site, even if you have them on a pole that someone puts in the ground for you so you can keep an eye on your job site. What this does, it prevents theft. It'll help prevent theft. But it also gives you the ability to keep an eye on all the contractors and the subs. Because if you have overages, which you will or it takes longer, you will have a track record of what is going on.

Starting point is 00:16:22 And I think it's very important. and that would be the most important thing for me. And then number two, make sure for all the subs, if you have a general contractor, that you're aware if they have their own liability insurance. Because what they're going to tell you is they're going to tell the G.C., yes, we have insurance. The G.C. is going to tell you, yes, everyone has insurance.

Starting point is 00:16:44 But if you don't have proof of it, you could find yourself in harm's way from a liability perspective if someone got hurt on the job site. So make sure you get verification and use, see real insurance letters to show that they are insured and you'll be in great shape. Those are two of my favorite hacks that most people don't do and don't know to protect themselves. And do you have any suggestions as to what Trey can ask his realtor before purchasing the property?

Starting point is 00:17:10 I'm assuming that there's no plumbing. There's again, no Wi-Fi. There's like no electrical. Like what, you know, experience do you have, Robert, in like purchasing properties and like some of like the mistakes people make early on and like what to avoid? Yeah, that's a great, great question. Number one is get a copy of the plot and understand it and really research, maybe do some YouTube watching or something like that so you understand what you're actually looking at when you're

Starting point is 00:17:38 looking at the drawings. Because that's going to be very important so you understand where your property lines are. It can come into play and be very, very important, especially for easements to make sure whatever your building is properly positioned on the property correctly. I would say that would be an important one, but then also really research the person selling you the land. If it's in a development, do they have any mechanics liens? Do they have any tax liens? What is the predicament of the overall development to make sure you're not getting into something where it could go really bad for you?

Starting point is 00:18:12 I had a very dear, wealthy friend who bought into a development and was going to build two homes in the development, found out the developer was filing bankruptcy. and they went through two or three years because they had already built one of the homes and no other homes were being built. So they were out on this island by themselves in a development that never came to fruition. So just do a lot of research before someone talks you into this purchase because it's very important to make sure that the future is what you expected to be for the property and the area.

Starting point is 00:18:44 You heard it here first, Trey. We got your broken down. Got you all the hacks and the tricks and the questions. and we're wishing you all the best of luck to you and your wife. Congratulations. So our next question comes from Nick. Nick says, I love the podcast. My wife and I just got married and we're both 30 years old. We have $450,000 invested in the markets in broad-based index funds. Around 90% of that is from my investing and the other 10% is from my wife's. About 270,000 of the 450,000 is in retirement accounts. The remaining 180,000 or so is an individual broker.

Starting point is 00:19:20 accounts, aka our bridge account. We're trying to figure out if it makes sense to pay off my wife's $50,000 of credit card debt that she brought into the marriage and has been trying to tackle for years now. I started helping her pay off her debt after we got engaged and were able to shave off $25,000 in the last year or so. We make around $250,000 a year combined and I personally have invested between $40,000 and $60,000 every single year for the last five years. So should we sell $50,000 from our taxable brokerage to pay off my wife's debt or just keep throwing around $2,000 a month at it and take longer to pay it off. All right, I'm going to kick this one off, Robert. So the math isn't mathing, first of all. So you guys are making around $250,000 a year combined. So let's say you

Starting point is 00:20:05 take home about 75 to 80% of that. That's $16,000 a month take home pay after taxes. There's absolutely no way, no way on God's Green Earth that you are only taking $2,000. of that 16,000 to use it to pay off this debt. I have no idea what you're spending $14,000 a month on. If you want to aggressively pay off this debt, again, I've talked about this all the time. My girlfriend and I, we live off of between like $5,500 and like $7,000 a month, super comfortably, including a high interest mortgage in Nashville, Tennessee. So if you apply those same parameters here, you're talking about $8,000 or $10,000 a month extra for Nick and his wife that they should have per month to use to pay off this debt, which if that's the case, then yeah, if you

Starting point is 00:20:54 have an extra $10,000 a month and you can pay it off in five months, I'm not mad at that, but $2,000 a month, it's going to take you so, so long, over two years to pay this off at that rate. I guess even whichever way you choose, I'm actually leaning, Robert, for them to just cash out $50,000 of this $180,000 in their sort of brokerage bridge account, maybe take it out of some of the more risky ideas that might be inside of there, pay their taxes on it, set aside a little bit of money for that, but then more importantly, use that, throw it at the credit card debt and literally cut up the credit card. You cannot use a credit card. Your wife is not a credit card person. You all are not credit card people. Do not use them. There are credit card people and there are non-credit

Starting point is 00:21:33 card people. You are non-credit card people. You are $50,000 in credit card debt at 30% interest. We're talking about tens of thousands of dollars in interest, Robert, that this person has paid on this debt over the last couple years as they've been trying to work toward tackling it. Get rid of credit cards. They're not your friends, at least for you guys here, and just focus on your high income and investing and building wealth that way. Brendan and wife, you can't out invest high interest debt. So stop. I'm not going to be as nice. Get rid of this debt as soon as possible. Something is wrong here. Austin said it well. The math ain't mathin. You've crushed it at your age to make

Starting point is 00:22:17 a good income. You guys are high earners. You've got some things dialed in, which is great. You've got the brokerage account. You've got some of your other stuff. You've got the broader index funds we talk about. But why on earth are you carrying credit card debt month over month and only chipping away at it? It makes zero sense. So as soon as humanly possible, take the 50k, pay it off, get rid of that 30% interest, and let your money grow the way it's supposed to rather than leaving that linger out there. And like Austin said, if you can't get it dialed in that you're only using credit for miles or other advantages and you're going to pay it off every month, then cut up the credit cards, don't have any until you get to that point in life because you are just wasting so much money on these high interest debts and you have to get rid of it, especially because you can get rid of it where some people are just stuck and they have to pay the high interest for years. You are not in that predicament and you should get rid of it as soon as possible. And Nick, I want to give you guys a benefit for the doubt here.

Starting point is 00:23:16 And by the way, your email says Brendan, but you introduce yourself as Nick. So I don't know which one to call you here. But either way, we just want to make sure that you guys understand, yes, you guys just got married. You didn't really have a reason to combine finances before this. So I understand why keeping this credit card debt around a little bit. You said you paid off 25,000 of hers, which is amazing. But now that you guys are married, there is no more excuses to keep this around, cash out that brokerage account, pay off the credit card debt. cut up the credit cards and then build wealth from there. I mean, there is no reason to have that much

Starting point is 00:23:49 credit card debt. And something else, too, Robert, that I want us to talk about for just like five minutes. I think that's really important. You cannot out earn your stupidity. You cannot out earn your stupidity with money. I fell victim to this for the first like probably six months of me, like being an entrepreneur. I was like, whoa, I'm making like a couple thousand extra a month. Like, I'm going to go buy some cool stuff now. I'm not going to care about a budget. I don't need a budget, right? I'm I quickly learned that wasn't the case. But a lot of people make this mistake of saying, oh, I'm making $250,000 a year. I can afford to do ABC XYZ because I'll always have money coming down the pipeline in the future to pay off the debt or to, you know, pay back this loan or to, you know, go on this vacation or whatever you might have.

Starting point is 00:24:29 So there's going to be a point, you'll realize you cannot out-earn your stupidity with money. And until you realize that, and Robert, we talk about this all the time. Some of our wealthiest friends use a budget. Some of our wealthiest friends forecast their, you know, investing month over month and they're spending month over month, right? The wealthiest people we know do this. And so if they're doing it and you're not doing it because you think you make too much, like come on, dude. Yeah, I think the big thing here is, and you're right, the wealthiest people I know, some of the billionaires and people that are 100 million plus, they budget and they have mortgages. They have a mortgage.

Starting point is 00:25:04 You know, they could buy a property 10 times over with cash. They have mortgages. They have car payments because guess what? They use leverage to build more wealth. And you can't have leverage if you have high interest debt. That's why you have to understand low interest debt is great. High interest debt is terrible. So let's get this fixed.

Starting point is 00:25:22 Let's move on. And you will be in a much better spot in the coming years. So our next question comes from Kiko T. Kiko says, Hi, Austin and Robert. My fiance is taking over his family's business, which is valued at $4 million. and it's being gifted to him completely for free.

Starting point is 00:25:38 The business sits on eight acres of fully paid off land. We live in a high cost of living area, aka Hawaii, and with our wedding approaching, we're also planning to build a new home on this property. We're in our mid-30s, and I'm currently maxing out my Roth IRA every year and contribute about $15,000 annually to my 401k. My fiancee wants to pay for our house entirely in cash, which should be about $600,000. While I'd prefer to finance about half of it, he should. strongly prefers keeping cash savings and isn't a big believer in investing, whereas I value investing

Starting point is 00:26:11 into the low-cost index funds and ETFs that you guys talk about. So if we pay all cash for this house, we'd be left with only about six months of an emergency fund or about 50 grand. And we could likely earn more by investing part of the house fund rather than tying it all up in the property. What do you think is the best financial move in this situation? Robert, you want to start? Yeah, I love this. I think it's really a bad idea to you. all of your cash to build a house, buy a house, whatever you want to do. Because at the end of the day, it takes a very, very long time to build up cash reserves of $600,000, $700,000 and to put it all into a home that is likely going to have low capital appreciation right now for the next

Starting point is 00:26:54 few years. And also, it just really hamstrings you from being able to do other investments like you speak about by owning these low-cost ETFs that we talk about on a daily basis. So for me, I think the husband is wrong. I think it's an antiquated thought process to want to pay cash and own everything. It just doesn't make sense because if you can borrow, let's say, for 5 or 6% or 7% and you can make 10 or 12% in the market or maybe even higher like we have the last couple of years, then you always want that positive arbitrage going in your favor. The other part of this is, let's say you build the house right now over the next 18 months. By the time you're finished, you'll be able to refixt.

Starting point is 00:27:35 finance the home at a much lower rate, assuming that rates come back down in the next two to three years, which then even gives you greater positive arbitrage on your cash that you are keeping in the markets versus tying up in the house. And this is where I think a lot of people get financing wrong is they don't understand the wealthiest people on earth use leverage and other people's money to build more wealth. And I think you should too. So I am super excited that you got this awesome $4 million business gifted to you. I don't really know what your annual income is. However, I wish I did know that information because I feel like I'd be able to answer this question a little bit better. I agree that putting $600,000 down in cash to buy a home is probably not the best

Starting point is 00:28:20 idea, especially as you guys are in your mid-30s. I'd rather see that $600,000 growing for you over the next 20, 30, 40 years as you inch closer and closer to retirement. But on the same token, If you only put 5% down on this house, your monthly mortgage would be about $6,000. So you're talking about $80-ish thousand dollars a year all in on your home, which fast forward seven years. And after seven years of paying that, you're now paying more for the house, right? Because it takes seven years at $80,000-ish dollars to pay $600,000 out of cash. And congrats, you have a 23-year mortgage.

Starting point is 00:28:57 So you'll be paying millions of dollars, right, to buy this property if you only put down that 5%. So that's like the tradeoff that comes with, you know, buying property, especially at these like medium to high interest rates. Also, I would not buy the property thinking that you can refinance rates in 12 months. I don't think we're going to see a material tick lower in mortgage rates in the next 12 or 18 months, maybe 24, 36. But like, I'd be really scared to like have these assumptions that you can like refinance this lower after it's built. And then fast forward to, you know, 2028. And, and, like, I'd be really scared to like, have these assumptions that you can like refinance this lower after it's built. And then fast forward to, you know, and the interest rates are still 7.5% or something, right? So if I were you, I would put 50% down, $300,000. You said that you want to, you know, he's extra risk-averse and doesn't like to invest and wants to buy stuff in cash. You guys are a partnership. You guys are married.

Starting point is 00:29:48 You guys are BFFs. I love that. So lean into his thoughts, say, hey, we can put 50% down on this $600,000, like, let's rock it and roll it. So we'll put $300,000 over here. And you can keep the other $300,000 invested in the market. Maybe you've got some dividend-specific ETFs so you can see some stability. Maybe some income coming in will help alleviate his, you know, scarcity mindset around investing and seeing what that income can look like and turn into over time.

Starting point is 00:30:14 But I don't like the idea of putting all $600,000 down into buying a house like this. And something else, Robert, that people forget about private mortgage insurance. If you do not have 20% equity, like loan to value ratio on this mortgage, every $100,000 that you borrow, is about $75 per month in private mortgage insurance payments. So if you borrowed $500,000 by not putting down this 20%, you're looking at $400 a month in PMI that just goes to Never, never land. Right? So it's like you've got to begin to optimize for these things,

Starting point is 00:30:49 especially as you are so young in your wealth building journeys. I love it, love it, love it. And that's a great take. And I'm glad you covered the PMI. So listen up, folks. Time could be running out to lock in a 6% or high. higher yield at public.com, you can lock in a 6% or higher yield with a bond account. But remember, your yield is not locked in until the time of purchase, so you might want to act fast. Lock in a 6%

Starting point is 00:31:14 or higher yield with a diversified portfolio of high yield and investment grade corporate bonds only at public.com forward slash rich habits. So our next question comes from Brady B. Brady says, hey guys, new listener here, and I've been really enjoying your podcast so far. My wife and I signed for a new construction build in January, and this is our first house. The expected end date of this build is August of 2025. So we are in escrow until then. Now, the house is $900,000, and because we are in Oregon, there's a new law for new construction builds specifically for a 30-year fixed loan. And because of this new law, we now have to put down a 10% down payment instead of a 5% down payment, which we wanted to originally do. Now, my wife and I together make 230,000.

Starting point is 00:32:01 $30,000 a year, and so far have only $18,000 saved up for our down payment. Our rent for our apartment is $2,600 a month, and our monthly bills beyond that are about $1,500 a month. That $18,000 is sitting in our brokerage account invested into single stocks like Walmart, Costco, Chewy, Sintaz, and others. Do you have a recommend another way we can expedite the $80,000 we need to save up in the next six months for our down payment? I appreciate any insights you can provide. So let me kick this one off, Robert. First off, if you have $18,000 that you are saving for a down payment, the last place that you want to park that money is in volatile single stocks that include Walmart, Costco, Chewy, Sintaz, and anything else you can come up with. That money needs to be

Starting point is 00:32:48 there in six months. You know what might not be there in six months? Walmart or Costco stock at all-time highs like they have been for the last couple years. We might have a 20% correction with some of these names, right? So now you have only $16,000 or $15,000 because you invested this money into some volatile names versus just parking it in a high-yield cash account on public.com. So the absolute first piece of advice I could give you here is to get out of those single stocks, move all of that money into a high-yield cash account, especially if you need this money in only six months. Now, if you need this money in six years, it's a different story, but in six months, you need this to be very stable and growing very slowly in a savings account. Yeah, I also want to backtrack a little bit

Starting point is 00:33:31 here, and that is the 18,000 saved for the down payment. We don't know what they have elsewhere. Do they have a million dollars of invested capital? Is the 18,000 all they have invested? And where is all the money going? Because as we always talk about, people need to build their bases first before they go out and build a $900,000 home. So let's assume that they have. So, we have a $1,000. have $400,000 invested, but they only have $18,000 for the down payment. I agree with you 100%. They have to get those funds out of volatile stocks, get them in a safe spot because that money is going to be needed much sooner than later. But I don't know of a way other than digging in and understanding their budget, where do they get the additional $62,000 to get to that $80,000 mark to put them in a

Starting point is 00:34:25 position for this down payment. So that's where it gets tricky for me is if they only have the 18,000 right now, why are they building a $900,000 house? It seems like it just the math doesn't add up for me. But let's assume that they sock away a ton of money in the next five, six, seven months until they get to August and they need it then. They would have to really, really sit down and find a way to put aside a ton of money every month to be able to pull this off. But I just don't want to see them in a position where their house broke and without additional knowledge, it seems like they are going to be house broke because you're going from a $2,600 a month rent to a mortgage on $900,000 plus I'm assuming there's HOA, you got to buy all the furniture, et cetera, et cetera. So it's a little bit of a

Starting point is 00:35:13 gray area for me of not knowing the best strategy to help them with this because we don't have complete information. Yeah, I'm going to try and help them the best I can though. I mean, at the end of day they've already signed for this new construction build they signed it last month back to this idea of being house broke i think they unfortunately will be if you're making 230 000 a year and you're taking home about 80% of that i know organ's got some taxes there's federal income taxes higher tax brackets right all that stuff but if you're taking home about 80% of that that's about 15 000 a month assuming you actually put 80 000 down on this 900 000 house you're buying you're borrowing 820,000. That's about a 7,000 a month mortgage or roughly 50% of your take-home pay.

Starting point is 00:35:59 You will be house broke. This is a terrible idea. I'm very scared for you guys. I'm not trying to say that to scare you. I'm really like not liking the numbers here. You should not be jumping from $2,600 a month to $7,000 a month, especially if you're over here saying, hey, I only have $18,000 and we need to come up with $80 in six months because I don't already have it somewhere else. It'd be different if you're like, hey, guys, I've got 18,000 sort of set aside in this fund for my home, but now I have to come up with another 62,000, and I have it sitting in a brokerage account, is it a good idea to sell it and pull it over and use that for the down payment? That's a completely different situation.

Starting point is 00:36:37 Maybe you've got hundreds of thousands already invested. You've built your base, things like that. You know, you guys are making great money. Again, like, don't get me wrong. But like, to go from, hey, we have 18,000 to this, like, how are we going to come up with another 60,000 in the next six months? because you don't already have it. Like, that scares me. Now, to answer your question, though, because you did ask it, happy to answer it, how do you come up with it? It's already in your budget. You guys are taking home $15,000 a month, assuming $2,600 for rent and another $1,500 a month for your

Starting point is 00:37:04 monthly bills that you mentioned. You now have about $11,000 of margin left in your budget. 11,000 times six months is about $68,000 that you will have. So $68 plus $18,000 is much more than the $80,000 you'll need. So don't worry. It's already in your budget. But again, coming back to this idea of like being house poor and just not having maybe the base built and just a lack of like planning, it seems like. I'm just really scared for you guys. And please, please, please make the honest budget, reevaluate this entire situation and don't be the person who has 50% of their monthly take-home pay going to their mortgage. And the interest you're going to pay on this. I mean, I'm looking at the mortgage calculator. they're going to pay nearly $2.5 million for this house if you include this at about a 7.5%

Starting point is 00:37:52 interest rate over a 30 year fix. So I just don't like what I'm saying. Yeah. And I agree. And I get it. You know, you want to have the big beautiful dream home. You know, you've got the family and all of that. But at the end of the day, I think too many people ignore debt to income ratio. What does it look like? What does our honest budget look like? And what should we be buying? Because at the end of the day, you definitely don't want your home, your overall total home ownership cost to be greater than 35 or 40% of your net income. And unfortunately, you're going to be far past that with this purchase. So it might be too late to back out. I don't know, but I just feel that you're going to be in a little bit of trouble here.

Starting point is 00:38:31 And I want everyone listening that might not be in this position to understand one thing. Don't buy a home based on what they'll lend you. Buy a home based on what you feel comfortable spending on as a. it's related to your debt to income ratio. Because there's so many ways that people get all of this, you know, these high priced homes where they get approved. Just because you're approved for a million dollars doesn't mean you should spend it. Because at the end of the day, there's nothing worse than being house broke and not being able to get out of it. You know, that reminds me when I bought my first home. I went to a mortgage lender and I said, what can I borrow? And they approved me for

Starting point is 00:39:06 $350,000. Of course they did. I think I was making $65,000 a year at the time. And that monthly payment was going to be like two grand. I was taken home like 3,800, $4,000 to begin with, right? So like they approved me for 50, 55, 60% of my monthly take home pay. It was, I'm like, guys, I appreciate this, but I'm going to go buy the house that's $270,000, and I'm going to go borrow $245, right? It's just like a completely different situation. So we're rooting for you. We hope it works out. You obviously are very high earners. You've got a ton of margin already in your budget. We hope that you. You can use that margin in the future to continue to invest and build wealth.

Starting point is 00:39:45 But just some of these numbers scare me. Make sure you have a complete understanding of what you're getting yourself into so you don't find yourself as a distressed seller in two or three years from now. All right, Robert, this next question is a little bit of a long one, but I really liked it, and I'm excited to dive in. So it comes from Mr. F. Mr. F works at SpaceX. He's 37 years old.

Starting point is 00:40:05 He makes $135,000 a year, and due to performance awards, earns another $100,000 a year and bonuses. He typically contributes 20,000 a year to their 401k that they don't match and holds $850,000 in company restricted stock units. He has, in his 401k, about $165,000 invested into the S&P 500, but he chose not to do a Roth IRA because SpaceX offers a employee stock purchase plan that allows to buy stock at a discounted rate, and he sees about a 30% return every single time he's able to buy the stock at the discounted rate. So he puts 5% of his check into this instead of, you know, his Roth IRA, which I guess in this situation is done well for him. He also owns a home at 3% interest. He paid $180,000 for it back in 2012 and now it is worth $450.000. His net worth is

Starting point is 00:40:58 $1.3 million and does not include the retirement accounts of his wife. And his question is, he feels like a large percentage of his net worth is tied up in SpaceX stock. He thinks Starlink is going to continue to do very well. He's confident that SpaceX is going to continue to grow, but isn't sure if he should keep $850,000 of his net worth tied up into this one company. So Robert, what advice would you give Mr. F? Great situation. Congratulations. But you're right. I think your fears are correct. I believe that having a major portion of your net worth or anyone having the major portion of their net worth in one stock in one company is very scary because if something happens that company goes belly up or you know something else happens and the technology doesn't

Starting point is 00:41:49 work or someone beats them in the market then your net worth could plummet very very rapidly you know there's a general rule of thumb out there that you shouldn't have more than five percent of your net worth in any one position and it doesn't necessarily need to be a steadfast rule but it's definitely a good rule of thumb. And in this position, you have a massive portion of your net worth all in one company. It's a great company. Obviously, congrats. But I would definitely look at starting to dollar cost average out of it, where you're

Starting point is 00:42:20 just kind of pulling some money out, maybe $50,000 a quarter or something like that and getting it into some of these other positions that we like, these low cost ETFs, and get more diversification for yourself over the next 24 months. That's what I would do because I like to sleep at night knowing that I'm not yoloing my net worth all in one thing. You know, I have a lot of Bitcoin and I'm very, very happy with that decision, but I've also sold Bitcoin over the years, even though I believe it would continue to go up. And that has been a very, very smart move for me because Bitcoin is volatile as well. So that's what I would do. I love the position you're in, but I totally agree with you.

Starting point is 00:43:01 More diversification, I think would be better long term and help you. sleep at night. I totally agree too, Robert. So just kind of plug up some stats here on SpaceX. The valuation in 2020 was 36 billion. The most recent valuation in 2024 was 350 billion. So a 10x jump in valuation or a 10x jump in stock price that our friend Mr. F here was able to realize. So one, that's just unbelievable, super excited for you. Again, great position to be in. I'm not sure that I would sell all of it. I don't think I would sell all of it. But I think I would sell all of it. But I think I would probably sell 50 to 75%. I'm not saying that SpaceX isn't going to go from a $350 billion, and they won't eclipse a trillion or $2 trillion or $3 trillion. They probably will. I have

Starting point is 00:43:45 no idea. But I think as a prudent investor, and Robert just laid this out correctly, if you believe in something for the long term, that's great. Have a little bit of slice of it. Have it in your net worth. Let it go out forever like it is for Bitcoin with Robert or like it could be with, you know, SpaceX with you. But there comes a point where you have to say, okay, this is irresponsible. This is becoming a little too risky for my cup of tea, right? You've got 70% of your net worth tied up in one company. I think I just read too that because of these tariffs, Canada is not using Starlink anymore. And I'm sure that's going to impact SpaceX one way or another, right? So there's just a lot of weird things that could positively or negatively impact

Starting point is 00:44:27 SpaceX over the next coming years. I would be very comfortable taking 50% of this off the top. And then now the question is, Robert, where would you allocate the $420-ish-thous thousand dollars that Mr. F is going to have? I mean, it's the playbook. I would get them into these low-cost ETFs. I would spread it out some. I would make sure to have some in crypto, some in the S&P 500, some in the NASDAQ, maybe look at AIQ is a great fund for exposure to the global AI sector. I would also look at some of the callouts we've had in nuclear. There's some really great ETFs there for the future that I think is good. But I would make sure to get added diversity in other sectors that I believe are secular growth trends, but also have the basics. We love, love having the S&P 500 and the NASDAQ. Every portfolio should have it. And that's

Starting point is 00:45:21 what I would do immediately to give some relief and get the diversity he needs. Yeah, I think what's really important, Mr. F to consider here is like for the last call it a couple years, you've been investing into the most risky asset class of all time, which is startups, right? You've been investing into a startup that is illiquid and is run by the world's richest man and is just running it like crazy and doing everything he can to make its value go up. And your portfolio has profited from that bet. Now it's time to say, great, I have been really great about picking the stock, this startup investment. It's super risky. It planned out for me just fine. Now I'm going to take that, you know, call it 50% or 75% and flip it to.

Starting point is 00:46:02 the complete other side of the risk spectrum. That's what I would do. I'm talking S&P 500 index funds. I'm talking gold. I'm talking silver. I'm talking like very normal things that might experience two to 10 percent corrections here and there, but nothing that's going to, you know, go up or down by 60, 70, 80 percent, like a single stock or like a startup very well could. We all know what Stripe is up to. So that's what I would do. I would completely flip on the risk spectrum for you there. But congratulations. what an awesome place to be in again and make sure that you consult with an accountant to optimize your tax liability as you sell this several hundred thousand dollars worth of RSUs. So our last question comes from Austin M. Austin says, hey guys, I love your podcast. You probably

Starting point is 00:46:49 covered this in the past, but I just can't remember the episode. Long story short, I got out of the army and pulled my money out of the TSP. I had about 35,000 in the traditional and 175,000 in the Roth. I decided to move all of it to my Vanguard Roth IRA and pay the taxes on the traditional rollover now with some cash, and I've got it all moved over to avoid the additional early withdrawal fee. I'm 30. I figured those investments will grow better, all being in the Roth over the next 30 years. So here's my question.

Starting point is 00:47:16 I have $210,000 of cash sitting in my Roth IRA ready to be allocated. I want to keep it simple. One, three, maybe five ETFs total. How much should I put per month into what funds? Do our dollar cost average? Do I invest it all on day one? How do I approach this? Robert, one kick it off?

Starting point is 00:47:37 Yeah, in the question, he mentions VTSAX, VTI, and V-O-O-O. So let's start there. I love the idea of what you're thinking, but I want to make sure you understand something. V-T-S-A-X and V-T-I are the same exact thing. It's just one of them is a mutual fund and one of them is an ETF. So you don't need both of the same thing. So just make sure you understand that.

Starting point is 00:48:02 I would do VTI and I would do VO and then I would probably look at adding QQQ instead of VTSAX because you don't need duplicates. And Austin and I generally try to help people understand that we just don't talk about mutual funds that are the same as far as what they invest in as the ETF and index funds that we like, just because they have higher fees and I don't believe it's necessary to have that active management in these indices. So that would be the blend I would do if you were only going to do three funds. And I do like the idea of dollar cost averaging right now as you get into these a little bit each month. Maybe you break it down over the next six months or three months because we are in a stage of volatility right now.

Starting point is 00:48:48 February is normally a really bad month. And you could look at it that while we're in this pullback, you could dump it all in. But we might see continued pullbacks over the next 60 or 90 days. So I'd rather see you dollar cost average in because I think that would be the better move in the coming months. Yeah, I agree. Call it $20, maybe $30,000 a month until all $210,000 is allocated. It's about, you know, six to 10 months, something in that range there that'll take you to allocate all of that funds. And you're going to be just fine.

Starting point is 00:49:17 Also, thank you so much for your service. Everyone, thanks again for tuning in to this week's episode of the Rich Habits Podcast, question and answer edition. If you have a question to ask us, head over to our Instagram at Rich Habits Podcast. DMS, a question. That's where we got a ton of these. Or send us an email at rich habits podcast at gmail.com or most importantly, join us live every Tuesday evening inside of the rich habits network. We've got a couple hundred people that join us over there. We have a Zoom call. We talk about the markets, headline news. This week we talked about tariffs and how they impact our portfolios and what's happening with all of that. So if you are a super fan of the show and like to nerd out a little

Starting point is 00:49:53 bit on the markets. The Rich Habits Network is for you. Definitely. And make sure you share it with a friend, even if it's just starting out sharing the podcast, maybe the free newsletter because there's so many people out there that just need the help in getting started. And maybe our approach with the Rich Habits podcast newsletter and the community is the way for some of these people to get invested, to get started. Because so many people sit on the sidelines, sometimes until they're in their 30s or 40s, because they just don't know where to start. Well, we're here to change that. So always share it with a friend.

Starting point is 00:50:28 Get them to watch it because there's just so much to learn and so much help we can provide people right here at the Rich Habits podcast. Thanks again, everyone, for tuning into this week's episode. We got some really positive feedback on Monday's episode with Sahil, so we're really glad you guys liked that as well. And we'll bring you some more cool interviews very soon. Thanks, everyone. Hey, y'all, it's Kelly Clarkson with Wayfair.

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Rich Habits Podcast - Q&A: $850K in SpaceX Stock, Building a Barndominium & $50K in Credit Card Debt

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