Rich Habits Podcast - Q&A: Betterment's Core Portfolio, Investing in Student Housing, & ARMs

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Starting point is 00:00:56 Find your advisor at IG Private Wealth.com. Hey everyone and welcome back to the Rich Habits podcast question and answer edition. We are so excited because later this evening, Thursday, August 15 at 4 p.m. Eastern Time, we'll have hundreds of people joining us for our webinar. And as a reminder, you can still register, assuming the webinar hasn't yet taken place yet, using the link in the show notes below. We already have over 880 people registered and it's going to be so much fun. This webinar is all about angel investing and pre-IPO investing.

Starting point is 00:01:32 It's essentially a webinar all about helping you guys, one, find really cool private placement deals and two, showing you how you can invest alongside of us into some awesome, awesome opportunities. Yeah, I'm super excited about it. I get asked dozens of times a month, how do you get in on these deals? Where does all your deal flow come from? And honestly, that is one of the coolest parts of what we're doing moving forward, the Rich Habits Network is sharing our behind the scenes deal flow and allowing other people to get in on it because it can take years and sometimes decades to get to a point where Austin and I are

Starting point is 00:02:08 in this deal flow to be invited into these companies to invest in these pre-IPO companies. So I'm super excited to talk about it, teach people about it, and then also share the deal flow with everyone that's in the Rich Habits Network. And speaking of the Rich Habits Network, Robert, the people who requested early access to the network were actually given that access two days ago on Tuesday. So if you were one of those people that sent us an email with the subject line network, go check your email address because we likely sent you back the access instructions. And we can't wait to see all the other people who are excited about the Rich Habits Network joining us over there as well. So be sure to check your email and you'll have the instructions sent to you

Starting point is 00:02:50 pretty shortly if you haven't received them already. But before we jump into the episode, I want to take a moment to talk about our sponsor, public.com. If you're looking for a simple yet sophisticated investing experience, you've got to check out public. From stocks to options, bonds the crypto, it's all there. You don't have to juggle or switch between different apps. Public let you manage your entire portfolio in one place. You can even earn 5.1% APY on your cash with a high yield cash account. That's not just a good rate. It's literally an industry leading. rate. The fact is millions of investors trust public and for a good reason. NerdWallet just gave Public 4.6 stars and calls it an impressive experience. And Public is a U.S.

Starting point is 00:03:37 based company, which is something Robert and I both really like. They've got award-winning customer support and they take the safety and security of their customers seriously, so definitely try it out. It takes two minutes to sign up, and we both think you guys are going to love it. That's public.com, all of your investing in one place. This was a paid endorsement for public investment. investing. 5.1% APY as of June 17, 2024, and is subject to change. NerdWallet, overall rating of 4.6 out of 5 stars is as of May 24. Full disclosures are in the podcast description below. All right, Robert, let's jump into our first question. These questions came from our Instagram DMs. Again, that's Rich Habits podcast on Instagram. If you've not yet followed us, you probably

Starting point is 00:04:17 should. We post behind the scenes stories and reels and clips and all the other fun stuff over there. So definitely go check that out. So this question comes from Alec. Alex says, hi, Austin and Robert, I discovered your podcast last month and I've been binging your episodes on my morning walks. Thank you for all the value you both provide. I'm a physician making $215,000 a year and I invest 40 to 50% of my monthly take-home pay with the goal of retiring from medicine if I want in my 40s. I'm 34 years old right now. I have a question and I really need your input. I've invested nearly $82,000 now into Betterment's core portfolio of ETFs since January of 2023.

Starting point is 00:04:54 However, the portfolio has only had total earnings of $8,300. Am I placing too much weight into betterment when I could be investing more into the ETFs that you all talk about, like V-O-O and QQQ. Additionally, I also opened a public.com account since listening to your podcast, and I've invested into the following names. I've got 9,000 into VO-O-Q-Q-Q-Q, Mote, A-IQ, QGT. I have another 9,000 in some magnificent seven individuals. individual stocks and 5,000 in some alternative assets like Bitcoin, Ethereum, gold, and silver.

Starting point is 00:05:27 So what do you guys think? Robert, I love this question from Alec and first and foremost, man, what a really cool scenario to be in. You work so, so hard to get yourself through medical school. You've passed your board. You're now making nearly a quarter million a year. You're 34 years old. I mean, you have your whole life ahead of you and you are just getting started. You are going to retire a multi-multimillionaire or in your sort of defense here, maybe even retire early, right, in your 40s. Like, that will be so fun. So here's actually just a quick pro tip that people might forget about. And Robert, it's funny.

Starting point is 00:05:56 We actually talked about this in one of the modules inside of the Rich Habits Network. And the only reason I know about it is because of my girlfriend. So what's interesting about betterment, wealth front, and some of these other robo advisors is they park you into a very similar portfolio construction of that as a target date fund automatically. So they're going to put you in international stocks. They'll put you in bonds. They'll put you in cash.

Starting point is 00:06:20 They'll put you in treasuries. They'll put you in just a plethora of different sort of asset allocations and classes. And it's up to you to mix that up and change it and to do what you want with it. So when my girlfriend invested through wealth front into her Roth IRA, they automatically put her in all these random things. And I was like, no, no, no, switch it out. You need VOQQQ, VGT, the ECFs we talk about. And that's what she's now invested into today. So you have the ability to switch things out and it gets automatically deployed and rebalance like a robot advisor does so well.

Starting point is 00:06:50 So maybe you're looking for that Alec as it relates to the hands-off experience that you get with a Robo Advisor. But to see only $8,300 in earnings on about $82,000 in investment over the last 18 months is pretty discouraging, especially after the 28% return the S&P experienced in 2023 and the 50-something percent return, the NASDAQ did in the same period of time. So I'm not sure when a lot of that cash was invested. I don't know if it all came in the beginning of 23, in the beginning of 24. I'm sure that has something to do with the earnings mix up there. But at the end of the day, I would really encourage you to rebalance and make sure that you have better control over what that money is invested into as it relates to the ETFs.

Starting point is 00:07:30 Robert and I talk about all the time on the show. Yeah, I think that's a perfect strategy. And again, great place to be. You just need to maximize your gains. Remember, we always say to make your money work as hard for you as you work to get it. And Austin is spot on. Get it rebalanced. Get it making more money because you don't want.

Starting point is 00:07:49 want to at your age have a set it and forget it strategy. Automation is great as long as you're keeping an eye on things and making sure you are getting maximum returns. So I love that answer, Austin, and I think you're in a great place and just make those subtle tweaks and you'll be on your way to really crushing it for retirement. Actually, Robert, to jump in right now, I just googled what the Betterment core portfolio is. And according to their website, their core portfolio is low cost and designed to generate long-term returns while reducing risk through diversification. We love diversification, but they say their diversification features a broad collection of exchange traded funds made of thousands of stocks and bonds from around the world. I don't know about that.

Starting point is 00:08:31 So I look further in the holdings and I see that 25% is international stocks. And another 9% here are emerging markets, 7% in bonds, another 3% here in bonds. So that's why you've underperformed so much. So, Alec, broadly speaking, international stocks haven't performed historically as well as the United States has. So seeing that here makes a lot of sense why. And I look over at the last one year return of this portfolio, it's only about 14%, where if you look at the S&P 500 over the last one year, the same period of time, it's about 20%. I just want you to know that that's what's happening. That's why you're seeing less returns. But again, if maybe that's something that you like, I don't know, right? So we gave you the answer. You got the sauce here. We want to retire early. Time to

Starting point is 00:09:14 invest aggressively while you're young. Yeah, and I want to add one more thing to that for everyone following along. This is why we always talk about optimizing your gains, because these types of funds, there's nothing wrong with them, but they're built more for preservation of your money and not growth. And like Austin alluded to, you have to choose what your risk tolerance level is based on your goals for retirement and then adjust accordingly like we're discussing right here. So great job. Hope this helps and good luck. So our next question comes from Rachel. Rachel says, Hi, Austin and Robert. I'm going to make this one really easy. I'm not going to get to the specifics of my particular financial situation, but instead, I just want to hear the pros and cons of buying

Starting point is 00:09:57 quote unquote student housing. In other words, those big 11 bedroom Victorian older houses that are walking distance from a college campus. Is this something you guys think is a good idea as an investment property or maybe there's too much chaos that can come with that that might offset any potential returns. Robert, you are the real estate guy, so I'm going to let you just take this one away. I think you nailed it on the head with the word chaos. So look, there's definitely some pros here. I did it back in the day and I did Section 8 back in the day and that is the reason it was back in the day because it was not passive. I had to become basically a professional attorney to handle all of my own evictions and all of my lawsuits because these properties get tore up. Now the pros of this

Starting point is 00:10:43 type of investing, they're there. You can get higher rents. There's always going to be a lot of demand. It's easy to find tenants and you don't have to keep the place as nice as if you're renting a single family home for a family with two kids. So those are the pros. But the cons, I think, outweigh the pros. And that is you're going to continually have damage. You're going to need constant maintenance and supervision. And every single time you flip a bunch of tenants every year, every couple years, you're going to need a full repaint and flooring and probably cabinetry and other things. Because again, these are college students that are going to party a lot and they're going to really ruin your property. So you just have to understand the numbers. I don't think it pencils out anymore like it used

Starting point is 00:11:26 to to be able to really make money because we do have higher interest rates now and property cost is much higher than it was when I was doing it. But those are the pros and cons of doing it. I I personally would stay away from it. I would rather see you go get a traditional duplex, triplex, or a quadplex because you can get good tenants in there that are long term and they're going to take care of the property. Yeah, I don't really have any perspective on this. Then I guess my personal experience of living in one of those, you know, 11 bedroom Victorian houses. When I went to the University of Tennessee, I lived in a house in what they called the fort, which was like a neighborhood walking distance to the campus. And I think it was nine bedrooms, 10 bedrooms.

Starting point is 00:12:04 and one of those bedrooms was like a closet in the basement. I mean, you know, this guy just put beds in rooms that weren't supposed to be rooms, right? So I was paying like $5.50 or $600 a month. So he was definitely making enough on those eight or nine bedrooms to cover a mortgage if he had one. I just feel like as a landlord today, I want to make sure that the people who are living in my properties at least treat them decently, right? And I know how we mistreated those properties in college. And so, Rachel, I'm not going to tell you that you should do this or not.

Starting point is 00:12:34 do this. I think that's more of Robert's perspective, but as someone who was living in a property like that six, seven, eight years ago, I wouldn't do it. I think it's a breath of pre-de-lawful. All right. So, our next question comes from Lupe P. Lupe says, my name is Lupe, and I've recently been introduced to your podcast. I'm currently trying to play catch-up and I listen to your episodes from the beginning. I do have a question, though, and I don't think it's been asked yet. I'm a U.S. citizen, but I've been working overseas for a non-American company. Due to my work situation, my taxes are filed with the foreign earned income tax exclusion. I do owe one property in the states that is being rented out. Given this situation, I've been under the idea that I'm not eligible to open a Roth IRA.

Starting point is 00:13:15 Is this correct? And is there absolutely no way that I can open up one of these types of accounts? And if that's the case, what other retirement account should I be investing in? I have no credit card debt and I'm using public.com for some T bills. Okay. So one, if you have an accountant and your accountant says you do not have the opportunity for a Roth IRA, listen to your accountant. Robert and I are just two guys on the internet. But just so we're on the same page, right? A Roth IRA works and people are eligible for the Roth IRA because they have earned income in the United States. If you are paying taxes on at least as much as you're contributing to the Roth IRAs, let's say $7,000 a year, if you're a person that makes $7,000 a year in the

Starting point is 00:13:55 United States and you've paid taxes on that money, you can contribute that, right, to. You can contribute that right to your Roth IRA. Now you're saying that you have this foreign earned income tax exclusion, which means you're spending 330 days or more somewhere else. Maybe you're paying taxes somewhere else as well. So you're not getting that double taxation, which is the reason for this tax exclusion. So if you are paying taxes somewhere else, and I know there's like treaties and all these other different things that are, you know, need to be taken into the account here. So again, take this with a grain of salt. But if you're paying taxes somewhere else and you are not paying taxes in the United States. I probably would say you can't open a Roth IRA. Of course, go ask a CPA,

Starting point is 00:14:35 go ask someone who can actually drill into the weeds with you, sit down with you, figure out your entire situation and not just take this with an Instagram DM, but I would assume you're correct here. Now, to answer your second question as to how can you begin investing into these other retirement accounts, what's kind of options are out there? One, you don't need to have any type of crazy account. You can always just go open something up on public or Fidelity or Robin Hood or wherever. you could also open an account on interactive brokers, assuming that's in the country you work in and pay taxes in and just start investing, right? You don't need to make it fancy. Don't have the hurdle of looking for this optimization of taxes and things like that with retirement accounts,

Starting point is 00:15:12 stop you from investing altogether. That's a silly way to look at it. Yeah, my take is simple. Austin, you nailed it. I would do two things. I would check with a CPA that is localized to you where you are in the United States. And then I would also check with an international CPA that knows all the rules there, put together your findings and figure out the best strategy for yourself. You can probably do all of this online and pay a fee so you know exactly the best way to do this, how to do it, and how to optimize it. That's what I would do. And that goes for anyone else listening. If you have a unique situation, right, I don't want people to think that the answers we give or the things we say apply to everybody. Robert always says personal finance is personal and it very much is.

Starting point is 00:15:54 So if you have a crazy unique situation like Lupe does here, don't be afraid to go find outside counsel and pay hundreds of dollars, a couple thousand dollars to get that advice because it can be very, very invaluable to you over the long run as it relates to building wealth. Absolutely. Now our next question comes from Amy. Amy says, I love your podcast. My question is regarding my mortgage.

Starting point is 00:16:16 Our home is worth $1.3 million. We have $859,000 left on the mortgage, but we're on a 5-1 arm. and although it's currently at 3% in two years, it could go up to 8%. What do you guys think about the situation and what should we do? Robert, I will let you take this one. So, Amy, great question. And so with this 5 to 1 mortgage, all that means is you have a fixed rate for the first five years.

Starting point is 00:16:41 And then the one stands for every year after for the life of the mortgage, the rate would go up or down one time a year. So your question, I believe, is right now you're at 3%. and in two years it can go up to 8%. So that's where it gets tricky here of what to tell you of how to deal with this. Because we have to look at it that assuming rates are coming down in two years instead of going up, you could also find yourself in two years where the rate only goes up to four or five or five and a half and not fully up to eight or nine percent.

Starting point is 00:17:15 So you have to decide does it make sense now before the two year arm is complete for you to refinance into a fixed rate, which could be tricky as well, because let's say you agree to a 7% fixed rate, but in two years when the arm starts to exercise into those one year periods, you could find yourself paying more. So it's kind of a tricky situation, and that's why adjustable rate mortgages can be so tricky for people to understand, because it gets you into more expensive house cheaper in the beginning, but it can really hurt you later, because if your rate did go from 3 to 8%, it would probably price your mortgage payment out for you to where it would make sense for your debt to income ratio. So I would say keep a good eye on it, start to look at where

Starting point is 00:18:01 rates are at in a year so you give yourself a year window and then make the decision of what is best for you. Yeah, Robert, I'm looking up right now. I see a headline here that says that mortgage rates averaged 6.47% last week is a 30 year fixed. And so that's a lot lower, materially lower than 8%, especially when you have a loan amount that large. And we know that mortgage rates are going to start to come down as the Fed cuts rates in September, October, and beyond that. So this time next year, you should say, okay, where are the current 30-year fixed mortgage rates at? Do I have perhaps the opportunity to refinance?

Starting point is 00:18:35 What am I doing now to make sure that my credit score goes up, allowing me to get a better rate, right? Start kind of doing some practices that will put you in the best situation. So in two years from now, you are not at 8%, but instead maybe at 4.5 or 5%, which is, bigger than you're 3% today, but it's materially less than 8%, especially on an $859,000 mortgage. Geez. Yeah, totally, Austin. I think you're spot on there. And, you know, good luck.

Starting point is 00:19:02 Keep an eye on it. And if you need to, jump in a DM, get in the Rich Habits Network, and we'll help you out in a year from now. So our next question is from Ethan P. Ethan says, hey, Austin, Robert. I'm 23 years old and I'm fresh out of college. I went to an in-state school and I'm fortunate enough to be my mom's only child, so I did not have much student debt, only about $5,000 to $10,000 max. I'm currently working full-time for the largest insurance company in the country, and I love my job. My question is, I'm currently saving up to

Starting point is 00:19:29 buy a house within the next 12 to 15 months. I have absolutely no expense except for maybe an Apple music subscription and a golf membership at my local course. I'm able to save at least $1,500 a month. How would you put this money to work? I have a public account. I currently have $1,000 in a high-yield savings, and $4,500 in my brokerage. My Roth IRA rate. has 1800 and I only invest in ETS. I love your podcast and I listen every single week. Really good question, Ethan. Okay, a couple questions back to you to now kind of chew on. You're 23. You have no expenses and you're only saving $1,500 a month, but you work for the largest insurance company in the country. I don't know how much your salary is. I'd imagine it's $50, $60,000, maybe $80,000,

Starting point is 00:20:10 which means if you have no expenses, you should be saving $2,000, $4,000 a month, not just $1,500. So that's the first call out. The second one is, how would you put this money to work? I would, if I were you, I would really consider building my base before I, you know, try and save $15,000, $25,000 to go buy what seems like maybe a single family home. You didn't say you wanted to house hack, which is something Robert and I always encourage people to do, especially when they're your age, right, 23, 24 years old. If I were you, I'd do a couple things. One, I would audit my savings every month.

Starting point is 00:20:44 Why am I saving 1,500 and not 3,000 if I truly don't have any expectations? Maybe you do. You're just leaving something out. I'm not sure there. The second thing I would do is want to make sure that I've built my base by maxing out my Roth IRA first every single year. I have three to six months of expenses. You only have a thousand in a high yield savings account. I want to see $10,000, $15,000 in that high yield savings account first. And then after you've got a clear path to a maxed Roth IRA every year and a nice emergency fund and you've audited the budget every month, then it's time to say, okay, I want to try and get the this $450,000 duplex. I'm going to put myself a 24-month shot clock on that. I'll be using

Starting point is 00:21:24 Publix high-gield cash account to have velocity with my money as I save it. And then I would go that way, right? Robert, am I wrong here? No, you're spot on. And I'm just like getting goosebumps because I just love that I get to do this with you every single week because changing people's lives on a daily basis is so important to give them that little boost of courage or boost of knowledge to help them figure it out. So I want to turn back the clock. When I was 23 years old, the first thing I did after I had my base built was I bought a four unit, a quadplex. I lived in one unit. I rented the other three units and I was positive cash flow off of the three units after taxes, PMI, and my mortgage payment every single month at 23 years old. So I basically live for free

Starting point is 00:22:10 and made money. So Ethan, build the base first, house hacks second. Because Trust me, if you buy a duplex, triplex, or a quadplex, live in it for a couple years to you get really building that base up higher and higher. Then if you want a single family home, guess what? The duplex or triplex is going to pay for the single family home. So you're going to be sitting there living for free. Now, if we didn't just tell you that story and you went from $20,000 invested to using all of that to buy a single family house, not only do you not have the base, so you have no money working for you because it's tied up in that single family house. but then you're also coming out of pocket 2,000, 2,500 every single month for that house,

Starting point is 00:22:50 the insurance, the upkeep, maybe the HOA every single month. So you're dead in the water. You have no money to invest now because it's all tied up in one non-cash flowing property. That is why this strategy is so important. I promise you'll thank us in 20 years. You can buy me a jet ski and you'll be so, so happy if you follow these steps. And Ethan, we're not trying to come down on you. You're a genius.

Starting point is 00:23:12 You're 23 and you're thinking about this. This is awesome. But I want to make sure that you don't make the mistake that I went and I bought my house too early, to be quite honest with you. I did have my base built, but it was in a lot of these ill-liquid retirement accounts. And I had to actually put the movers, Robert, on a credit card. Yeah, man, it was crazy. So it all worked out.

Starting point is 00:23:33 Don't get me wrong. But it was like, dude, what would you thinking, man? Like, God, so much risk could have come with that. It was tough. So we just don't want you to be in that situation, Ethan. And for everyone else listening, we are not. not coming down on Ethan, but also I want to add one more thing that we talk about a lot, Austin, but we haven't mentioned recently. And that is people considering total ownership cost,

Starting point is 00:23:54 whether it's a car, whether it's your home, whatever it is, you have to consider total ownership cost. A lot of people go, oh, I can afford this. So they look at the payment. They look at the insurance and maybe the PMI. They don't take into consideration that the property might have an eight-year-old roof and in two years or three years it's going to need a roof. They don't look at, man, this air conditioning unit could go at any moment and be $2,000. They don't look at landscaping and lawn care. They don't look at pool maintenance. Look at total ownership costs so you don't buy too much property because when you do, you will be literally the term housebroke yourself. And it is a recipe for never building wealth because you're constantly just putting all the

Starting point is 00:24:37 money into a non-cash-blowing asset. So, Ethan, Robert and I are going to challenge you to have a duplex, triplex, or quadplex that is cash flowing to you by 27 years old. We're going to give you a four-year shot clock. You're saving a lot of money right now, only 1,500, but I think you, especially if you have no expenses, truly no expenses, you can probably get that closer to 2 or 3,000. So over the course of the next three years, you'll have your base built. And then you can save up another $20,000, maybe $40,000 over the coming 12 to 18 months after that. So by your 27th or even 28th birthday to then put down as a massive good down payment on an awesome duplex, triplex or quadplex that you'll live in, you'll house hack,

Starting point is 00:25:19 and you'll be so glad you waited instead of trying to jump the gun and then the roof breaks and then the AC unit goes out or the dishwasher breaks like it did for me. And then your tenants are crazy. And then you have to go into high interest credit card debt. You're pulling out of your 401k. You got to sell the, you know, the Roth that. Don't do any of that, right? Take your time.

Starting point is 00:25:37 have a plan and stick to the plan. I love it. Now, Robert, I don't know if you knew this or not, but at public.com, you can actually earn 5.1% APY with a high-yld cash account. There are no fees, no minimums, just an industry-leading 5.1% APY on your cash. And with up to $5 million of FDIC insurance, your money is secure. So go to public.com and start earning 5.1% APY straight up with no strings attached. It's an industry-leading interest rate with no fees, period.

Starting point is 00:26:08 Again, that is public.com. This is a paid endorsement for public investing, 5.1% APY as of June 17, 2024, and is subject to change, full disclosures in the podcast description below. We definitely love public. We both use it. They just have so many great tools. And being U.S.-based, again, really makes me happy because I feel like I can always get someone on the phone if I need them.

Starting point is 00:26:30 I just love the platform. Actually, I didn't tell you this, but one of their product managers, emailed me this morning to talk about a new product that public is launching in the coming weeks. And it is a very, very cool product. It's not public yet. So I can't announce it yet, but I'll tell you after we record. It's really cool. And everyone's going to love it. It is really, really cool. That's not fair at all to me or the people listening because you got to come out with the goods. We need the tea. But we'll share it with you guys as soon as we can. So our next question comes from Jaden S. Jaden says, hey, I've been listening to the podcast since the beginning.

Starting point is 00:27:02 and you all have really helped me set a foundation for myself. So I really appreciate that. My wife and I are both 25 years old. Combined, we make about $135,000 a year. We have a mortgage payment of $1,800 a month and no other debt. We have a total of about $70,000 invested across our Roth 401K, 401B, Roth IRAs, HSAs, and a separate brokerage with everything in our control, primarily targeting Vanguard's VOETF. Additionally, we have a six-month emergency fund parked in a high-yield savings account,

Starting point is 00:27:32 and we are already investing 25% of our gross income, which, by the way, just to pause there, Robert, these people are doing it, right? We hear about all the time. Inflations kicking my butt. The little man can't get ahead. You know, our family struggle. This isn't that. Don't get me wrong. I empathize with that. But Jaden S and his wife are just, they're crushing it. 135,000, which means they're both making about $70,000 a year. They're investing. They have the mortgage. They got the emergency fund. I mean, this is what happens when you make a plan and you stick to the plan, Robert. Yeah, I love it, especially at 25 years old. The number one thing that I think every day that I think about is how can I get our message out to more people that are under 30 years old?

Starting point is 00:28:17 Because if we can get them thinking like investors and not consumers earlier, then we can let compounding really do its job. And so that is such a cool thing to see Jaden and his wife, 25 years old. got the plan, they're sticking with the plan, and they're in this podcast sending us a question, and it just makes me so happy when I see people that young that have it figured out, and we're just here to tweak and give them a little more guidance. I love it. So let's give them that guidance. Jaden says here is my question. I've recently picked up a side gig that pays $100 an hour. It's freelancing as a software engineer. I intend to work anywhere between 5 to 10 extra hours a week, and I'm setting aside 30% of this for taxes.

Starting point is 00:29:00 Now, once we start having kids, my wife wants to be its stay-at-home mom, which would decrease our salary to only $90,000. We are very blessed to be making good money and planning ahead debt-wise, but I'm at a bit of a loss with what's best to use this extra side money for today. Do we just forget about it and throw it into more investments for the sake of investing? Or is there something else you would do knowing that my salary is likely going to decrease when we get ready for kids? Any advice is much appreciated. Jaden, what a really cool side hustle. that's awesome. So any software engineers out there right now who are listening, just know that you can make 100 bucks an hour freelancing as a software engineer somewhere. So let's pretend that Jaden now is

Starting point is 00:29:39 working seven extra hours a week. So that's $700 a week. That's $2,800. Hit the side. Let's call it $800 of that for taxes, right, called 30-ish percent. So he's taking home $2,000 per month extra. We're talking about $24,000 a year. So Jaden said, what do I do with $24,000 a year being in this awesome financial situation. Jaden, if I were you, and I know this sounds maybe not what you were thinking, but I would consider putting half of that, most of that, some of that, at least, into a 529 plan. You seem like you love to invest. You guys are very smart with your money. You're very focused on everything as it relates to your finances and being able to park an extra, maybe call it 12, 15, 20,000 a year into a 529 plan for your children and have that invest throughout their lives.

Starting point is 00:30:29 So when they go to college or decide even not to go to college, have all this money waiting for them in a Roth IRA when they turn 18. I think it's a very smart move. They don't have to be born yet to my understanding for you to begin investing. You just make yourself the beneficiary. But when they are born, you kind of move that beneficiary status over. But don't hold me to that. But what I'm saying is you should definitely be investing this money, right, full stop. It just comes down to the vehicle that you invest it through.

Starting point is 00:30:51 So I would take a different approach. You're already crushing it. I would take every dime I make with the side hustle and pretend. it doesn't exist, not a portion of it. I would put all of it into the traditional brokerage account that you have full autonomy over. And because of your ages, I would up the ante on the risk on that and have it be a little more high risk. I believe based on what you've laid out so far, you have pretty good risk tolerance.

Starting point is 00:31:17 And I would maximize as much as I could for the gains on that right now and not worry about the 529 for the kids just yet because you don't know when that's going to happen. I'm not trying to be morbid or weird about it, but sometimes kids don't happen the way you want or when you want and it takes longer than expected. So I would get that money optimized and crushing and pretend you never made it, maybe have it fully automated that it's in a separate bank account

Starting point is 00:31:42 and it goes right into these automatic investments to be able to make sure that you are optimizing all of that because you're already living off of your current incomes. And then even after you take the haircut on your income, then you could dial some of it back and be able to maybe split it up then after that. But that's what I would do to really set yourselves up and get you ahead of the curve

Starting point is 00:32:02 in that traditional brokerage account that you have control of. Robert, I love that answer. And something else I think that our friend Jaden needs to do because we talked about this in the Rich Habits Network is give yourself a reward for investing milestones. So for example, every time I invest $100,000 in the stock market, the crypto markets, in real estate, whatever,

Starting point is 00:32:23 when I deploy $100,000, no matter how long that takes me, I give myself a $10,000 permission to spend that money on something that makes me really happy. And I recently accomplished that. And so I went and bought a jet ski for like $8,500. And I love the jet ski. So Jaden, maybe you should give yourself a $50,000 or $25,000 milestone or something where it's like every time you guys invest $25,000 or $50,000, you set aside $5,000 for a vacation. Right? You guys are young. You guys are doing so well. All of this money should definitely get deployed and have velocity and use, but don't forget, you guys are in a great situation. And if you can spend some extra time with your wife, you know, maybe before the kids come,

Starting point is 00:33:05 again, no idea when that's going to happen. But if you can spend some extra money on that bass boat, you've always won, you can pay cash for it. And it's only, you know, I don't know, $4,500. Like, whatever that thing is that just moves the needle for you and your wife from a happiness perspective, I really want to encourage you guys to save up for it and get it. Because you guys are doing so well at such a young age and you've done just such a great job. Yeah, I love that. I think it's a great strategy because at the end of the day, it's okay to want cool stuff, you know, but you just have to make sure that you're not living beyond your means to get it. And you guys are crushing it. So I love that concept, Austin. And I recently rewarded myself as well. So it's been a really good year for both of us. And we want to see the same for all of you. So our last question comes from Adida S. Adida says, hey, guys, I'm a huge fan of the podcast and I'm starting a new job. I'm 21 years old and I'll be making 130. $30,000 a year. Oh my gosh, let's go Adida. Adida says I've been maxing out my Roth IRA and I'm

Starting point is 00:34:02 looking for tips on how to invest my money. One, my 401k offers a match but also allows me to invest however I want. So in this scenario, should I max out my 401k or should I only contribute to the max? Just to give you the quick rundown again because we say this and we want to make sure everyone knows it. Match beats Roth beats taxable. What that means is the free money you get with the match is always something that you should be thinking about, right? If you can get that free money, go get the free money. Then you want to do the Roth IRA because we always want to make sure we have full autonomy of our investments. It's our individual retirement account. It's going to follow us around for the rest of our lives, max that out and get the index funds we always talk about.

Starting point is 00:34:41 Now, assuming you have autonomy, which you stated here, Adida, that you do, you can go back and max out that 401k. The reason why it's so important for you to have autonomy to do that is because back to our example earlier when we talked about that core portfolio only performing like 9% over the last 18 months, right? You're automatically invested sometimes with these crazy fund managers into some really weird stuff. And those really weird investments sometimes underperform the markets. And so we want to make sure if you are actually deploying tens of thousands of dollars a year into the markets, you're investing into the right stuff. V-O-O-Q-Q-Q-Q-Q, V-T, these big, awesome, long-standing index funds that do really well over a long period of time. Now, in your situation, you can do that.

Starting point is 00:35:27 So go max that out. And then if you still, for whatever reason, have more money that you need to invest that you have left over, put it in public.com and buy more ETFs. And then do that until you've built your base. And then number two, you say since you're young and have a higher risk tolerance, what can I invest in once I finish building my base? Fantastic question. This is where diversity comes in, diversifying your assets so you're not having all eggs in one basket. Austin and I do a ton of different types of investing. We invest in reits. We invest in cryptocurrency.

Starting point is 00:35:58 We invest in wine and whiskey. Timber tracks. There are just so many ways to do this. And I suggest you do that once the base is built. But don't do it all at once. Really learn what works for you, what resonates for you, and start to diversify in those sectors. Because if I hear one more fake wrong guru say,

Starting point is 00:36:21 go all in on one thing, don't listen to anyone that talks diversification, run because they're wrong. If you go all in on one thing and you're wrong, guess what? You're broke. Then you're back at zero. If you diversify in one or two sectors in your diversification has a downturn or a bad few years, guess what? You're still going to be okay. So yes, diversify once you get your base built. So then that way you can make sure to protect yourself for the future. And Robert, some easy ways to diversify that our friend Adita can just jump on is Bitcoin, right? You can add, call it, you know, 5 to 15% of your total invested capital can be invested into Bitcoin. So in your situation, you know, once you've built your base, maybe the next five or $10,000 you deploy, you can buy some Bitcoin with. You can do that on public.com.

Starting point is 00:37:10 Maybe you want to diversify a little bit into some T bills, a little bit of a stable income stream over there at over 5%. You can also do that on public.com. Something you can't do on public, though, is invest into farmland. Maybe you want to go to Acre trader and buy some farmland that pays you some timberland, things like that. You can do some artwork on masterworks. You can do some real estate on Fundrise. And then finally, you can invest into some fine wine or whiskey on Vino Vest.

Starting point is 00:37:35 I mean, there's so many cool ways to diversify your portfolio. It's something Robert and I are really passionate about. And of course, only do this after you've built your base. Yeah, Austin, I love that takeaway. And we don't talk about Vino Vest and Acre Trader. some of these other masterworks, we don't talk about them enough because once you start diversifying your portfolios, not only these investments fun and we learn about fine art and some of these other things, but the returns are great. I think our returns for VinoVest were over

Starting point is 00:38:03 12% in 2023, if I remember. 15%. So I love it. And I think what's really cool too about it. And I know, I mean, we're not getting paid by VinaVest to say this, but Vino Vest, if you want to sponsor the podcast, hi, I'm Austin. This is Robert. But, you know, what's cool about them too is like, And this is not just then. This is a lot of these other platforms. They make it accessible. So like Fundrise, for example, you can get started into real estate investing with just $10. VinoVest.

Starting point is 00:38:27 I got started with just $1,500. Masterworks, $2,000, $3,000, $5,000, right? You can start investing and diversifying your portfolio with just a couple thousand dollars. And I think that's really valuable. I agree. And everyone, thank you again each and every week for following along on this journey of the Rich Habits podcast. We are so excited about the Rich Habits Network and can't wait to see.

Starting point is 00:38:48 see you all inside there. And just if you find value in the podcast, please share it with a friend, please share it with a relative. Get those five-star reviews out there for us because we really want to continue bringing you guys all the best information and help all of you reach financial freedom sooner than later. Thanks everyone. Sorry, investing, trading. That isn't a personality. You don't need the voice. You don't need the jargon. You don't need the podcast. You already know how to trade. You've done it your whole life. And TD Easy Trade taps into that instinct so you can build something real. No minimums, no monthly fees, 24-hour support, no investor personality required. Because you are made to trade and TD Easy Trade is made to help. Download it now. And have a great

Starting point is 00:39:37 rest of your week.

Rich Habits Podcast - Q&A: Betterment's Core Portfolio, Investing in Student Housing, & ARMs

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