Rich Habits Podcast - Q&A: Business Trouble, Portfolio Allocation in Retirement, & $450K of Student Loan Debt

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Starting point is 00:00:53 Spotify Advertising. You're among fans. Hey everyone, and welcome back to the Rich Habits podcast question and answer edition. It's Thursday, which means you get Q&A episodes straight to your Spotify account. Now, these Q&A episodes are favorites because we're over here sitting down and answering your questions as if we are in your shoes. You send us questions via Instagram, DMs, email, and even inside of the Rich Habits Network. We've got a ton of really fun questions to dig into today, specifically as it relates to joint brokerage accounts, another question about $450,000 of student loan debt, and then another

Starting point is 00:01:30 interesting question about how to actually implement the 4% rule. Now, before we jump into the episode, Robert, big week. We've seen a lot ups and downs, lefts, rights, a lot of cool things happening here. What is your big call out for the week? Oh, man, I just think we've been so spot on about volatility. We're seeing all of these talks about capital gains taxes going away. What's going to happen with tariffs. How is China fighting back? And I just think it really speaks volumes to us always being ahead of it and trying to really guide people in the best ways we know how to help them, you know, navigate these troubled waters. And I'm really excited to cover all of this in the Rich Habits newsletter. So make sure anyone listening, you definitely go check it out. It is free. All you have to

Starting point is 00:02:15 do is enter your email. But yes, it's been some pretty crazy couple weeks and I'm excited to cover it all. Well, what's really exciting, too, is how well I think some of our AI software stocks have done so far year-to-date, Cloudflare. We specifically called that one out, I think call it four or five episodes ago. It's up 62% year-to-date, 62% in about six weeks, which is crazy. And then Monday.com reported earnings Monday morning, actually, and their stock is up 41% year-to-date. They're also one of these AI software stocks, or at least a software company that will benefit from AI, which we've had in our portfolio for a while. So long story short, we stay winning. We're excited. There's a lot to look forward to in 2025 and a lot of questions to answer in this episode. So let's jump into it. But before we do that,

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Starting point is 00:04:12 I listen to your podcast and it is the best place for me to get straightforward financial education. It's a great combination of high level direction with enough. details to be actionable. I'm a married female in my late 40s. I have my retirement funds going just fine, but I'm ready to start my bridge account. Now, here's my question. My husband also wants to be on the name, so sort of like an authorized user. How do we go about both of us having visibility into this account where he can make trades and I can make trades? Thanks so much for your advice. I can't wait to see my question included in the Q&A episode. Yeah, so Elizabeth, great question.

Starting point is 00:04:51 essentially what you're describing here is a joint brokerage account. A joint brokerage account is an investment account owned by two or more people. It allows for multiple people like you and your husband to contribute funds toward your investments, make trading decisions together, and also have full visibility into the performance of the account. Now, these joint brokerage accounts are commonly opened up by married couples, siblings, sometimes business partners, depending on what that kind of looks like there. And it's really simple to open up a joint brokerage account. One, you have to make sure that that broker is offering it. I know some brokers don't. A lot of brokers do, but just like kind of make sure you got that figured out first. And then two, what's different here is all

Starting point is 00:05:34 account holders have to provide that personal information and complete the paperwork. So Robert, for example, like if we weren't to go open a brokerage account together as business partners, we would need your social security, your data birth, your address, my social security, my address, my data birth, things like that, so that both of us can have access to this account. And then once the accounts open, both you and the other sort of authorized user, kind of like on a credit card, right, you have authorized users, can make trades, can view the performance, can deposit and withdraw money, things of that nature. So you're describing a joint brokerage account. Just make sure you do some research as to who offers those versus who doesn't. And it's a pretty straightforward

Starting point is 00:06:14 sort of account to use. Yeah, and I'm going to add some more texture to this and kind of on the negative side. I think it's very important to understand why and when you should have a joint account, because this becomes a huge contention point when people get divorced. So many times I've seen it along the way where someone has an account and both parties are putting the money into the account, comes down to having a divorce and you go, wait a minute, we've both put the money in, but it's my account. Good luck getting your portion. So that is why having a joint account is a great idea. It helps with estate planning because then you can both have access to all of the investing, make sure you're on the same page. You can both deposit funds into that account. But just make

Starting point is 00:06:58 sure you understand why you're doing it because it is a really good idea, especially for married couples that are building wealth, because it just puts everything in one place, makes it much easier from a tax and an estate planning perspective. And it gives both parties protection. So many people along the way just dump all their money into one account. Oh, our money is our money. And then at the end of the day when something goes wrong, it becomes not our money. So just be careful out there. I love the joint account. I think it's a great idea. And I think the cautionary tale of this and the key term that both of us used when we were describing our answers was married couples, right? You don't want to do this with your boyfriend or your girlfriend. You don't want to do this with the person

Starting point is 00:07:40 you've been dating for six months. And if they're trying to convince you to do it, something might be wrong. This is something you do with your husband or your wife. This is something you do with a business partner that you have a contractual agreement with. This is a very, very big deal. Like you're giving this person complete access to your money, the ability to withdraw, to invest, to trade, do anything with your money. So make sure you trust that person wholeheartedly and 100%. Elizabeth, what a wonderful question. So our next question comes from Mitchell S. Mitchell says, hey guys, your podcast is top-notch, and since day one, I've been a listener. I'll look forward to your episodes every single week. Thank you so much for the dedication you have to your craft. I have a franchise that has

Starting point is 00:08:20 gone downhill quick. My business partner and I disagree on everything. Our relationship has gone to a minimum, and I don't feel the same amount of effort was ever put into the business for both sides, and as a result, it's now failing. We're trying to sell it and can't even agree. on when or how to sell it. I'm ready to dust my hands off and move on. My partner is not. When, if ever, we sell this business, I have to pay off a $100,000 helock. And right now, the interest rate is at 7%. I have $37,000 in my bridge account, spread across index funds you all talk about. I have $50,000 in a Schwab Intelligent portfolio, another $16,000 in my Roth IRA, $130,000 in a company retirement account. I've got a little bit of Bitcoin and other cryptocurrency as well. My wife also has

Starting point is 00:09:10 an retirement account, but I'm going to leave that out of this. How would you go about paying off this loan once it is inevitably due? Do I sell stocks to pay it off? Do I sell the index funds? Should I invest it into dividend ETFs and use the payments to pay it off? Should I stop investing altogether? What do I do? I have two children in daycare. Both of our cars are almost paid off. Our house payment is roughly $1,500 a month at 2% interest. My wife and I, make a combined $210,000 a year, and we're in our early 30s. Daycare, honestly, is our highest cost right now, which is more than our house payment. It might sound odd, but I'm hoping to pay this loan off in the next year. Robert, what do you think about this situation? So this is a very difficult

Starting point is 00:09:50 situation, but it is not unique. It happens every single day. First and foremost, I wouldn't pay anything off. I would go to this person if they're not ready to sell, and they do not see the writing on the wall. And I would try to negotiate a full release from them. You could go to them and say, hey, Bill, hey, Mary, whatever the name is and say, we're not seeing things the same way right now and just not in agreement. So I would like to create a settlement with you and get a full release and you can take the business and run with it. And this could be something where maybe you say, I'll give you $20,000 right now. You give me a full release on the loans. You give me a full release on the lease because make sure you do that.

Starting point is 00:10:30 Any equipment loans, make sure you get a full release. and maybe you walk away with a haircut, but not a severe one because you wait and see what he does. Because at the end of the day, you guys are going down a very slippery path. If you don't put in the effort, he doesn't put in the effort, and all you're doing is fighting, you're going to find that it's going to get worse and worse, and you might end up paying all of this off and full. So I would first negotiate with him, see if you can get out of it. Let him take it because who cares if you don't think you're going to be able to sell the business for a profit anyway, and move on and get back to what you're going to be able to sell the business for a profit anyway, and move on and get back to what,

Starting point is 00:11:02 you seem to be good at, and that is investing in the stock markets and other type of investments that are less risky because not all partnerships are created equal and it is not always easy to navigate the waters with a business partner, especially if you go all in right out of the gate, which it seems you two did, because people just don't operate the same way. Everyone doesn't have the same drive and the same tenacity to build and really create a meaningful, profitable business. I think the phrase is the only ship that doesn't sail is a partnership, right? To your point, Robert, partnerships when it comes to business partners and businesses that are started, right? That's why you need to have very defined dissolution, you know, definitions and protocol and the operating

Starting point is 00:11:49 agreement and everything else. So the first piece of advice I want to just give anyone is like make sure whenever you go into business with someone to have an operating agreement that's like ironclad. very clear, you know, about if the person dies, what do you guys do? If the person decides not to work on the business anymore, what is the protocol? Like, have all of these circumstances very clearly defined before you go into business with someone. So that's just like for anyone listening that wants to start a business, do that. Now, specifically as it relates to Mitchell here, so Mitchell, you've got 100K on a helock. So what I'm hearing is like, hey, my name's Mitchell. I went $100,000 in debt via a helock on my house to go fund this business. The business is,

Starting point is 00:12:30 failing now. And even if I do sell it, I can use some of that money to pay off the HELOC, but you'll still have, call it $50, $60,000, $80,000 you'll owe on this. If I were you, I know it sounds really crappy, but if I were you, I would sell some of this $377,000 in your bridge account and use that to pay off the HELOC. You mentioned you've got some index funds. You also mentioned in your email here, you've got some Berkshire Hathaway, maybe split it up 50-50, right? Let's call it 30,000 or 30,000. 35,000 can be Berkshire Hathaway stock. The other 35,000 can be from these index funds and, you know, just get rid of it that way. Something else, though. I mean, you did mention you have $210,000 a year of combined income. I don't know if the business contributes to your combined

Starting point is 00:13:16 income, assuming it doesn't, which would be an amazing situation to be in. Maybe there is a world, though, where you can stuff away $25,000, $35,000 a year to pay off this he lock, right? So two-year pay-off period. I know it's a little bit longer than your one-year time. one that you had made a goal on. But this would allow you to keep all of your money invested in the markets, which I'd imagine will grow over the next two years as well. So there's a couple ways to approach this. If you really want to get out of the debt, you have the money in the bridge account. But if you are willing to make the, call it, month-to-month sacrifices in your budget to really squeeze that extra money out, find the margin and pay this debt off fast, I think you can do that as well.

Starting point is 00:13:52 Yeah, I love it. You're in a tough situation. This happens every single day to people and partners. and it's just sometimes you just lose money and you've got to move on and just use it as a business lesson. So our next question comes from McKinsey R. McKinsey says, Hello, Robert Nostin. Thank you for putting out such a great podcast. I love listening and learning as much as possible. My question for you is regarding incoming cash earmarked for a business acquisition.

Starting point is 00:14:17 Oh gosh. McKenzie, I hope you were listening to what we just said about the operating agreement. McKenzie says, my husband and I are selling our house soon and moving into a fifth week. wheel RV. Okay, hope you guys are ready for that transition. Oh my gosh. After the house is sold, we will likely have about $100,000 from that transaction. This money is earmarked for a down payment on a future business acquisition. If you were in my shoes, where would you keep the money in the meantime where it would be safe from volatility and ideally making some gains? Another factor to consider is if we take out an SBA loan, is there any way to protect our personal assets?

Starting point is 00:14:52 Or would we just be leveraging our personal assets for this loan? Would establishing a trust be a good option for this? If so, do you have any recommendations on establishing a trust? Thank you for your time and consideration. Robert, I'll let you kick this one off. This is a scary question because there's a lot happening here. We just talked about going to debt to open a business. You say a future business acquisition, but you do not define what type of business acquisition. And that scares me as well because that means you want to open a business and maybe you just don't know what type you want to buy yet. And that is scary in itself. What would I do with the money while waiting to do this business acquisition. I mean, I love public.com.

Starting point is 00:15:31 You know, you put your money into high yield cash account in public, keeps it from volatility. You make that four or five percent. I think it's a great place. Austin and I both do that. But just make sure you're understanding the bigger picture here. Understand the business you're buying. Understand why you're buying it. And understand that all these people are going to sell you on a business that they say is passive. They say it's super easy. And I can assure you any brick and mortar business, 99% of them are not passive. So make sure whatever it is you do buy, you understand the type of business, the potential for profits, and how to properly operate the business. So it's very, very important. But I love the high yield savings account for this situation. I think it's a

Starting point is 00:16:11 great, safe way to protect yourself. And to answer the other question about the SBA loan, the answer is no. You're going to have to personally sign for it. You're going to have your assets are going to be under scrutiny. And, you know, you're going to be liable for the, even if you have the trust. And I don't think you're in a position yet where you need the trust per se, just because if this is your first business, you're just getting started out. You don't have hundreds of thousands or millions of dollars in assets and towards retirement.

Starting point is 00:16:40 So I would just do the thing you're doing. If you're going to put this money in, put it into the high yield savings account, get it built up when you get ready to buy the business, use your own money if you can or do a friends and family round. You might be able to find friends and family that trust you, love the business idea and you can borrow from them without risk of losing your personal assets and maybe for a much cheaper interest rate. Personally, I'm pretty skeptical of the friends and family. If I lose their money, I don't want my friends and family to hate me. So I will not take money

Starting point is 00:17:11 from my friends and family on a business idea. I'd much rather go into debt. But on the same token, I don't think it's a good idea to go into debt to start a business unless you have an existing business that you want to buy. That's got years and years and years of profits that you've can point to when it comes to, you know, extrapolating upon what those financial statements might begin to shape up as over the coming 6, 12, 18 months to pay off this debt. You mentioned you're moving into a fifth wheel. I really just want to make sure you guys know what you're getting yourselves into with that. I did a lot of camping growing up, a lot of fifth wheel time growing up. Just be prepared, right? It's very different than a house, first off. And then when it

Starting point is 00:17:49 comes to this business, yeah, I mean, if you can avoid the debt, that's like best case scenario. maybe there's a world where you can, I mean, you've got this $100,000, what can you do with that? Can you owner finance it? Can you, you know, what are the things where you don't have to kind of pull from your own pockets or raise money from people that love you and things like that that might put you in a situation where if you have a bad month or a bad quarter, you know, your whole business doesn't just blow up. Owning a business with little to no debt, depending on, of course, the type of business really gives you that flexibility to, have those bad months and quarters, which are inevitable newsflash when it comes to owning a business. But I just think the biggest thing to realize here is that, yes, you are signing your own personal assets away whenever you take out an SBA loan.

Starting point is 00:18:36 Austin, I love that takeaway. And it really, truly speaks to both sides of the world. You know, you can go out and get debt from a bank. You don't know them. You know, you care about the money, but you also, you know, can go find these SBA loans. But then you also have friends and family. I do both. I have a pretty large. group of people that trust me with their money because I do a lot of investing in, you know, businesses and restaurants and, you know, real estate. And so I think both sides of the fence is a great way to do it. But in this instance, if you have the money and you can control the narrative and control the business with your own money, go for it. I love that. So our next question comes

Starting point is 00:19:13 from Nicholas N. So Nicholas says, hey, Austin and Robert, want to start by saying thank you for all the knowledge you've passed along to your audience. I come from parents who lack financial literacy. And I learned all of what I know now from you two. Wow, thank you so much, Nick. That is amazing. I love this. So Nicholas says I'm 23 years old. I finally started my full-time job after college, and I'm earning $68,000 per year with a salary. I have $60,000 in student loan debt, and I'm trying to figure out how I should approach paying it off. I've been fully funding my Roth IRA at $583 a month. I've been saving over $1,000 a month for my high school. yield savings account and I've got a little bit in my bridge account on public.com.

Starting point is 00:19:58 My high yield savings account is now over six months of expenses. My Roth IRA is on the way to being maxed out and I feel like I'm doing pretty well for myself. I have to start paying toward my student loans five months from now. So I've been doing everything I can while they've been on pause to build some money on the side. But do you have any recommendations on how I should pay off my student loans once they restart? Robert, we talk about this all the time. where people have, if it's a big debt, like a car debt or a fifth wheel debt or student loan debt or something that doesn't, you know, exactly go up in value. When it comes to mortgages, that's a little bit different because the underlying asset goes up in value over time. But, you know, student loan debt, it's just consumer debt, essentially, if you think about it.

Starting point is 00:20:44 And the rule of thumb that Robert and I like to share is we want these people to pay off this debt, but not until they have equal amounts or more. of that debt invested into the markets, right? So in Nicholas's example here, he's got $60,000 of student loan debt. Pay off the $60,000. Who wants to have that kind of debt hanging around their neck for the rest of their lives? But don't do it until you have $50,000, $70,000 invested in the markets growing for you over time. The reason I say this, Robert, is I've got a friend who, I think she's got about $180,000 of student loan debt. She's a doctor. She's like doing her thing, big payments, all that fun stuff. And she's at that point now where, you know, she's got these payments every single month,

Starting point is 00:21:29 but she has nothing invested, and she's like 30 years old. And she has a very great salary. She's making a whole lot of money. She's doing very well for herself. But she's at this point, again, where she's like in her early 30s, and she's got nothing invested. And that's not because she doesn't know about it. She knows she should be investing, but she doesn't know, I want to pay off this debt

Starting point is 00:21:48 first. And don't get me wrong. That's a great strategy. We want to be out of debt before retirement, but there is no retirement unless we're investing along the way, right? That is the definition of building a retirement nest egg. So I told her, I explained her, I was like, listen, it's good to want to pay off this debt. You should want to pay off this debt. It's a lot of money, but you should also want to have, you know, 50, 80, 100, 150,000 invested at least working for you

Starting point is 00:22:14 you before you start taking another $200,000 over the next five or 10 years to pay off the debt and only focus on pay. off that debt, right? So, Nicholas, same thing goes to you, my friend. You've done a great job building up your savings account. You've done a great job maxing out that Roth IRA. If I were you, I would consider trimming down the savings account depending on how stable your job is. I really don't know what you do for work. If you're a nurse making $68,000 a year, your job is pretty stable. If you're in marketing making $68,000 a year, it might not be as stable. So depending on your stability of your job, I would trim that down to maybe four or five months, take that difference, start investing it into your bridge account. Get that in the index funds and ETFs we talk about.

Starting point is 00:22:56 Build up this bridge account over the next, call it three or four years to that 50, 60, 70, 80,000 dollars. And then once you're likely making more, you got that promotion, money's coming in, you're feeling great. Time to go all in on those student loans, baby. Pay them off and then take what that payment was, which for you is around, I guess just about $700, $800 a month, which is your student loan payment. and now start investing that, right? If we're freeing up a payment every month, we're not freeing it up to spend it. We're freeing it up to invest it

Starting point is 00:23:26 and have it help us build wealth. Man, that was an incredible, incredible response. And it really gave me goosebumps, and my mind went crazy thinking that that is a cartoon. I feel like we need a rich habits cartoon. And the illustration for that answer is, people go to college, they get the degree, they get the good job,

Starting point is 00:23:47 they start making the money, then they jump on the hands. hamster wheel and they can't get off. That's all I could visualize. So many people in their late 20s, 30s, and even 40s just continually have lifestyle creep build and build and build on them. And they're making 60 grand. Then they're making 80 grand. And they're making 100 grand. Then they're making 150 grand. But they never get off the hamster wheel long enough to be able to put aside that 15 or 20 percent a month to go towards retirement. And it's one of those things. I wish we could back everyone up and say, stop living beyond your means, especially in your 20s and 30s.

Starting point is 00:24:22 Because if people could do that and just delay gratification and put more money aside early and let compound interest do its job, they would be so much more wealthy and better off down the road. So Austin, that was a great, great takeaway. And it's just, it's the hamster wheel. People can't get off of it because they upgrade the house, they upgrade the cars, they get the new iPhone. They do this over and over again for decades.

Starting point is 00:24:47 decades and then go, oh shit, I only have $86,000 put away for retirement and I'm 47 years old. What am I going to do? And then they start listening to the Rich Habits podcast and we fix it for them. So I love this takeaway. Great job. Thank you. And yeah, I just really want to reiterate. If you are in your 20s, your 30s and you're laser focused on wanting to pay off your

Starting point is 00:25:10 student loan debt, I love that for you. You are well ahead of your peers because you want to pay off this debt. but just be cognizant of how important it is to get money invested at an early age. My girlfriend's a great example of this. She has student loan debt. She also has $25,000 in a Roth IRA. So having that sort of balance between debt and investments at a young age is really important. So our next question comes from Chris S.

Starting point is 00:25:37 Chris says, Hi, Austin and Robert. My name's Chris, and I'm going to hop right into it. I'm 36 years old. I make $105,000 a year, not including my car. quarterly sales commission. I've got $8,000 in debt for my truck at 4%. My girlfriend and I just purchased a house and we just had our first baby. I have $168,000 in my company offered 401k. Every paycheck, I put 4% toward a target date fund so I can earn the match and then I put everything above that

Starting point is 00:26:05 into my Roth IRA. Good job. That's what you should be doing. That is right. Chris says I've never been taught how to financially be successful, but after listening to your podcast, I'm starting to gain the confidence in investing. I'm very new to investing and I just created a public.com account because of your recommendations and I bought VOO and QQQQ to get started. I also have very minimal invested into cryptocurrency, about $500. I have $17,000 in my savings account not working for me. After all monthly bills are paid, I've got $2,000 a month remaining. This does not include, though, my monthly expenses such as food, gas, date night, etc. My question is, what should I do with the 17,000? thousand dollars in my savings. I've considered opening a high-yield cash account on public to start

Starting point is 00:26:51 earning four percent in interest on this money, but should I also keep $3,000 in a sinking fund for annual unforeseen expenses that come up, maybe $4,000 in my checking and then put the rest in a high-yield savings? I don't even know how to go about now this $2,000 a month too. Can you guys just help me out here? No problem, Chris. I love this, right? Robert, I think what's so cool about the show is a lot of people after listening for a couple months or even a couple quarters, they go from, okay, I had a mess and now my mess is cleaned up. I've got real money coming in. I've got margin of my budget. Now I have just no clue how to like properly how to build it, how to build those automations, right? How to like really set everything up. So let's walk our friend Chris through

Starting point is 00:27:34 that here. So the first thing I want you to do is create your honest budget. You can go use the link in the show notes below. It's going to be an Excel spreadsheet. It's going to be super easy for you to use. and this is going to be a way for you to see where all of your money is going every single month. And you can also perhaps include these quarterly sales commissions whenever they hit as well. But the reason I say that is because you mentioned you're making $105,000 a year take home, which is about $80,000 a year after taxes, I'd imagine, in like these 401K contributions. And $80,000 a year is about $6,500 a month post-tax. And you mentioned how you only have $2,000.

Starting point is 00:28:13 is remaining, not including monthly expenses like food, gas, date, night, etc. So I don't know what you're spending $4,500 a month on. That doesn't also include food, gas, date, night, like, important things. Your mortgage utilities, they shouldn't be $4,500, at least on $105,000 salary. So like, create the honest budget, find the margin, identify what that looks like there, and let's now move on. Let's assume you got that budget rocking and rolling. The next thing I want you to do is to keep one month's expenses in your checking account.

Starting point is 00:28:47 Robert and I say this all the time. It's totally cool to keep about a month's worth of expenses because it allows you to never really have to have that overdraft fear or the fear of like, oh, man, this is going to come out and I didn't have the money for it. Or, oh, I need to, you know, Venmo request my friends. We can send me money. Like having one month's worth of spending in your checking account, I think is pretty safe. It's what I do personally. I think it's what Robert does as well. And it's just a super easy way to make sure your bills are all figured out and you're good to go.

Starting point is 00:29:16 And now it's time to talk about sort of this like $17,000. So let me remind people, $17,000 or any amount of money in your high yield savings account, your emergency fund is not an investment. This is protection. This is insurance. This is allowing you to keep your investments invested if an unforeseen emergency expense strikes. So let's say you need to come up with funeral money because your grandparents died and they didn't do it correctly or whatever. Now you have to come up with $9,000. If you did not have $9,000

Starting point is 00:29:52 in an emergency fund to use, you'd have to cash out part of this $168,000 of your 401k. You'll pay the penalties, the fees. I mean, you're borrowing against your future, all these bad things, right? So having the emergency fund in place is protection and insurance against your investment, to stay invested. And then Robert, why don't you talk a little bit about sort of like the sinking funds and how you think that they should now begin to beef up the Roth IRA and the retirement accounts and all the other fun things with this, call it $2,000 remaining? Chris, love what you're doing. You're obviously paying attention. You're an investor, not a consumer. You're doing all the right things. I love what Austin said about having that emergency fund. And remember, just like Austin alluded to,

Starting point is 00:30:39 The emergency fund is not what you want to call investing. You want to have it making money while it's sitting there, but you want to also realize that that money is for the future. It is for any incidents that may come up, and you just want to make sure you have protection. So many people that do not have a sinking fund, we call it that safety fund, they just end up when something comes up,

Starting point is 00:31:03 whether it's tires, a funeral or something, or they need a new refrigerator. It goes on the credit card. And that is a recipe. for disaster. So we always want to make sure we have that available to us at a moment's notice to be able to move forward on some of these things that come up. So I think you're doing a great job. I love that you're covering all your bases. I do think you're light and you should have more in cryptocurrency. At your age, crypto is a really solid strategy right now to maybe have two, three,

Starting point is 00:31:31 four, five percent of your net investable capital into, you know, and don't go crazy into the meme coins. I see it all the time. Just have the tried and true, the Bitcoins, the Ethereums, the Chainlink, XRP, XLM, those types of projects that have the highest potential of great returns in the coming years and adoption. But I think you're doing a great job and Austin covered it really well. Yeah. And I think like in this last question, I kind of see it buried here in the email. How much should I be investing? You know, Robert and I always encourage 15, 20, 25% of your monthly take-home pay, right? So in this situation, if you are taking home, let's call it $6,500 a month, 15% of that is about $975. So aim for $1,000 a month. You mentioned you got $2,000,

Starting point is 00:32:17 kind of in this remaining here. I mean, you're taking home enough money where I think you can carve out 15% of that, especially when you include these quarterly sales commission little bonuses, right? Maybe all of that can go toward investing. There's a wonderful world here for you, Chris, where you've got this great high-yield savings account. You've got one month's worth of expenses in your checking account. You've got nearly 170,000 at 36 years old in your 401k. You're doing a lot of things right. You got the Roth IRA.

Starting point is 00:32:44 Like you're doing some really good stuff here. But to Robert's point, it's time to really build out some good ETFs, a little bit of cryptocurrency. You just bought this house. Like, it's time to really say, okay, cool. I'm no longer just like throwing darts and seeing what's going to stick. I now know that I've got the house. got the baby, got the wife, got the career.

Starting point is 00:33:04 Time for me to have clear automations, clear strategies, clear protocol every month with my money, protocol every quarter with these bonuses so that I know that I will retire with millions of dollars in retirement. Bravo. I love that takeaway. And before we get into our next question, listen up, folks. Time could be running out to lock in a 6% or higher yield at public.com. You can lock in a 6% or higher yield with a bond account. but remember your yield isn't locked in until the time of purchase, so you might want to act fast. Lock in a 6% 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 Matt M. Matt says, hi guys. I love the show and I've been learning a lot. I've been investing for 30 years now and I'm getting close to retirement.

Starting point is 00:33:54 I have a sizable portfolio that is well diversified in passive real estate, equities, and bonds. your recommendations seem geared toward the younger investor with more time in front of them. What general recommendations would you give to an investor that is close or early on in their retirement years? Can you give an example portfolio allocation for an investor that wants to invest passively? Thanks for any suggestions you may have. Robert, do you want to kick this one off? Yeah, I love this question, Matt. And I would say the way to look at it would be as you're nearing retirement, you can take your foot off the gas. That's the best illustration I can give you. And what that could mean allocation-wise is maybe you lower your stock exposure down from 40 or 50% down to 20 or 30%.

Starting point is 00:34:37 Maybe you up your exposure in the bond market a little bit more and you have higher exposure to bonds and the ETFs we talk about all the time and just getting yourself a little more risk off. So you lower your volatility more as you get into retirement. But I think that is an easy thing to do. Your broker that you currently have can help you. If you're part of the Rich Habits Network, you could fire off some ideas and thoughts to us. And one of us could answer that question as well. But like I said, get into those less volatile asset classes, maybe up the ante in the index funds and ETFs. We talk about more bond exposure and less individual stock exposure moving forward.

Starting point is 00:35:15 I love that, Robert. A large degree with what Robert said. But I think a couple like important caveats and like things to call out. The average age life expectancy is 80, 80. 85 years old right now. And if you're nearing retirement, let's say you're 60, that means you have 20 more years of investing ahead of you. And I think the big, and this is coming from someone who's 28 years old, so call me crazy. But I think a big misconception people make whenever they're in retirement or close to retirement is they go completely risk off. They go completely to cash or completely

Starting point is 00:35:51 to bonds or completely to like these passive instruments that do not exactly go up and value. Sure, we've heard of the 6040 portfolio and the Trinity study and all that fun stuff there. Like, that's really cool. But I think that's like, you know, what people should be gearing toward. And again, I think people go a little bit to the extreme side of going completely risk off. Risk off in my definition in retirement means I'm not dabbling in the dark arts of single stocks anymore. I don't want to own a single stock that might have a 10, 15, 20% correction in a day because of a bad earnings, right? I want to be broadly diversified, to your point, into real estate, bonds, equities, right, cash flowing businesses, perhaps, dividend, ETFs,

Starting point is 00:36:35 things of that nature that will be, they'll see some volatility because the markets go up and down over, you know, a week to week period, but they go up into the right over a year to year period, decade to decade period. And that's the type of exposure I want to have. So to get more, I guess, actionable and tactical here. I'd probably completely cut out single stocks in my retirement. I'd want to have some wonderful dividend focused ETFs like SCHD, DGRO. I might also want to have some exposure into more resilient sectors of the stock market. A recent example might be the ETF IAI. That's the I shares, U.S. broker dealers and securities of exchanges. It's pretty resilient in my opinion. I might also want to have some of these NEOS funds in my retirement to supplement that monthly income, right?

Starting point is 00:37:24 SPYI, QQQI, and then maybe their new one, NUSI, which is their hedged equity ETF that kind of pushes back on volatility. So there's a way where you can construct a portfolio aided by, you know, passive real estate, equities, bonds of that nature that will allow you to, you'll still see some volatility in retirement. Investing inherently involves risk, but at the end of the day, it's not going to be the same volatility that you'd see with single stocks. It's not going to be even the same volatility you might see in the NASDAQ or the S&P 500 on a week to week basis, but a little bit more smoothed out while still having upside potential. I love it. That is such a great take. And that's why we're good at what we do. 30 years of age gap really comes into play because we have two completely different

Starting point is 00:38:12 perspectives on so many things, but yet it somehow comes together magically to help guide people no matter where they are on their journey. 100%. So our next question comes from Blake E. Blake says, I'm very thankful for this podcast and I look forward to the videos every week. What's up, Blake? Thanks for watching videos, man.

Starting point is 00:38:29 Everyone else, watch us on Spotify and YouTube. Blake says, your podcast has helped me so much and I've learned a ton. My wife and I are 25 years old. We're newly married and have a combined income of $120,000. Wow, that's great. It's amazing.

Starting point is 00:38:44 Wonderful. Blake says we have two credit cards and owe $7,000 on them. combined. I have 23,000 left to pay on my car and it's worth about 17. The monthly payment on that is about $430 and it's an 8% interest rate on that auto loan. I was in a bad spot and I was rushed into buying a new car last year. I don't really want to talk about it. All right, Blake, as long as you just don't make that same mistake again. Blake says we are ideally gifted $100,000 for a down payment on a house in the near future and another $20,000 later this summer of 2025. Now, the question I have is should we use

Starting point is 00:39:20 this money to pay off our credit cards and the car, or do we throw all of it on as a down payment for a house? Do I keep it in a high-yield savings? Do I put it in an investment account? My wife has about $40,000 in her Roth IRA. I've got about $10,000 in mine. And we'd love for this gift of money to be used the best way possible to benefit us in the future. Blake, shout out to you guys. for getting a wonderful gift from the parents, the grandparents, from whoever's giving you $120,000. I think that's amazing. I hope to gift my children with life-changing money one day as well. So, Blake, here's what I would do. The first thing I would say is I'd have a conversation and I'd ask my wife why she's investing and trying to out-invest high-interest credit card debt. She's got $40,000 in

Starting point is 00:40:05 this Roth IRA. You guys mentioned you have combined $7,000 on your credit cards, three for you, for for her. There's no reason to have 40,000 invested if you have 4,000 in high interest credit card debt. So just like one, make that mindset shift and make sure you don't make that mistake going forward. The second thing I want to call out is, yeah, if you guys are, you know, wanting to put this $120,000 to work, I would keep it in a high-yield cash account on public.com. It's SIPC insured. It is FDIC insured, all the fund insurance is up to, I think it's like $2 million. So you're not going to lose your money, that's for sure. And then to your point, yeah, I'd use a little bit of it to pay off the car. I'd use a little bit of it to pay off the credit cards. Now you're talking about $85 to $90,000

Starting point is 00:40:50 that if you want, you can absolutely go put down on a wonderful house. Put down 20%, no more, no less, and you'll avoid PMI, save you probably $300 to $400 a month that way. You might even have a lower interest rate because you put down that 20%. And just make sure that whatever house you choose doesn't make you house broke. You don't want that monthly payment to be anymore between 33, 35% of your monthly take-home pay. I mean, Austin, you really covered it. I hate to see anyone with that much negative equity

Starting point is 00:41:21 in a car purchase. It happens every single day, unfortunately. But I agree with you. Get the credit cards paid off. Learn how to use them responsibly. Figure out what to do with the car. Maybe you're paying it off and keeping it for now because the negative equity is not going anywhere.

Starting point is 00:41:35 Maybe you roll it over into a cheaper car and roll some of the negative equity over. You're just in a tough spot with that, but it's an easy one to fix because at the end of the day, you could pay it off, get rid of it, have the free car note, and then start investing the difference,

Starting point is 00:41:51 the $430 a month. But I think you covered it really well. And Blake, you guys have the most important thing covered out of the gate, and that is good income. From there, everything else is fixable. And so keep that in mind. Don't get your head down.

Starting point is 00:42:05 Stay positive because you're in a good spot and you're making really good decisions. And I think something we forgot to talk about might be their emergency fund. Yes, I would make sure that before you put this $85, $90,000 down to buy a house, that you have at least three months of expenses, including what this soon-to-be mortgage is going to be saved up in an emergency fund in a high-yield cash account on public. Again, back to our last question, that allows us to ensure against our retirement.

Starting point is 00:42:37 retirement savings and our accounts and investments and things like that in case of emergencies, which happen all the time, unfortunately. So let's now jump into our last question of the episode coming from JJ. JJ says, hi Robert Nasson. I have a question and would really appreciate your recommendations. I'm 32, single, and I have a student loan balance of $450,000 and an interest rate of 3%. As I'm about to start my first job with an annual salary of $300,000, how should I allocate my income specifically in the first one to five years. Would it be smarter for me to max out a

Starting point is 00:43:12 traditional IRA or a backdoor Roth IRA given my higher tax bracket? Additionally, I want to purchase an apartment at about $800,000 at some point. Could you please provide some insights on the best timing for that? Robert, want to kick this one off? Yeah, I'd love to. JJ, great job. You paid the price to be able to get this high earning job. And I love it because at your age at 32 years old, you have a long investing horizon and you're single right now and I'm assuming no children as well. So what I would do for the next one to five years is stockpile money. You have low interest on your student loan debt. So keep paying those payments.

Starting point is 00:43:50 Make sure they're on time. But I would not pay that down just yet. I would get your base built. And at your earning potential, I would not let lifestyle creep get in the way. I would not go out and live this baller crazy lifestyle just yet. I would get as much money put away as possible. And then when you get that base built. And in your instance, the base should probably be $250K rather than $100,000 because you have the golden ticket right now.

Starting point is 00:44:18 Low debt, high income, and not a lot of financial responsibilities. So don't go out right now and get the $6,000 a month apartment. Don't go out right now and upgrade the car to a $1,500 a month car payment. Stockpile your money. get the base built, get diversified, and then down the road in that four or five years, then you can start worrying about chunking away larger amounts towards the student loan debt. I 100% agree, Robert. I like to describe where JJ is right now as a season of his life.

Starting point is 00:44:51 He's in the season of his life of building and saving and being very smart with his money. He's going to make $300, $400,000, $500,000 a year every year for the rest of his life. he has the rest of his life to be loose and quick with his money and have a good time after he has built his base and done the smart financial sort of foundations that we talk about. So tactically speaking here, I would give yourself a five-year shot clock, a five-year season to achieve the following, right? So right now you're making $300,000 a year. Conservatively speaking, let's say you're taking home 70% of that. That's going to include your taxes, your insurances, maybe just a little bit of 401k investing, but let's just assume you're taking home $210,000 a year.

Starting point is 00:45:38 $210,000 a year for five years is $1,050,000. I think it is a wonderful goal to invest half of that. So $500,000 over the next five years, $100,000 a year, which now allows you to live off of $110,000 a year. I would argue that it's pretty reasonable to live off of, $110,000 a year. of $110,000 per year. We're talking about $9,166 a month. I mean, who the heck can't live off of that?

Starting point is 00:46:11 So I would, for the next five years, live off of $9,100 a month. Everything above that gets invested. We fast forward five years into the future, JJ. You now have half a million dollars invested. You're 37 years old. Now if you wanted to, you know, keep this same lifestyle or do whatever around this kind of frugality, and really dig into those student loans and pay them off. That's cool if you wanted to instead focus on getting an apartment or a house or something of that nature. That's also cool. But what's more

Starting point is 00:46:41 important than all of that is you have half a million dollars invested at 37 years old, which remember, the rule of 72 tells us that the stock market doubles every seven years. You've got five more doubles with your $500,000 before the age of 67. So $500,000 at 37 years old, assuming it doubles every seven years and the stock market continues throughout our lives. And again, I can't predict the future here, but it likely will. You're talking about eight, 10, 12-ish million dollars in retirement, right? That's by adding nothing to this money and you like grinded in this five-year period, you're 37, you got half a million invested and you let it ride. And now you've got $10 million from it. Like that's the type of like moves that we want people.

Starting point is 00:47:32 to be making when they have this kind of money. When you know you have $10 million waiting for you at 65, 67 years old, you can now go buy the $800,000 apartment. You can go focus on paying off the $450,000 of student loans, right? It gives you a sense of relief knowing that you've laid that smart financial foundation that will grow for you throughout your life. I love it. This is an incredible episode. So many great questions. And it really makes me happy to think about all the people we're trying to help and guide and educate and so many people are actually taking action. We talk about it all the time, you know, for people to take notes and take action. And it's so important. So I love these questions in these episodes because there's no better feeling on earth

Starting point is 00:48:18 from the older gentleman of the podcast to be able to wake up every day and know that I'm financially free, that I don't have to worry about anything creeping up on me that I can't pay for. So it's so important for everyone. Always remember to take notes and take action. And if you find value from this podcast, please share it with a friend. There's always people out there that are struggling financially or in business or in mindset. Share the podcast. Have them sign up for the newsletter.

Starting point is 00:48:46 There's so much we offer and value here for each and everyone that follows along. I couldn't have said it better myself, Robert. Everyone, go check out the Rich Habits newsletter. Go check out the Rich Habits Network. Follow us on Spotify, if you haven't already. leave a comment, vote on the poll, do everything to engage with us on Spotify. It's our platform of choice. And as always, hey, y'all, it's Kelly Clarkson with Wayfair. Ever order furniture online and wonder, what if? Like, what if it doesn't hold up? That sofa was four days old. You should have ordered

Starting point is 00:49:15 from Wayfair. With Wayfair, there's no what if. Just style you love and quality you can trust. Visit Wayfair.com.cair, every style, every home. Because thank you so much for listening to this week's episode of the Rich Habits podcast. Have a great rest of your week.

Rich Habits Podcast - Q&A: Business Trouble, Portfolio Allocation in Retirement, & $450K of Student Loan Debt

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