Rich Habits Podcast - Q&A: Buy a House or Build My Base, 7% 401(k) Match, & Selling a Business for $1.5M

Episode Date: July 4, 2024

In this week's episode of the Rich Habits Podcast, Robert Croak and Austin Hankwitz answer your questions!Should I buy a house or build my base? When am I ready to buy single stocks?What do I do about this match on my 401(k)?Should I max out my 401(k)?What is a bridge account? When am I ready to trade options? Should I sell my business for $1.5M? ---Subscribe to the Rich Habits Newsletter, ⁠⁠⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠⁠⁠---Public has finally launched options trading on their platform! To create an account and begin trading options, ⁠⁠⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠---⭐ Download our FREE Budgeting Template – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Earn 5.1% on your savings with a High-Yield Cash Account – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Trade stocks, options, music royalties and crypto on Public – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Automatically buy stock where you shop with Grifin – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Protect your family with term life insurance from Suriance – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Use code “Spotify” for 15% off our 4-module video course – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Optimize your portfolio with Seeking Alpha – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠---👤 Explore everything Austin does – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here ⁠⁠⁠⁠⁠⁠⁠⁠⁠👤 Explore everything Robert does – ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠❓ Ask us questions for our Q&A episodes – @richhabitspodcast on Instagram📬 Inquire about working together – [e-mail]---Disclosures: Options are not suitable for all investors and carry significant risk.  Certain complex options strategies carry additional risk. Options can be risky and are not suitable for all investors. See the ⁠⁠⁠⁠⁠⁠⁠⁠⁠Characteristics and Risks of Standardized Options⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ to learn more.For each options transaction, Public Investing shares 50% of their order flow revenue as a rebate to help reduce your trading costs. This rebate will be displayed as a negative number in the “Additional Fees” column of your Trade Confirmation Statement and will be immediately reflected in the total dollars paid or received for the transaction. Order flow rebates are only issued for options trades and not for transactions involving other assets, including equities. For more information, refer to the ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Fee Schedule⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠.All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Open to the Public Investing, Inc., member FINRA & SIPC. See ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠public.com/#disclosures-main⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ for more information.Hankwitz Group LLC has an existing business relationship with NEOS Investment Management LLC. The opinions expressed are those of the author, and the author owns several NEOS ETFs.

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Find your advisor at IG Private Wealth.com. Hey everyone and welcome back to this week's episode of the Rich Habits podcast question and answer addition. We hope everyone is sitting by the pool, eating some hot dogs, enjoying something on the grill this awesome Independence Day. And don't forget to check your email inbox because the Rich Habits newsletter comes out every single Thursday, except it came out yesterday because we know that no one's going to check their emails on the 4th of July. So Wednesday morning, you should have got an email all about what's moving. your portfolio. What's going on in the headlines of the news, the stocks, everything else in

between, right? These newsletters are incredible. They're very illustrative. And we think you guys are going to like them. Yes, I hope everyone is having a wonderful Fourth of July week, getting lots of celebration in, but not too much. And remember, let's keep all those digits in play because we do live in a digital world. So be careful with the firecrackers and be safe out there. Yeah, I'm so excited about how things are progressing with the newsletter. with the new community and all the things we've got cooking behind the scenes for all of you. So we're very excited for the rich habits and rich habits community moving forward. And can't wait to show you everything we've worked on.

Yeah, I mean, Robert and I actually, I think this last week aligned on the name of it. It's going to be called the Rich Habits Network. Everyone's going to be invited to join the Rich Habits Network. There's going to be some unbelievable educational materials, weekly and bi-monthly sessions. live webinars and things of that nature, as well as life-changing investment opportunities. I mean, Robert and I get these incredible investment opportunities. Robert, I mean, you were just approached to invest into X-A-I, which was Elon Musk's AI company just a couple months ago, right? These are the things that come our way. We can't wait to share them with you guys.

So keep an eye out for a little bit more about the Rich Habits Network here in the coming weeks. It's not open yet. We're kind of testing some things first. Just a very small group of people are giving us feedback right now. But stay tuned. And just real quick on the newsletter, Robert, we have eclipsed 43,100 active subscribers on this newsletter. Over 50% open rates. I mean, this is growing like a weed. I mean, we're really adding about 100 people a day now. It's unreal.

Well, it's really exciting because as you talk about kind of deal flow, I think that's one of the most exciting parts about the Rich Habits Network is sharing our deal flow with all of you that join. just because it gives us a way to really kind of spread the love around because it takes years and years to get to a point to be able to get the kind of deal flow we do and get those off market deals and pocket deals, if you will. And so that's one of the most exciting parts about this because we have so many sophisticated investors that are growing their own portfolios, but may or may not have the open doors that we do to all of these inside deals that end up being these massive IPOs later on down the road. road. So that's exciting for me. I can't wait to really get into that part. So everyone, again, not open yet, but stay tuned for the Rich Habits Network. We're going to have a big announcement coming up about that here pretty soon. So before we jump into our first question, if you're an options trader, you have to ask yourself, why wouldn't you choose an options trading platform

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Full disclosures in the podcast description. All right. Our first question is from Autumn. We got these seven or eight questions coming up. They all came from our email, Rich Habitspodcast at gmail.com. Don't forget, you can email us your questions, especially if it's longer and it's not going to fit in an Instagram DM, which are most of these here. So Autumn sent us this email.

Hey, guys, I just found your podcast and I'm obsessed. I've learned so much already and I can't wait to listen to more episodes. I'm 26 years old and I make 90,000 a year as a public auditor and I currently pay $1,500 a month in rent for my one-bedroom apartment. I have $13,000 in my Roth IRA, $18,000 in my 401k and $18,000 in savings. Should I invest more money toward the markets and build my base of about $100,000 or should I instead prioritize saving for a single family home? Because I'm in Charlotte, North Carolina, I would pay about $550,000 for a house in this area. Robert, what do you think about this? I mean, first and foremost, congrats, Autumn.

That's just incredible. You have really dialed in at a young age, and that is amazing. And so what that does for us as educators is it really takes and helps us help you more, because you've done so much of the hard work. You've tackled being a high earner. You've got good processes in place already where you're working on your 401k and your Roth IRA and your savings account and all that. So what would I do moving forward? I would do both. I would get a little bit out of the 18K in savings and get that into a high yield savings, maybe keep 8K in savings and put 10K in high yield savings. I would work towards getting further into your base and having more money going into these index funds that we talk about, the VOOs and QQQQQQU.

and VGTs, but then also you could be splitting that up and putting more into the high yield savings to go towards that first property. But as I always say, at your age, I don't know if I'd buy a single family home. I would really, really want you to look at using the Fannie Mae 5% down mortgage and you could buy a duplex, triplex or quadplex in that $5,000 range, house hacks. So then that way you can live even less expensively, because you could buy a duplex, because you would have tenants paying off a portion or all of your mortgage. That's where I would go. I would split it up.

I would do both. Or maybe wait two years. Consider continuing to do the rent at the $1,500 a month and just stockpile as much as you can into those index funds and the high yield savings. And really get yourself set up and have that base fully flushed out before you buy the first property. I really like this answer. And just to kind of piggyback on what you. you said about having the base built, I don't think it's black and white, right? Just like what

Robert said, I think you can do both at the same time. You know, I think unfortunately a lot of people, right, you're 26. I think I had the house bug at 26, 27, right? Everyone wants to go and buy a house as early as possible, especially our younger generation. We feel like the housing prices are only going to go up. It's only, you know, it's getting harder and harder and harder for us to go buy these houses. And I think what's more important as you begin to think about, you know, having a specific location to live is giving yourself a little bit of grace, but more specifically some breathing room as it relates to how long it's going to take you to achieve that goal. So for example, right, let's say that you wanted to buy a 550,000, 600,000, 500,000, right,

somewhere in that range, duplex. And you wanted to live in one side, right out the other side in Charlotte, North Carolina. And you were going to try and put 5% down on this, but maybe you want to get a little aggressive. You don't want to go so much in that. Let's say you want to do 10% down. So let's call that $50,000. I would give yourself a three-year, maybe four-year tops, but a three-year shot clock on saving up this call it $10,000 to get to that $50,000 goal to put that down as a down payment, right?

So it's about $1,000 a month. And don't make the mistake of keeping that money, especially because it's going to be a three- or four-year time period here. Don't make the mistake of keeping that money in a checking account. You could absolutely put that into some T-bills and earn about 5.5%. you can put that into a high-yield savings account or even, you know, sprinkle some of it into VO, an index fund that's going to track the S&P 500 for the next three or four years because, you know, in the short term, we can't predict it. But over the next three or four years, I guarantee it's going to be worth more than than it is

today. And so I would definitely prioritize a house definitely, right? We want to do that. It's a box check. But you don't want to do it at the expense of making sure that you have money working for you. Because back to this idea of owning real estate, Robert, I've, find myself sort of in this conundrum, you know, I put down 20% to buy the house that I'm in right now,

which means out of pocket were about $90, $95,000 is how much I had to put down to buy this house. And that's nearly $100,000 that's not working for me. And that's $100,000 that I could have invested mid-2020. That would probably be worth now $150, maybe $175, depending on what it was invested into. So it'd be up a whole lot, but instead it's stuck inside of this house as equity, which I'm not mad about. I love this house, whatever. I can definitely afford that sort of stuck dead money, quote unquote. But I guess I'm trying to say to you, Autumn, is that you do not need to be pigeonhole yourself into that situation. You should absolutely be doing both. So stay invested, keep putting money.

Like, you have time on your side right now. You're young. You make a lot of money. We're proud of you. But if you can have a goal of three or four years to hit that $40, $50, $60,000 down payment to then go buy the duplex, I mean, you're going to be living on top of the world, right? Like, that's the best case scenario, in my opinion. the things I see a lot and I'm really glad you kind of wrap that up the way you did but one of the biggest things I see for the younger generation is they save save save save save for four years get it all together they're ready to buy the house they buy the house but then they have no money saved for investing so they have no money working for them so that 40 or 50,000 that they put down on the house

for closing costs and down payment is now what we say dead money because even though it can go towards building equity in the house, you can't use it unless you were to get a home equity line of credit. So that's why I like to see people do both. Don't buy a house before you have the base or do both if you're really dying to buy the house and it's really you yearn for it. Do both because of the fact that you don't want to be house broke and then have to wait three or four or five years to start investing again because you used it all to purchase the house. So I think it's good to do both and I really like that question. What a great. question, Autumn. We're super proud of you. And you did have a quick follow-up question asking about

how do you stay compliant with your independence requirements because you do audit publicly traded companies. Robert and I did a little bit of research and we think the best way to invest while staying compliant is to just buy these broad stroke ETFs that we talk about, right? V-O-O-Q-Q-Q-Q-Q, VTI, right, the total stock market. No one can get mad at you, especially the SEC, or buying every single stock, no matter what company that you're specifically auditing and seeing those financial reports before they are released to the public. Just obviously don't buy that single stock on the side to say, I'm going to go buy these big mutual funds, these big ETFs, these big indices, and just go that way, right? Don't go and try and pull it Nancy Pelosi.

Yes. All right. Our next question comes from Krishna. Krishna says, hi, Austin and Robert. Thank you so much for all you do. I love your podcast. And at this point, I've listened to all of the material on Spotify. Please, please, please release new episodes more rapidly. I have literally listened to all of them, L.O.L. I'm 30 years old. My wife is 27. We work in tech and we gross 350,000 a year. I am three to four years into my investment journey and I have 175,000 in a brokerage account, $125,000 in my retirement accounts, home equity of $200,000 in a high-yield savings account, and outside of my Roth investments, I robo invest about $1,500 a month and discretionally buy

some single stocks as I see fit. Two questions for you guys. The first question is, how much should I have invested into index funds and ETFs before it can comfortably begin to buy single stocks? Do you have a percent allocation that you recommend? There's a good question. So, Robert, I think that once everyone sort of built that $100,000 base of S&P 500, NASDAQ, things like that, go have some fun, right? Add some diversification. And we're not saying go gamble on penny stocks that you see on Twitter or go gamble on, you know, some crazy microcaps that you see some guy talk about on TikTok or Facebook or your Uncle Jerry's over here telling you to go double down on the random IPO that just happened. But I do think that if you're someone like me, I really like Tesla, right? I think they got a

cool thing going with the Robotaxy stuff coming up. They've got these optimist, autonomous, autonomous robots. Like, I'm excited for that. So I have Tesla stock. And so for you, Krishna, you know, once you now have this $17,000 in a brokerage account, if you want to have maybe 10% of that in single stocks, 15% of that in single stocks, I'm not mad at it. Now, as long as these single Single stocks are big, normal, large companies that have clear track records of outperforming the S&P 500. Maybe they pay a dividend. They're certainly profitable. You know, they've got a great outlook by Wall Street.

Price targets are looking great, right? As long as you understand what the companies do and you're feeling good about them, yeah, add 10 or 15% of your portfolio. You know, that could be in the single stock range. The only caution I want to give you is not to make the mistake of thinking, let me go out and try and time the market with these single stocks. I think a lot of people say, if I add Tesla stock to my portfolio, then I'm going to buy it. It's going to go up a couple percent. I'll sell it. Then I'll keep kind of playing the markets.

That is gambling with single stocks. We want you to be a single stock investor, right? If you want to add them to your portfolio, say, okay, Tesla this or Monday.com that or Costco this or Apple that, right? And have these sort of like underlying theses as to why you want to own a company's equity and why you want to own that company for years and years and years to come. that's how you should be thinking about single stocks, not exactly as like trading options on them or trying to like, you know, swing trade them or buy the crazy up and downs. Yeah, and I think you're already there with the base that you've built and you guys have the hard part secured and that is high earnings. So I think you're ready. And like Austin said,

build it with a basket of tried and true stocks, the Amazon's, the Teslas, the apples, you know, the Costco's of the world, the stuff like that. Don't start gambling in a bunch of crazy stocks that you hear about on Twitter or wherever you get information. But I do think you're ready to start building up those single stocks in a portfolio and just have it separate. Know what you're doing. Know what you're looking at. Do your own research. And I think you'll be well on your way to really balancing out all of your portfolios and having a good basket of those individual stocks. And just to give you some more inspiration as to the single stocks I own in my portfolio. I've got Broadcom. I have William Sonoma because they pay a great dividend. I've got meta,

Uber, Google, Amazon, Microsoft, Costco. I've got OnCloud, the running shoe. I did a lot of research in them. I really like that company. You know, MasterCard Visa. So I just, I want to show you that the names that I have in my portfolio, they're not unheard of companies, right? These are MasterCard Visa. These are 500 billion dollar market cap companies. I have single stocks, but I invest in big, large single stocks that I think are going to, you know, push out a lot of cash and dividends and profits to their shareholders. I think the stock price is going to go up over time. I'm not going to try and buy these crazy upswings of 40% down swings of 20. Like, I'm not doing that. And so we'd encourage you to probably not do that as well. And a second quick follow-up question you had was in a recent

episode that Austin was talking about some tax strategies given your business home office situation. Are there any tax loopholes someone working remotely at home can use? Okay. So if you work remote at home and you are working as a remote employee for someone else, then no. I don't think there are any like tax loopholes because you are a W-2 employee just working from home. However, if you had a side hustle, maybe which was building websites on the side for fun and you incorporated in the state of Massachusetts, which you said you live in here, and you pay the $300 a year LLC fee to have an corporation, you get your E-I-N, you do a couple other things. And now you realize, wait a second, because I made maybe a thousand dollars doing this, but I can write off all this extra stuff to make

it show I have a loss. You can really, really begin to methodically think about and execute upon a way to lower your taxable income with your side hustle. Again, this is a side hustle thing that might bleed over into your kind of taxable income as a human being here. I did this. specifically myself, whenever I was working on sort of building this side hustle media company back in 2021, I was still working full time for my employer. I was working remote because of COVID and I had my LLC and I was able to ride off, you know, the internet and the portion of my house and things like that. But I did it for my side hustle, which of course did save me money because I was making money. It allowed me to sort of save some money there. But I didn't do it as a W2 employee. It's just not how that works.

So if you have a side hustle and you're making money at home doing something, And sure, there's a ton of tax strategies. Robert, maybe talk a couple of your favorite tax strategies that you're using as someone who, you know, works out of your own office there at your house. Yeah, I mean, there's just a lot of different things you can do. You can write off the square footage of proportionally of the apartment or home you live in or condo. You could, you know, as you move along and you memorialize your sidehouse, so you could migrate your cell phone bill over to the company into the LLC name and have some more right on.

there with the cell phone bill. You can do it with your automobile with gas and tracking mileage. You can do it with internet. You can do it with office supplies, desks, furniture computers. There's a lot of different ways to skin the cat once you own your own company aside from being a W-2 employee. So that's just always a consideration we tell people is if you have a side hustle, memorialize it so you can enjoy all of these tax benefits that you don't get as a W-2. employee. Krishna, what a great question, man. We're rooting for you. We think you're going to do just fine. And with the single stocks you end up choosing, just make sure you understand how the business makes money. And again, single stocks are more volatile than ETFs. So if you see, for example,

I'm looking at my portfolio here, I have a single stock right now that's down 4% today, right? That's just part of the game. Four percent. I mean, if the S&P went down 4% in a single day, everyone would be, you know, panicking and hollering from the rooftops that the world's coming to an end. But you just got to kind of hold on to that. and just be okay and be ready. I'm trying to look and see what I have that's down today the most. Let's take a look. Ooh, right now today, my biggest loser is extra space storage.

So, yes, I have one, two, that's down 3%. And you just got to be ready for that, right? Single stocks have the volatility, much more volatility than these index funds. So our next question comes from Joe. Joe says, thank you so much for the content. You guys are killing it. I especially appreciate your positivity and encouragement. I have a wonderful Roth 401k at my job.

and they match up to 7% no matter how much I contribute and the funds are invested into the S&P 500. I want to buy a house in the next three years. Should I, one, save for this down payment by using after-tax, take-home dollars, and investing them into V-O-O-1 public, letting it grow and cashing it out and using that money as the down payment, or B, should I invest more into my 401K, not buy a house, and take advantage of these awesome matches that my employer is giving me. What do you think, Robert? Wow, I was going to have you take this one. I think either way works. I'm always going to be more of a fan of the VOO on public route and the after-tax take-home dollars personally. And I'd really love to see what 401k plan this is that's giving

this match up to 7% and make sure that it's fully 7% because I just don't believe it. But I don't know. I'd like to hear your side. I'm always of the ilk of controlling my own money and having as much of it in accounts that I'm fully autonomous with. So yeah, my takeaway would be I like autonomy on accounts as much as I can. And in the instance of this question for Joe in buying a house, I think the better route is taking this money, putting that after tax money into VO, let it build until he's ready to go and purchase the property. that way he has control of the money, he's not going to get penalized to use the money. And I think that's the better strategy here over more and more into the retirement account, which would be then penalized if he had to take money out early for the house.

Yeah, I'm leaning toward, you know, doing the after-tax dollars simply because and like buy a house, yes, don't buy a house and keep the money in retirement. You know, if you wanted to not buy a house and really take advantage of this match, we're talking about maybe $1,400 a year. year, right? Like maybe $2,000 a year. I mean, are you really going to invest $30,000 every year toward your 401k? Like, if you are, great. If you can afford that, do it, right? If you can really afford $3,000 a month to invest, I'm just saying a lot of people normally can't. And so, if you really want to do that for the next couple years here, call it three or four years,

instead of buying a house, focus three or four years on, you know, investing 30,000 a year, 40,000 a year and take advantage of, let's call it, $2,500. So, you know, all in, we're talking about a free $7,000, $9,000 match from your employer by really focusing on this match versus buying a house in that time allotment. So, you know, if you think that $7,000, $9,000 is going to be a big needle mover for you, be my guest. I just don't think, I just don't know that I would sacrifice not living in a nice house that I bought myself. I put a good down payment on. Like, I think I'd probably prioritize that.

But it really just depends on where you are in your investing journey. If you already have tens of thousands, if not hundreds of thousands in a Roth 401k, then just like let that ride for you. But if you are building your base right now and you're still trying to find that first $50,000, then yeah, maybe this is a great opportunity to buckle down, get a free $10 grand from your employer and put it to work. It really comes down to where you feel most comfortable and what you think is a better priority for you. We of course want everyone to own a house throughout their life. We think that it is

a great way to not only diversify your net worth into different asset classes, but nothing, I think, is better than knowing every single month what you have to pay for your living situation. Whereas if you're in an apartment complex or you're renting, of course, they can always raise rent. So I think I told you guys the story. When I first moved to Nashville, I was renting a house for like 1,500, 1,600 bucks a month. Three bedroom house. I had a couple roommates. And the guy came up. to us, obviously this was 2018, 2019. Nashville was just starting to really move up in real estate. He came over and said, hey, guys, I'm raising your rent from this $1,500 a month now to $2,200. So you got two months to figure it out. You can stay or you're just going to pay more in rent.

And I'm like, wow, he just raised our rent 50% overnight. Like, that's unreal. Like, that's not going to happen if you have a mortgage, right? And so it's up to you, man. Like, do you prioritize having, you know, a house to call your own and things like that? Or do you rather prioritize building your base and really getting after it? It just depends on where you are. Of course, we think you can do both. We just talk to Autumn about this, right? We don't think it has to be so black and white, but it's really up to you. Personal finance is very personal. And yeah, I think I'd just be railing at this point. I've been beaten dead horse. Yeah, I like it. You wrapped it up pretty well, though. All right, our next question comes from Joey. Hi, guys. Love your podcast. I just signed up for the newsletter. I'm getting a bunch of good stuff from you. It's changed how I think about investing. My question is, should I max out my 401k at $23,000 a year, which is 15% of my gross income? Or do I just contribute up to the match from my employer at 5% and take that 10% difference and put it into QQ and VO index funds? Right now, I'm maxing the 401k, but it's only earning me 6.5% per year. My effective tax rate is about 19%.

So I am benefiting from the tax savings, but I feel like I'm really losing out on some S&P 500 gains. Robert, take it away. Yeah, I agree, Joey. You are spot on with your thinking. I would just do the company match and Austin's got a great saying that we use all the time. And I would get the rest of it into the QQQ and the VO and the VTs of the world because you're going to just really, really crush that six and a half percent. And we always want that positive arbitrage of earnings going into your pocket and not somewhere

else because the last thing you want to do is go years and years where you're leaving two, three, four, five percent on the table because it just, really hurts your chances of getting to your freedom number sooner. So I like where your head's at. I think it's a great question. You're spot on and right on track and that's exactly what I would do. Yeah, something you didn't mention, Joey, was your Roth IRA. So our saying it's very simple. Match beats Roth beats taxable. So right now you have that 5% match. And of course it's being invested into whatever here earning about 6.5% per year. You're to date the S&Ps up over 15%. So you're lose not on about 9 or 10% there, but you are getting that free money, right? So if it's a really

100% match, you get 100% return there on that match, which we love to see. So contribute up to the match. And then what I want you to do is make sure you are maxing out your Roth IRA every single year. That's $7,000 for 2024. You can open up a Roth IRA on any brokerage account, pretty much. I've got mine on M1 finance. I know they've got some on Robin Hood, Schwab, Fidelity. You can do whatever you want. Just type in Roth IRA, open Roth IRA on Google. And once you open the Roth IRA, that's when you begin to really have autonomy over your investments. You mentioned you feel like you're losing out on these S&P 500 gains. You are, right? But by maxing out your Roth IRA and investing into the S&P and investing into the NASDAQ, QQ and VO, and the other ETOs we talk about, VGT, VTI, AQ, AIC,

moat, things like that, you will be able to see all of the upside that comes with that and do it in a tax advantaged manner, right? Because the Roth IRA, all the money you put in is after taxes, which means when it comes to retirement when you're 59 and a half at the earliest, 65, if you are a normal human being, you can take the money out and enjoy it tax free, right? All those profits are tax free. So again, match, go get the match, free money, then max out the Roth. And then if you still have extra money left over, which you might, because you're doing 23,000. a year. Then that extra money, right, it's already in your checking account. It's through your paycheck. You paid taxes on it. Open an account on public.com. Go to public.com slash habits. You'll get some

free stock, some free money, some free something there. And then start buying these same index funds inside of public. Because, like you mentioned, you don't want to lose out on these S&P 500 NASDAQ gains. So go buy the same ETFs that are in your Roth on public, but it's a taxable account. And you're just going to ride the wave. You're going to build your base. You're going to be a hundred thousand error and eventually a millionaire and everything's going to be good for Joey. I feel very confident for Joey right now. You can tell Austin has a couple Celsius in him because boy, he is rambling and he is on fire today. I already know. We're rolling, everyone. We're rolling. All right. So speaking of public, are you paying too much to trade options? If you're not trading on public.com, the answer is yes.

Public is the only platform where you earn in rebate on every option contract traded. And that's in addition to no commissions or per contract fees. There's no one else out there paying trading rebates so you won't find a better deal. Bottom line, if you're paying more than zero to trade options, you're paying too much. Switch to public and start getting rebates on every single contract traded only at public.com. Paid for by public investing, options not suitable for all investors, and carry significant risk, full disclosures in podcast description. Our next question comes from Sam. Austin and Robert, thank you so much for the information you both provide us. It's much appreciated. I'm gonna try and keep this short and sweet. I'm 29 and my wife is 26. Our household

income is roughly 170,000 a year, which means we bring home about 10,000 per month. Unfortunately, neither of our jobs offer a 401k match. So the only investment accounts we currently have are Roth IRAs, which we max out each year, and then a high yield savings account for our emergency fund, which we put about 8 to 10% per month into. My question is this. Where do we go from here? Does it make sense to contribute to a 401k without a match? Do we just shovel money into index funds within a taxable brokerage account? The only debt we currently have is on our home, which we purchased just before the pandemic. We have a 5% interest rate on that, and we have $50,000 in student loans for my wife's master degree at about 5% interest as well. Which poses another question. Would it make sense

to go ahead and aggressively pay down this student loan debt? I know in past episodes that you've mentioned, that the Dave Ramsey method of paying down debt isn't always the best approach. Thank you all for the help, and we look forward to hearing your response. I'll take a first step of this one. So I want to start with this. I want to start with reassuring you guys that just by maxing out your Roth IRA accounts, right, two separate Roth IRA accounts, which is $14,000 a year, is going to yield you over $9 million in retirement.

So from age 29 to age 65, 5888 a month at a 12% annual retirement. turn. Maybe it's 10, maybe it's 8, maybe it's 14, right? Let's call it 10, 12% here. We can be optimistic because that's what life's about being optimistic. You guys are going to have millions of dollars. Even if I'm 50% wrong with my assumptions, you guys are going to have over $4.5 million in your retirement accounts. So when you are kind of feeling down, like, I don't know, I can't do the 401k. There's no match. I shouldn't do it. All I have is the Roth IRA. All you have is $4.5 million. You're right. Like, crime of your river. You guys have a lot going for you here. I don't want you to feel bad about your situation.

You guys are crushing it, especially with the income. So because now we've sort of talked through the Roth IRA, yes, max out the Roth every year, put it, please, be aggressive. Don't put it into these target date funds that'll put you into bonds or cash or whatever else. We want you in NASDAQ-100-QQ-Q-Q-Q. We want you in S&P 500, V-O, V-G-T, things of that nature. You're young, you can be aggressive. Time is on your side.

So now that we have that out of the way, let's talk about what else you can do. You said, do we just shovel money into index funds inside of the... a taxable brokerage account. The answer is yes. And I know you might kind of feel like, wait, I don't know if I should do that because what about the taxes? You pay taxes on profits, right? So if we're paying taxes on our profits, that means we did something right. I think a lot of people, Robert, make the mistake. And I've made this mistake in the past, but I've learned from this mistake. And I want more people to understand. People make bad trading investment time decisions because they're so afraid of taxes. For example, someone's going to be like,

I go out and buy this stock. It's up. It's down. It's whatever. You know, I saw this one guy. He talked about how he was up so much money on some investment that it was just right there. He wanted to get out of it. But he refused to sell it because it wasn't a long-term capital gain. We wanted to wait it a whole year first.

I'm just like, dude, we're talking about like maybe $5,000 of extra taxes on a $100,000 profit. Who knows what the next six months going to do to this stock? Like, you should probably figure that out, right? And this was a very sort of short time horizon thing for him. And so I guess what I'm trying to get out here is I don't want Sam. Sam and his wife to make the mistake of not investing into a public taxable brokerage account because they're afraid of taxes. Taxes are just life, unfortunately. And you guys are doing a great stuff with the Roth IRA. So, you know, that's awesome over there. But, you know,

paying taxes on profits isn't something to be really down in the dumps about. It's something that is just kind of part of everyone's journey. Yeah, I love it. And then the last thing I'll bring up is the student loan debt. I don't think I would touch it. There is so much talk about new programs and forgiveness and rebates and all of this stuff. For me, if I see student loan debt below six and a half percent, I say you keep paying the minimums, see what the government does, especially in an election year, and then reevaluate down the road when you get yourself further along in your investment journey and you've got your base built. Because too many people will shovel all of their money into paying off student loans, but not have a backup plan, not have

an emergency fund and that just doesn't make sense to me, especially if your student loans are at 5.5% or less interest rate. Yeah, just to add some color here, right? You know, let's say at 30 years old from 30 to 65. You know, you guys are over here bringing home $10,000 a month, so $120,000 a year. You guys are investing aggressively and you're like, let's, you know, maybe instead put that to the student loans so you can pay it off in two years, right? So let's say it'll be 31 at the time. If instead of being dead focused of paying off these student loans over the next two years, you were dead focused on taking $50,000 and investing it into the S&P 500, and if we have an annual return of only 9% from 31 to 65,

that $50,000 turns into over $1 million at $65. So by aggressively paying off your student loans, that's what it's costing you, right? That same $50,000 if it's not deployed and working for you while you're young and while you have time on your side. Now, don't get me wrong. I don't want anyone to retire with $50,000 of student loan debt, just like I don't want people to be in their 70s with a mortgage, right? Debt has its place, but debt also doesn't have its place.

And so that's where Robert and I really disagree with Dave Ramsey, where it's very much a gray area. And if you can use debt as a tool, especially if you're younger here, and you have this $50,000 of student loan debt, and you're just fine with the payment, you're rocking and rolling, everything's great, you're making all this money,

and you have time on your side, and you want to really build your base and get money working for you, because you know it's going to work hard over the next 35 years, that's what we think you should do, right? We're talking about a million dollars in retirement here. So, Robert, I totally agree. I would keep the debt around, at least, you know, until you have the equivalent amount. So that same 50,000 invested somewhere else.

So once you have that same 50,000 invested and it's rocking and rolling, then, you know, go crazy, go pay it off, do what you want to do. But don't make the mistake to what Robert said of getting so focused on paying off this low, medium to low interest, student loan debt while not having actual money working for you in the meantime. 100% because we don't know what the government's going to do, but also we have such a younger audience. And I just want them to understand that compounding is their friend over decades of time. And if you're spending all your time now and every dime worrying about some of these lower interest, you know, student loan debts versus building your base to allow it to do its job, you're really going to miss out on so much in retirement money later on.

And so I love this question and I love tackling this question because I think it's so important. Our next question comes from Maxine. Hey, Austin and Robert, love the podcast. I make sure I listen every single week and it's definitely maybe more conscious about my financial decisions. I was wondering, at which stage is it appropriate to include options trading in my investing journey? Is this something later on for more seasoned investors once the base has been built? or is this something I should do alongside building my base? Understandably, trading options is more complex,

but I will be interested into hearing your thoughts. Keep up the great work. Robert, I'll you take this one. Maxine, you're spot on. I think that options trading is a great tool to have in the shed, but I don't think it should be in the beginning. I think you should have your base built. You should really understand how to build a really nice portfolio.

That's what we're here to help with. And once you get that portfolio of index funds built, then your next step is to get a portion of your investable capital into say maybe a cryptocurrency portfolio, maybe some individual stocks, maybe a couple reets. There's so many other things that go along with diversification of your base once it's built before I would say you start focusing on options trading just because it is a little more technical. It takes more time, more research, and more upkeep. And I think there's so many other things you can do, to trading options to really build your base and set yourself up for financial freedom.

And don't get us wrong. I trade options all the time. I use it as a way to generate income. I also trade options as a way to hedge against volatility in my portfolio, right? You can buy put option contracts on a big position that you might have already and use that against earnings risk, right? Earnings call volatility. So there's a lot of different ways that sophisticated investors can use options as a way to generate income with covered calls. I do this all the time with Tesla. And as a way to mitigate portfolio volatility risk, assuming things might be wonky in the markets and you don't want to see that volatility, which is something that a seasoned and, you know, educated investors, sophisticated investor like myself is happy to do. So as you build your base, don't worry about the option stuff. Keep it simple, stupid, right?

K-I-S-S. So take that, buy the ETFs, buy the index funds, build your base. And then once you've done that and you've done what Robert said, right, get you some reets, maybe some crypto, maybe you're doing some angel investments, right? you're really building out that diversified portfolio. As part of that diversification might be learning to trade a little bit of options, right? Learning to, you know, sell your first covered call or buy a put option contract against volatility risk or whatever it might be.

Like that is just a, like Robert said, a tool in the tool shed. It's not something to, you know, base your whole strategy around. It's just a way to have a little extra insurance against volatility risk and making sure the portfolio continues to go up into the right. Love it. Love it. All right. Our last question is a good one.

It comes from Nate. Nate says, hi, Robert Nossin. My name's Nate. I'm 24 years old, and I purchased a service business for $330,000 right out of college at 22. Over the past two years, I've been able to triple revenue and quadruple SDE, which is projected to be $600,000 for 2024. For those of you that might not know, SDE is essentially Nate's take-home pay after taxes, right? He's going to pay himself 600 grand in 2024 as profits from the business. I now have an offer to sell the business for $1.5 million in cash. I still owe $250,000 on my original business loan at 5%. The only reason I would entertain this offer is because I am looking to relocate back to my home state of Iowa in the next year and a half. And here's my question. Does it make sense to sell or should I continue to

try and grow the business to receive a higher multiple? If I do sell, where do I even put the I would likely use 500,000 of it to leverage myself into buying a new business that could profit 800,000 per year. I do not currently own any real estate besides my personal condo that I owe $400,000 on at a 7% interest rate, so maybe I buy some rental properties. And question number two is, do you guys have any tax strategies to share that could help me offset some of the 600,000 in income? Side note, I've already maxed out my Roth and my simple IRA from previous years. I have $175,000 in a business checking account and $40K between brokerage account. in crypto. I know I'm currently sitting on too much cash, but I am in sort of this analysis paralysis in searching for my next business opportunity. I've always had an entrepreneurial spirit,

and I'm really excited to hear your answers. Robert and I, we disagree on this one, which is going to be a fun conversation. So Robert, make your case and I'll make mine. All right. So we could spend three hours on this question and we don't have three hours. So I'm going to try and keep it short and sweet. No, man, let's air it out. Let's air it out. I think our audience would really love some like, you know, 10 minute answer question. Nate, so here we go. First and foremost, yes, you're sitting on too much cash. You need to get way more money out of these accounts, invested into your brokerage account, diversified over the index funds we talk about, maybe some more in crypto, maybe an emergency fund in a high yield savings account. And then also secondarily, at your age, selling it a $1.5 million, which is, I think, a 2.3x multiple on this business, I don't know why you wouldn't keep it for another year. year or two and try to maximize revenue and earnings to get more money put away because right now the scary thing for you everything you have looks great on paper but unfortunately it's just on

paper and if you wait too long in the business you risk it going down then that could hurt you but also think about it right now if you sell this business at 1.5 you owe 250,000 to pay it up so you're down to 1.25 then you take 500,000. and you go invest in another business that you have no idea if it's going to do well or not. So that 500,000 could go to zero. Now you're down to 750,000, which is still fantastic for your age. But you're so heavily entrenched and engaged financially in the business. You haven't pulled enough out yet and invested elsewhere to give you leverage, safety, and diversity.

So I think in my opinion, I would hold. hold the business for one more year if it's growing. I would take that year to sock away as much money as possible in other investments. I would get at least $125,000 out of the business checking account, get that into at least a high yield savings account making you 5.5% and that's where I would start and I would work my ass off on the business for at least one or two more years to try and get the multiple up. Because right now, if you believe, leave 600,000 is going to be the net revenue profits for you for the year of 2024 and you're going to sell it for 1.5. You're really giving them a great deal at that multiple, whereas I think

you could get it to $1.8 or $2 million with a little more work and a little more tidying up of the business. And that would get you set up so much better to where you'd be fully, fully at that one and a half, $2 million mark to be able to put away and set yourself up for retirement. That does sound like a pretty good answer, Robert. Good luck, Austin. Okay. I'm going to take the other side. Bird in the hand is better than two in the bush.

My dad always told me that. So if you have the opportunity, in my humble opinion, at 24 years old, to sell a business for $1.5 million in cash and then take $250,000 of that to pay off your original loan. Now you have $1.25 million that you pay taxes on. Let's say you pay a quarter million of taxes there on that. And now you have a million dollars. A million dollars is now in your checking account after taxes, after everything's set and done. I'm not saying that it's a bad idea to take that $500,000 and go chuck it to the next business. Like obviously, you know what you're doing here.

You can do this. Like, go be my guest. But you now have a little bit of retirement slash insurance in the back of your head, right? There's no more like, oh, I did this. Is it going to work? Like, I think I can do this. Like, all of the uncertainty is gone. You have a million dollars in cash.

Take $500,000 of that. Go start your next business. Take $500,000 of that and go put it into a taxable brokerage account and invest it for your. Congrats. You're retired now. You're 24 years old. And now this $500,000 will grow into tens of millions by the time you're in your 40s and 50s and 60s. Right.

But like, I guess what I'm trying to get out here is if I had the opportunity to lock in a million dollars of post tax profits in my checking account while still having the opportunity. opportunity to invest in, you know, start my next thing at half a million dollars. And then also have half a million to say, yeah, I'm 24, got half a million. It's in these awesome brokerage accounts. It grows by 10, 12 percent a year. I'm doing great. Like, it'll be a million by the time I'm 30. I think that's a great place to be. What I don't want is a recession to come in 12 to 18 months. And unemployment spikes. Now there's no one that wants to buy your business. Your four best employees go away. You know, something happens. And now your business is, you know, you went from 600 and SDE to 420 or 500 and now you only have a $700,000.

It's like there's a lot of uncertainty when it comes to this stuff. And I'm not saying that you should not take uncertainty. And certainty is cool. That's how people make the big bucks, right? They make big risk, big money. All I'm saying is you should come from a place of authority and power and financial flexibility the next time you have that uncertainty. Right now you have not at least disclosed to us what your financial situation is.

For all we know, maybe you've got 30, 40,000 in your personal checking account and another 30, 40 here in investments, right? Like, that's great, but it's like, it's not half a million great, right? And so what I'm saying is, you know, get your ducks in a row, go get the bird in your hand, go get your million dollars, and then go start the next business, 500K, go do your thing and have 500K invested. And now you're really feeling good about what's in the bank, what opportunities ahead for you. And here's the best part too, Robert, why I also think that it's a good idea to sell. because maybe the next business, you said you want to leverage it to buy a business I could profit 800k a year, maybe you want to get investors involved. How cool is it now to go to investors and say, yeah, I sold my last company for $1.5 million in two years?

That's what I have as a track record. Do you want to participate in this next deal? And so now you have a track record. Now you have a case study that you can take to investors that will maybe even make it so you don't have to leverage that much all 500, maybe only $200 or $300, depending on what you want to do there. So I don't know. We're on different sides of the equation here. I just, I really think he should sell, take his money and run. All right. So I'm going to make two little changes. And you rallied at the end and you came out strong. So I'm going to go with you on one side of that. And if you do decide to sell the business, rather than going and just taking 500K of that new found beautiful cash that you have, don't do that. What got you here is some sort of creative financing or owner financing. So your next business, here's the newfound. the real hack. Don't use 500K. Use 100 of it or 200 of it. Get investors for the rest of it. Give up a

little bit of equity or get owner financing and try to invest in an opportunity zone so then you can avoid some capital gains taxes from the sale if you're going to sell by investing in an opportunity zone or integrate a 1031 exchange in here somewhere for the new business. That way you can offset some capital gains taxes and keep more money for yourself. That's the last kind of mouse trap that I can build out of this very long equation to try and help you figure out the best way to do it. Man, I'm just so proud of Nate, 24 years old, 1.5 million opportunity. Oh, man, sound like you're a rock star, Nate. Super proud of you, dude. I remember those days. I remember at 24 years old. I had just gotten this big beautiful home on the water. I had my laundromat. I had my

quadplex. I had the two bars and restaurants. I had a small little coffee shop and I was 24 thinking I was the coolest thing ever. It was an amazing time in life for me. Yeah, when I was 24, I think I was wearing crocs and drinking beer on Broadway. But look at you now, buddy. Look at you now. Yeah. Four years later. I'm just kidding. I was 24 hours working, obviously, at a minute of this. Yeah, you were, you were crushing it at 24. So great, great question. This was an awesome, awesome episode. So many incredible stories and great questions. We have so much going on with the rich habits community and the rich habits podcast. And I feel just so blessed and grateful each and every day that so many of you follow along every week and you engage with us. That's what's so important

is that so much of our community and our members engage with us to let us know, you know, what we're doing right, what we're helping you with. And really, because our goal here is to really break down and make wealth building and financial freedom appear to be easy because it is if you have the right tools and the right information being provided to you each and every day. And that is one of the best things that Austin and I are able to provide for you. and I love our 30-year age gap. It just makes it an incredible situation and makes us really uniquely qualified

to share all of this information and these stories with you to help all of you on your journeys as well. Couldn't have set it better myself. Everyone, thank you so much for listening to this week's episode of the Rich Habits podcast, question and answer edition.

Don't forget, we have a newsletter. It's in the link in the show notes below. Rich Habits newsletter. Over 43,000 of you've already signed up. It's crazy. I checked it yesterday, and it was like 42,950, and I checked it right now and it's 43,080. Like, I mean, 100 people are just jumping in here every single day.

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And hope you guys are enjoying the fourth. Let's talk groceries, specifically your groceries. With Instacart, you want your groceries just the way you like them, right? Well, the Instacart app lets you do just that. They have a new preference picker that lets you pick how ripe or unripe you want your bananas. Shoppers can see your preferences up front, helping guide their choices. Instacart, get groceries just how you like. The July holiday.

See you later.