Rich Habits Podcast - Q&A: Dead Money, $400K in Savings, and ESPPs

Episode Date: January 11, 2024

In this episode of the Rich Habits Podcast, Robert Croak and Austin Hankwitz answer your questions!---Be sure to check out Public's new ⁠⁠⁠High Yield Cash Account paying 5.1% APY.⁠⁠⁠ This is higher than anything else on the market and is FDIC insured up to $5M. ---Earn 5.1% APY using a Public HYCA, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Opt-in and share your email, ⁠⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠⁠Learn more about our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠4-module video course!⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Download our FREE Budget Template, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠To learn more about Robert: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://stan.store/RobertJCroak⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠To learn more about Austin: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://stan.store/austinhankwitz⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Contact: [e-mail] ---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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Saving those children is how we all go home. From binge all episodes exclusively on Paramount Plus. Hey everyone, and welcome back to the Rich Habits Podcast question and answer edition. We love doing these weekly episodes for you, so keep sending us questions. Send them on Instagram at Rich Habits Podcast. Email us questions, Rich Habitspodcast at gmail.com, or get in contact with us any way you possibly can, and we are going to answer your questions. Now, we are thrilled that public.com continues to be the exclusive title sponsor of these

question and answer episodes. As a quick reminder, public.com is one of our favorite online brokerage platforms. They offer much more than just stocks. They give investors the opportunity to own cryptocurrency, T-bills, bonds, and even music royalties, which, Robert, I looked at my music royalty investment. I don't know if I remember we talked about it. I want to say it was back in like Q2 or Q3 of this year when they launched the Shrek music royalty.

I'm up 40% bro. I'm up 40% on my investment. It's kind of wild. Well, that's why people that follow along are winning at the game. of finance and wealth building because we have some pretty great callouts. And I love the fact that, you know, one of the most important things in the markets today is to actively manage your money and know what you're doing for the future and having a plan. And so all of these things that we talk about, we talk about the music royalties, we talk about crypto, we talk about VinoVest and

investing in timber. These are a lot of strategies that no one else on the internet is really sharing. And that's what I love most about it. So back to public. They even, even just launched their own high-yield cash account that pays a higher yield than Robin Hood, M1 Finance, ally financial, literally everyone else, at 5.1% with no subscription fees required. Did I mention the funds are insured up to $5 million? They're also fully liquid so you can withdraw your funds at any time. Be sure to move your existing funds over to Publix's high-yield cash account by visiting public. dot com front slash rich habits yes they even built us an amazing landing page again that is public dot com

forward slash rich habits it is super simple move your funds off of robin hood off of m1 finance off of ally financial you're not earning the best yield you can get take that savings move it on to public and earn a whopping 5.1% higher than every other platform out there now with that being said let's jump into these questions. I'm really, really excited with the first one coming from colon R. Colin says, I have a question. I have an option to participate in the employee stock purchase plan at my company. I was thinking about doing the max contribution of 10%. Now, I already have a 401k and I put 5% in there to get the match and the free money, so don't worry. Now, this stock offering is over a four-month period, and as you all know, I would get a 15% discount on the stock. I work for

an oil field company that specializes in P&A and robotics. The beta of the stock is around 1.7, so it's pretty volatile, but right now it's about 10 bucks a share. However, I'm excited to buy the stock at this 15% discount because I think there's going to be big upside. What do you guys think? Robert, this is a really good question because there are a ton of people listening right now that do likely work for a publicly traded company and might not own stock in the company they work for. Now, if it were me, and I was really excited like Colin here is, about the oil field company I work for, about the future, it's 10 bucks a share. I know, see, he called out really smartly here. It's going to be volatile. He's called out the beta. He's done his research. It seems like

Colin has figured out, kind of weighed his options of if I invest what the upside could look like and if I don't, you know, what that kind of opportunity cost might be. So Colin, if I were you, man, you seem like you got the math figured out. You've done the research. Do it. Give it a whirl. Maybe throw five, seven, if you want to do the whole, 10% there of your salary, be my guess. That might be a lot depending on what you're already doing for investing. But what I would not want to do is encourage you to check out the employee stock purchase plan while also having high interest debt. Make sure you're out of the high interest debt first before you start doing these cool investment ideas, even if you already have this

potential 15% discount on the stock. Yeah, I love this scenario, but like Austin said, I don't think I would go over 5% on this as far as your investment into this program. And one way to look at it, and you flushed it out is having that 15% discount on this contract per se, it really bakes in a little bit of wiggle room for you in case of the volatility that you speak of. So I like the idea. Again, I wouldn't go all in either. If you love the company and you believe in its future, then maybe do that 5% up to the 10%, but I wouldn't do anymore. Great question, Colin. We wish you the best of luck, man. If you buy the stock, send us the ticket. We want to watch it. We want to see how it performs. Our next question comes from Gene J.

Hi, Robert Nostin, happy New Year. Thank you so much for the podcast. I'm learning so much valuable information. What's up, Gene? Thanks for listening. Gene says, I have a few questions and I'm hoping you could help me out here. I currently have $25,000 from old 401ks rolled into a traditional IRA. At the time, I didn't know what to invest it in, so I put it all in a target date fund. But after listening to your podcast, I'm learning I'm probably better off investing into ETFs like VOO and QQ. So with that being said, two questions. One, should I convert my traditional IRA into a Roth, which I would just come out in here and say, yes, you should do that. It seems like it's only 25 grand. You'll pay a little bit in taxes, make sure you have that money set aside. But I'm assuming you're probably under the

age of 45, even 50 maybe. So putting it to a Roth, you still have a lot of time to build wealth, and it's not a large lump sum, which means you're not going to have to have a $100,000 tax liability. So convert it. I would say yes, Robert. Agreed. Yep. always have the Roth if you can because it's better to pay the taxes now than later because you don't want to kick the tax man can down the road for sure. And then second question here from Gene is, should I take my investment out of the target date funds and then park them instead into these ETFs? Robert, what do you think about that? Well, you know that anyone listening along that we're not

big fans of target date funds. So I just like having more actively managed accounts and different funds and ETFs that are performing better than a target date fund. And so the answer for me, for number two is definitely yes. Take it out of the target date fund. Get it into a mixed bag of ETFs like we talk about like VOO and QQVTI, some of those things, S-C-H-D, maybe SPYI, get it diversified into a basket of funds that are going to perform well, but also give you stability because a target date fund just doesn't take into account COVID-19 wars, bare markets, all of that.

It is meant to be safe and prevent losses. you also leave so much of the upside of good markets on the table while being in a target date fund. So I would definitely get rid of the target date fund. That's my opinion. ETFs are your way to go here. QQQ, VTI, VO, you want those index funds. Those are going to give you over a long period of time some really great returns versus maybe subpar returns, but a little bit more safety, if that makes sense. Yeah, when you're on your wealth building journey, a lot of times people don't realize

if you leave one, two, three percent, four percent on the table. year over year, those cumulative returns that you're not gathering for yourself, that positive arbitrage for yourself in your portfolios really adds up. If you underperform the benchmark of the markets by 3% a year in the Target Date Fund, and you do that for 10 years, you left 30% of your money on the table that you could have received yourself rather than not having the performance like we discussed. So it's very important to understand that some of these numbers might seem small in the short term, but in the long term, they really add up. I'm right there with you, man.

Our next question comes from Dante M. Dante says, hi, Austin and Robert. I'm a huge fan of the show, and I'm really excited to continue learning more here in 2024. SPY comes up a lot in your shows, and I have a couple of questions. SPYI earns a dividend, which is distributed monthly. Does it earn any other additional profit that gets reinvested back into the fund? I saw it was only up 4% last year. but you guys keep talking about how it aims to track the S&P 500, and that was up 20% last year.

So can you help me connect the dots here? It doesn't seem like the 4% equals the 20%. Robert, this is such a fun question because for you and me, this is like, you know, third grade. But for other people, like, I totally understand why you like this, right? It's like, wait a second, that number does not equal the one that you guys just said. What the heck's going on here? So whenever you're looking at any ETF, we talk about ETFs all the time, QQQ, V-O-O, VGT, Mote, VTI, all these other names.

When you're looking at these ETFs, Dante, and anyone else listening, I want you to look at not just the price return, the actual stock price moving up and down, but I want you to look at the total return. You can find this on Seeking Alpha. You can find this on Morningstar. You can find this on Yahoo Finance. But it's going to show you not just what the price of the ETF did, but what also the dividends that were distributed also meant for the total return of that ETF.

So right now, I'm going to pull up real quick in real time what the total return for SPY was in 2023. So the total return for SPYI in 2023 was 18.5%. That means if you had invested $100,000 into SPYI, the total amount of money you'd have now is $11,500, right? 18.5%, which is great. Now, what's different about SPYI because you're probably looking at the price of it and you're like, wait a second, the one-year chart looks a little bit different than 18%. It's only 4%. So what about the other, like, I don't understand. How did it go up 18? You're forgetting about the distributions. And this is with every ETF, right? Not in stock for that matter. Not only is the price changing, but when you get paid a dividend, that's also part of the return, right? And so that other 14% or so 14.5% return was those

distributions being reinvested and all that other fun stuff there. So whenever you're doing your research, Highly recommend not looking at just the price performance of a stock or an ETF, but also looking at the total return of that stock in ETF over a one, five, and 10 year period. Yeah, I love it. And it's a really good way to break it down so people understand the total return is completely different because I get that question all the time. So Austin, good job of breaking that down. I like it. Really good question, Dante, and I hope you were taking notes. I know this can sometimes get complicated and hard to understand. But we're here to break things down. best way we can. Now, our next question comes from Dinell A. Dinell says, first and foremost, I want to give you guys a huge thank you. You both are my lifesavers. I'm a hairstylist, so I don't get a 401k, but I did start my Roth IRA in 2020, but I didn't know I was supposed to be investing it. So you guys and your message of investing the Roth IRA has definitely helped me.

Unfortunately, my money sat for four years, not making a dime. Now, I'm a single mom, and thankfully, I found your podcast, and I'm excited to start investing. My question is, if you are me at 30, 36 years old, what would you do to speed up your wealth building journey with only a $50,000 a year annual income? Is it real estate? Is it small business? Or should I just stick to maxing out and investing my Roth IRA? I feel like I'm really far behind. Danelle, you are not far behind and Robert and I really appreciate the kind words and we got your back. So here's what I would do. So Robert and I made an episode called Making and Investing Your First 100K about a month ago. And oh my gosh, this needs to be your playbook. We believe Danelle.

that people, it doesn't matter if you're making 50 or 100 or 150,000 a year, a lot of people still have sort of this like big burden on them that I feel behind until they hit that 100K mark and then compound interest really begins to work for them. Now you're saying, Austin, Robert, I don't have 100 grand. This is going to be so hard for me. I'm a single mom. How the heck am I supposed to come up with that money? We get it. We totally get it. But that to me should be your like North Star goal. It's an attainable goal. You can get there. in seven, eight, nine years. We don't want you to feel overwhelmed of the,

I need to get $3 million so I can, no, listen, that's, that's a behoovey. We don't need any of that. We want some baby steps, some nice small action items we can get after here. And 100K might sound like a lot of money, but in the grand scheme of things, it's not because you're going to get there faster than you think. Now, Robert, I'm going to let you jump in here and add some of your thoughts, and then I'll rally behind you with a couple other actionable ideas to get this first 100K. But what do your thoughts, Robert?

Yeah, so many people get this wrong. They're so focused on. oh my God, I'm behind. I don't have enough money. How am I going to retire? I need to get that million dollars. But the way to look at it is really important. And that is you putting together the steps, you know, the baby steps needed to get yourself started and get towards that $100,000 saved and invested. And so that's just really important for you to look at it and really condense down the ideas. Should you be getting into real estate right now? No, I don't think so. Should you be buying a business right now? No, I don't think so. What you should be doing,

is working on exactly what you mentioned to get yourself to that first 50, then 100K, so you have your base that is solid and is building and compounding for you year over year. Then you can start diversifying further into real estate and building businesses. Now, if you have a great real estate opportunity and you want to put a little money towards it or invest in a real estate property, that's totally fine. But it shouldn't be your main focus until you have that $100,000 base that's making money for you every month and every year. Then after that, it's compounding. You're starting to make some passive income. Then you start diversifying into these other categories. So you're absolutely right. If the IRA

is fully maxed out right now, great. That's awesome. Then you can open a traditional brokerage account and start investing in this basket of ETFs. You can put some money into the new public high yield cash account right now that's making over 5%. That's a good idea for diversification. You could get a little bit of into crypto and buy some of the blue chips in crypto like Bitcoin, Ethereum, and ETF. You want to have that base of 100K first before you start doing all of these crazy strategies trying to yolo and catch up because you're not too late. It's never too late. And you just have to have the right strategies in place and execute on those strategies. So, Dinell, what are the step one, step two, step three? I'll break it down for you here. Step one,

it's 2024. It's time to get a budget. I want you to get a piece of paper. and write down every month all the money that comes in, as well as all the money that's projected to go out. I want you to write down the subscriptions. I want you to write down everything for your child. I want you to write down everything you're spending money on, right? And then I want you to write down the number next to it. After you do that, start circling the stuff that's not necessary. And I know there's going to be something.

I just this year, Robert, got rid of four subscriptions that I was not using. And it saved me over $100 a month now, right? Like, even I do this stuff. I need you to circle the stuff that's not necessary. That's how you're going to find wiggle room in your budget. Now you're probably saying, okay, maybe I can come up with a little bit extra wiggle room there, call it $150 a month. And I guarantee if you wanted to try and get more work as a hairstylist, you could probably

earn an extra $10,000, maybe even $30,000 in 2024, you know, boosting your income from 50 maybe to 70. That extra $20,000 could be a game changer for you in hitting that first $100K mark. And even if you don't do that, even if you're only able to find $300 a month now and invest that toward your retirement. here from age 36 to 66, that $300 a month is going to be $700,000 tax-free in a Roth IRA in retirement. That, my friend, is not far behind. You are par for the course. You're going to do great. We're very excited for you. But don't get bogged down by this idea if I need to be a millionaire.

I need to be a million, this, million, that. You know, Robert, you had a really cool quote on your Instagram story the other day that I think Danelle would really resonate with, one day or day one day. Am I going to start investing one day? Is it, I'm just going to one day day I'll start doing that. I'll get there. I'll buckle that. Or is today day one? Right? We all have to start with a day one. Danelle, you've been investing since 2020. We're proud of you. But this is going to be your day one now as you listen to this episode on January 11, 2024 to say, I'm going to go earn an extra 10 grand this year. I'm going to put it toward that 100K mark. I'm going to get after it. I'm excited for it. And I'm going to retire with hundreds of thousands, if not over a million dollars.

And the cool thing about being a hairstylist is I know many, many hairstylists that are friends of mine, they might only work four days a week. Some of them may be five, but most of them are four or five days a week. And if you look at the simple math, if you were to add one day a week, let's say you take every Thursday off and you say, you know what, Austin and Robert are right, I've got to step up my game, I'm going to start working Thursdays. If you made $200 every Thursday for the year, so $200 a week extra by $1,000. 52 weeks, that's $10,400 you could be putting towards your retirement. And that $10,400 compounding over 10 years would be well over $100,000 going right into your retirement accounts. And it's that easy as just adding one more shift a week if you're doing well as a hairstylist. So simple. It's just really

all about the math and the goals that you set for yourself for retirement. We're so proud of you, Danelle. You're not far behind. And we hope that anyone else listening right now that might think they're a little behind. You're not. You've got time. You're so young and there's so much to be excited about in 2024. Our next question comes from Sarah P. Now, this one's a little bit of a long one, but we thought it would be smart to include it because there's one piece of information in here that Robert really resonated with, and I'll call that one out. Sarah says, I'm trying to figure out what to do next with my financial planning. I own three rental properties that produce $3,1,17a month. I have $1.2 million in equity, my primary residence. That's Robert's part there. I have

70K in my 401k. I just opened a brokerage account. Not quite sure how to use it. I have a Roth IRA, you know, 30K in savings. Sarah's doing a lot of different things right now, right? Sarah is all across the board. However, Sarah said she's in the process of getting divorced and she's planned to retire in about 10 years. Now, she's thinking about selling her home, paying off the $160,000 she still owes and buying a smaller home to live in while also purchasing a couple investment properties. Robert, I know you talk a lot about the sort of, you know, dead money that is the equity in primary residences. Can you kind of re-explain that to people listening right now as well as let's give Sarah some advice? Yes, I love this. And the biggest takeaway for me is to step back a

little bit on this whole scenario. Great question. And thanks for laying it out for us, Sarah. but, you know, I would first be concerned with where is the money going to go to from the equity in the home if you sell it prior to the divorce? Is the house in your name? If it is, does your soon-to-be X have any rights to those funds and so on and so on? So assuming that said person does not have rights to those funds, then definitely I love the idea of selling this home, getting all that equity out of it so you can get it working because when you have this much equity in a property, it is dead money. because it's tied up in the property. It's not cash flowing. It's not making you any money. So one of the first things I tell anyone that'll listen is look at a he lock,

look at a way to pull some of the equity out for other investments and other opportunities because the opportunity cost when you have that much money sitting in a property is just too profound for you not to pull that money out. So assuming you can sell it and you can exercise getting that $1.2 million in equity and using it elsewhere, I love this strategy, especially if you downsize the home you're going to live in and you have all of those other funds to be able to put towards other properties. But just be careful.

Make sure you're looking at the Fannie Mae 5% mortgage program that's out right now. It is a great new program that was launched on November 18th of 2023. 5% down, you can buy up to $1.3 million and up to four doors. This could be great for you moving forward. You might want to buy a fourplex, live in one unit for now, rent out the other three. and then just really making sure you're smart with that money that you're getting the equity out of the home you're selling. You know, is there a 1031 exchange ability? What can you do with those funds to pay as little taxes as you can?

So just there's a lot that goes into this strategy, but I think you're on the right track of getting out of that because $1.2 million sitting while going into markets like we're going to in 2024. I really just don't like that at all. So I think you're on the right track. And if you want further help on this, please DM me or email me or Austin. And we will walk you through further strategies on this. But I think you're on the right track. I love the fact that you're working and getting your high yield savings built up. You have the Roth IRA that's happening.

All of these are great things. But you do need to get that $1.2 million working. I would agree. And something that Alex Romose said that I really resonate with is he doesn't invest into the S&P 500. He invests in the SME 500. which means he invest into things that he knows very well because he thinks he can outperform the market by doing so. Sarah, if you do not feel like you can invest into stocks and ETFs and do well,

but you instead feel like you are really good at this rental property stuff. You already have three rentals, you're cash flowing. You know, it's producing a lot of money for you. And you feel like you can take this equity out of your primary residence after selling it and buying something else, have five or $600,000 running around here to allocate to something cool that you're very familiar with. Like, do that. Do what you are familiar with. That is what's really important here. Do not go on and buy some crazy assets that you've never heard of because some guys on the internet told you like, no, invest in yourself. Invest in things that you're very familiar with, things that have a long track record of success and things that you can directly

control. So Robert, I couldn't agree more. The 5% Fannie Mae mortgage there that is a duplex, triplex, quadplex. Sarah, you are very familiar with real estate. Maybe this is your next move. And it's going to produce more passive income. So you could probably retire even before 2034. Really, really good question. Okay, so before we jump in in the next question, I want to remind everyone about how excited I am about the new public.com high yield cash account. This account pays 5.1% APY on your savings, and to put that into perspective, if you're an average American with three months of savings in a checking account, you could expect to earn an additional $1,000 every year on your $19,000 in savings. Don't forget, every dollar you save on the public platform is insured by the FDIC up to $5 million.

There's full liquidity, there's no subscription required. So be sure to check out public.com forward slash rich habits or click the link in the show notes below. We highly recommend moving your low paying savings off of Allies 4%, wealth fronts 4%, M1 finances 5%. Move that over. Earn some more money. Earn some extra yield on your savings. It is a great idea to do so. Major shout out to public.com for introducing this new product. T-bills were revolutionary. Now they're revolutionizing the high yield cash accounts. And we are super, super excited to be introducing this to you all. All right. Our next question comes from Yoruba G. Yoruba says, my house is under contract and we close on it on February 6. I bought it for $226,000 and I just sold it for $395. I own a job.

general contracting company here in New Jersey, and the reason I sold the house was because I was struggling to pay on it every month, and I was sick of having a beautiful house that I couldn't afford. I have just found a new property that's rent-to-own, and I think I negotiated a pretty good deal. The seller wanted $335,000, so I offered to rent it for two years and then buy it for $265 so I can add some additional rehab while I live in the house. The house needs about $30,000 of rehab, but once it's fixed, I think it could sell for $400,000. Do you guys think this is a good idea? What's your perspective?

Robert, I want you to go first here because you're the real estate guy. And I feel like there's a lot of moving parts in this question. Yoruba, I hate this. I got to tell you, it just doesn't make sense to me. You say you bought a house and it's a beautiful home for $226,000 and you're selling it for $395,000 because you hated the payment and hated being house broke. But then you tell us that you're going to rent a house that is of a greater value, base value, than the house you're selling.

So I don't understand how are you gaining anything financially in this instance, assuming that the rental payment on the $265,000 is going to be equal or greater to the house you already own. So I'm really confused here. But let's assume that you have found a way to make it make financial sense for you and you want to do this deal, then so be it. If you feel the upside potential on this new deal is better than your current house, then go for it.

But I don't see an advantage to get you out of this keeping up with the Jones's housebroke scenario of doing this new deal. I would rather see you pocket that money. Let's say that $175,000, let's say after closing costs and everything, it's 160 grand. I'd rather see you take that 160 grand, get 100 of it invested to give you a good base investment in your Roth IRA and some index funds, maybe some crypto, some high yield savings. then take $65,000 instead of putting into this rental house, I would rather see you go buy a new home that is lesser expensive,

build it up like you did on the one you're currently selling, and then do the same thing again in two years where you flip it. But in the meantime, while you're living in it to flip it, you have a much cheaper payment. With you going up in price right now, I don't see the financial scenario that is advantageous to you because you're still going to be strapped financially with this high payment because the house you're buying now is a greater price than the one you bought before. So I'm unclear, but those are my takeaways on what you should do next.

I feel you should downsize and do another flip so you're not strapped monthly with another high payment. I'm rather than with you, man. You know, I think a lot of people make the mistake of being house broke or house poor, however you want to kind of describe that. their monthly payment is 30, 40, 50% of their take-home pay. And, you know, when half your money leaves your bank account every month just so you can live in a house or live in, you know, a place, like, that's very, very expensive, right? You want your money working for you as hard as you work to earn it, something of robism that I have adopted.

And you can't do that when it's just going to interest to pay off your mortgage, right? That's not how that works. So I would totally take this 160 grand that Robert laid out. Put 100,000 of it into the markets, right? Build that 100,000 base that our previous listener was trying so hard to build herself. You have that base now given to you as a present because you were so strategic in the house you bought for 226. Take the 100K, put into the markets, get started that way. And to Robert's point, take this other 60 grand or something. If you love fixing houses up and you think that's like your little thing that is really, really good for you. Lean in on that. That's totally fine. But do it in a way that makes financial sense for you every single month, right? Don't go out and buy another big. house for 300, $200, $265, whatever this new number is, that might be a bigger payment than what you were before. Take the $65 grand and maybe do what Robert was talking about before. Use that 5% Fannie Mae down payment program, buy a duplex, live in one side, fix up the other side, rent that out, and then fix up your side, rent that out. And then now you have two cash flowing properties that you could

probably sell from when you paid for. I mean, that's how I would do this. I don't know about this rent-to-own stuff. Robert, what is rent-to-own? Can you explain that to me? Yeah, a lot of times what you can do is you can find somebody that'll do a land contract where you say, hey, I really want to buy this property. It's just owner financing, just another version of owner financing, where you say, okay, this house is $300,000. I'll give you the $300,000, but I want you to carry the mortgage for five years. I'll give you 5% down. You carry the mortgage for five years. I pay X amount of payment that goes towards the payoff in this land contract. And then at the end of the five years, by then, you could spin it off into a traditional mortgage.

That's a lot of how it works generally. His version here is a little bit different because it kind of doesn't make sense where they're going to rent to own, but then they're going to get a Fannie Mae loan. They don't even know yet what the best program is going to be two years down the road. But it really, this question is great because what it does is it kind of illustrates our lives full circle back from grade school. When we hated math and we were in fourth grade and we're like, math is stupid, why do I have to learn math. And then you realize when you become an adult and you're trying to create

financial freedom, you're trying to open your businesses, you're trying to really understand and be financially literate that everything is math. Everything is calculated ROI of what is the best long-term decision for myself and my family. So it's just really important for everyone to gain more and more financial knowledge. And that's why I appreciate everyone that follows along on their financial journey with us here at the rich habits podcast and the rich habits brand but yes very important to understand the math of this and the ROI so that's my takeaway for aruba here really good question man we very much appreciate it and we're not trying to you know crucify you here we're just trying to share in real time our thoughts our ideas our actions what we would do if we were in your shoes with

the same amount of money and i think robert and i lit it out pretty clear now our last question comes from marcus s marcus says robert nasson i must say i absolutely love the Rich Habits podcast, and I'm so thankful to be able to listen to your advice. Now, I need your help with the next step in my financial journey. I'm in my mid-30s. I'm single with no kids, and I don't plan on having any. I'm a high-income remote worker that currently lives in northern Florida, a moderate cost of living city. I have $400,000 in cash in some high-yield savings accounts. I know you guys hate this, but this is what I do right now. I do not own any real estate because I'm not sure if I want to stay in Florida long term, but I'm at a loss for

what I should do next when it comes to investments. I'm curious as to what you all would think would be the best strategy moving forward. Should I put a large chunk of my cash into an investment account into some index funds? Should I buy a home? Should I consider buying a business? I don't really know what to do right now. I've got a lot of money with no direction as to what to do with it. Thanks so much and I look forward to listening to every episode in 2024. Marcus, dude, thank you so much for the kind words. And congrats on the incredible discipline you have as a human being to have saved and collected $400,000 in cash. I mean, man, I'd have bought a jet ski by now, Robert. Okay, Marcus, you're a smart guy. You're crushing it. I'm sure you've already got your,

you know, investment portfolio rocking and rolling. You're maxing out the 401k, I'm sure. Right. So, you're doing all that. You're laying the base. Now you're trying to figure out what can I do strategically with this large sum of money to really accelerate my wealth-building journey. I think when you ask this question, I want you to figure out what your end goal is. I had this sort of conversation with myself a couple of years ago. My end goal was to retire early. I did not want to be working when I'm 50 years old. I did not want to be working when I'm 60.

Yeah, Robert's like, that's me. Robert, you're doing it for fun. Damn it. It's different. But it's like, I didn't want to be like, you know, an old head over here, having to slave away because I am house broke or because I'm in too much debt, right? I wanted to be someone who could retire early. So for me, what that meant was I needed to build up streams of passive income. Now, what that means to me right now is my dividend growth portfolio,

investment portfolio that is super focused on companies that are paying me passive income via dividends, as well as ETFs like SPYI that are paying me monthly distributions. And I even learn how to do some covered calls. Robert and I talked about this. a couple months ago, that's producing about $1,000 a month for me as well. So, Marcus, if I were you, I would really sit down and try and have a conversation with yourself and, like, think, do I want to be really, really rich? Is that the goal? Is the goal to make $5, $10, $15 million by the time I'm 65? Is the goal to make $2 million over the next 10 years so I can retire? What's the goal for you? And once you've figured that out, I think this process gets a whole lot easier. But Robert,

I want you to jump in here and give some tactical advice as to what you would do if you had this much money sitting in a high-yield cash account. Marcus, the first thing I would do in your mid-30s, I would get 350,000 of that money out of the high-yield savings, and I would get it working. What does that look like for me? I don't care if you're unsure if you're going to be living in Florida or not. Florida is a great place to buy property, lots of tax advantages. So the first thing I would do with that 350,000, is I would leverage some of it into cryptocurrency. I would get the money that I have left in the other high yield savings, I would get it switched over to the public.com new high yield savings account, making 5.1 percent, yielding 5.1 percent. So I would do those two things

first. Third, I would look to take advantage of the Fannie Mae 5 percent loan that is out right now. That is you can buy up to four doors and up to $1.3 million in property. So I would first and foremost go find myself a duplex, triplex, or a quadplex. There are plenty of them in North Florida that you can buy for $3,000, $500,000. I would buy one of those as an investment property, get that working as well. And then I would just really look at diversifying and getting my money working for me, because right now you're playing Scarity Cat, you're playing small, and you have all this money, you've done a great job getting it. Now you need to make sure you have velocity on that money. So think crypto, think adding to your portfolio of the index funds. Think about maybe having some

individual stocks in the stocks that you love and the companies that you love. But also think real estate, maybe do a couple small venture investments into small businesses. These are all things at your age you should be doing because you have the flexibility of being able to take higher risks. Because of the fact that you don't have any kids right now, you don't have any real high debts or high monthly expenses. So you should really be having the maximum velocity you can on this money. So that's where I would start right then and there. Really good perspective. You know, Marcus, you shared with us, you have a portfolio of index funds and a taxable investment account.

I hope it's on public.com of about 50 grand. I would definitely, we always try and encourage people to hit that 100K mark because that's when compound interest really begins to take effect. I would take 50 grand of this and put that into more index funds in the same account. So you do hit that 100K mark. I love the idea that Robert shared of purchasing a rental property. I think that would be an awesome, awesome way. to deploy some of this capital. I love the idea of diversifying into cryptocurrency. Maybe you'd take

$15,000 or $20,000 of this and buy some Bitcoin and some Ethereum. And the last thing I'd share here with you, Marcus, and it's something that I do personally, I'm with about $25,000 a year of my own money. But I participate in something called a rolling fund with people that I trust. So essentially on Angel List, you can go to this website where these people collect money every quarter from investors. It's $2,000 or $3,000 or $5,000 a quarter. And they then take the money that they collect and invest it into budding startups. Now, these startups could be pre-seen all the way up to like series B or series C. But if you want some, you know, real moonshot investment ideas, I would not discredit that.

I would definitely check out, learn more about Angel's and the rolling funds that they offer. And then do a lot of research into who is behind the rolling fund that you are trying to get a part of. Another fund I'm in is called Ensemble, EnS-E-M-B-L-E. Ensemble, they're based out of Austin, Texas. I think I put like 10 grand into their fund back in 2022, and they raised about 150 million from investors. They invested into like Zoom and Karta and Udemy and some other really cool startups as well back in the day. So if you want to be really aggressive with some of this money, I mean, you're only 35 years old, right? You definitely have some opportunity to be aggressive with your money here.

I would definitely recommend learning about some angel investment opportunities. I love it. That's a really good breakdown. It's always about diversification. So if any one sector goes south for a couple of years, you're not in a position where you're not cash flowing and you're not still growing your portfolio towards retirement. That is one of the keys and probably one of the things I've been best at over the last 30 years is really diversifying so I don't get crushed like everybody did in 2009 and 10 with real estate when they were all in on real estate and then they started over. I always want to preach to people that if you have diversification, you'll never go broke. And that is one thing that I love to really, really educate people on is having that diversification will mean you will never go to zero.

And that's just a great feeling when I go to bed at night. And speaking of diversification, Marcus, if you straight up want this money to be doing whatever and you want to earn straight up passive income with SPY, $400,000 in SPY will yield you about $50,000 a year in passive incomes, about $4,000 a month. I mean, if you want to earn $4,000 a month and have that as a return of capital payment, so it's tax-free, very tax-efficient, different strategies they have there. Like, that's also a possibility. Again, have that conversation with yourself. Do you want to retire early? Do you want to deploy this capital into some crazy investments that might go to the moon? Right.

It's like all about what you kind of want to do. I'm in the boat of retiring early, but I've also made my long-term bets as well. So have that conversation with yourself, Marcus. And as always, thank you so much for support in the podcast. Again, thank you all for joining the every third. Thursday episode, the Q&A episodes you guys have grown to know and love. We're so excited. And for any of you that are new or that have heard about the podcast, please make sure to give us a five-star review if you love the information and you love everything that we provide to you each and every week. And also

thank you all for joining us and following along on the Rich Habits podcast and Community's Journey. We are so excited for 2024 and all the things we have cooked up for all of you moving forward in the coming months. And don't forget, if you're not yet on our email list and receiving these weekly emails from us, you need to do that. There's going to be a Google form in the show notes below. Just click the link, share your email with us. And we're going to add you to this awesome, awesome monthly challenge email campaigns that

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