Rich Habits Podcast - Q&A: Doubling My Income, Life Insurance, and SEP IRAs

Episode Date: March 14, 2024

In this episode of the Rich Habits Podcast, Robert Croak and Austin Hankwitz answer your questions!---To listen to Public's new podcast, ⁠⁠The Rundown, click here!⁠⁠---Public has finally released options trading on their platform! To learn more about all of the product features Public offers, ⁠⁠⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠⁠⁠---⭐ Download our FREE Budgeting Template – click here⭐ Earn 5.1% on your savings with a High-Yield Cash Account – 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] ---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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Hey everyone and welcome back to the Rich Habits Podcast, a top 10 business podcast on Spotify. This episode is our question and answer edition, which means we look at our Instagram DMs, we look at our email address, Rich Habits Podcast at gmail.com and other places for your questions. And then we take those questions and answer them on this episode. So if you have a question to ask us, be sure to DM us on Instagram at Rich Habits Podcast or again, email us a question over there. Now, Robert, before we jump into the episode, I just want to remind our listeners of a couple key events coming up. The first key event I want to remind people of is our webinar. We have a webinar on March 27 at 4 p.m. Eastern Time. We have 1,000 seats. We ran out of seats last time. This time be the first 1,000 and hopefully you will be able to attend the webinar. This webinar, like our last webinar, will be joined by the Nios Investments team and their Wall Street veteran asset managers to talk with us about portfolio.

composition, right? How to build an investment portfolio from scratch. We're going to be talking about index funds, different ETFs, different single stocks, different alternative assets, all the types of cryptocurrencies. It's going to be a really, really fun webinar. And I think Robert is very excited about it. Yeah, the last one was amazing. I learned a lot. I think we all did. And having them back on is just so exciting, not just for us, but I think for our audience, because I just love the fact that we've built rich habits to this point now where all these amazing talents from around the country want to join us and really dig deep on all of these subjects that we talk about on a daily basis so we can really help everyone on their journey understand all of the nuances of investment strategies

and how to build well so I'm super excited and I love it and want to do one a month if we can. Let's hopefully get there for sure. And also just wanted to remind everyone here too, something I did over the weekend and I think it's a rich habit we've talked about in the past, but I really want to encourage others to, you know, put this into their monthly routine is tracking their net worth. I think a lot of people listening right now might not know where they are from a net worth perspective and that could come from a place of one, just not knowing how to track it or two, kind of being scared to even look to see what it is. But we want to just really remind everyone here that it's so, so important to know where you are because if you don't know where you are right now,

It's going to be really hard to know where you're going in relation to that. So put it on your calendar as a monthly reminder to check in with yourself financially and look at your net worth. Have you paid down your debt? Have you taken on more debt? Have your investments grown? Have they dwindled? Have you invested new money? How have you been as it relates to growing your net worth?

It's something I do every month, Robert. I know I think you do it quarterly. But I think it's really important for our audience to kind of put that reminder on their calendars for them to do. Yeah, I deal with it every single day with clients. and people that work through my private community in the fact that they look at it almost as if the amount of stuff they have is what is equal to their net worth. And that's just a bad way to look at it. I see so many people that go, oh, we have two new cars. We have this nice house. We have a boat. We have all this. But then when you dig through the numbers, you know, we talk about the honest budget

all the time. When you dig through the numbers, they have a negative network. Because what they don't realize, just because you possess assets does not mean. you own them and that is a key factor because if you have a loan on a boat and let's say you took out that loan for 50k and now the boat after depreciation's worth 35k and you might have it paid down to 40k it's still a negative net worth on that what could be asset and this is one of the biggest problems i think most people understand is just because you have stuff does not mean you have a positive net worth and it's very very important to understand that because you want to get your ducks in a row as soon as possible so very important and i'm very excited about it

And Robert, before we jump into this question and answer episode, thanks everyone for bearing with this short conversation beforehand. Talk to the people about how important it is to own assets that go up in value, like investments or real estate or businesses, versus assets that go down in value, like boats, cars, or electronics. This is the key to success. So many people, as soon as they make money, let's say, and you start making money. Let's say you were making $42,000 a year, you get a bonus, things are going well, you're up to $65K a year. year, the first thing most people do is figure out how to spend that extra money. Instead of keeping their lifestyle the same and building their base. You guys have heard for over a year now, Austin and I speak about building your base. And I think it is the most important thing you can do for yourself

and your future is understand, without a base, you're not going to have any future financial freedom. Because if every time you get more money and you make more money, you just spend more on lifestyle creep, you can never get ahead and kicking the can down the road for years. decades will get you in trouble later. I promise you, this is one of the things that is the most important for everyone to understand. So the way I would rather see everyone do, everyone that's listening and following along to the rich habits podcast and in our community is to understand soon as you get that money, build that base, whether it's 50 or 100K, start buying cash flowing and appreciating assets, whether that's real estate, stocks, ETFs, even crypto in the Bitcoin

and the Ethereums of crypto. Start, building that base so you have passive income and appreciation before you start buying all the toys. Because at the end of the day, I don't think I've ever met a person that's bought a boat, bought a jet ski, or bought a new car that sold it for more than they paid for it because guess what? They're the biggest depreciating assets you're ever going to own. It's almost strange to call it an asset because there's no positive arbitrage for you with your money. So it really just is a fun liability.

So keep that in mind. The most important part is to understand you can't kick the can down the road forever and just have a blast because then you're going to be working till you're 75 years old and no one wants to see that happen, at least not on our watch. A fun liability. I really like that. I mean, I would argue my Toyota forerunner is a fun liability. That's for sure. All right, everyone, so listen up. By now you're probably familiar with the all in one investing platform, public.com, in public recently launched options trading, something like,

we're both really excited about. And if you activate your options trading account by March 31st, you can earn a lifetime rebate of 18 cents on every contract traded. That can add up to hundreds or even thousands of dollars in savings throughout your lifetime, especially if you trade covered calls like I do. Plus, unlike other investing platforms, public doesn't charge commissions or per contract fees. Very, very important. So that's no commissions, no per contract fees, and a rebate of 18 cents on every contract traded. Discover the most cost-effective ways to trade options now. And start getting something back on every contract, every trade.

It only takes a couple minutes to sign up at public.com. And just as a quick reminder, this was paid for by public investing. You must activate your options account by March 31st for revenue share. Options are not suitable for all investors and do carry significant risk. To read the full disclosure, there is going to be that in the podcast. description below and as just a quick reminder this is for U.S. members only. All right. Our first question comes from Jesse.

Jesse says I've got roughly $30,000 in a SEP IRA. My investment options are limited inside of this account and it's been underperforming the market. So I'm actually excited about the possibility of moving money out of this account into an account with more flexibility. I think I can move it into a traditional IRA with no tax implications or even convert it to a Roth, but I will have to pay taxes and that. case. I'm leading towards just moving it to a traditional so I have autonomy over my investments,

putting it in a handful of index funds and leaving it there to grow. What are your guys' thoughts on this idea? Robert, do you want to kick this one off? Yeah, without knowing the age of Jesse, great question, love it. I would be looking at, first and foremost, let's assume you're under 40 years old. I wouldn't want to kick the can down the road. I'd really consider migrating as much as you can into that Roth IRA now, getting those taxes out of the way. So then you have the benefits for the rest of your career into retirement. So that would be one of the things I would want to do. But also, I want to understand more. Austin, maybe you can shed some light of why don't you have autonomy now? You know, I know that in my SEP and in your SEP, I believe you have full

autonomy to do the investments as you'd like. So Austin, touch on that a little bit for our listeners because I think that's important to understand, especially if it's underperforming, that you want to have a say in what's happening with your money. All right, Jesse. So a SEP IRA is a simple Pension Plan, which essentially you can think about it like this. Your employer doesn't offer a 401k or one of these like more established sort of retirement strategies. So to keep things simple, they offer a SEP IRA, which just means that they're taking a percentage of their, call it, annual profits and they're using that to contribute to their employees' retirement funds, right? They're the ones that are contributing to your fund. You are not contributing to it. Your employer is

doing that, right? So in my instance, back in 2021 and 2022, when I was building my small business as a solopreneur, I was the employer. So I was able to contribute to my own SEP IRA in the eyes of the employer, if that makes sense here. But that's the key differentiator about the SEPIRA in a 401K. The employer is the one who is contributing to that, where a 401K, the employee is the one who's contributing to that. So, Jesse, in this example of your $30,000, not having autonomy over that is really important. If I were you, and I agree here with Robert, depending on your age, we're talking about maybe like $8,000, $10,000 in tax. Liability here, if you do roll that over to a Roth, and then now you have the lifetime tax regrowth that comes with the delta that's

left in the account, plus any other contributions you make, assuming you roll it over to a Roth IRA. So if I were you, I would roll it to a Roth IRA. I would take the tax hit now early as there's not that much money in there. And I would continue to max that out every single year. To your point, I would put it in those index funds we talk about, V-O-O-O-Q-Q, V-G-T, V-T-V-I-T, V-I-T, V-I-T, M-O-A-T, even A-IQ, Robert Lobs'A-Sox. So that's what I would do. I agree 100% with what Robert alluded to, and I think you're well on your way, Jesse. Our next question comes from Kim. Kim. Kim says, I love the podcast, and I'm learning so much, and I'm kind of kicking myself for not starting sooner. I'm 56 years old and have a traditional IRA of $250,000 and a SEP IRA of $450,000. Can I combine

them? What's the difference between all these IRAs? Do I need to roll this over into a Roth? How should I be thinking about this? Robert, think about what we just talked about with Jesse. Now that we know how old Kim is, and let's answer the question. Great question. But let's answer the core part of the question. Would I do the Roth at 56 years old? I personally would not do that. I don't think it makes sense for you. I like where you're at right now with the traditional IRA and the set. So I think you're on the right track. I wouldn't do the Roth IRA right now. I would leave those where they are and I would continue to monitor them and make sure you're just not in a situation where you're trusting the employer to be able to make all of those decisions. Because as we said in the prior question, we want to have

as much autonomy as we can or say in our investments to make sure they're performing well. Very important. Good question, Kim. So the two. 250,000 that you've got in the traditional IRA, you're 56, I would imagine most of that is invested into the index funds, the 450,000 that you have in the SEP IRA. If you want to combine that, right, and roll it over to the traditional IRA, I'm not mad at it. Just know that when you do that, that does not mean selling the individual securities, which are stocks and ETFs, taking the money out to your bank account and then re-depositing it into a different account by combining them, quote, unquote, that really means that you're transferring the ownership of these stocks off of, you know, whatever, if it's Fidelity or Vanguard or Bank of America, whoever your SEP IRA is through and transferring it over into whatever your traditional IRA is through, which might also be Fidelity or Vanguard,

right? But you know what I'm saying? You're moving from one asset manager to the next. And then once you've done that, I think you're in good shape. I mean, you're 56 years old. You're able to now invest up to again $7,000 in the year of 2024 toward this traditional IRA. You're definitely going to see some compound growth between now and 65. We've got another 10 years ahead of you. But if I were you, I would also consider how you want to think about taxes, right? Because now you're at that point in your career where you might want to begin dwindling down over the next 8 to 10 years. And of course, I would imagine now $700,000 will absolutely double over the next 10 years if it's invested in these S&P 500 index funds we talk about.

So call it $1.5 million by the time you're 65. However, this $1.5 million, to your point, will be in a traditional IRA. And so as you enjoy that money that comes out of that traditional IRA to fund your retirement, you need to be thinking about setting aside the money for taxes. Now, I'm not saying there's specific tax loopholes to use. I'm just saying it's probably a good idea to consult with a tax professional on that process. Our next question comes from William. William says, I've got a question coming out of Murphy's Borough, Tennessee.

I'm turning 21 years old this year, but I failed to set a good goal for myself. I feel like I'm spread too thin financially. Right now I'm contributing $100 a month to my Roth IRA and I'm also putting $100 a month toward a traditional portfolio on public.com. I'm also trying to dabble a little bit into Bitcoin. I'm in school for radio and broadcasting, but I'm currently unsure if I'm ready to commit to this major and make a career out of it. I still live with my parents so my bills are limited, but I'm afraid this isn't sustainable

for when I move out and begin to live on my own. How should I go about really dialing in my finances and making more efficient moves with my money. Robert, do you want to kick this one off? Yeah, I think you covered it yourself, William, and that is dialing in. Right now it sounds like everything I hear dabbling, I hear this, and it just sounds like you're fragmented and don't really know where you want to go. So let's define that.

Let's figure out how much are you making right now and can you be making more money with a side hustle or something else? What are your financial goals, let's say for the next five to 10 years to get you started to build that base and how do we achieve that? Where are we at with you've got the Roth up and running? Let's define what you're doing with it. You're putting in $100 a month right now. How can we make that more and get it up more to $500, $500 or even $250 a month

because you have the gift of youth and we need to make sure that we accelerate everything you're doing because of your age to set yourself up so much better for later on in life? So that's where I'm at. I would really figure out how can you make more money? how can you dial in your objectives so you understand what you're doing and have a plan rather than kind of haphazardly going about it? Because the last thing we want to hear is dabble or uncertainty or all of these words. It just means you're kind of bouncing around and we need to fix that right away. So more tactically speaking, I think I'd break this up into two buckets, right?

Left side of the aisle, we've got pre-graduation. You're still in college. On the right side of the aisle is post-graduation, right? You're out of college. Pre-graduation, I think the only thing you need to worry about is, well, I guess two things. One, do you want to do radio broadcasting as a major? And what's the career from that? And if not, two, how can you find a major or, you know, something to study that you can make a career out of that pays off your student loans and is a fruitful career.

So all I would focus on right now in college, sure, if you want to keep doing the hundred bucks to the Roth IRA, 100 bucks over here, be my guest. But I think what's really important is I knew a lot of people in college who drifted around. They had like seven different majors throughout the four years. years. They graduated with something they don't really care about. They had 40, 50, 60,000 of student loans. And then they were just kind of like, oh, what was me? You know, don't be that person. Figure out, yes, I want to do radio broadcasting. Double down on it. Be the best radio broadcaster you can be, graduate first in your class in radio and broadcasting and go become the next Chris Cuomo or something like that, right? And then from that is post-graduation. So from a post-graduation perspective, you have three things to worry about. The first one is paying off the student loans, especially if they're high interest. The second one is doubling down on investing. that you have actual income. And the third one is, to Robert's point, figuring out those longer-term goals. The medium long-term goal I think a lot of people should have is to build an emergency fund. It's a lot more approachable than what I think a lot of people make the mistake of making a goal of, which is buying real estate.

A lot of people make the mistake of going out and buying real estate or trying to buy their first primary house or house hack or something like that without having $15 to $20,000 in cash sitting in a high-yield savings account first, right? They'll make that mistake. So again, William, you got to MTSU, you're in Murphy's Borough. If I were you, I would double down on whatever major you want to do, be the best major you possibly can be. Do not go into high-interest student loan debt studying something that's not going to make you money out of college. So if you do want to do radio and broadcasting, figure out exactly how much it's going to make you, get the internships, line up the jobs, do everything so you're gainfully employed

when you graduate. And then once you graduate, I want you to pay off the high-interest debt as soon as possible and I want you to build an emergency fund of six to 12 months of expenses. For me, that's call it $30-ish thousand dollars. For some people, it's 15 to 20. For others, it could be up to 40. but figure out that for you. I guess it's close to probably 15. And then once you've done that, you can kind of have that like safety base built, not exactly the investing base, but the safety base,

right? You're out of debt. You've got your emergency fund. Now you've got a little bit extra income. Let's double down that investing and really max out not just the Roth IRA, but also other taxable accounts and Bitcoin and, you know, alternative assets. Maybe you go buy your first real estate property and house hack. That's when you should begin to do those things. And the biggest piece of advice I can give you, William, is it doesn't happen overnight. We're talking about a five to seven year process, right? I turned 28 in a couple months, and it has taken me so long to get to where I am. And if I think back to like with the goals I had, but now was, you know, 19, 20, 20, 21, 22 years old, like, yeah, I mean, it's taken nearly a decade now and I'm just starting

to scratch the surface on those. So please take a deep breath, slow down, enjoy the process, but make sure you have a plan so you're not just drifting through life after graduation. And I want to add one more very important thing for William and everyone listening that has a similar situation. Do not rush because at the end of the day, William, you said you're living with your parents. That is awesome. If you can make that work and prevent yourself, because I think so many people want to rush to go get the first house, get the bomb apartment or whatever it is, don't do that. Like literally, I spoke to a guy the other day that was in his early 20s. He bought like a little camper van, not like a sprinter, but like an older camper van, moved to the area where he could get this really good

job, joined a gym, and he lives in the van in the parking lot of the job, and the gym is right there because he calculated by doing that he could save $2,300 a month for the first two or three years of his career. So don't rush into going out and getting that nice apartment or buying that first home. Get your base built. Promise. I promise, I promise. You will love it later when you realize that you didn't immediately put yourself in this place where you have very, very, little money left over because all you're doing is working to pay bills very, very important. I mean, Robert, would you rather have a cool social life in trying to impress your friends or live in a camper in a parking lot with $50,000 at the end of two years? I mean, give me the

$50,000 every day of the week, dude. And just to your point, Robert, too, I mean, I was that guy, right? There's an Instagram photo on my account of Mielick standing in front of my house with a dog and a cool Lexus. That guy was broke. That guy was super broke. But he looked cool. He thought he was cool. No, that's not what cool is, William. So to Robert's point, whenever you're now in your early 20s, mid-20s, even late 20s, don't fall victim to the keeping up with the Joneses or trying to look cool or impress people. Now's the time where you can live with your parents, save $1,500 bucks a month on a rent, and no one cares. It's totally normal. It's fine. It's totally fine. Live with your parents for a year or two out of college, three years even, right? But make a goal

to take the money you're saving by doing that to pay off the student loans or start investing, building that base we're talking about, the high yield savings account, right? Do things intentionally, right? You want everything to be intentional with your money, very intentional with your money. And if you're able to do that, if you add discipline to intentionality, you are wealthy. Really, that's all it is. Intentionality plus discipline equals wealth. That is the formula. I love this episode because, you know, me being the elder statesman of the two of us, I've been down the road. I've lived beyond my means. I've had all the crazy stuff. And now looking back, I think I did it better than 95% of the people I knew because at 21, I already had the Roth set up. I already had my brokerage accounts and I did all

that, but I still live beyond my means. So when I can share those stories now to people and say, I promise you later on in life, you're going to remember this day when you had your question answered on the Rich Habits podcast and you made those changes because there's no back. feeling than financial freedom in waking up every day with a plan for what you want to do and not have to worry about money or paying a bill. Because trust me, it's terrible when you're like, how am I going to pay my rent? My cell's going to get shut off. Maybe you're behind on your car payments. That's not going to happen on our watch. So that's why I love this conversation in this episode. So before jumping into our next question, I want to remind everybody that public

is officially the cheapest way to trade options. That's because they're doing something no other brokerage has done before. They're sharing 50% of their options revenue directly with you, the customer. So whenever you trade options on public, you get something back minimizing your transaction costs. Go to public.com and activate options trading before March 31st to lock in your lifetime rebate. That's public.com, the cheapest way to trade options. Our next question comes from Hank. Hank says life insurance.

You hear it promoted all the time as a good investment, but is it actually? For the record, I just got married and I do not have kids. Is it a good idea for me to get life insurance as an investment? If not, when is life insurance appropriate to consider? Go for it. Just the biggest eye, man. It's just, oh my gosh. But that's okay. Hank, good question. Like, that's what we're here for, dude. We want to answer these questions. We love answering your questions. So the first answer I have to your question of, is life insurance a good investment is no. life insurance is insurance. It's insurance. Life insurance is not an investment. Life insurance is not a wealth building tool. It's not those things. It is exactly what it's called insurance. Now,

unfortunately, a lot of people make the mistake of thinking that life insurance can be an investment. And unfortunately, there's a lot of life insurance agents out there that deceptively encourage people to think that life insurance can be an investment. And how they do that is something called universal indexed life insurance, which they say, hey, pay me $300 a month. A little bit of that will go to this policy. And the policy will track the S&P 500 up to 6% per year or 8% per year, which is the longstanding average is what they say. And the other little bit is going to go to a cash value. Think about like a little piggy bank that you can borrow money against. Right. You have to borrow your own money. That seems silly. And then a majority of that, because this is how life insurance

agents make their money, goes to commission. So of the $300, call it $150 of that is going to the commission of life insurance agent. 75 is going to go make 7 or 8% per year. Another 75 is going to go sit in a grummy piggy bank that doesn't make nearly as much as the T-bills on public.com. And then over the lifetime of this policy, you'll see, oh my gosh, you know, my I UL is worth all this money. And how do I get that money? Well, if I want to get the money, I've got to borrow it from my piggy bank. that sort of seems silly. And then after I die, my IUL is worth call it this $1 million. But if I had just taken that same $300 that I was paying to invest into this investment, I could have made $6 million because the stock market, one accounts for dividends, two does more than 6 or 8% per year. And three,

you don't have to borrow your own money out of a piggy bank. So you guys can't tell I don't like life insurance as an investment. I think it's very silly. And if it were me, and this is what I do, Here's what I think you should do, Hank. Very simply. Your life insurance, from the perspective of insurance, is supposed to replace your income when you die. That's it. That's all it's supposed to do. So the best rule of thumb here is figure out your annual income. Put a 15 times multiplier on that. So let's say you're making $100,000 a year. Put a 15 times multiplier on that. So that would be $1.5 million policy. You're going to get a 10, 15, 20, 30 year term. life insurance policy, which means over the next 30 years, if you die, your beneficiaries will

get $1.5 million, and then they will take that $1.5 million, invest it into the stock market, and use the 4% rule, right? They'll take off 4% of that $1.5 million to pay themselves with to replace your income when you die. That is it. It's that simple. And the best part is the term life insurance policy premiums on a monthly basis. They're not 300. They're not 400. On average, they are 20% of the cost of these IULs, right? So you get all this great money at the end of the road for your beneficiaries for 50 bucks a month, 60 bucks a month. It is incredible. Yeah. So Hankwitz just crushed it for Hank. So Hank, good job. I love it. And yes, we could go on my wall right in front of me. I have two pages of insurance notes and why we don't like them. And so

and I think Austin covered it all because it's a sticking point for us because right now there are so many charlatans out there on the internet selling everyone and bragging about how IULs are so great for them and it's a great investment because they make the highest commissions of anything out there that is considered an investment vehicle and keep in mind these life insurance salesmen don't have to be licensed they don't have to have any any educational stuff to be able to help them guide you on this. And when you say licensed, you're talking about licensed as a certified financial planner. Yeah, yeah. They don't need any of these licenses. So it's one of those where it's tricky because, you know, there can be instances where certain policies might be beneficial.

Not an IUL, but let's say if you're very wealthy and you want the long term cash value of a whole life policy or you want the charitable and estate planning uses, there are some instances. But in most cases, life insurance is just not a good investment strategy. And Austin, you crushed it. Yeah. Let me be clear. If you are a billionaire or a decadillionaire, you know, or something crazy like that, like you've got to tens, if not hundreds of millions of dollars of an estate that you've got to figure out how to like most tax efficiently pass it onto your heirs, I'm sure that there is some convoluted life insurance way to do that tax efficiently. I am sure of that. And I'm not arguing against that. However, 99.999% of people listening to this podcast right now, that doesn't apply to them. And not even just listen to this podcast, I live in America. That doesn't apply to them, right? So I don't

want people to mistake themselves as, oh, I'm like the, what is it called, the Rothschilds. And the Rothschilds use life insurance to keep all their, like, sure, they're be jailers. They can, whatever they do, let them do it. I'm not that. I'm not, I don't claim to be that. I don't plan to be that, right? So I'm going to do what works for me. I'm going to do exactly. this term life insurance policy. And what pisses me off to, Robert, before we go to this next question, just kills me, dude. That cash value that these IULs get so excited about, this little piggy bank, yeah, you got 150,000 of cash value. That does not get passed on to your beneficiaries. You are essentially paying money to have it sit in a piggy bank that you then have to borrow against,

right? You have to go into debt to have access to that money, which means you have to give it back eventually. And once you die, that money just goes to the insurance company. They just, oh, that's our money now. thanks. It's crazy. And none of these agents ever share with anyone when they're selling these IULs and other similar policies. If you miss the payments, all your money goes away. No other investment does that. If I'm putting money into a brokerage account or a Roth IRA and I stop investing for two years because I'm struggling, guess what? The money still grows. You stop making the payments on that IUL. All that money, I don't care if you've been paying for eight or 10 years, it's gone. They keep it. These are the things that drive me nuts.

about over complicating your wealth building journey is keep it simple, stupid. You don't have to go try to do all of these crazy strategies, like you said, the Rothschilds, to be able to, like, I see people that own two little small businesses and they're already trying to overcomplicate what needs to be done. No, because all you're doing is adding more expense

and more difficulty to your wealth building journey. It's unnecessary, and I love this question. And just as the very last antidote I want to add here, is the goal is to be self-insured. The goal is not to have life insurance until you die. The goal, Robert, like we've been talking about for several episodes now, is to have millions upon millions of dollars in retirement that you can pass on to your beneficiaries, your heirs, and people that depend on your income and depend on you to live their lives when you die will be just fine, right? That's the purpose, again, of life insurance. If you unexpectedly die, your wife in kids or

husband and kids or whoever you have around you that depend on your income to sustain their life can have an income. That's the point. And if once you get to a point where you're so wealthy that the money in your investment accounts or your real estate portfolio, however you want to define wealth, can supplement their income enough to make sure that they're good when you die. Well, congratulations. You don't need life insurance anymore, right? You are self-insured. Great question, Hank. Sorry, it took so long. We just get so riled up with our life insurance questions. Okay. Our next one comes from David. David says, what's up, guys? I'm a huge fan of the podcast, but I got a quick question regarding covered calls.

The majority of my portfolios and index funds like QQ and VOO that I plan to hold for a very long time. Would it make sense for me to sell covered call option contracts against those at a very low delta? It seems like the premium returns would be much lower when compared to individual stock options. But since I've got hundreds of shares of these stocks in my portfolio, it seems like it could be a fun way to sneak out an extra few percentage points in passive income. year. Thanks and keep up the great work. Dude, what a cool idea. David, I love this, especially if you're able to do it to your point at a low delta. So just so everyone's on the same page here, there are statistics that the seller of the covered call option contract gets to look at before he sells or she sells the contract. And those statistics essentially tell you the odds of this security being

so volatile that you have your underlying investment called away from you. Right. So you sell it at whatever that price is. And with a low delta, right? So what David says here, that's saying the probability of keeping your full investment and the premium is pretty high. So David, I love this idea. I probably should do it myself, actually. So thanks for the inspiration, man. So if anyone out there has a brokerage account that has hundreds and hundreds of shares of QQ or VO or VGT or VTI,

these ETFs and index funds we talk about a lot and you want to squeak out a couple more percentage points and passive income on top of their total return that is afforded to you by investing in the security. And you want to do that via covered call option contracts. Be my guest. David, I look forward to hearing more about how this goes for you in the future. And again, what a great idea. It's just all about being creative without being doing too much. You know, we say keep it simple, stupid. If you have the understanding and the knowledge, then go for it. And that's why we're adding more and more of these webinars to really break down some of these more intricate investment thesis ideas and structures that we do because it helps people keep getting more and more gains

out of their investments. You know, we talk about positive arbitrage and I really like this idea. It's creative and could work in this instance. So speaking of building and diversifying our portfolios, our friends at Public recently launched their own podcast called The Rundown. So please check it out. It's a new rich habit you can work into your daily routine listening to the Rundown public's new financial podcast. Yeah, it's actually hilarious because it's hosted by my friend Zadadmani. He's a rock star content creator. And it's only five minutes long. You'll walk away getting caught up on which stocks are making the biggest moves, the economic stories that matter most in your portfolio. What's moving, what's up, what's down. I think they even talked about. Robert Wendy's is now doing like surge prices, like how Uber has surge prices. Wendy's is now doing that with their cheeseburgers. I mean, it's just so funny, man. The stuff they talk about over there. So go check it out. Wherever you listen to podcasts is going to be a link in the description below. here on Spotify to go give that a listen. Our next question comes from Angel. Angel says, hey guys, I love the podcast and I love listening to the podcast on Spotify.

So here's the deal. I make $35,000 a year right now. And with April coming up, I'm excited because I'll be making $90,000 a year with a career change. Do you have any tips or pointers on where I should start saving, investing, or paying off debt? Thanks for all the help. Robert, run it.

Yeah, so Angel, I love this. And here is the number one thing. and we cover this earlier in this episode. Going from 35K to 90K, don't live like you have the 90K, keep living like you have the 35K. Sure, treat yourself a little and maybe nudge yourself up to that 45K.

But what I would do if I were you is I would take as much of that additional new money and I would deploy it as soon as possible. I'd get the Roth IRA maxed out. I'd start working on building up my Bitcoin and my crypto portfolio. I'd make sure to diversify, maybe get a traditional brokerage account. I'd go to public.com and get that high yield savings account set up so you have that cushion

there that's making money. I would really, really pretend that that new money doesn't exist for an expense purpose and use it all for investing or at least most of it. Because if you immediately go from 35K mindset and lifestyle to 90K mindset, you're not going to use this window to be able to set yourself up for the future. One of the stories that I tell all of the time in my cousin Tim at Crow Capital does is I had a girlfriend back in the day and she was 22 years old. She got in an accident. She received 25K in a lump sum.

It wasn't a bad accident. And she said, what should I do? I said, don't touch it. Act like it doesn't exist and invest it. And this was 30 some years ago. Guess what? She took all 25K. She bought a convertible, a depreciating asset.

That money's long gone. That convertibles rusted into the ground. And if she'd have taken at least 20 of that 25K 30 some years ago, she'd be a multi-millionaire, but she didn't listen to me. And now she's just living a normal life. And the last time I spoke wasn't doing well financially. And this is why you have to set yourself up early or when these windfalls happen. So Angel, please, please, please set aside a bunch of that, use the tactics that we're discussing and really set yourself up for later.

What a great answer, Robert. And I think Angel, the biggest thing I can't engage. encourage you to think about here is put yourself in a season. Put yourself in a season, call it two years of living like you make half this amount of money, $45,000. Okay? You already know how to live at $35,000. Let's up it a little bit to $45,000 a year and live like that for just two more years, right? This is just going to be a small season of your long, long life. And during those two years, I want you to do three things. The first thing I want you to do is pay off all your credit card debt, because if you're living at $35,000 a year, you probably have had some unexpected expenses that came up,

and you probably had to swipe your credit card to cover those expenses. So the first thing I want you to do with this extra money that you're making now, pay off your credit card debt and stop going into credit card debt. So how do we stop going into credit card debt? The second thing I want you to do, that emergency fund. Robert did a good job calling out public.com for that. I want you to have three to six months of your expenses, call it $6,000, $15,000 sitting in, In cash, in a public.com high yield cash account.

There's going to be a link in description below. Click that link. Go check it out. 5.2% interest you'll earn on your cash while it's sitting there. What is that money for? It's called an emergency fund for emergencies. And you wanted to go to Disney World is not an emergency. You wanting to upgrade your car stereo system is not an emergency.

An emergency is a death in the family, a unforeseen medical expense, or even popping three of the four tires on your car so you got to go spend 1,400 bucks getting new tires for your car. That's an emergency, right? Those things are real emergencies, and that's what this fund is for, which means you no longer have to go into high interest credit card debt, like you probably have been now for the last couple of years at 35K a year. Okay, paid off the credit cards. You've got the high-yield cash account. You feel good, dude. You feel rich for the first time in your life, which is awesome. Now, it's time to get even richer. So you've probably done this. It's been probably call it nine to 12 months you've got the money set aside you paid off the debt right you're still making

this 90k now you've got one whole more year of a 45 000 delta between how much you're making and how much you're spending after taxes let's call it 35 grand that's 3,000 dollars a month what can you do with $3,000 a month well you can max out your Roth IRA within the first three months of the year that's 7,000 now you've got 29,000 more dollars congratulations you just bought 20,000 nine more dollars worth of these index funds we talk about some cryptocurrency and maybe even a single stock that you're really excited about. Now you're two years older, Angel, you have no high interest debt, you have an awesome emergency fund, and you've got like 40 grand in investments, dude.

Like you are doing so well. So that's the type of mindset, Robert and I want you to have in this, right? Because this is just a season of your life. Now that you've got that sort of base that we talk about, right, 50 to 100,000 in investments, the nice emergency fund, no high interest debt. Congrats, dude. You're doing well. Maybe now it's time to start living like you're making 60, 70, maybe even even.

80K a year, right? Treat yourself a little bit. You worked really hard for that two-year season of your life. Go take the vacation, but pay for it with cash and don't go into crazy credit card debt to go to Mexico, right? You can get a cool all-inclusive for probably like $1,600. That's again, only half of a month of your sort of delta there during that season. I guess what I'm trying to say here, Robert, is if you put yourself in these seasons and you can keep yourself in this mindset of knowing that it's not going to last forever, you have a little bit more tenacity and drive underneath of you, to get excited to hit these specific goals that we're talking about. And I think what's so frustrating for people, whenever they see us talk about,

oh, yeah, live like I make 45 when really I make 90. Okay, no way. Like, that's going to last. You're right. It's not going to last. It's only going to last two years. Like, we don't want you to make this your identity. We just want you to do this for a small period of time.

So you're setting yourself up. Like Robert's friend didn't set herself up. We want you to set yourself up for long-term wealth building throughout your life. It's just crazy to me, because I don't think people really understand that compound interest is your friend. And the sooner you can get money working for you, the sooner you can get to the goals you desire for later on in life. And it's just so, so important to understand that. Because it's just when you get in this situation where you're going to have this sort of windfall,

chunking that money in for that short amount of time, like Austin said, the season, is so, so important. because then it just continually compounds for you later on rather than always doing the minimum. It's like people that have high credit card debt and pay the minimum for years. They threw all that money away for years and years because they never got rid of the debt. And it's just you want to always have that positive arbitrage in your favor. I could have said it better myself, Robert. Our last question comes from Ms. Takaido. We hope that we pronounce your name right.

She says, I love the show, but I have a question regarding crypto and where to buy it. I bought some through Fidelity, but a coworker mine told me it's not safe. Should I buy through Coinbase instead? What should I do? I'm kind of freaking out. Why does she think it's not safe? Do I sell it? Do I buy it?

Do I buy more through CoinBase? What do I do? What do I do? What do I do? Okay. First thing you do is you take a deep breath and you listen to what Robert's about to tell you. I think you're perfectly fine with Fidelity. I do love Coinbase.

I think they're very stable and you have nothing to worry about. You're insured. All as well. You can also look at Crypto.com. public.com. There's a link in the show notes as well. We love public for buying our crypto. Uphold is out there. There are many safe platforms. So just Usa, calm down. All will be well and get that money working in crypto because obviously we're heading full on into this bull market in crypto. So now is a great time to be dollar cost averaging in. So I'm glad you're on top of it,

but I don't think you have anything to worry about. Yeah, actually, Robert, I just look this up. The choice is yours. Trade crypto directly through Fidelity, crypto, buy and sell Bitcoin in Ethereum, starting with as little as $1, trade crypto seven days a week, 23 hours a day on our website or mobile app. I mean, it's fidelity. It's fine. Fidelity's got like trillions of dollars and assets under management. I mean, this is even have a Bitcoin ETF. I promise you, Fidelity is doing just fine. Even a custodian, I think, Robert, for a couple of the Bitcoin ETFs that are out there right now. Yeah, the only thing I like about it is it's kind of funny. like trade away, you know, 23 hours a day with as little as a dollar. Yeah, they want you to trade in

and trade out because they can make some more fees, but don't do that. You don't need to be a day trader in cryptocurrency. You can buy and hold. You can swing trade and just build a portfolio and understand what you're doing. Don't just listen to the coworkers. Don't just find something on the internet. Do your own research and really understand what you're getting yourself into. And as we always say, have an investment thesis before you start. And just to remind you here, right. The reason why they want you to trade left and right and buy and sell and get you encourage about trading all day long is because they make a 1% fee on every trade you make. All you got to do is dollar cost average into Bitcoin and Ethereum.

Feel free to use Fidelity. They're going to be just fine. If you want to use Coinbase, go for that too. But it is not a life and death situation here. There's no need to sell everything and move your money. There's no need for any of that. If you feel better having it on Coinbase, go open a Coinbase account and just start adding new capital over there while keeping the Fidelity account. Again, there's reason to sell the money because you get scared. We want you to sell your Bitcoin when you want to sell it, not because of some fomo or some fear factor, right? And so if you want to do that, go for it. But again, Robert and I think that fidelity is just fine. Everyone, thanks so much for listening to this episode of the Rich Habits podcast. Don't forget, we are hosting the

How to Build an Investment portfolio from scratch webinar on March 27th at 4 p.m. Eastern Time. There's going to be a link to register for the webinar below. We had 900 of you. join us last time, be sure to reserve a seat because they are limited. It is completely free to join the webinar. It's going to be about an hour long. So if you're commuting home from work or still at work, don't worry. It's not going to be too long. And it will also be a lot of fun. Again, thank you all so, so much for supporting the Rich Habits podcast and everything we do. And I'd like to do a little shameless plug for Austin and I. We have our first ever, the money mindset two-day wealth Building Summit is coming up April 26th and 27th right here in South Florida and St. Petersburg.

Myself and Austin will both be key speakers in this event. And you can go to my link in bio and soon Austin's in my stand store to check out the details for the event. We're very excited. And it is limited seating. It's only going to be a 100 person live event with also the live webcast. So check that out as well. Thanks, everyone. And have a great rest of your week. Thank you.