Rich Habits Podcast - Q&A: Our Favorite Nuclear Stocks, Deferred Compensation, & $203K in SPYI

Episode Date: October 24, 2024

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Man, it's been a while, but I knew it, I knew you. You make us proud to be toys. Disney and Pixar's Toy Story 5, now playing only in theaters to get available now. Hey y'all, it's Kelly Clarkson with Wayfair. Ever order furniture online and wonder what if? Like, what if it doesn't hold up? That sofa was four days old. You should have ordered from Wayfair. With Wayfair, there's no what if. Just style you love and quality you can trust. Visit Wayfair.com. Wayfair, every style, every home. 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 Robert and I sit down here for about 45 minutes and answer all of your questions that you. you ask us across all the different platforms. You can ask us a question by emailing us, Rich Habitspodcast at gmail.com is the email address to use. Put in the subject line, something catchy so it gets our attention. You can also send us an Instagram DM at Rich Habits Podcast, or more importantly, you could ask us a question inside of the Rich Habits Network because those questions always get answered, not just on episodes like this, but in our live streams and everything else we do over at the Rich Habits Network. I'm super excited about this episode, Robert, we've got a ton of questions teed up, including a question about nuclear, which I think will be a fun one.

Yeah, I'm super excited about this episode as well. I love the complexity of all of the questions. It really makes me realize that people are digging in, they're taking it seriously, they're taking notes and taking action, and it shows in our viewership. We have been growing, growing, growing, and it's so awesome that so many of you are sharing the episodes with friends and family members and other people that might get valid. for what we're doing here. So before we jump in here, I just want to give a quick heads up that interest rates are falling, but you can still lock in a 6% or higher yield with a bond account at public.com. That's a pretty big deal because when rates drop, so can the interest you earn on your investment. A bond account allows you to lock in a 6% or higher yield with a diversified portfolio of high yield and investment grade corporate bonds. So while other people are watching their return,

shrink, you can sit back and collect on those regular interest payments. But you might want to act fast because your yield is not locked in until you invest. The good news, it only takes a couple minutes to sign up at public.com. Lock in a 6% or higher yield with a bond account only at public.com forward slash rich habits. And Robert, I want to linger on this for a little bit because I don't want people to think this is just an advertisement and we're just kind of getting paid to tell you guys to go do this. you all should absolutely think about adding these high yield bonds to your portfolio, right? The S&P 500 averages about 8, sometimes 10% per year. Obviously, over the last couple of years, we've seen a lot higher than that.

But a well-diversified portfolio, right, after you've built your base, should also include some of these high-yield investment-grade bonds paying 6, 6.5%, 7% in some cases. Public.com is the absolute easiest way anyone can add high-yield interest rate. corporate bonds to their portfolio. You can buy Nvidia, you can buy Apple, you can buy Ford, you can buy Boeing. I mean, there's so many options to go out there and add them to your portfolio. So once you've built your base, go to public.com, get this bond account and add that to this now growing, well-diversified portfolio you will have as we head into the new year of 2025. I love it, but also, and I love this call-out, because I think our listeners, new, old, and people

have been with us forever, understand that we're not out here, shill, and we're not out here, just any random companies. We only talk about and work with companies that we actually invest in or have equity in ourselves. So I think we've really built that, especially with a company like public that we both use every single day. We love, we work with them. And I think it's great for the audience as well because we handpick these select few companies that we work with here on the podcast and in the Rich Habits Network to make sure that everyone is getting the best tools and platforms out there that we know of. Now as a quick disclaimer, this was brought to you by public investing member FINRA and SIPC. As of October 21st, 24, the average annual yield to worst across the bond account

is greater than 6%. Yield to worst is not guaranteed. This was not an investment recommendation. All investing involves risk. And please visit public.com slash disclosures slash bond dash account for more information. So with that being said, Robert, are you ready to jump into the first question? I am so ready. We have some great questions today and we get to like really utilize. our big brains on these ones, so let's go. John B says, I'm narrowing down two to three franchises I want to get into. My question for the experts is this. What is a better option for loans? A small business loan like an SBA loan or taking a loan against my portfolio, aka a pledged asset line of credit. I thought about liquidating some stocks I owned to put more cash down on the loan,

but I remember Robert and Austin talking about how they wouldn't want to lose out on growth of their investment opportunities and get hit with capital gains just to take on debt. Interest rates are about the same for both of these loans, maybe marginally higher for SBA loans, but does anyone have an opinion or real-life learning to share about this? Robert, I'll let you go first. Yeah, I love it, John B. Let's clarify just a few things with franchising. It's not all rainbows and unicorns, so make sure you select wisely.

If you need any help, I have a great friend who's a franchise analyst in the country. He would really, really help guide you. You could do a free call with him if you already have it. But secondarily, when it comes to the funding and the loans, yes, you can look at an SBA, 7A loan. But keep in mind, the interest rates on those are very high right now. And it kind of puts you in that spot where you're in this high interest debt situation to open this business. So I would say you could look at some other things. Maybe you look at doing a friends and family round.

Maybe you do a hard money loan to get the money you need. up front because it's going to be much less expensive than an SBA loan from an interest rate perspective. But also you could look at a platform like on deck, see what they have to offer, because they're going to take into consideration your credit, your company credit, you know, your history in the business and all of those things. So just make sure you really flush out all the options to find the best money you can find to do the franchise. Now, over the last 15 years, I've done very well in franchising, but I also have friends that have done very poorly in franchising because they chose poorly and they negotiated poorly.

So make sure you have a professional helping you with site selection, lease negotiation, and most of all, the funding and how you get your money to get up and running. And make sure my biggest pro tip for you or anyone listening getting into franchising, make sure you have enough operating capital once you do get open. through the construction and into operations because so many people operate with far too little capital and they find themselves in harm's way quickly. You want to give yourself a cushion of at least a year if you can to make sure that you give the business time to mature enough to create profits to build the bank account up. So what you're saying is have expectations of the business to do

well, but don't overestimate how much you'll make in this short term. And like, don't take on credit card debt to supplement what those future profits might look like. And now you find yourself in this weird buying living off of, you know, credit cards to help the business grow. Is that what you're kind of saying? Yeah. And what happens in a small business that's underfunded. And this happens every single day, I deal with an on a regular basis in my one-on-one calls is so many people are underfunded. Then they max out the credit cards. Then they get a second mortgage on their home. And they do all of this. And what happens is you find yourself spending your time chasing money instead of building your business.

And that is a double-edged sword that can ruin so many good businesses by being underfunded. So just try to do your best to understand. You want to expect great things, but you want to be prepared for bad things because you never know what's going to happen. I remember opening a brand new restaurant that I was building of my own and we were making it franchisable. And we opened up and it was gangbusters. We were doing over $40,000 a week, and I was like, I'm a rock star, I'm a hero.

This is incredible for a 1,500 square foot restaurant. And then they closed the road for 18 months, and our customers had no access. The entire commercial side of the area where all of our lunch customers came from had no access to our restaurant. And it ruined us because we couldn't do anything about those outside conditions. So just be prepared for the worst and make sure that you are, funded well enough to make it through the good and the bad times. Now, John, my only perspective here is someone who hasn't ever taken out at SBA loan or hasn't ever taken out, you know, margin or, you know, what you call a pledged asset line

of credit, which is the formal way of describing it there. M1 Finance has a, I think it's six, six and a half percent interest rate on this pledged asset line. So, for example, I've got about half a million dollars of assets on the platform. I think I can borrow between 25 and 50 percent of that. as a pledged asset line of credit, which means I could borrow up to $250,000 of debt against my assets on this platform at a 6.5% interest rate, right? So if that is a opportunity that you might have to sort of take on maybe a margin loan, and then you can use that debt at a lower 6.5, 7.5%

interest rate versus this 13, 14, 15% we're seeing from these 7A loans right now to go work about the franchise and get it up and running, that could be a good opportunity because, one, the debt you're taking on is completely covered by your assets. So even if the business does terribly, you're not going to now go into bankruptcy with the SBA and these other different things. You just simply sell your assets. Maybe they've even appreciated by that time, hoping that doesn't happen, by the way. And so now you're still out, you're Scott Free. There's nothing to worry about from bankruptcy perspective. But now, two, you don't have to sell your stocks, man. Your stocks can continue to go up into the right. They can continue to appreciate over a long period of time. You don't have to,

worry about the capital gains taxes that come with it. So I'm cool. I'm leaning toward the sort of margin loan solution that you mentioned, John, especially with a platform like M1 Finance. But just be careful. Know what you're getting yourself into. Understand what margin calls mean. Go watch the margin call movie if you want.

But we're rooting for you, John. This sounds like a really cool opportunity, and we hope it works out for you. So our next question comes from Brandy S. Brandy says, I'd like to now get into the nuclear sector after seeing what big tech is doing in the space. I know Robert has mentioned a few names,

and I've seen some of them on, Barons as well, but has anyone bought any of them? I'm looking for a bunch of different names, if it's ETFs or single stocks. Robert, Austin, can you share with me your thoughts? Robert, do you want to walk through perhaps what happened recently in nuclear with Big Tech? And then two, a couple ETFs per se that people could purchase or add to a well-diversified portfolio to have some exposure into this cool new theme of nuclear energy? Yeah, I love it. And this is a great question, Brandy. I love the sector because as Austin and I have been speaking on, a lot in recent months.

The U.S. as manufacturing starts to really thrive again here, we need a ton of infrastructure support in the energy sector. Not just in the energy itself, but the picks and shovels of building that energy so we can have these huge gigafactories for Tesla and Amazon and FedEx and all of the big, big companies that are out there building. And why I like nuclear is because of its effectiveness when it comes to the cost of creating the power.

And I've been talking on nuclear now for about a year and a half through URA and also URNM as a couple of my favorite funds that I really like. But why I think it's important is nuclear is going to be completely different this time. And as you've seen, Microsoft, Amazon, and Google are all investing heavily into the sector as well. So they're getting on board also. And what I see and what I've been researching for the past couple of years is that we're going to see nuclear be more of these localized centers where they're going to build these plants to be able to produce this power. And I think it's important to understand that instead of the big old way of looking at nuclear where it's dangerous and these big plants, it's going to be a lot more centralized locations for nuclear power throughout the country.

And I think it's a great sector to have some of your portfolio in. As I mentioned, I've been buying URNM and URA for quite some time. but you mentioned CEG Constellation Energy Group. I think that is a great one as well. I've been adding that to my position. I like it a lot. And then also VST. Vistra is a very good company.

They're one of the largest energy providers in the country. And I like those as well. I just think it's a great sector. You always hear Austin and I talk about that you don't have to be first to a sector. You just have to be ahead of the masses. And even though Microsoft and Amazon have announced recently their dedication to the nuclear space, I think we're still early. And that's why we want to get in

with these picks and shovels play into that sector. And I hope that helps. So all in all, I really love this play in the nuclear field. And all of the big companies are really investing because they know AI is here to stay. And AI is very energy consumptive. And we want to make sure that we understand that. And that is why they're investing in the sector. And we want to get a our piece as well. Yeah, so I've not yet invested into URNM, but it seems like a pretty interesting ETF. It's the Sprott uranium miners ETF. And then there's also URA. Personally, when it comes to investing in a new sector that I've not done too much research on, right? I normally don't invest in things I don't research, which is why I haven't invested in anything yet. I like to do a broad

stroke type investment, right? I don't like to find a single stock and go all in and have that only stock be my, you know, exposure to that sector, I will instead choose an ETF or two. So it seems like URA and UR and M will be the two broad stroke sort of investments that I'll make in this nuclear space alongside owning Amazon, Google, and Microsoft stock. Yeah, I think that's a great play. We never want to teach anyone to go all in on one stock. That's generally how people get their heads knocked off. But definitely, Brandy, great question. And I love the sector. I'm dollar cost averaging into all the projects we discussed, and I hope this helps. So our next question comes from KeyS.

Key says, my company offers deferred compensation to reduce my taxable income. The funds are held in a fidelity brokerage account with full control, but limited investment options. I did this a couple years ago, and I invested all the funds in FXAIX and VVIAX to track the total performance of the S&P 500. It's open enrollment time again, but I'm having second. thoughts about doing this. Just wanted to find out if others in the Rich Habits Network are doing this or if they've ever considered this option before. What a great question, key. And again,

thanks so much for being a part of the Rich Habits Network. So you might be asking yourself, well, one, what the heck is a deferred compensation plan? And then two, is it something that I should be thinking about? So a deferred compensation plan is normally part of an employee's regular compensation that is set aside to be paid out at a later date, usually at retirement. Now, you can think of a deferred compensation plan, kind of like a 401k. There are qualified and non-qualified deferred compensation plans. Qualified deferred compensation plans are available to tons of employees, including Robert, myself, and Key, which are those 401K plans, 403Bs, and things like that.

That is governed by the federal government about how much you can put inside of them, and they are a really cool way to invest toward retirement. non-qualified deferred compensation plans mainly cater to the high-income earners like the executives that are making tens of millions of dollars a year. Now, Key, it sounds like you have a qualified deferred compensation plan. Your company says, hey, you can put your compensation into this Fidelity brokerage account. You can invest it into the S&P 500 to grow over time, allowing you to bring down your taxable income in the year that this money has received. So I think it's a great idea, assuming you have full autonomy over it like you mentioned that you do and that you are not just relying on that as a way to retire you're also doing the Roth IRA right you're also building the bridge account you're also building the base and doing everything that Robert and I talk about deferred compensation plans are pretty interesting especially if you are one of those high earners and you're making tens of millions a year I mean that is how we get into some interesting tax loopholes as it relates to compensation but in this situation key seems like you're setting yourself up for success and two thumbs up for me yeah and my

side of this, I would say you have to look at it from this perspective. If you're not one of those people making millions of dollars a year and you have limited investment options in this Divered comp plan, you might want to consider like you already are, not adding additional money to it and maybe going another route. Because again, then you'll have full autonomy, more options, more diversity, and probably a higher return year over year. So it really depends on your situation because again, you do have the ability with a deferred comp plan to reduce your taxable income now, but the tax is going to come out somewhere somehow down the road. So just keep that in mind when doing this consideration is that you might want to do exactly

what you're thinking of, and that is not re-upping during this open enrollment and moving the money elsewhere where you have more control maybe into the Roth IRA or whatever it may be to give you a better situation for down the road as you build your wealth. I think it makes a ton of sense, Robert. It really goes back to this idea, you know, how we always talk about personal finances, personal. I mean, you have to be not just in control your money, but know where you're going, right? We always talk about people that don't have a plan and just drift through life financially.

Those are the people who end up being 54 years old with no money in retirement and 140,000 a student loans and, you know, maybe they haven't even bought a house yet, right? Key, you're obviously not like that. you're asking the right questions, you're part of the rich habits network, so you're surrounding yourself with other like-minded individuals. It just comes down to maybe there's a world where you could retire early, leveraging a bridge account. Maybe there's a world where you do want to put more into this deferred compensation plan.

If it's underfunded, in your opinion, there's a ton of things to consider here. But I hope my answer and Robert's answer can help you navigate this question. Now, our next question comes from Leslie K. Leslie says, I'm in a high-income tax bracket. In the past, I would max out my 401K to save on your money. taxes. When does it make sense to pay the taxes now and invest with post-tax Roth IRA money and maybe even a mega backdoor Roth IRA? Robert, you want to kick this one off? Yeah, Leslie, you're right on track. This is probably one of the top five topics we discuss all the time. Do you keep maxing out the 401k or

whatever you have for that retirement account through work? Or do you lower it down just to the match, maybe and take all the rest of your investment money and put it through the Roth IRA and build the bridge account. Because if you have all that money in the 401k and you're maxing it out and putting it as much as you can, not only are you kicking the tax man down the road, which we don't know what taxes are going to be like 10, 20, 30 years from now, we could only assume they're going to be higher. And so I just always like to cut the losses early, get the money over into a tax-free account. so I know for the rest of my life with that money, it's tax-free as it builds and compounds on itself. So that would be what I would do.

I would look at the 401k. You've built it. You've got money in there. Great. Only do up to the company match. Then I would get the Roth maxed out every year, but then also start looking to build that bridge account. If you look back to the episode about net worth millionaires, it might be a great one for you to watch. Because it's really important to understand if all your money is tied up in a 401k or your

You still have kind of these handcuffs because you can't get out there and retire early. You can't do what you want with your money because it's tied up. So I would definitely consider looking at the Roth IRA, getting a bridge account set up and start going that route because you probably have a lot of money to invest every month and we don't want it to be all tied up in a 401K, especially because 401Ks have a tendency to underperform general ETFs and index funds that we talk about having that basket of low-cost funds to be able to build your wealth around. I love this question, Leslie, and I think at its core, Robert is very much correct in the assumption that probably in 20 years, our effective tax rates on every single one of

us is going to be higher than they have been for the last, call it five years on average, maybe 10. I guess what I'm trying to say here is the federal government is running an insane deficit, and the only way that they are going to turn that deficit into a positive or even just neutral, right, balance the federal spending budget is to spend less or collect more in taxes. Spending less is really hard because once you open up the floodgates and you start spending, no one wants to turn them off, which means the only real solution is to raise taxes. Now are they going to raise taxes on everyday people like us? Are they going to raise taxes on billionaires or corporations?

I have no idea. It's a very fair assumption that taxes will be higher in 20 years than they are today. And so for me, that means I want to get as much money as possible into a tax-free account, like the Roth variation of my 401k and my IRA as I possibly can. Now, it seems, Leslie, that you have been putting all this money in a normal, traditional 401k for the last several years, allowing you to bring down your taxable income today. This has probably been a good strategy for you, especially if your effective tax rate is in the 30-ish percent. I mean, you're probably saving some money.

here. But I do want to encourage you to think about making the switch to the Roth variation that Robert talked about. I'm not saying to convert your existing funds into a Roth account. That is a taxable event. That could be tens of thousands of dollars paid to Uncle Sam just to do that. We're not saying that. We're just saying to take a pause on the traditional IRA and 401K contributions. And if your company offers a Roth 401K, open up that account, contribute to it. You definitely can open up a Roth IRA yourself and use a backdoor Roth IRA strategy to contribute to that. So there's ways that you can add after tax, right, these tax-free dollars to your retirement accounts in a way that doesn't cause you to have a taxable event, like converting from a

traditional to a Roth would. So Leslie, there's a bunch of ways to approach this. Just really want to encourage you to think about those after-tax dollars. Now before we move on to our next question, I need you all to listen up because time can be running out to lock in a 6% or higher yield at public documentation. You can lock in a 6% or higher yield with a bond account. But remember, your yield is not locked in until the time of purchase, so you might want to act fast. Lock in a 6% or higher yield with a diversified portfolio of high yield investment-grade corporate bonds only at public.com forward slash rich habits.

Again, that's public.com forward slash rich habits. So our next question comes from Andrew G. Andrew says, hey Austin and Robert, I've been listening to your podcast for a few weeks, and I can tell I'll be listening for much longer than that. Me and my wife, both 28 years old, make roughly $140,000 a year combined, and we have no debt other than our mortgage. We bought our house in early 2022 for $275,000, and we took out a mortgage for $220,000 at a 3.5% interest rate.

Now, over the past two years, we've been paying extra on our mortgage every month, and we've gotten the principal down to roughly $200,000. Each month after expenses in savings, we have about $500 to do whatever we want with. We've been debating on whether it would be wiser to invest the extra money or pay towards principal each month. I ran an amateurization table with the extra payments and if I continue to pay an extra $500 per month toward the principal, my last mortgage payment would be on January 1st of 2039, saving me $50,000 in interest paid and cutting roughly $12,000.000. years of debt off my mortgage. However, if I invest the $500 per month over the remaining life of the loan through compounded interest using a conservative 10% annual return, I'll have roughly

$720,000. Anyway, from an emotional standpoint, I would have a peace of mind and would feel like a great accomplishment to pay off the house early and owning it outright. From a practical standpoint, I feel like my dollars would be put to better use if I invested them. Any advice would be amazing. Thank you so much for what you do. Robert, I'll let you kick this one. it off. Andrew, great question, and you've already spelled it out for everyone listening and following along. You should probably know my answer. I get it that you want the peace of mind of having your house paid off. But I can tell you this from experience that having debt, as long as it's good debt like you have on this house, is not a bad thing. And I don't think it makes sense to pay any more

extra payments when your mortgage interest rate is 3.5%. We can make 10%.5%. We can make 10,000. 10%, 12%, 15% a year with our money pretty easily in almost every year of our lifetimes. So I don't see why I would want to pay off a 3.5% interest rate when I can make more with my money. If you follow along for a while, you know I always say make your money work as hard for you as you work to get it. And in this instance, you can borrow and have that 3.5% mortgage interest rate and take the extra money and put it towards investing. I think you would be way better off in the long term for retirement, leaving your payment in place, paying the minimum payment, and let the bank carry the note for as long as they'll do it.

Because to pay it off early, yes, you have peace of mind, but you also have all of that money tied up in a home that you cannot touch if you want to touch it or do anything with it unless you sell the property later. The financial side of this and the math side of it is easy. you're going to invest the money and make the money work on your side, that positive arbitrage, and keep making the minimum payments, and you will figure out when you wake up every morning you're one step closer to financial freedom that it's okay to have a house payment.

I am right there with you, Robert, and Andrew, just to make it a little bit more relatable, I'm sure you're really tied up in this idea of, oh my gosh, I really want to pay off this house. I had the same mentality. I was also a Dave Ramsey listener back of the day, and I had the idea, in the dream of paying off the house. Don't get me wrong. I'm going to pay off the house I'm in right now. But the difference between my house and your house is I have nearly a 7% interest rate on this mortgage. You have a 3.5 interest rate. My 7% is much more exciting to pay off than just a 3.5% interest rate. Now, let me also mention that in part of paying off this house early, I will have hundreds of

thousands, if not millions of dollars invested in the markets before I do it. Allowing my money, money to double every seven years in the markets. You are instead of choosing, you know, the markets to allow your net worth to grow, which we've seen over the last 90 years the S&P 500 has been around, this has been a wonderful way of wealth building, that you believe that this specific real estate investment will outperform the markets. I, of course, cannot predict the future, but I'm willing to bet that that is a wrong assumption. I'm willing to bet that the S&P 500 will continue to do 8, 10, 12, 15% per year over the next 5, 10, 15, 20 years because you talk about this being paid off in the next 15 years. Now, back to this idea of paying it off in 15 years, right? Andrew, you mentioned that you're going to

have this extra $500 per month and use that as an extra payment on your mortgage for the next 15 years. If instead of doing that, you took the same $500 that you've already said is in your budget and you invest it in, let's say, a Roth IRA or you open up an account on public.com and just put it in the and P-500, assuming a annual return of about 10 to 12% per year, that $500 is going to turn into $250,000 over the course of 15 years, assuming you continue to invest every single month. That $250,000 is much higher than the $50,000 of interest that you would save if you paid off your house early. Heck, if you want to just put all this money in a bridge account, grow it for the next 15 years, and then take the 250 to pay off your house early, you can go do

that. But what we're saying is it's a better idea 10 times out of 10, especially at a 3.5% interest rate to invest the money than to pay down the house early. We want every single person to go into retirement without a mortgage payment. We think that is paramount because rent payments always go up, but if you can pay off a house like you're good, right? If that's the biggest line item in everyone's budget, living costs, and if you can predict them every month, you're going to have a happy retirement. We want you to pay off your mortgage before you retire, but you're 28 years old. You got 40 more years until you retire. And in our opinion, your money is best used if it's invested in the S&P 500 and the other index funds we talk about, allowing it to double every seven years for the next 40 years that you'll be investing versus paying off the house early.

I couldn't agree more. You guys all know my stance on this. If you can borrow for less than what you can make with your money, you always borrow. Everyone should know this. I'm going to say it a thousand more times, so get used to it. Because at the end of the day, that is why some of the wealthiest people on Earth have mortgages on their yachts, mortgages on their mansions, payments on their Rolls Royces is because they can borrow money cheaper than when they can make with their own. And, Andrew, I want to make a very clear distinction from what Robert just said versus what you're doing. You are borrowing money to own an appreciating asset.

If you were borrowing money to purchase a $200,000 Rolls Royce or Lamborghini, I would call you crazy, tell you to sell it so you can't afford it. pay it off whatever right like get out of that but you are borrowing money at a three and a half percent interest rate to own an asset that let's call it over the next 10 years will probably be worth between 500 and 550 000 that's really cool and of course you want you to pay off that mortgage before retirement but you don't need to right now you're pretty young time is on your side compound interest is calling your name says Andrew come utilize me I'm ready to grow for you right so go do that we're rooting for you man our last question comes from jay Jake B. Jake says, hi, Austin and Robert. First off, you guys are doing an awesome job providing

valuable content. It's very much appreciated. I'd love to get your perspective on my situation. I currently have $140,000, save for a house and a high yield savings account, which I plan to use mostly as a down payment to keep my monthly mortgage around $2,000. However, after listening to your insights, I'm now wondering if it makes more sets to invest that money into QQQQI and SPY for passive income instead. If I put all $140,000,000, into the house, it'll be tied up and inaccessible. On the other hand, if I invest the $140,000 into KQQI and SPYI, I could potentially generate around $2,000 a month in passive income, considering the fact I already make $700

a month from KQQI alone. I'm the sole provider for my wife and three small children, so managing cash flow and financial security is really important to us. Here's a quick snapshot of my current financial position. My salary is $91,000 a year. My retirement plan has $26,000 into it. I have a Roth IRA worth $61,000. We have $10,000 in our HSA. My QQQQI investment on public.com It's $63,000. I have an emergency fund of $10,000 and I have a car loan of $32,000 at a 6% interest rate.

Given this information, what would you do if you were in my situation? Should I prioritize the house down payment or focus on building passive income? I'd love to hear your thoughts. Thanks. Robert, want to kick this one off? Yes, with limited information, Jake, we don't know your age. And then we also. don't know what you're currently doing for your house situation. So I'll take a shot at it, but we do have a little bit of a gap in information here. I hate the idea of taking that whole big nest egg and dumping it all into a house because as you alluded to, it's tied up. It's inaccessible. That money is dead money until you sell the house. And I get it. You want to lower your house payment down. But like we just did in the last question, how we broke down the math, that $140,000 working for you in the

markets is going to far outweigh and gains what you save in your monthly mortgage payment over time. So at the very least, if you're considering this and you're really hell bent on it, I would put $100,000 away and only use $40,000 towards the house. And if that doesn't work, maybe it's not time to buy the house yet. And maybe you need to look at another option. Maybe you house hack just for one year to get some equity into a property that will later cash flow. Maybe you look at one of the Fannie Mae or FHA loan programs that offer 5% down instead of 20 or 25% down. So then that way you can keep more of your money working for yourself. But for me, I never like to see people be house broke by having so much into their homes that they don't have the freedom to do the other investments that it takes to become financially free earlier in life.

Jake, this is a really good question. Yes, you should keep your monthly mortgage around $2,000 a month. Full stop. That is 33% of your take-home pay. Any more than 35% of your take-on pay, Robert and I argue that you're getting on the verge of being house broke. Too much your monthly take-on pay is going toward your living situation after you include utilities, HOA, things like that. So I really like the idea of keeping your monthly mortgage around 2000, which to your point means you might have to put more down on a house to achieve that, assuming interest rates for mortgages don't come down. We do know that interest rates on mortgages should begin to come down. below the 6% and even below 5% over the next call it 12, 18, 24 months. So fingers crossed, that trend continues. To Robert's point, I agree, I don't know your current living situation. You all might be in an apartment or something or maybe you already have a house. So whatever you're doing right now, if it works, perhaps consider continuing that before you think about buying a house. I know right now in all of America, it is cheaper to rent on average than it is to buy a house.

That is a complete fact. So maybe you're renting and it's cheaper and you're taking advantage of that situation. So the idea of putting $140,000 into KQQQI allowing you to make $2,200 or so per month, I think it's a great idea. But let's now think about the cons that come with that. And even what that money would be used for. So if you put all that money in, you're now making $2,000 a month, $21, $2,200 a month. Is all of that money now being used to pay your rent? Is all that money now being used to buy groceries?

gas and health insurance like what are you doing with this money that is going to materially move the needle from a day-to-day life situation perspective for you and your family you guys are making 91,000 a year you're doing a great job as a household here but I do know that three kids and a wife are definitely expensive especially on $91,000 a year so being able to supplement your income with an extra $2,000 a month could be a game changer for you guys and additionally what's cool with that too I mean you already have 60,000. So we're talking about $200,000 invested into an index fund that is not going to go anywhere, right? So if you need to sell the 200,000, maybe in the next couple of years to use

that as the down payment on a house, you could also do that. I think putting the money in QQQQI gives you a little bit of flexibility, allowing you to have some of this monthly income paid to you that you could use to supplement your lifestyle and take care of the kids and the wife, as well as maybe stay on the sidelines for a little bit longer as you wait for a potential cool down in the mortgage interest rate environment as we inch closer to a sub six, sub five, maybe even a sub four interest rate again over the next 12, 24 or 36 months because to your point, you have to be in that $2,000, $2,100 a month mortgage, all in payment. If not, you will be house broke.

I love the takeaway, Austin. I think you killed it. I agree 100%. I just don't like seeing the $140,000 sitting there making 5%. I love the idea of getting it working for them while they figure out when is the best time to buy. Of course, we assume interest rates are going to come down and that's going to help them get that payment down as well. So, Jake, good luck. I love your takeaway, Austin.

Keep us updated. With that, too, I'm just now noticing 26,000 and a 457 plan is not that much. You are doing great with the Roth IRA and, of course, $200,000 in a bridge account is incredible. But I would also encourage you to beef up that $450,000. plan pretty soon. I'm not saying you have to focus on this right now. I know you're focused on buying a house for the next couple of years and saving for that, but I'd really like to see that closer to 100,000 in the next call it like four, five or six years. So definitely beef that up a little bit. But really good question, Jake. Everyone, thanks so much for tuning into this week's

episode of the Rich Habits Podcast, question and answer edition. Don't forget, if you have a question to ask us, you can email us at richhabitspodcast at gmail.com. That's what Jake and Andrew both did. or you can send us an Instagram DM at Rich Habits Podcast, but more importantly, you can join the Rich Habits Network, just like Leslie, Key, Brandy, and John B, all did and get your questions answered on the episodes and or in the Rich Habits Network community. Again, thank you all for stopping by each and every week. Make sure if you find value in these episodes you share with a friend, tell them about the Rich Habits Network, and get them involved as well because everyone has their pain points in their

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