Rich Habits Podcast - Q&A: Recasting a Mortgage, Starting an ATM Biz, & Arbitraging Tax Refunds

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Starting point is 00:00:30 Welcome aboard via rail. Please sit and enjoy. Please sit and stretch. Steep. Flip. Or that. And enjoy. Via rail, love the way. Hey, everyone, and welcome back to this week's episode of the Rich Habits podcast Question and Answer Edition, which means you ask us questions via email or Instagram DMs and we take those questions. We digest them and then we answer them. giving you our perspective of what we would do if we were in your shoes. Before we jump into those questions, a couple quick reminders. The first one being to check your email inbox every single Thursday. The Rich Habits newsletter is sent out to like 45,000 people and everyone loves it. They eat it up. We get a lot of positive feedback about our newsletter.

Starting point is 00:01:21 So if you've not yet subscribed to that, there's going to be a link in the show notes below. And if you have subscribed and you enjoy it, consider forwarding that email to a friend so that they could also enjoy the Rich Habits newsletter. And don't forget, our next webinar is August 15th at 4 p.m. Eastern. We are going to dig deep into all things angel investing, show you how we do it, teach you how to do it, and really it's going to be an awesome webinar. We can't wait. Yeah, and you will also be presented with an opportunity to invest alongside of us.

Starting point is 00:01:52 Literally going to show you guys how you can invest into these massive multi-billion dollar pre-IPO companies that Robert 9. get asked to. I mean, Robert, you were just asked, I think it was about two months ago, to invest into X-AI, that, like, you know, new Elon Musk AI company that he built. So just, we get these opportunities all the time. And we have finally figured out a way to unlock access to all of you. So be sure to reserve your spot to that webinar. Again, that's August 15 at 4 p.m. Eastern, and it is completely free. Robert, you were just here in Nashville. We got to hang out with each other over the last weekend. What was your favorite part? Oh, I would say my favorite part,

Starting point is 00:02:30 was all of the filming because you and I have created so much incredible content over the last year and a half, but we rarely get to do it side by side, chopping it up and really just digging into all of the great things that we get to talk about for our listeners each and every day and breaking it down for them. So I think filming together was incredible. I really enjoyed learning more about Nashville and the surrounding areas in case we get a place. We get a place there. So as we build the rich habits network, it makes things easier for you and I logistically. So that is really exciting thinking about it because I love the beaches and I love Florida, but I also really am excited for the Rich Habits Network and our future. So seeing some areas

Starting point is 00:03:17 so I can visualize where I would want us to get a place. I think that was top of list. And then the food. We ate way too much. So now I'm going to need a few days away from you and all that food. So I would say those are my top three things. I'm right there with you, man. And speaking of the network, if anyone wants early access to the Rich Habits Network, we've already had over 200 people send us in email asking for that. But if you've not yet sent that email again, throw the word network in the subject line, email rich habits podcast at gmail.com with that subject line and let us know why you want to join.

Starting point is 00:03:52 And we will do our best to give you early access. So stay tuned for that. Now, Robert, before we jump into the episode, I do want to take a moment to talk about our sponsorpublic.com because if you're looking for a simple yet sophisticated investing experience, you got to check out public. From stocks to options, bonds to crypto, it is all there. You don't have to juggle or switch between different apps. Public lets you manage your entire portfolio all in one place. You can even earn 5.1% APY on your cash with a high yield cash account. And that's not just a good rate, Robert. That is literally an industry leading rate. The fact is,

Starting point is 00:04:29 millions of investors trust public, and it's for a good reason. You all know we love Public, and Nerd Wallet just gave Public 4.6 stars and calls it an impressive experience. And Public is a U.S.-based company for those of you that didn't know. They've got award-winning customer service, and they take the safety and security of their customers seriously, so try it out. It takes two minutes to sign up, and I think you'll love it. public.com all you're investing in one place. This is a paid endorsement for public investing, 5.1 APY as of June 17th, 2024, and is subject to change. Nerd wallet overall rating of 4.6 out of 5 stars was as of May of 2024, full disclosures in the podcast description. All right, Robert, let's jump

Starting point is 00:05:19 into our very first question. Our first question comes from Giselle V. Giselle says, I'm 23 years old, and I'm in the armed forces. I just received a $15,000 bonus, and at the moment, it's sitting in my public.com T-bill account earning 5.4%. I want to invest this money wisely, though, not just keep it in T-bills, so these proceeds can aid in my goal of retiring by 45 years old. I don't plan to have any children. So do you guys have any ideas? I was told to think about an ATM business, but I'm not too short. I'll kick this one off. So to talk about the ATM business, first. I was also almost spambuzzled into starting an ATM business. I feel like that's one of the flashier sort of, you know, start here, start now, easy businesses that some of these fake gurus

Starting point is 00:06:08 like to talk about. I found some people back and I think it was 2018 or 2020 on Instagram that we're talking about the millions of dollars they were making in ATMs. And all you have to do is buy their course and put $10,000 into one of these machines. It's crazy stuff. So probably better side hustles out there. If you do, though, are into this idea of true passive income. You could look into the vending machine business, right? You know, I had a vending machine business. You know, we started it back. I think it was in 2022. We paid like $40,000 for it. It was doing about $2,200 a month in free cash flow. It's about one times annual profits is what we paid for it. And you can find these on buy biz sell. You can find these on, what is it,

Starting point is 00:06:47 LoopNet and some of these other cool websites where they're selling existing businesses. But the hardest part about that is the maintenance. So just be ready. If you do want to have like sort of physical machine, like an ATM business or a vending machine, I would definitely lean toward the vending machine side of the equation. But what would I do with $15,000? That's such a great question. I guess the first thing I would do is I would make sure that I already have the taxes set aside for that $15,000. I don't know if that was already pulled out of your paycheck and set aside for you, but I would make sure I 100% have my taxes set aside and figure it out for that money. So come April of next year, I don't have a weird $3,000 or $4,000, you know, tax benefits.

Starting point is 00:07:25 that just causes me to go into debt or sell my investments or something silly. The second thing I would do is, of course, I would make sure that I'm depositing 7,000 of that in the calendar year of 2024 into my Roth individual retirement account, and I'm investing that money immediately. I don't want that just sitting around. I want to deposit and invest. Assuming you've already done that, unless you've already built your base, Giselle, which I'm not sure you said you did.

Starting point is 00:07:49 I don't see anything in this question about that. But unless you've already built your base, I'd make sure this money goes toward that. I mean, you're 23 years old. you're very, very young, and you have an opportunity now to get a great jump start on building your base. And assuming you have built your base at 23 and you're just rolling in it, the last thing I would now consider is real estate, right? A $15,000 sort of bonus can be a great aid toward building a down payment on a duplex or a triplex. Maybe you can find something for $400,000 and this money could go toward that. Those were a bunch of different things I would consider doing. So Robert, I don't know if I left you

Starting point is 00:08:22 that much meat here on the bones. But I'll let you answer the question as well. Yeah, Giselle, first and foremost, always ask yourself, is the market you're considering investing in growing or shrinking? And in the instance of an ATM business, you have to think that we are going away from the dollar, not the dollar in general as far as fiat currency, but people just don't carry cash anymore and have less need for cash these days. And that's going to continue to trend into digital rather than back to cash. So that's why the ATM business to me is no longer the business that it once was. So I would definitely stay away from the ATM business.

Starting point is 00:09:04 That's my thought. Austin covered it well. I feel like it is to one of the shiny ball syndrome things where people can sell you a course for your done for you ATM business. I think it's very scammy. And so I would just stay away from that because like Austin said, there's so many other better side hustles you could do with your money and invest in. And I just don't think the ATM business is it.

Starting point is 00:09:29 I would also, I mean, it seems like you're into this idea of passive income. So maybe there's a world where you can park all 15,000 into maybe a high income ETF, like an SPY or a QQQQI. And that would start to yield a couple hundred. $100 a month to you in tax advantage, pretty much tax-free income. So depending on where you are, right, in sort of your journey of building wealth, there's a couple ideas here, but I agree with Robert. The ATM business, I think, would be at the bottom of the totem pole for me.

Starting point is 00:10:00 A really good question, and thank you so much for your service. Our next question comes from Ryan W. Ryan says, hey, Austin and Robert, I recently found your podcast and I've been binge listening to every episode on my way to and from work. All right, Ryan, you're driving right now. Make sure whenever you hear your name and your question, you don't freak out too much and swerve out of your lane. Keep eyes on the road. Eyes on the road, Ryan. All right. Ryan says my wife and I decided to buy a house together before selling our primary residence. And after we sold our

Starting point is 00:10:29 home, we had $350,000 in cash. We got lucky and have a 4% interest rate. And this happened, though, before I found your podcast. So we did a recast on our new home, bringing our monthly payment down to $2,800 a month after deploying all $350,000 in cash toward that mortgage. We both work in my parents' family business, and our household income is $325,000 a year. We have a one-year-old daughter, and since listening to the podcast, I've really restarted and paid more attention to investing. We also have a brokerage account with Schwab that has $60,000 into it. My Roth IRA has $100,000, and we just opened a Roth IRA for my wife.

Starting point is 00:11:08 On top of this, we put money into public.com every week into almost all jobs. the ETFs you guys mentioned on the podcast. Now, here's my question. In a recent episode, Austin said, if you had $400,000 and you dropped it into SPY or KKQI, you can expect to earn $4,000 a month in income. My question is, should I actually try and do that by pulling the equity out of my primary residence? But if we were to do that, we would have to take on a helock, and I do have a dream of paying off this primary residence eventually. We're even paying an extra $1,100 a month toward our principal to achieve that, and we have $360,000 left to pay off. It is worth $820,000. Robert, that was a bit of a long question. So just to give everyone a quick recap here, he's pretty much trying to figure out, should he take $350,000

Starting point is 00:11:58 of equity out of his primary residence that he took as a proceed from selling his previous house and using that as a way to begin generating passive income using a covered call ETF or some other high income ETF. I'll let you go from there. To me, it's a little bit tricky because I feel like you recast the mortgage. And for those of you that don't understand what that means, let's break that down for a second as well. Recasting your mortgage basically just means that you're taking a large sum of money and you are recasting it by dumping that into the mortgage to lower the amount owed, then they recast what your payment will be using the same property, the same mortgage, and the same interest rate. So by doing that, they were able to substantially lower their payment,

Starting point is 00:12:46 but now after learning that that probably wasn't the optimal thing to do with that money, the question now becomes, do you do a helock or something to get that money out and get it working in an SPYI or something else? So for me, it's a little, tricky because I don't know that the math is going to work out right now because if you take a he lock out at 7%, let's say, seven and a half percent, which is probably what you can get it at, you're going to be paying that back in interest. And then you have to consider, is the positive arbitrage on your money in VOO or SPYI or something else worth it? And in my opinion, I just don't think it is. So I would just sit tight where you're at, but don't

Starting point is 00:13:33 do that anymore because we always talk about if you can borrow money for less than what you can make with it, you always borrow. And I wish we would have met you sooner to keep you from recasting the mortgage. So we could have invested all of that cash because we probably would have been able to make $40,000 a year with that cash. So that's my opinion, Austin, but I can see you're ready to take something on here. So go for it. Yeah. So unfortunately for Ryan, average HELOC rates right now are nine and a half percent. So the math really isn't even mathing, assuming you can get a 12 or 13 percent sort of yield there, right? Just you're going in too much risk for a couple percentage points. It just doesn't make sense. So kind of doing some quick math here, though, right? You guys are

Starting point is 00:14:15 taking home about $20,000 to $22,000 a month of, you know, after tax, take home pay and you're adding an extra $1,100 per month to the principal to pay this off. In my opinion, if you are really gung-ho on this idea of like making some passive income and sort of building up, you know, you're 46 and 47, you have another 15, 16 years until you can really touch your individual accounts here. And you have this brokerage account with 60 grand. So I guess what I'm trying to get at is if you're really gung-ho on trying to build up this bridge account, allowing you to retire 5, 7, maybe 8 years before you can touch these actual retirement accounts by dipping into the bridge account, then maybe you stop doing the extra $1,100 per month in principle, and you begin putting

Starting point is 00:14:58 that into an SPY. And you guys, again, are you taking them $1,000? grand a month, maybe you carve out four or five thousand of that and you quickly now have an extra $60,000, $70,000 a year that you're deploying into these passive income ETFs, allowing you to get to that $350,000, $400,000 range over the next four, five, maybe six years. Right now, right, you fast forward six years and you have a brokerage account that's paying you $5,000 or $6,000 a month every single month in passive income because it's invested into these high income ETFs that are very tax efficient. And you can take a portion of that, use that to pay off your monthly mortgage. And now you have sort of this like, you know, a little bit of financial independence, a little bit of

Starting point is 00:15:41 financial freedom, but most certainly flexibility as to how you want to look out your expenses on a monthly basis. If you want to maybe even take this income and use that as an extra way to pay down the mortgage faster, maybe try that, right? But I really agree with Robert here. You should not take out a he lock at nine and a half percent interest. this to try and earn an extra one or two percent, maybe three, right? It just doesn't make sense. But if you instead want to begin building up an account over the next four to five years, I think that's a wonderful idea because, again, it gives you that flexibility to even use the monthly income from that to start paying down your mortgage faster. I love it. Yeah, I think that's

Starting point is 00:16:14 just a great takeaway. And, you know, we're glad that you found us now because we are here every single week for everyone to really help kind of spell it all out and figure out what is the best strategy what would we do if we were you and what have we done for ourselves in the past so i love questions like that so our next question comes from josh w josh says hi austin and robert i have a question i've been meaning to ask you off for a while just like you two i'm a big believer of buying the dip when the chance comes by believing the asset i'm more than happy to buy it at a discount however having the funds on hand and ready to go when the time comes has been a struggle for me because I usually invest my money as soon as it hits my bank account. When we had the dip recently in cryptocurrency

Starting point is 00:16:56 over the last month or so, I wasn't prepared. So I had to pull a couple thousand from an emergency fund. Obviously, this is not optimal and something I want to avoid in the future. So my question to you is this. What's the best way to keep funds set aside in preparation for buying the dip? All right, Robert, I'll take a stab at this one. And I think it comes back to the sort of phrase we like to say, broke people react, wealthy people forecast, right? And Josh, I'm not calling you broke. But what I'm saying is, I know exactly how much money I'm going to invest during the month of August before the month even begins. Okay? And I do that because I can forecast ahead. I know what my budget looks like. I know how much money I'm going to make. I understand what life events are coming up. So I know that I'm going to invest about

Starting point is 00:17:36 $20,000 into something during the month of August. It's up to me what that looks like. But that's my amount. And so what I will do, Josh, is I will take $20,000 from my bank account and I will deposit it into my investment portfolio. And once it's inside of this portfolio, my brokerage account, on normally and every other day, sometimes a weekly basis, I will begin depositing and deploying that money into the markets. I think it's totally fine to kind of average that out over a couple weeks. Definitely average it out by the end of the month. Right. I want to have it all deployed over that 30 day period. That's what I do. And it allows me, Josh, to buy those days. dips when they do come, right? CrowdStrike, for example, has had an awesome massive dip that I'm really excited to buy into. And I now have money to do that. I was able to kind of buy and get excited about that. Same thing to your point, Robert and Josh with this cryptocurrency pullback.

Starting point is 00:18:26 We had a couple weeks ago, I think it got down to like 55 or 57 with Bitcoin. So being able to forecast the next month and being able to sort of put that money into your brokerage account and then deploy it systematically every day, every other day, every week. Is it a Friday? Is it a Tuesday. I don't know what it is for you, Josh, but that's what I do. It works and it allows me to buy the ups, the downs, and I'm buying nearly every day of the month. It's pretty cool. So I'm going to take it a little bit different direction, more from a layman's terms, because Austin is one of the most prolific thinker investors I've ever met as far as how much he automates everything. So I'm going to break this down for the average Joe. So Josh, assuming you want to be prepared for the dip, I think one of

Starting point is 00:19:10 the easiest strategies you can do is to have the money earmarked for when you look for that dip or you see that opportunity and just keep it in like a public high yield savings account, somewhere where you can make a little money with it because you don't want it sitting for a month or two or three if you're not sure when a dip or what dip or what you're buying is going to be. We automate our investments much more than most people and that's why we win. But when you're getting started and you're not quite sure where the money's going to go, I think it's fine just to take whatever money you have, have it set aside, have it spoken for for your investments, whatever that might be.

Starting point is 00:19:49 And just look at a high yield savings account because it's simple. It's easy to get to. It's 100% liquid. And then you can make sure you don't miss any dips. And that's how I would do it for the average person out there that's looking to take advantage of downswings in the market. Yeah, I think like, you know, it'd be even more tactical. that, Robert, let's say that someone gets paid every two weeks or on the first and the 15th, right? So every

Starting point is 00:20:12 paycheck, I mean, let's say you know that you're going to invest $1,000 a month. So every paycheck, you set aside $500 and you deposit it into your brokerage account. And then maybe that next Monday, right, assuming you get paid on a Friday. The next Monday, you invest 250 of that. So half of that, then you wait a week and then you invest the other 250. Then you get paid again. And it's another $250, another $250,000, $1,000 a month. That's a way to do it. If you want to be a little bit more patient to Robert's point. Of course, you can put it in a high-yield savings account, but I do agree with Robert that you should not have money sitting to buy the dip for more than a month, right? I mean, we want you investing every single month. I don't care how big the dip is.

Starting point is 00:20:50 I mean, no one can look and predict the future one month, two month, three months out. So again, dollar cost average on a weekly, bi-weekly or monthly basis is always the best way to be an investor. Really good question, Josh. That's why you never hear Austin and I say buy the dip. We always talk about dollar cost averaging because buying the dip in my opinion is kind of a fallacy because no one really knows when the dip is going to be if there's going to be a dip. Is it going to be prolonged? How severe is it going to be? And you hear a lot of the fake gurus that are out there on Instagram and TikTok every day when they're like, the market is getting wrecked right now. All tax are crashing. And then you look and you're like, wait a minute, Navidia's down 3%. Amazon's down 2%. That's not a crash.

Starting point is 00:21:36 that's normal business and so that's why we prefer to look at it as dollar cost averaging and try to automate as much as possible versus sitting there holding money just watching the markets hoping for a dip because you don't know if it's ever going to come or how severe it's going to be right there with you man i couldn't have said it better myself our next question comes from emmanuel s emmanuel says i love the podcast and i wanted to ask my first question i hope i make the cut Well, Emmanuel, you're here. Thanks so much for listening, my friend. Okay, Emmanuel says, on an episode earlier, you all said that getting a tax refund is a bad thing.

Starting point is 00:22:13 It is like the government holding your money and then giving you those taxes that you overpay back. Would it instead be smarter to not have taxes withheld from my paycheck each pay period? Take my own taxes out. Throw it in a high-yield savings account. Make money off of it until tax time and then pay the taxes that you own, but take the profits from the high-yield savings. savings. It's easy money to make if you ask me, but am I thinking about this wrong? Ooh, okay, Emanuel, dude, I appreciate that. What a guy. Emmanuel's over here thinking on every way that he can arbitrage his money, make a little bit more here and there. We love the mindset, Emmanuel. We just

Starting point is 00:22:49 want to give you your flowers, dude. We love where your heads at. Now, here's the deal. I have pretty much one rule in my life. I don't like to play with the government of the United States, especially the tax man. I will always pay for the top-notch accountant so that I can protect myself. I will always be happy to overpay in taxes just a little bit, assuming I can get that money back, right? But I guess what I'm saying is I just don't like getting risky with Uncle Sam. He has a lot of power and he is a very mean guy that will find the heck out of me if I do one thing wrong. So in this instance, I love where your head's at. I wouldn't do it. I would, though, Emmanuel, I would try and figure out what that perfect amount is, where if you do

Starting point is 00:23:33 owe taxes, it's just a little bit, right? You're not getting that one, two, three, four thousand dollars of tax refund back. Maybe you're getting back $200 or $300. Or maybe you owe $200 or $300, right? You can absolutely optimize for what that tax refund might look like in the year going forward. Just go to your HR department, ask them to withhold a little bit less or a little bit more, whatever it is for your instance here, but I appreciate it. I just wouldn't do it. I'm just not that type of guy. Maybe that's the type of guy Robert is. I don't know. What do you think, Robert? No, I don't mess with the tax man. Do I push the envelope as far as I can to make sure that I'm fully within every single law, but not just leaving money on the table? Absolutely. At the end of the day,

Starting point is 00:24:16 the tax code is there for us to exploit it. It is there for us to learn. It is there for us to grow. it is not an enemy of us. The IRS is not our enemy. They are our friend, but I don't want to mess with them. So for me, same thing as Austin. I want to make sure that I just follow the letter of the law, but I make sure I push the envelope as far as I can in my favor. So although I like your sentiment, I agree.

Starting point is 00:24:43 I wouldn't do it. I wouldn't mess with it because the last thing you want to do is get them on your trail and get them going through everything you do and keeping an eye on you because, you know, that just generally doesn't end very well. Yeah, I also feel like your employer wouldn't be very happy with you doing this either. I feel like they would get kind of weirded out that you are not letting them withhold taxes, right? And the thing that's so weird too is like, as an employer myself, I use a payroll automation software,

Starting point is 00:25:11 but I mean, we pay taxes every quarter, right? It's not once a year. It's every quarter as an employer manual. So your employer is paying taxes on your behalf every three months. And there's not much money you can make in a high-yield savings account in three months. months, assuming you also paid on a quarterly basis. So again, love where your head's at, dude. Like, you're thinking about this stuff, right? You're just thinking about it wrong when it comes to taxes, because we don't want to mess with the IRS and the government get audited. We don't like that. So what

Starting point is 00:25:36 a good question. And best of luck, we hope you're able to optimize your taxes here in 2024 and 2025 in a very responsible manner. Now, Robert, I don't know if you knew this or not. I've only said it a hundred times, but at public.com, you can earn 5.1% APY with a high yield cash account, baby. There are no fees. minimums just that industry leading 5.1% APY on your cash. And with up to $5 million of FDIC insurance, your money is secure. Go to public.com and start earning 5.1% APY straight up with no strings attached. It's an industry leading interest rate with no fees, period. Public.com. This is a paid endorsement for public investing, 5.1% APY as of June 17, 2024 in a subject to change. full disclosures in the podcast description if you are not yet parking your money in public

Starting point is 00:26:28 dot com what are you doing of course emmanuel i mean this is what he was going to do right he was going to take all his tax money put it in public and make some extra money i hope you still has money in public we love public everyone to go check them out and i want to follow up real quick because this got asked on a one-on-one call earlier about public dot com because everyone knows that we love public and we use public and that is what happens if they go out of business or if they sell off or Black Rock buys them what happens to our money and again it comes back to five million dollars fdic insurance your money is secure they follow the rules it's an american company so you can get someone on the phone if you need to so i promise you austin promises you we both use public we love public and they're a

Starting point is 00:27:14 great company i couldn't have said it better myself robert and speaking of public. If you all have not yet tuned into their podcast called The Rundown, it's hosted by Zaid Admani. He is a super smart, super funny, super charismatic guy. Their podcast is every single day, literally a daily podcast for you to supplement your rich habits podcast listening here. If you just want to stay up to date with the markets. And it's five minutes, six minutes long. It's very short. They give you the quick headlines and they give you a quick summary of what's going on so you can attack the investing day ahead of you. So definitely go check out the rundown as well. We do recommend their podcast if you want a little bit more of the stocks news, business news, economic news, stuff

Starting point is 00:27:53 like that. Yes, of course, we support public and the podcast is fun. It's short. It's sweet. And they just have a really good outlook on the markets. So I'm definitely a big fan. So our next question comes from Eric S. Eric says I've been listening to your podcast since January and I've been thoroughly enjoying and learning so much from you and your guests. I really appreciate the difference you all are making for all of us listeners. I particularly enjoyed your recent episode on Dave Ramsey. My wife subscribes to Dave Ramsey's belief that all debt is bad, so I'd shared the episode with her because you all explained it so well. However, I'd like to take a moment to say that I do have a lot of respect for Dave Ramsey for all he's done, not just for us,

Starting point is 00:28:30 but for everyone else. Now, here's my current dilemma. My wife and I have a townhouse in Southern California that we bought in 2018, using a VA loan with no down payment for $650,000 at a 2.6% interest rate. Soon after the purchase, we had to move overseas for work, and we are currently renting out that home as a long-term rental. Since the purchase, the real estate market in Southern California has been doing pretty well, and our townhouse is estimated to be worth about $1.15 million. Now, I'm no real estate expert, but I don't think we're going to see the same rate of capital appreciation going forward, so I think perhaps it's time to sell and invest that money into ETFs, stocks, and crypto. We currently owe $600,000, so I assume the profits will be about $450,000 after paying closing

Starting point is 00:29:13 costs. What do you guys think? Now, we don't plan to move back to the states for another five or six years and we're definitely not going to move back into that townhouse. More about our situation is I'm 43 and my wife is 44. I plan to retire from my current company at about six years and I'm lucky to work for a company that allows me to collect my pension right away, which is projected to be between $90,000 and $100,000 per year. We have $800,000 in our 401k, which is mixed between a Roth 401k. We have another $400,000 invested between our bridge accounts, including the ETFs you all talk about like VOO, a few single stocks and other bank managed money market accounts, along with. with 25,000 and our emergency fund. Wow. Congrats Eric and your wife. You guys have really built yourself

Starting point is 00:29:53 a wonderful, wonderful financial situation. I'll let Robert take the first step at this. Yes, well, we appreciate you understanding that our message does differ from Dave Ramsey for many, many decades. I am a firm believer that good debt is great to leverage so you can build wealth. We've gone over this many, many times. The math just adds up. But, does give out some good advice. So totally cool that the wife is kind of on the other side of the fence, but I'm glad that you can see some value that we bring. What would I do in this situation? It's a tough situation, but a great situation to be in. If you believe that that market in Southern California is kind of tapping out and slowing down and you're not going to see the

Starting point is 00:30:37 great capital appreciation you have seen in recent years, then I think it's a great idea to consider selling it now. If you think you're at the top of the market and you're, you're, you're you're going to be able to get the most amount of appreciation and equity out of it. And I do think it's a good time to take that and flip that over into the market because the other way to look at this is you mentioned in your story that you're still going to be out of the country for four or five more years. And so I guess I would feel like I could sleep better at night, not having to worry about a rental property and rather have it in my brokerage accounts, making money while I sleep and knowing that nothing could happen to it. So I think you could go either

Starting point is 00:31:19 way and it would be a good bet, but I just know that if I have money in the markets making 8, 10, 12, 15%, I'm likely not going to make that much year over year between the cash flow and the capital appreciation. So to me, I think you could go either way. I would lean towards selling. I'm right there with you, Robert, and let's paint them a picture of what this might look like. So one, yes, I understand your wife is bought into Dave Ramsey, but I hope your wife also now realizes that you guys made $450,000 because you decided to go into debt without having a down payment like Dave Ramsey says not to do. So let's just be grateful that you guys did not listen to Dave in that instance. Now think about this. Let's say you sell the property in Southern California. You come out with

Starting point is 00:32:03 $450,000 in proceeds. And this $450,000 is now invested into the stock market, the ETFs we talk about. Now, over the next six to seven years, this $450,000 should double to about $900,000, let's call it $8,900,000 to $900,000 because the stock market goes up and it doubles every seven and a half years or so. So now you guys are in your early 50s, if not on your 50th birthday at this point. And you have $800,900,000 invested from this 450. And if you add that to the money already in your bridge account, which should double as well to $800,000, now you guys are looking at about $1,000,000. if not $1.7 million. What would be better than being 50 years old, being able to buy back to your wife really hating, you know, debt here?

Starting point is 00:32:50 Maybe you want to buy your next property in cash so you don't have any payment and you really want to do this Dave Ramsey stuff. Go do that. That's fine. You literally have $2 million like you could afford that. You're now making that $90,000 a year. You're retired. You have another, call it $1,900,000 in this bridge account that's paying for your lifestyle on

Starting point is 00:33:08 top of the $100,000 a year from $50,000. 60 years old before you can tap into those 401ks. I mean, that's where my head goes, right? So you sell the house, you take the proceeds, you invest them. Happy wife, happy life. Your wife doesn't want debt. That's fine. Go buy a house. Maybe it's a condo. Maybe it's something cool to live in now that you're back in the States. Something reasonably priced. You pay some cash for that so you don't have any sort of payments around that. And now you guys are retired. You have no mortgage. You're making 90,000 $100,000 a year and your bridge account spitting out cash before you're ready to really tap into those retirement accounts at about 59.5, 60 years old. That's where I

Starting point is 00:33:40 go, that's the cool scenario in my opinion. I'll let Robert give any feedback. Yeah, I think it's a great scenario and I love the breakdown. The only thing I try to get out there as a message, so they're both 43 and 44 years old, respectively. When you get to that 53 and 54 years old, you're still a long ways off from retirement. But I like to put in some color and perspective that at some point, unless you're already at your freedom number and you're already there where you need to be in retirement, you have to get out of the building phase of life. You have to get into the nest egg and the preservation stage. And so that's one of the things that I just like to make sure people have in their time horizon is when do we cut off taking the higher risks and really kind of hunker down with their money to

Starting point is 00:34:31 build towards a higher freedom number? So I think this is a great position that they're in. You broke it down really well, but I just want to make sure they're looking at that horizon in 10 years to understand you don't always want to be out there building and investing in ways that could cause you to go backwards in your net worth. And so I think they're in a great spot. And I just would like them to keep that in mind for future thoughts of how they're investing and into what. And speaking of, you know, sort of having this like retirement in the next six or seven years with your company and making about 100K a year and this bridge account and stuff like that, I mean, you really have an opportunity to make, assuming that this bridge account doubles over the next six or seven years. And you know, you take this 450. It doubles over the next six or seven years. And you keep, you know, let's call it 700K aside to buy a house with and the other 800, 700,000 invested. I mean, you could put this into like SPYQQQQI or some of these other high yield tax efficient ETFs pay very little in taxes because their income is considered a return of capital as well as have a very

Starting point is 00:35:36 predictable monthly income of the tune of a couple of thousand dollars allowing you to have an extra 50, 60, 80,000 on top of that 90, 100 of your pension. So there's a lot to consider here. You guys are in a very great spot. I think Robert's advice around sort of flipping the switch, once you're ready, away from building to sort of cash flow is just paramount. Super, super important. Really great question. We're really proud of you guys. Thanks listening to the show. Our last question comes from Mary C. Mary says, I'm new to investing and I just started listening to your podcast recently. You guys mentioned the S&P 500 index funds, but I'm really confused because when I Googled how to do it on Fidelity, they told me FXAIX, but you all said V-O-O and then someone

Starting point is 00:36:18 else said SPY. I know there's different tickers for the S&P 500s and some of them are similar, others are different, but which one am I supposed to be buying? Because I'm really confused about all these different letters. Robert, you want to take a stab at this? Yes, Mary, it's really just up to individual preference. When you look at the difference between SPY and VOO, it's just two different companies. You're going to get almost identical returns, almost identical expense ratios. It's all just about personal preference. Austin and I both prefer VOO only because of the company that manages it. That is it. So it shouldn't be that confusing. And when it comes to FXAIX, again, this is just another version of being able to get that basket of companies investing in the S&P 500. And the cool thing about

Starting point is 00:37:09 this, if you're on Fidelity, it has a very low expense ratio and very low minimum investment. So all three of these are good. It just comes down to personal preference because they're all almost identical. Yeah. I mean, at the end of the day, Mary, congrats on doing all the homework. You seem to really get a good grasp on this. And just to reiterate what Robert was talking about is that there are ETFs and there are mutual funds. And they're pretty similar, right? ETFs stands for exchange traded funds, which means you can go to public, you can go to Schwab, you can go to Robin Hood, and you can type in V-O-O, and you're going to get an easy way to purchase the S&P 500 through this exchange traded fund. It's a mutual fund that's traded on a stock exchange. So you just go out and buy

Starting point is 00:37:54 it and it's in shares. It's great. FX-A-I-X is a platform. platform-specific fund on Fidelity for their investors, right? So it's like, hey, guys, if you want exposure to the S&P, don't worry about buying Vanguard stuff or whatever, BlackRock stuff. Just come use our stuff. You're already on our platform and we'll charge you less. And so that's all it is. So if you're on Fidelity, get you some FXAIX. If you're not on Fidelity, get you some V-O-O, it's just as cheap. If you're somewhere else, go get you some SPY. It really doesn't matter. As long as you are buying and holding S&P 500 exposure and having that in your port And you're holding on to that over a long period of time and you're building your base with it.

Starting point is 00:38:32 That is what's most important. It doesn't matter the specific ticker you use to get that exposure. 100%. Well, I want to thank each and every one of you that follows along every week, talks about our podcast, shares our podcast. And we are so excited. As Austin mentioned earlier, I was in Nashville this week, filming our butts off all week long because we are coming out with so many great tools and educational processes. for all of you through the Rich Habits Network.

Starting point is 00:39:01 So look forward to seeing that coming very, very soon. And make sure if you haven't already joined the newsletter that you do so right away, share it with a friend. Maybe they need some help financially or with mindset or some of their business structures because we're very, very proud of the Rich Habits newsletter. And it's totally free. It comes out every single week. So make sure you join that as well.

Starting point is 00:39:21 And we look forward to seeing you on the next episode. Looking forward to it. Shoot us a nice five-star review. if you haven't already. We've got over 5,000 now, five-star reviews, Robert. It's pretty awesome. Super grateful to have everyone's support here. And we can't wait to see you on Monday with our next episode. Thanks, everyone, and have a great rest of your week.

Rich Habits Podcast - Q&A: Recasting a Mortgage, Starting an ATM Biz, & Arbitraging Tax Refunds

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