Rich Habits Podcast - Q&A: RSP vs. VOO, $5K/month For Life, & the Best Advice We've Ever Received

Starting point is 00:00:00 Spotify, it's Jay Shetty. Are you one of those media strategy people? Scrolling through spreadsheets, searching for an audience that pays twice as much attention to your ads than they do on social? Let me introduce you to fans. And they're here with me on Spotify. Trust me, I know fans. They don't skip. They stay for hours.

Starting point is 00:00:21 They don't move on. They manifest. They're not a demographic group. They're fans. Spotify advertising. You're among fans. Hey everyone and welcome back to the rich habits podcast, a top 10 business podcast on Spotify. This is our question and answer edition episode, which means we take your questions and we answer

Starting point is 00:00:41 them. We're going to answer, I think, nine or ten questions in this episode. Really high demand episode. You guys love it when we answer your questions and we can't wait to answer more of them. If you want to ask us a question and absolutely get it answered 100%, be sure to check out the Rich Habits Network. The Rich Habits Network is the easiest way. for you to connect with Robert and I on a weekly basis during our live streams, as well as connect with other podcast listeners across all the different industries that they work in. Tons of entrepreneurs in there, tons of people just figuring it out for the first time, as well as over six hours of video coursework for you to review and learn from. And more importantly, take

Starting point is 00:01:20 notes and take action. Yeah, I'm excited. We just launched the school community with the Rich Habits Network a week ago. And already it is crazy in the community. There's just so many smart people. And it's exciting for me because we're getting to help and educate and spur community in the rich habits network with so many people. And I am so thrilled to keep moving forward with it and building it bigger and bigger. And as Austin alluded to, there is already six hours worth of course material in there. Plus multiple tools that we're giving away in the community. And we will continue to add more and more modules as we move along with the rich habits network.

Starting point is 00:01:58 So it's very exciting time. for both Austin and I. Yeah, Robert, we've got over 300 people right now in the Rich Habits Network, and it's only been two weeks. Unreal, how popular this has become. And I get back to every single direct message. So really, if you DM me in the network, I'm going to get back to you. Now, Robert, speaking of answering questions, we got a ton of questions in today's episode, most of them from the network itself. So if you want your question answered in next week's episode, join the Rich Habits Network, ask a question, and we might pick it for our episode. But before we jump into this episode, Austin, let's hear from our sponsor.

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Starting point is 00:03:20 out Public.com. It takes two minutes to sign up and Robert and I both think you're going to love it. Again, that's public.com. All of your investing in one place. This is a paid endorsement for Public investing 5.1% APY as of June 17, 2024 in his subject to change. Nerd Wallet overall rating of 4.6 out of 5 stars as of May 24. Full disclosures in the podcast description below. Now, Robert, our first question comes from Kai. Kai says my wife and I have been contributing the max into our 401k every year to reduce our taxable income. After listening to the Rich Habits podcast, I'm beginning to wonder if this is even a good strategy, especially considering the tax rates and how they're likely to be higher in the future. Are there better ways to reduce tax burden and maybe divert funds into our

Starting point is 00:04:02 brokerage accounts, maybe even a backdoor Roth IRA? Kai, this is a really great question and I'm going to kick us off. So, Kai, let me remind you and everyone else listening how Robert and I recommend people deploy their capital. Match, Roth, then taxable. So if you can invest into a 401k and you get, let's call it, a 3% match from your employer, that 3% match on your invested capital is an immediate 100% return your investment, which is incredible no matter what the 401k is invested into. Next, we want to move to our Roth IRA. And in this case, for you, maybe it's a backdoor Roth IRA. And the reason we don't want to immediately max out the 401k and just invest up to the match

Starting point is 00:04:43 and then move to the Roth is because sometimes we can't control what the 401K's invested into. For example, some people have their 401k's automatically invested into target date funds or other random high fee funds that their employers pick for them, forcing them to underperform the market year over year over year. Now, if you're pouring all your money into underperforming funds and completely neglecting your own Roth IRA, then you are forced to underperform the market, not have the S&P 500, the NASDAQ, VTI, VGT, the things that we always talk about on this podcast, right, these longstanding index funds. Now, after you've got the match, after you've maxed out the Roth, then that's

Starting point is 00:05:20 when you say, okay, either I have autonomy over my 401k and I should go max that out, or if I don't, and it's just invested in these underperforming funds, I should take my remaining dollars if I have any and put all that into public.com into what we call a normal taxable bridge account. This account's purpose is so you can retire early. We want this account to grow to hundreds of thousands of dollars in your 40s and 50s so that when you eventually have hundreds of thousands, if not millions in your 401k, hundreds of thousands, if not millions in your Roth IRA,

Starting point is 00:05:52 but you can't touch it until 59 and a half, but now you're 53 and you got a couple hundred thousand in this normal taxable account that you can touch without penalty, then it's going to bridge you over into retirement until you can finally access those other accounts. I really appreciate, though, the call out around the higher taxes. I totally agree. I think taxes will only go up in the future. The U.S. is running at a crazy deficit. We just saw that Kamala Harris wanted to do something about a 44% long-term capital gains, things like that, right? I think income taxes are going to rise in the future, which is why Robert and I really recommend everyone to do and choose a Roth IRA, pay the taxes now, and have that tax-free money in retirement.

Starting point is 00:06:31 That's a great takeaway. And, Kai, if I were in your shoes, I'd invest up to the match, max out the Roth. And if I had autonomy, max out the 401k. Then if I had any money left monthly, I would pile that into that bridge account, Austin was talking about. It can be on public.com and invest that money in those basket of funds that we like and talk about all the time, V-O-O-V-G-T-Q-Q-Q-Q-Q-Q-I-V-I and even Berkshire Hathaway. And if you don't have the autonomy, then more in the bridge account could be a good idea versus maxing out everything else. At the end of the day, Robert, and it's crazy because I just had this conversation in the

Starting point is 00:07:09 DMs and the Rich Habits Network. A guy was like, hey, Austin, here's sort of my financial picture right now. The problem is I am worth about $5 million, but I can't retire because 3.5 million of this is tied up with retirement accounts. and I'm only 51 and another million, million and a half really is in my house and he only had about $200,000 in a bridge account. And he's like, I can't touch this money for another, call it eight years, nine years. And I don't want to sell my house, but like I am a net worth multi-millionaire, but I can't retire. I have nothing generating income for me that I can access today without

Starting point is 00:07:43 paying penalties on it. And so that's what we're trying to encourage people to do is be cognizant. We of course want you investing in your 401k. We want you to be optimizing your Roth IRA and having all of your in these tax advantage accounts working for you, but do not make the mistake of over-indexing, right, over-allocating money into these retirement accounts, knowing that once it is several million dollars and you're like, wait a second, I can retire now, but I have sort of these golden handcuffs where if I want to touch the money, I've got to pay that 10% penalty. I've got to pay, you know, taxes on. I got all these different things. Just be cognizant of that. Kai, you're doing a really great job. And we're really proud of you for maxing out your 401K. Just make sure you've got

Starting point is 00:08:20 that backdoor Roth IRA also working for you behind you. the scenes. Yeah, I love this strategy and I'm surprised more people don't talk about it. We deal with net worth millionaires and multi-millionaires on a daily basis and no one ever told them earlier on, you have to have money that's available to you prior to retirement. And you just really need that autonomy. So it's so important that we keep pushing this message of having that bridge account and having people understand the difference because this is an exact scenario we don't want people to be in. Now, Robert, to this guy's second question, do you have a bridge account? Do you have a bridge account? And have any other way on the top of your mind here that he could lower his taxable income?

Starting point is 00:08:58 I mean, the best way to lower taxable income, in my opinion, is short-term rentals, just because then that way he can, you know, we always talk about it's not what you make, it's what you keep. So by buying short-term rentals every year and accelerating the depreciation, he could certainly eat away at some of the taxable income. But I'm a big fan of getting rid of the taxes now. So many people ask me on a weekly basis, oh, I don't want to pay the taxes on my 80K or my 180k, they don't realize you have to pay it at some point. Why not pay it now rather than kicking the tax man down the road? It's just better to get it out of the way now in these Roth elements because then that way you're not paying any taxes on it later on. So, you know, there's a lot of different

Starting point is 00:09:36 ways to find these tax advantage processes and that's just what we get to do here each and every day is try and break it down for people. Our next question comes from David R. David says, at this time, which index would you prefer over the other, the regular S&P 500 or the equal weight S&P 500? Oh, I love this question, David, and I just, I want to make sure that everyone's on the same page about what David's talking about. So we all know and have talked about religiously now for over a year and a half of the S&P 500. It is the 500 largest, most profitable companies in the United States listed on the stock market, right? I think Amazon, Apple, Tesla, Microsoft, I mean, every big, awesome, beautiful company that you've ever heard of, right? But it also includes a lot and even hundreds now of other companies you might not have heard of,

Starting point is 00:10:27 but they do still meet the criteria to be categorized as an S&P name, which means they've been profitable for so many quarters. Their market capitalization is X amount and size. And so this index, right, these sort of investing rules, deliver eight, nine, 10, 12 percent returns over a long period of time here. And what David is trying to allude to, Robert, which I think is interesting is, wait a second. The difference between the S&P 500 and the equal weight S&P 500 are not the names inside of it, but instead how big of a weighting each of those names have. So for example, right now in the S&P 500, the magnificent seven, the seven largest, most profitable companies right now inside the index, wait about 25% of the index. So if these seven companies go down, have a red

Starting point is 00:11:13 day while all other 493 companies have a green day, then I mean that green day is really pulled back by some of this volatility that we might be experiencing with the Magnificent 7. And so what I'm trying to decipher here for the listeners is, is it a better idea to spread equally across all 500 companies in the S&P 500 or have a greater weighting with the larger names by market cap? So that's what David's asking. Now I'm right there with you, David, RSP, which is the ticker, of the ETF, that is the Invesco S&P 500 equal weight ETF, just hit all-time highs. It's up about 11% year-to-date. And the reason it's seeing sort of this new all-time high is because the market breadth is beginning to expand beyond just technology, technology, and AI and AI, right? I feel like

Starting point is 00:12:02 that's been the narrative, Robert, for the last 12, 18, 24 months in the market, which is why the Mag 7 became so big and inflated. But now investors are saying, wait a second, let me take some profits off of these big technology companies and begin deploying that money into utilities, for example, right? We had Jay Jacobs on to talk about his ETF IDU or the defense ETF names or the aerospace names like XAR, even healthcare, right? All these other different sectors of the market are beginning to have a little bit of life given back to them. David, if it were me, I would approach it this way. I think it's foolish for anyone to try and time the market, right? And so by saying that you're going to go all in on an equal,

Starting point is 00:12:41 weight ETF or the standard ETF, I think it's kind of a fool's errand. But my question is, why not both? Right? I've got a little bit of RSP in my own portfolio. I think it's a great way to sort of hedge against this mega cap technology volatility that might be around the corner. And it allows us to have some additional exposure to, you know, those value names. I know the Dow Jones is seeing some life again right now too. So it's a way to have some additional, you know, hedging in your portfolio in a very risk-adjusted manner. But Robert, I want to get your thoughts on this as well. Yeah, I think it's important for everyone to understand when you look at a regular S&P 500 fund and equal weighted. If you consider the regular S&P 500 fund like a VO, you're going to be looking at it's going to move more in a momentum-based way because we're so top-heavy, like Austin said, with the magnificent seven, because that top seven to ten companies drive all of the action.

Starting point is 00:13:32 When you're equal and you have this equal-weighted S&P 500, same companies, but because it's equally weighted, then it is more very very, value-based driven because the money you spend is spread across all 500 companies. So that's very important to clarify and for people to understand. We also have to look at with the Fed proposing to cut rates, let's call it September 18th. We believe that'll happen. Then that is also why we've been talking about small cap and some of these smaller companies because as money gets more affordable for them, they see more growth. So I think it's all a very good mix. Like Austin said, you don't have to have one or the other, you can definitely have both, depending on what you believe is going to happen with the Mag 7 versus the rest of the S&P 500. So our next question comes from Claudia R.

Starting point is 00:14:20 Claudia says, I'll be retiring in January of 2025. I have two options. I can take option one, which is $5,000 a month for life with no increase for inflation, or option two, which is a $1.2 million lump sum. What option should I take and why? What a good question. Robert, I'll let you cook this one off. Yes, Claudia, what a cool scenario. I would say I want the 1.2 million right now to retire off of. Always take the lump sum and let me explain why. The $5,000 a month may sound enticing until you run the numbers. First, you have to live over 20 years just to receive the equivalent worth as that lump sum in the $5,000 a month payments. And I can't predict the future to know how long you're going to live, but neither can you. Also, if you were to take into case,

Starting point is 00:15:09 consideration the rule of 72 that just basically states that your money is going to double in market value every seven years or so so if you invest that 1.2 million dollars and in seven years it doubles to 2.4 million dollars and then again doubles again in seven years to 4.8 million dollars you can't achieve those same numbers with the $5,000 a month even if you invested all 5,000 every single month I just don't think the numbers would add up for you to get there and it would take you decades and decades to achieve that. So my opinion, take the money, run, get it invested properly, and then you can drink my ties on the beach forever. Yeah, I think the rule of 72 is really important here, Robert, because, you know, we hear about people winning the lottery.

Starting point is 00:15:55 And sometimes it's like, hey, do you want to get paid X amount of dollars every month or year as a lottery winner? Or do you want to take much less, but have it get paid to you in a lump sum? And if you run the numbers, the lump sum always wins. And that's because we have a lot with our money when that money is invested into things like the stock market. For those of you that might not know what the rule of 72 is, it's very simple. If you take the number of 72 and you divide into it your expected annual rate of return, the number that is spit out of your calculator is how long it's going to take you to double your money. So if we have the number 72 and the stock market returns 10% per year, 72 divided by 10 is 7.2 years that it's going to take for our money to

Starting point is 00:16:36 double. The stock market does about 10% of years. That's why we say doubles every seven years. And beyond that, too, what I think is really important here, Robert, to address is the 1.2 million can be passed on to Claudia's heirs. I have no idea if the 5,000 for life is going to be like passed on beyond that, right? But, you know, if you do take this lump sum and something happens to you, your children have something, where if you don't take the lump sum and you're just depending on this 5,000 a month for life, then if something happens to you, you know, what happens to your children. So I think that the lump sum is more responsible, has a higher upside potential throughout the rest of your life in retirement. And I don't know what the taxes look like on it. So be sure to check that out for sure. But make sure

Starting point is 00:17:19 you are getting that money invested properly. That might mean working with a professional. That might mean doing this yourself, whatever you are comfortable doing here. But optimizing for income, ensuring that the money is obviously not being yoloed into some cryptocurrency or some options trading contracts or whatever else. Just want to make sure it's a nice diversified pot here that you can begin to pull four, five, six percent off per year and really enjoy retirement. I love it. I love it. Okay, Robert, our next question is coming from Travis Z.

Starting point is 00:17:49 Travis says, I've built my 100K base and I've begun investing into cryptocurrency. I currently have about 6% of my invested capital and various cryptocurrencies that you and Robert talk about. I've done a fair amount of research about the pros and cons, though, of holding my own keys in a hardware wallet versus investing through crypto sites like public or fidelity. Currently, most is stored on exchanges, but I want to get some advice from the people in the Rich Habits Network, but more importantly, Austin and Robert, before investing more on these exchanges.

Starting point is 00:18:17 So here's my question. Do you prefer storing your crypto in a hardware wallet or just investing through these exchanges or even via spot ET apps for the long term? Robert, you are the crypto guy. I'm going to let you start this one off. Yeah, Travis, I think it's a great question. And here's how I try to look at it. If I had $100,000 in crypto, I would say I would probably have 70% of it in cold storage and then in a hardware wallet.

Starting point is 00:18:41 And then I would have 30% of it on the exchanges and here's why. I like to have money on exchanges so I can constantly be making moves versus having it on hardware wallets, having to get out the hardware wallets, get my seed phrases and be able to move that money. But I also like having some safety at higher levels of crypto ownership and having some in cold storage. But I don't think there's anything wrong with holding your crypto on exchanges. They are insured. And in 95% of all instances, you're going to be fine with your money. And if you wanted to look at ETFs, I think those are great as well, because then you

Starting point is 00:19:15 have further protection through the company, whether it's BlackRock or Fidelity or ARC investments holding your money because you have their insurance layer as well. So just keep that in mind. I think it's good to use all three. I don't particularly need the use of these ETFs and the fees that are associated with them. I like to own the cryptocurrency, the asset itself, but there is nothing wrong with these ETFs if you want some management help

Starting point is 00:19:39 and don't mind paying those fees. Couldn't just set it better myself. I've got about 50% of my cryptocurrency in a cold storage wallet. I've got the other, call it 35-ish, 40% on exchanges and another 10 to 15% in these ETFs, specifically Bitcoin ETFs that are in my Roth IRA. You know, I think Travis at the end of the day,

Starting point is 00:20:01 it's whatever you're most comfortable with. I think you should, though, get comfortable using and learning how to use cold storage wallets. I think that's a very important skill to learn, especially if you plan to be a long-term cryptocurrency investor. However, I would not do, you know, what unfortunately, I think a lot of people make the mistake of doing is like, you know, let me go on this random website, like a Ku-coin or a Mount Gox, right, or one of these crazy websites, and buy some crypto, give them my credit card information. And then, you know, you hear two months later that everyone was hacked or something crazy happened, right? So if you are going to use online exchanges, stick with the big guys, the coinbase, the public, the M1 finance, the fidelity, right? Skip with

Starting point is 00:20:41 the everyday names that we all know and love and don't fall victim to a Chinese exchange hack that might happen for some random site you found on Twitter. And another pro hack for everyone following along, if you're going to get into cold storage, learn this mistake. And trust me on this. Do not buy your cold storage wallets from eBay. Don't buy them from Amazon and don't buy them from Best Buy. Don't buy them anywhere except from the manufacturer's website. And here's why. People will go into a Best Buy.

Starting point is 00:21:14 They'll buy a bunch of these cold storage. They'll put a back door into them. They'll re-shrink wrap them. Put it back on the shelves. You buy it. You go home. You upload your crypto. Boom.

Starting point is 00:21:23 Your crypto's gone. You want to make sure you only buy it from the manufacturer's website. and do the work to check it and make sure it's correct. This is very, very important. I've seen too many people that'll buy a used or an open box item on eBay and wonder why their crypto got hacked. Don't do that very, very important. Yeah, I have my friend John.

Starting point is 00:21:43 He lost about $50,000 because he bought it. I think it was on Amazon is how he bought it. And it was fine for like two years. And then out of nowhere, just gone. He woke up one day and he realized that it was sent out of his wallet about two months because he hadn't checked it for months and months. Of course. Of course. And then he looked on, he's like, oh my God, where all go? And he looked at the transactions. And it was just sent away two months ago. And he had no idea. There's nothing to do about it. It happens all the time. And I probably don't

Starting point is 00:22:11 talk about this enough. I'm going to definitely bring it up on tonight's live. Just because it's so important to realize that you have to be super careful in this day and age of technology. It's, I believe, a great time to be alive and create wealth, but you have to protect it as well. For sure. And so if this is confusing to you or you might not know what's going on. Maybe it's a good idea to just start with a coinbase, start with public, start with one of these tried and true exchanges until you begin to accumulate tens of thousands, if not hundreds of thousands of dollars in cryptocurrency like Robert and I do. And then it's like, okay, let's figure out how to use these hardware wallets. Now, before we jump to our next question, I want to remind everyone, you can earn 5.1% APY at public.com with their high

Starting point is 00:22:51 yield cash account. There are no fees, no minimums, just an industry leading 5.1% APY on your cash. And with up to $5 million of FDIC insurance, your money is secure. So 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. That is public.com. This is a paid endorsement for public investing. 5.1% APY is as of June 17, 24 in a subject to change. Full disclosure is in the podcast description below. All right, Robert, our next question comes from Connor. Connor says, what's the best piece of advice you've ever received, whether from a person, a book, or a class?

Starting point is 00:23:31 For me, it's not just one piece of advice from a single source, but a recurring theme that I've noticed in the words of people I admire, the books I've read, and the experiences I've had, which is consistency is key. But Austin and Robert, I'd love to hear her thoughts as well. Robert, I'll let you start off. Yeah, this is really a great question, Connor, and I think more people should ask it, and you really, really eloquently spelled it out. I think everyone should have a notebook or a folder or something on their phone. It could be handwritten where you keep all of the things you hear that resonate with you, whether it comes from me or Austin or someone else out there that you know like and trust. I think it's so, so important because then I feel like it just builds this database of habits and thoughts and mindset to be able to help you know directionally where you're going in life and be able to take and reflect on these notes over.

Starting point is 00:24:22 over and over again so you always have direction, even during the hardest days. So for me, I'm going to use two instead of one because I think they're both super simple, but very important and I live by them every single day. That is number one, never listen to people that are not going where you're going. This is so important. I've had my ex-wife's parents tell me what I should be doing financially, even though they weren't anywhere near I was financially. I've had people that do not have the education that I have.

Starting point is 00:24:52 in finance and building businesses or have never owned a business, trying to tell me how I should tell other people or myself how to build a business. So that is a very, very important one for me is always about never listen to people who are not going where you're going. You wanna be listening to people that are ahead of you or where you're at and moving in the same direction

Starting point is 00:25:12 because then you're gonna always be surrounded with people that are gonna lift you up and wanna see you win just like you wanna see them win. And number two, and this one is more about execution, you have to, be in it to win it. A very old guy. I don't remember his name one time. He was at the bar when my grandma owned it and I was inside the bar working. I was very young and he said he noticed that I was always hustling and always kind to everyone and just putting in the work. He said, son,

Starting point is 00:25:39 you're going to go far. Just remember you have to be in it to win it. And I love it. As simple as it is, it's the difference between talkers and doers. You have to take the risk. You have to get out there and you have to be in the game to be able to win the game. And if you're not, you're going to sit on the sidelines. You know, Robert, I like that a lot, especially your first point about not listening to people that aren't going where you're going. A couple phrases and some advice that I got myself throughout my life that really resonate with me now. The first one is, what if it could turn out better than you ever imagined?

Starting point is 00:26:07 I think a lot of people are afraid to start because they have no idea what's going to come of an idea, what's going to be the outcome, why would I even do this? It's not going to work. Like, just all this pessimism and they don't want to even start something, because they can't even imagine what it is going to turn into. And so then ask yourself, what if it could turn out better than you could ever imagine? Like when I started becoming an entrepreneur in 2020 and 2021, I had no idea that I would eventually have a number one podcast on Spotify.

Starting point is 00:26:35 I would ring the opening bell at the New York Stock Exchange alongside Robert here in BlackRock, that, you know, I would accomplish so many crazy cool things that, you know, 25, 26, 27, 28 years old. And that's just a piece of advice I'd get anyone. Anyone starting as an entrepreneur, anyone wanted to start a business. small business. Like, just imagine if it turns out incredible. How fired up would you be to go to work every single day? Yeah, I love that one and it really rings true for my life. You know, I think back, I came from a broken home, East Toledo, Ohio, you know, just really, really struggled through grade school, high school, and it was really, really rough into college. And everyone always thought

Starting point is 00:27:11 I was this crazy big dreamer. And then when I got into my 20s, everyone was like, oh, you're always doing this and doing that. And you're all over the place. And because I had no. no quit in me. I just knew I was meant for greatness and I was going to keep shooting my shot until I got there. And I remember when silly bands finally happened, my big, big come up. It was the biggest of my career to date. Everyone then was like, oh, that's so cool how lucky you got with silly bands. Oh, that's cool how you fell into the silly vans thing. You know, and we went from a 15, 16 person company. So I was already doing pretty well. We went from 15 or 16 people to hundreds of employees. and then thousands of employees helping make the silly bands.

Starting point is 00:27:52 And it was the coolest thing because no one would just give me the damn kudos and say, great job, you deserve it. You have worked your butt off for 25 years. You deserve this as much as anyone's. I love this one because I think so many people in society have a lack mentality that they believe being rich and successful and being financially free is for other people. And that is just bullshit. Anyone can do it if they're willing to have the tenacity to,

Starting point is 00:28:18 to stay at it and fail forward over and over again until they find their way. Well, that not only just kind of reaffirms what Connor said, which is consistency is key, but it also teased me up for my next point here because you want to give to us. I want to give to. And it just hit me right now. I had a different one I wanted to share, but I think this one's more important, which is people overestimate what they can accomplish in a year, but underestimate what they can accomplish in 10.

Starting point is 00:28:42 And that goes back to investing. It goes back to being a business owner. Right. People are like, oh my gosh, I'm going to go get all the stuff done. I'm so fired up. Like, I'm going to invest this much money. I'm going to start this business, have all these sales, whatever, whatever, okay? I was an insane dreamer back in 21, 22, 23, right?

Starting point is 00:28:57 I had all these ideas. And I think this podcast is even a testament to that, Robert, right? Did we think we're going to get way more downloads and be way more popular in the first six months, 12 months? Like, sure, like, we published 20 episodes and no one listened to any of them, but a couple hundred people. Right? We overestimated what it might look like in the near term.

Starting point is 00:29:13 But we stayed consistent to Conner's point, published every single week. And then now as you zoom out over the last 18, 24 months with this podcast, it's only been up until the right. And so that doesn't just go for this podcast. It goes for our businesses. It goes for our investing, right? You stay consistent. Maybe you don't hit that million dollar mark in, you know, two years, but you will in 20, right? Just like that long-term time horizon and how much you can accomplish over a five, seven,

Starting point is 00:29:37 10-year period is unfathomable. And it's so important for people to realize that anything worth doing doesn't come in the very short term. It comes over a long period of time through consistency and tenacity. It's so true. And that's why people, you hear me say in videos all the time, Austin, where I say you're one meeting, one phone call, one event away from a totally different life. So many people never give themselves that opportunity because they're not willing to shoot their shot.

Starting point is 00:30:03 They stay in their comfort zone. They do their nine to five job. They do their side hustle. Whatever it is instead of shooting the shot. No idea is that crazy out there, especially in this age where we have. have all of the social media and all of these free tools at our hands. So that's why I tell everyone, the number one thing you need to do is get out of your comfort zone, shoot the damn shot, because you never know what could happen. There is so much out there to be had. Never sit on

Starting point is 00:30:29 the sidelines. Get excited. Your competition sucks. You're going to win. You're a winner. You listen to the podcast. And let's get excited, man. 2024, you still got three, four months left. We have a lot to be excited about. And 2025 is going to be everyone's biggest year yet. We cannot be more excited. We're rooting for all of you. Hell, I'm so pumped right now. I want to hang up from this podcast and go do something. This is great. I love this. Well, we got to answer Laura's question before we do that. Let's do a few more.

Starting point is 00:30:56 Laura says, hey, Austin and Robert, you guys had this awesome webinar on covered calls where Austin walked through the steps to sell covered calls on his Tesla stock, and it really opened my eyes. So here's my question. Is there any reason not to sell very conservative covered call option contracts on your stock positions to earn some extra money on the stocks that you're bullish on for a long time. Yeah, if you miss the covered call webinar, I'll put a link in the show notes below. If you are confused as to what a covered call is, essentially what you're saying is, let's say you went out and you bought 100 shares of Tesla stock for $200. So you spent $20,000 on Tesla stock. And you sold an option contract allowing someone out there to buy your Tesla stock for $210 a share, or a

Starting point is 00:31:42 $1,000 profit on your $20,000 investment. So if someone ends up buying this option contract from you, they're going to pay you something called premium. This is how our friend Laura here was talking about making some extra money on the stocks you're bullish on. You can get paid to $300, $400 of premium upfront for this contract. If it trades up to $210, the person's going to exercise the contract. You made the premium and the $1,000 profit. Congrats, you made a bunch of money. If it does not trade up to $210 and the option contract does not get exercised, you keep the premium. You keep the premium. and you keep your Tesla stock. So that's what I've been doing myself for about a year now. I've generated about $18,000 of premium income by selling covered calls against my Tesla stock. I bought them for

Starting point is 00:32:23 close to about $220 a share, I believe, maybe a little bit closer to $215, but it's around that range. But okay, so here's the whole thing. No, there's not a bad reason that you should not do this at all, right? There is no hang up. You should absolutely do this. But of course, owning 100 shares of the stock, any stock can be very expensive. So that does deter some people. I mean, you think about Microsoft right now is trading at $416 a share. That's $41,000 that you'd have to front for Microsoft. So if your portfolio is big and you've got a ton of single stocks for whatever reason, you have hundreds of shares of them and you want to sell option contracts,

Starting point is 00:32:56 covered call option contracts against your position, let's call it 15, 20% out of the money on like a four, five, six week period, right, expiration date into the future. Go for it. Get some extra premium and use that money to fill up your gas tank, buy your groceries, or maybe even buy more of the stock. But you have to remember the downside risk that comes with this. And the downside risk is you have to be ready to sell the stock if your strike price is hit.

Starting point is 00:33:20 Or be willing to roll it forward tremendously so that you can cover with the premium the fact that you don't want to sell the stock, which will lock in your holdings for a very long time. I'm currently on, I think it's a mid-November expiration date for my stock with Tesla because I had to roll it forward a bunch. That's just the ups and downs of selling covered calls. But if you're super bullish on a stock like Apple or Microsoft or maybe Amazon and you don't mind rolling it, you know, several months or even years into the future to collect some income, go for it. You have nothing to really get too worried about. I love this question and your answer was incredible.

Starting point is 00:33:54 And it's important for everyone to understand this is kind of the meat and potatoes of what we do with the Rich Habits Network and the Rich Habits podcast. Is helping everyone that's willing to execute, take notes and take action and find those additional ways. to leverage your money for the highest gains you can get. And that is by actively managing your investments. And I don't mean day trading. I don't mean forex trading. I mean listening to the practices that we educate you on and being able to implement them into your own portfolios

Starting point is 00:34:25 so you can maximize those gains rather than just putting your money into a mutual fund or something else and letting it sense. I think this is a great question. And I really, really like your answer on this, Austin. Well, I mean, we're ultra bullish. on the S&P 500 and the NASDAQ-100, and we're sort of already doing these covered calls when we invest into SPYI and QQQI, right? If you don't know what I'm talking about with these covered calls

Starting point is 00:34:50 and single stocks and you don't want to buy 100 shares of a single stock and have that kind of, you know, exposure, then just buy SPYI and QQQQI and have them, the fund managers, do this for you. They do these covered calls. They do it all for you. Expense ratio is very low, 12, 13, 14 percent annual yield. And so you're being able to trade some upside price potential for income today at about one, one and a half percent per month via distributions. Very tax efficient, very cool way to do that. These ETFs are the foundation of my income focused portfolio, so there's a lot to get excited about over there. Now, Robert, our last question comes from Francisco F. Francisco says, I'm curious on how layering would work if there are multiple LLCs with different partners. For example, if I were to be a member of

Starting point is 00:35:35 three LLCs all with different partners, would I need to convince each of these three different partners to allow me to layer all the LLCs into one holding company and one revocable trust? Robert, before you answer this question, I want you to give a couple examples as to what you would put in an LLC, rental properties, businesses, things like that, right? And then explain what layering is, as well as why it's a good idea to do that, what a holding company is, what a revocable trust is and then answer Francisco's question here. Okay, here we go. So why is layering important?

Starting point is 00:36:09 It is one of the most important things you're going to do in your career if you plan on owning real estate, small businesses, and assets. And the reason for this is you want to make sure you have those layers of protection. It's that simple. And that is why it's so important that you control everything and own nothing. Please write that down. I want to control everything and own nothing. You don't want to go out there buying rental properties in your personal name.

Starting point is 00:36:35 You don't want to go out there buying small businesses in your personal name because you want that layering that a limited liability corporation company provides. So then how I look at it is you want the base layer is your LLCs. Then on top of the LLC, you want to have that holding company. That holding company then owns all of the ownership membership of those LLCs. Then you have the revocable trust at the top. This is the layering pyramid you want to have as you grow your portfolio of businesses or real estate or whatever the assets are. Very, very important. So to get to your question, Francisco, one of the things now that we've got that figured out with the layering to understand is, could you go to your partners and say, hey, I want to put all of these LLCs in one holding company and one revocable trust?

Starting point is 00:37:23 You could. But then the problem is they also own part of each of that. And then that kind of muddies the waters. I would look at it this way. If you own the majority share of each LLC, I would just take that portion your pro rata share, put it into the holding company and into the revocable trust and do it that way.

Starting point is 00:37:42 You can do it with your partners, but I don't suggest you do it all into one holding company because you never know what might happen to your partners down the road or what could go down. And you want to make sure you have some clarity so your wealth is never disturbed by someone else's mistake. So that's the best way. way I can explain it. Of course, always check with your accountant or whoever your real estate attorney is

Starting point is 00:38:04 to help you with that strategy. That's what I use and most people that I know use for a strategy. But that would be the way I would do it. So let's dig deeper. It's what you use. What LLCs are at the base layer and then from a holding company perspective, like how did you, do you just use an accountant? Do you like a lawyer? Like who creates that and then a revocable trust? Like who do you go to the create a revocable trust. Like how do you actually execute on these things versus just like want to like draw a picture for it, you know? That's a great question. So for me, I'm very fortunate. We have croak capital. So we have everyone internal that handles these things for me. But you can go to any good corporate lawyer that does business documentation usually. You can go to someone that does like a fiduciary

Starting point is 00:38:51 retirement and wealth planner. Some advisors do it, but just be careful. They might not know the best strategies, but I think it's best just to find someone that's really good with tax. That could be a lawyer, it could be a CPA, and have them help you through it. Because this is Uber important as you grow your wealth, because the last thing you want to do is build wealth. And let's say you get to a million, two million, five million, 10 million and have an inside attack or an outside attack that then they're able to penetrate the corporate veil and be able to come after your assets. That's why layering is probably one of the most important phrases you can take. away this year from any of our podcast to protect yourself in your wealth building journey.

Starting point is 00:39:31 That was a great explanation. I feel like every time you explain it, I learn something and then I kick myself for not having done it perfectly yet. I feel like every time like, oh, should have done that a little bit differently. Or oh, maybe I'll do that next time. I appreciate that walkthrough in Francisco. I hope that this answered your question. Everyone, don't forget, check out the Rich Habits Network. We're getting all our fun questions from there. Robert and I host live streams in there. We've got a lot of really cool things coming up regarding the angel investments. We've already done one, Robert, which is so cool. We've actually already had $60,000 of angel investments made so far in the Rich Habits Network,

Starting point is 00:40:03 which is really exciting. And for accredited investors, we have a very special announcement happening in the Rich Habits Network here very soon. I cannot wait to share it. I can't talk too much about on the podcast. So if you want to know, you got to be in the Rich Habits Network to get the update there. But like we said, the Rich Habits Network is the best place for you to connect with not just Robert and I, but also the other listeners of the podcast.

Starting point is 00:40:24 Over 300 people are in here. Entrepreneurs, business owners, investors, real estate moguls. I mean, again, I was talking to a guy that's got over $7 million of real estate recently and he's in the network. So if you have a question and Robert and I don't immediately answer it, we are pretty confident that someone in the network is going to be able to also help you out. So with that being said, there's a link in the show notes below to check out the Rich Habits Network. Yes, and thank you each and every day for following along with the Rich Habits podcast and the Rich Habits Network and helping us grow this thing and just make it incredible. You guys have heard me tell the story that my goal is to help educate one million people to become millionaires.

Starting point is 00:41:01 I'm not letting off the gas anytime soon. And neither is Austin. So we're very excited for the future of the Rich Habits Network and the Rich Habits podcast. And we appreciate you every single week. Thanks, everyone. And have a great holiday weekend. We'll see you later.

Rich Habits Podcast - Q&A: RSP vs. VOO, $5K/month For Life, & the Best Advice We've Ever Received

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