Rich Habits Podcast - Q&A: Selling A Business for $1M, Acorns vs. Public & Investing in Texas from California

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Starting point is 00:00:48 Try the Creamy Parmesan and Bacon Quarter Pounder today. Or treat yourself to your Dreamburger lineup with our original Quarter Pounder with cheese or Quarter Pounder BLT. At Participating McDonald's Restaurants in Canada, product availability varies by restaurant. Hey everyone and welcome back to the Rich Habits Podcast question and answer edition brought to you by public.com. These are our Thursday episodes where we put ourselves in your shoes trying to imagine what you're going through and answer your questions. Literally if we were doing and going through whatever you are going through. If you have a question to ask us, you can DM us on Instagram at Rich Habits Podcast or you can email us at Rich Habitspodcast at gmail.com.

Starting point is 00:01:27 Our first question comes from Carl M. Carl says, hi, Austin and Robert, I know you guys preach the investing strategy of match beats Roth beats taxable all the time, but should that strategy change slightly for someone hoping to retire early? My employer lets me contribute to a Roth 401k. I get a 5% match. So I've been maxing out that Roth 401k and my personal Roth IRA every single year. I also max out my health savings account and any extra funds past that are what go into my taxable brokerage. account. Since I can't touch my Roth 401k until I'm 59 and a half without penalty, would it make sense to contribute maybe slightly less than maxing it out and maybe more to my taxable brokerage

Starting point is 00:02:12 account? That would provide me some flexibility if I plan to retire before the age of 59. I'm 38 years old. I make $130,000 a year with a combined half a million dollars now invested across all these accounts. Robert, our friend Kyle here is rocking and rolling. Half a million bucks at 38 is nothing to knees at. That is incredible, incredible progress, Carl, no matter how it's invested, right? That is, that's awesome. Robert, we talk about match beats Roth, beats taxable all the time. How that goes is we say up to the match because you want to get that free money from your employer. Then focus on maxing out that Roth IRA because you get all that tax-free gains and growth in your retirement. Plus, you get to choose how that Roth IRA is invested. So if you want to make sure it's invested in the S&P and

Starting point is 00:02:59 the NASDAQ and the Dow Jones, you can do that. You might not have that same autonomy in your 401k. So up to the match, max out that Roth IRA. And then if you do have autonomy over that 401k and you really want to turbocharge those retirement accounts, go back over to that 401k, max it out because you want to get as much money working for you tax advantage as possible. And then if you still have money left over like our friend Carl here, then everything left over goes toward that taxable account. If you do not have autonomy over that 401k, then skip the going back to it and just focus on that taxable account. Because Robert, it's so important for us to always remind everyone when you have autonomy over your investments, which means you can choose the ETFs, the index funds, the strategies, right? It's

Starting point is 00:03:46 not just like aggressive or moderate or target date fund, right? Like you actually get to choose it and you get to pick the right ETFs and funds with the lowest expenses with the best track records. that is going to compound for you so much better over a long period of time than just getting thrown into something because your employer doesn't really care about your retirement. So, Robert, we talk about this strategy and our friend Carl has now alluded to saying, hey, maybe I should be focusing on my bridge account. Do you maybe want to take a moment here to explain why it's called the bridge account as well as how Carl could access and leverage that bridge account to ensure that if Carl does have enough money to retire early, he can do so? Yeah, 100%. I think in Carl's situation, in anyone that's considering retiring early,

Starting point is 00:04:33 you always want to be building the bridge account along with these tax-advantaged accounts like the 401K and the Roth IRAs of the world, because the bridge account gives you that autonomy, Austin was talking about, you can do whatever you want with it, whenever you want with it. Just remember, though,

Starting point is 00:04:50 that that account is going to have a tax liability later on, but it allows you to have that money building alongside the retirement accounts to give you that freedom if you want to retire early. And I think we've talked about in the past, we did a couple episodes talking about this fire concept. Financial Independence, retire early, F-I-R-E. And I think you can kind of adapt that kind of a strategy

Starting point is 00:05:13 to where you're looking at this bridge accountant saying, okay, I don't want to retire at 59.5. I want to retire at 54. So then you know you need five and a half years of whatever your monthly spend is to be able to do that and retire early and comfortably. And that's the easiest math.

Starting point is 00:05:31 Look at yourself right now. I think Carl's 38 years old and say, all right, I want to retire five years early. So you know what your time window is and how much you need to have in that bridge account to be able to get you through, bridge you for that five years, six years, seven years for that early retirement. And that's the easiest way to calculate how much needs to go in that traditional

Starting point is 00:05:52 brokerage account, that bridge account for that time period as you start investing, more in it now so you can accomplish what you need and give yourself the opportunity to retire early without having to take from the Roth or do anything funky with your money that's already set aside for later. What a great breakdown, Robert. Our next question comes from Juan Carlos. Juan Carlos says, hey guys, I love your podcast and have listened to all the episodes. My girlfriend and I are members of the Rich Habits Network and appreciate all you do. I've mostly been doing what you preached since I was 29 years old, starting completely from scratch. I started as a small business owner,

Starting point is 00:06:29 and now I have a personal training studio that makes about $325,000 a year in profit. I own the building we operate in free and clear. It's estimated to be worth about $2.5 million. There's also two apartments upstairs that I use as Airbnbs that make about $60,000 a year. I have another real estate company with my brother in Illinois. We own 125 properties worth 14 million and 06 million on those loans. I also have three films on Amazon Prime called Unsuper Size Me. I did by myself and they make about $100,000 a year for me. My SEP and Roth accounts are $850,000 and my bridge account is worth $2.7 million. I've also done about $160,000 of investing in venture capital with the Rich Habits Network, most of it in Apptronic and Fluid Stack, which I'm very very.

Starting point is 00:07:18 excited about. So my question is this. I'm thinking of selling the training studio. What are your thoughts on the best way to go about that? Because I've heard you mention loop net, but are there any other ways that I should be approaching this? Juan Carlos from Florida. Really, really cool question. And first off, like, you know, when Robert and I were reading this question, it just like gets us so excited to think that people like Juan Carlos that have 10, 15, 20 million dollar net worths, I guess, depending on what this personal training studio is worth, listen to the show, as well as people, like, I don't know, Rebecca or Ron or, you know, someone else here who's got 20, 30,000 of student loan debt and they're in credit card debt and they're starting over and they're just trying to

Starting point is 00:07:59 get it all figured out. Like the people that listen to this show are awesome and they're all across the spectrum and we're so, so grateful for that. So Juan Carlos, I'll let Robert maybe take a stab at this because I feel like he has a little bit more experience talking toward this. But here's something that I would ensure is thought through deliote. That's a little bit. That's a little bit more experience. before you sell this personal training studio. And that's that Airbnb. You know, when I was thinking about this ahead of time, I was not considering that Airbnb that makes $60,000 a year. If it actually profits $60,000 a year, which is like very, very great. That's awesome profit. If it actually profits $60,000 a year, whoever you sell this personal training studio to, I don't think they're

Starting point is 00:08:43 going to buy the building, so you'll still have autonomy to do whatever you want with that Airbnb. I would just want to make sure that they're very aware and they're very comfortable knowing that above their training studios and Airbnb that gets, you know, Airbnbed out and people use it and you use it for that, you know, 50, 60, 70,000 a year of profit and likely plan to and continue to plan to in the future. Because the last thing I want to happen here, one, Carlos, is you negotiate a deal that makes sense for all parties and then eight months into the future. Maybe there's some sort of stipulation or something that happens and they don't want Airbnbs going on while they're trying. to do some personal training and there's a way they could back out of the deal or like i don't know something weird so just like make sure that you call out the fact that the top there is being used with with Airbnb as you negotiate this and and things of that nature and maybe i don't know maybe that's something someone wants to buy from you like like who knows i really don't know but but robert i'll let you take

Starting point is 00:09:37 this one yeah i like that thought always protect yourself and always make sure that you have really good contracts so you make sure that something like that doesn't happen but let's start with the sale in the first place. I think with a business like that in the fitness industry, I think you can probably get a 3-4x multiple on earnings. So I would say at $325,000, let's call it $1,000, $1.2 million is probably what the business is worth and what someone will pay for it. How would I sell the business? I do mention loop net and biz buy sell all the time, but this is a different animal. You're very successful. You already have your money in order. I would. would hire somebody rather than just throwing it up on a website and getting all these random brokers to try and sell it. I would hire somebody to consult with you. I would meet with people that are brokers in this niche and try to find somebody that's really good in that area that has national investors and can find you the right tenant because sometimes it can play in your favor to sell a business like this and they default in eight months and you get it back and it's still thriving. But a lot of times if they don't do a good job and they buy it and they buy it and they,

Starting point is 00:10:46 default and you're the building owner, which you are in this case, you might find yourself with a big gaping hole in revenue because they run it into the ground. Then you have to find a new tenant and start over. So I would have the meetings, find someone really, really good that can help you. And I have a guy, so I'll link you up with him in the Rich Habits Network and really find somebody that knows how to get the right tenant to buy the business. Because I'm assuming you didn't mention you want to sell the building because of the other revenue and because the building is probably appreciating quite nicely. But I want to make sure you have the protective mechanisms to get the right tenant and make

Starting point is 00:11:25 sure you really flush out their financials, their experience and all of that. Don't just take the first offer that comes through because many times these people won't have the financial stability to be able to make it for years to come. And you just don't want to get it back from them after they've run it into the ground. Robert, I know inside the Rich Habits Network, which, by the way, seven-day free trial, just go Google Rich Habits Network or in the link of the show notes below, click the Rich Habits Network. And you can get all this information that I'm about to talk about. But I know inside the Rich Habits Network, Robert, we recorded, it's probably like an hour and a half long module about buying, operating and exiting a successful cash flowing business. Obviously, you've done this, you know, a handful of time. So I'm curious, like what maybe tips and tricks? or things people should look out for when it comes to buying. Like, let's not talk to the person who wants to buy this. Juan Carlos is smart.

Starting point is 00:12:20 He's going to figure this out. Let's talk to the person who wants to buy a personal training studio that makes $325,000 a year in profit. What are maybe like two or three really important must haves for that person to understand and really have come to reality with if they want to be successful in operating this business? That's a great question. I would say first and foremost, know the numbers, the real numbers.

Starting point is 00:12:44 And fortunately, we live in an era now where things are no longer cash. So generally the books aren't going to be wonky, but there are a lot of business owners that have two sets of books. They'll have the books that they're reporting and the books that are real that come through the POS system, which is great. Because no matter what they use, whether it's stripe or toast or whoever it may be, I think there's Clovers out there, you're going to be able to audit those. actual receipts and understand what are the real numbers because they're going to build a rainbows and unicorn case for you to say, wow, this is an amazing deal, but you need to know the real numbers. So always make sure you get those audited books, go back a year or two.

Starting point is 00:13:25 And then also, along with those books, go check out online reviews. Make sure are they still doing a great job with their social media? Are they getting really good reviews, Google reviews and such to make sure there's nothing out there. And then thirdly, I would say, make sure you do a lot of checking and research on the owners that are selling themselves. Do they have any back taxes? Are there issues with the business themselves where they owe a bunch of vendors money and all of that? And ask the question to them or the broker, hey, why are you selling? This is a profitable business. Why are you selling? Because you need to get to that reason because if you can't, then there's probably some red flags behind the

Starting point is 00:14:10 curtain you're unaware of and you just want to be really, really careful. So I would say those are the most important thing. I could do a whole book just on everything else, but I think that's the meat of it of how to protect people from paying too much or buying a business that's on its way down and declining and the owner is trying to get a life vest. Well, if you do want that whole book, we wrote a whole book. It's called the Rich Habits Network. It's a whole module where we talk about every single aspect that's got like, I don't know, four or five different chapters in it. It's great. So go check out the Rich Habits Network if you want to learn about that.

Starting point is 00:14:42 And the other eight hours of video coursework talking about retirement investing, building your credits, personal finance, budgeting, everything. It's all in there. It's so, so fun. Now, before we jump to our next question, this episode of the Rich Habits podcast is brought to by public.com, the investing platform for those who take investing as seriously as we do here on the show. Because on public, you can build a multi-asset portfolio of stocks, bonds, options, cryptocurrency, and now generated assets, which allow you to turn any idea, any idea

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Starting point is 00:15:49 That's public.com slash rich habits. Paid for by public investing, full disclosure in the podcast description. So our next question comes from RK. RK says, I have a rental property in Dallas. Texas. I rented it out for three years and now my tenant is moving out and I need to spend $10,000 to fix it up. I'm just wondering if I should rent it out after I repair it or if I should try and sell it. The rental is completely paid off. The rental market right now in the part of Texas I live in is kind of slow and as is the real estate market. If I sell it now, I'll probably lose $40,000,

Starting point is 00:16:25 The home was valued around $350,000 when I bought it. If I rent it out, rent will also be about $1,000 less than what it was before. I have a full-time job in the medical field. I make $180,000 a year. I also have a home in California, and I invest significantly across my Roth, my IRA, my brokerage, all the fun stuff, and I have a one-year emergency fund. No debt except the home I'm living in in California. So what do you suggest?

Starting point is 00:16:52 Do I sell it or do I continue to rent it with less money coming in? every single month. Robert, I think this is like, well, one, thanks so much for your question, RK. Two, I think it's like, it's one of those things where you kind of want to get excited for RK because they're in this really easy situation where they don't have to feel as if they have to rent it for a specific number every month to pay the mortgage. RKs paid off the house, bought the house in cash. And so because of that, RK. was able to rent it for probably, I mean, talking about $1,000 less than before. So you're probably renting it for like $1,800, which is a lot of $1,000. which means you're probably renting it for $2,500 or $3,000, let's just say $2,800, and you're doing that for three years.

Starting point is 00:17:32 So you have now collected $100,000 of cash paid to you by your tenant over the last three years, and you spent $350,000 on the home, which means that you have had a cash on cash return over the last three years of about 29%, which like, not bad. I mean, you could have put that money three years ago in the stock market, and it was, would have probably done better than 29%, but maybe you're really rich. You got the, you know, Roth, the IRA, the brokerage, and you want to diversify. And you don't want any correlation in the stock market. You just want to diversify in different asset classes, have some passive income, like all the fun stuff there. And that's great. And it seems like, you know,

Starting point is 00:18:10 that's working for you. But what's so interesting and even sometimes cool here about having this type of situation, RK, is that your renter can just like stop paying you and you don't have a mortgage to worry about. Yeah, you got some insurance and some taxes, stuff like that. get that but if i were in your situation i would not sell it for a loss right there's no reason to do that don't go those 40 50 000 like that's just that's silly just rent it for you know try try to rent it for maybe five hundred or seven hundred dollars less maybe a thousand is where you have to end up and that's okay because you don't have a mortgage you don't have to worry about all these like big expenses on a monthly basis you're just cash flowing like crazy every single month here so maybe you're now

Starting point is 00:18:50 renting it for i don't know eighteen hundred dollars you're going to make 20 21 000 dollars over the next months on this rental property. They'll set aside maybe 5,000 of that 21,000 for vacancy and repairs and things like that. And I hope you were doing that over the last three years. You said you have to spend 10,000 to fix it up. I hope that 10,000 was already set aside ahead of time, right? But you're going to be just fine. You're going to be fine. What's your take here, Robert? Yeah, I agree, totally. I would not sell the house. It's a soft marker right now. Interest rates are high, so people aren't buying as much as normal. And I would just do what you said. You know what you're doing. Put in the 10K, clean it up, get a good tenant in.

Starting point is 00:19:25 write it out, wait for the market to respond. It always does. I'm sure that in two, three years, it'll be back to normal. You won't be operating at a loss. And just get the income for now rather than taking that big hit. You know, if you just made a million dollars this year and you needed something to offset, you know, your income, your normal income, then maybe sell it. But in your instance, you're crushing it.

Starting point is 00:19:49 You can withstand this downturn in the rental amount. And I would just keep it, fix it, re-rent it, forget about it. keep moving on and wait for the markets to recover. Yeah, I totally would too. And, you know, if you said this was some random place in Missouri or some random place in Montana, right, where there's no, like, true excitement, right? We're talking about Dallas, Texas.

Starting point is 00:20:11 Dallas, Texas is awesome, right? They've got the Texas stock exchange there. That's like the financial hub of Texas. Of course, more and more people are going to migrate to Dallas. There's a lot of people moving there. Like, this is going to be just fine. You fast forward five, six, seven years into the future, your $350,000 home is going to be worth hundreds of thousands of dollars more.

Starting point is 00:20:30 And you'll have generated maybe another 100 or 200,000 of rental income, which is going to completely return your total $350,000 purchase price plus more. So I think you're in a great spot here. I wouldn't sell it. I wouldn't worry about it. Just keep riding the wave. And, you know, that's what comes with being a landlord, especially a long distance landlord. Holy smokes.

Starting point is 00:20:49 California to Dallas. So our next question comes from Trenton. Trenton says, hey y'all, my name's Trenton. I'm 27 years old and my wife is 24. We just had her first baby at the end of March. Congratulations. That's awesome. Let's go. Trenton says we are now very much focused on our future because of our baby. So I work in health care making $130,000 a year with the opportunity for an 18% bonus depending on my team's outcome. I have an employer sponsored 401k with $35,000 in it. I can contribute 5% to them and they match four. My wife has a Roth IRA with about 13. thousand dollars. I have a Roth IRA with about $10,000. I recently started maxing out these accounts, and we will soon be moving away from Edward Jones to another platform that's going to be self-directed due to the fees that we're paying. Our joint money market has about $10,000, and our checking account has $2,000. Our monthly mortgage is about $2,500, and we've lived in their home for less than a year.

Starting point is 00:21:44 My wife's student loan payments start up this month at just under $400 a month. Most of these loans have an interest rate below 5% and some of them are smaller. However, in two years, those interest rates will increase by 1%. They are reduced right now due to auto pay. She's doing some personal training work to help direct some funds in that direction, but that's limited revenue at the moment. I'm about 10 months from completing my master's in health care administration program, at which point I will also owe about $40,000 of student loans that needs to get paid back. So my question is one of priorities. In your opinion, should I slow down our Roth contributions to speed up the student loan payments, or should I stay the course and let the markets out-earn relatively low

Starting point is 00:22:29 interest rates? I'm also looking into side hustles that could produce some extra streams of income. Robert, I'll let you start this one off. There's a lot going on here, but I'm going to take a stab at the things that glare at me the most. And I would say number one with Edward Jones, I love where you're at, moving away from Edward Jones and self-manage. these accounts because do you need a brokerage like Edward Jones at this point at that under $100,000 mark? I don't think so. And people have to realize Edward Jones is not necessarily a fiduciary. So what that means is if they are just a broker dealer, they're going to sell you what they make the most money on, whereas a fiduciary is bound by that fiduciary rule to do what's best for you

Starting point is 00:23:11 in your account. And also, Edward Jones does charge pretty high fees in an account. In an account of your size, I don't know how much is in there exactly, I'm guessing it's probably about about 1.25% in fees, which is a lot of that fee drag you're talking about. So for me, I would probably switch out of Edward Jones, get a traditional account with somebody else. It could be public. It could be fidelity. It could be somebody else where you self-manage and you're doing your own thing in rock and rolling. That's where I would start first. And then second, I would say with the student loans, Austin and I always talk about, we want to make sure that you have your base built and more money in these investments first before you start chunking down and paying off student loans, especially because yours don't have a considerably high interest rate. I know you're saying 5.35%. That's right on the border for me. I think it's low enough that I'd rather see you build up these funds more, get the traditional brokerage, get the high yield savings and everything over that $100,000 mark before I start paying these off.

Starting point is 00:24:14 But Austin, what am I missing here? You know, I'm sitting here on the side doing a little bit of math. And it might be tight, but I think you can do what I want you to do. All right, Trenton. So first off, y'all crushing it, 27, 24, got a baby, got tons of money, right? $70,000 invested already. Congratulations. So you have $130,000 a year that you make.

Starting point is 00:24:37 And you contribute 5% of your salary to that 401K, which comes out to $6,500. a year or $541 a month. Okay, so we want the free money, that 4% match that comes with it. And I, you know, 1% whatever, like we can get past that. It's $1,000. Right. We'd love to get that free money. So continue to contribute that $541 a month from your salary to this, you said, employer sponsored 401K. I think it's a pre-tax. You didn't say Roth. So let's assume it's that pre-tax 401k. So now we're getting that match, 541. They're essentially thrown in 500 bucks for you and we're off to the races and you're just building wealth. That's incredible. It's at $35,000 that you had mentioned. But your wife has this Roth IRA. You have a Roth IRA and you want to make sure that you are maxing those out. So to max that out, that's $625 a month for both of you. Now we're at $12.50 a month in contributions to you. your Roth IRAs plus the $541 that you are contributing to your 401K. That's nearly $1,800 a month, which, like, that's a ton of money. Like, that's a lot of money for someone making $130,000 a year.

Starting point is 00:25:58 So if you're making $130,000 a year, I'm going to assume your effective tax rate is like maybe 25%. So you're taking home about $97,98,000 of that every single month or about $8,000. thousand dollars a month. So 8,000 minus this, would you say your mortgage was 2563, minus the $1,800 month contributions. That leaves you with $37.50 a month to live your life on. Again, you just had a baby, wife, like all these things are going on. I don't know if that's too tight of a budget for you. $3,700 is like, it's pretty tight. So maybe you don't, maybe you dial back the 401K contribution a little bit. Maybe you dial back the Roth IRA contribution. a little bit. Maybe you dial back other parts of your budget like the subscription services so you can live

Starting point is 00:26:46 on this budget. But I would love to see you optimize all these little things so you are really, really, really beefing up your investments. Now, to answer your question about priorities, I would not prioritize paying off student loans at a 5% interest rate, knowing that you've got $70,000, $80,000 invested. Our sort of rule of thumb around here is do not worry about putting extra money extra payments, extra, extra, extra on low interest student loans until you have the equivalent amount of those student loans, that balance, invested in growing and compounding for you in the stock market. You know, people make the mistake and, you know, Dave Ramsey talks about this all the time. It's like, wipe out all your debt. Get rid of all the debt. Sure. Let's pretend someone is going through the baby steps and they have $50,000, $80,000, $100,000. Let's say, y'all, $80,000, a student loan debt,

Starting point is 00:27:41 between the two of you. If you were walking through the baby steps, you would, you know, pay off all of your debt with only $1,000 in your emergency fund, including that $80,000. You would stop investing and you would just purely focus on that $80,000. Then you'd start investing. Then you'd do the whole, you know, down payment thing, which you guys have a down payment, and you'd start paying off your house faster and 15%. Like, I understand how the baby steps work. But the problem of that in your situation, Trenton, is that's $80,000 that over the course of probably, you know, if you got Gazelle intense, like he says, maybe you could pay off in the course of like two and a half or three years. That's $80,000 that's now not compounding in your favor at the young age of just 30, right?

Starting point is 00:28:24 And so like what we like to do, like, don't be wrong. Student loans suck. No one wants to, you know, retire with student loans or retire with a mortgage. Like we don't want people to have a lot of debt whenever they retire, but we also want people to focus on getting as much money in the markets as humanly possible, as young as possible, right? So that compounds for them, not just throughout their lifetime, but then turns into a generational thing that goes into the future. Paying off debt only goes to zero. That same $80,000 is going to double now every seven years to $160, $360, $320, $640, right? Fast forward 20 years, that $80,000 is now half a million, where if you had focused and got Gizel intents to pay that $80,000 off, it would just be worth zero, right? And so like, would you rather

Starting point is 00:29:06 have half a million or just like, no debt? I'd probably have half a million because then I'd take a part of that half a million, pay off my debt and have the rest keep going for me. So like, it's totally up to you here, Trenton, how I'd approach it or how you'd approach it rather. But what I would do is try and do that little like thing I just explained about the Roth and the 401K thing like that. Get that to $100, $150,000. I get really, really aggressive about investing in your early, early age. open up the 529 account for your kid. The Trump account, get yourself a Trump account. You can get the $1,000 of free money right now for your baby, and you can contribute $5,000 a year toward that Trump account. They're going to compound that throughout their lifetime and flips into a traditional

Starting point is 00:29:47 IRA at the age of 18, and then that's going to compound. Like, there are so many better places over the next two, three years to park your great income of $130,000 a year, then paying off your student loans at 5% interest. You get me so hype when you go on this tangent of compounding versus paying off low interest debt. I love it. Everyone needs to understand it because that is why we do what we do here at the Rich Havits podcast and then the network.

Starting point is 00:30:17 I love that when you do that breakdown. It's just so good. And for everyone listening, please rewatch that section. Listen to it carefully because it means all the world, especially for younger people that are still carrying this. student loan debt and think that the most urgent thing in their life should be to pay that off versus getting money compounding while they sleep. I absolutely love it. So our next question comes from Austin on Instagram. He says I'm 22, single and still living at home, full-time farming, making 42,000 a

Starting point is 00:30:49 year before taxes. But most of that income rolls back into the farm. So I am working part-time for a drone application company making 300 bucks a week. I started investing right out of high school with Acorns because it was easy. Very set it and forget it. I now have $6,500 in five ETFs and 24 single stocks. Also, I have an IRA with a thousand across four different ETFs. Should I keep going inside of Acorns or switch to public or do both? Thank you guys so much. I've changed my habits and started to invest more because of your show. Robert, I know you love acorns. I love acorns. Well, here's the thing. We love people that invest no matter like the app, the tech. the strategy. You can be doing the roundups. You can do Griffin stock where you shop, right? You connect

Starting point is 00:31:37 your debit card, your credit card. It looks at your transactions. It figures out you, every time you shop at Amazon, I'll take a dollar from your checking account and put an Amazon stock. Like, there's so many different really cool, awesome financial technology applications out there that all essentially just encourage people to invest. If I were in your shoes, though, Austin, I would start taking my investing very seriously. That means going to public.com, a platform where you're not just doing like some single stocks, some meat, like, you can do a high yield cash account. You can do corporate bonds. You can do generated assets. You can do their agent product. Like, you know, Bitcoin, I don't know, like public's platform is so robust, so much more robust than Acorns. Acorns is more of like a little

Starting point is 00:32:20 like, cool, you're investing. Like, it's kind of like tricking someone to invest, right? I will round up your little, like, you know, which is great. Acorns is like the, what's it called, Robert, the gateway drug to investing for a lot of people, which is awesome. Like, we want as many people as possible to be investing. But when they're ready to take that step to start taking their investment seriously, public is definitely the way to go. So Austin, if I were in your shoes, I would do everything I can to migrate out of acorns and on to public. Go to public.com slash rich habits. There's going to be a button you can press and it's going to show you all the steps to do to migrate your portfolio to public. And then if I were you, I would do the Roth IRA.

Starting point is 00:32:57 I would take some of this money. I'd make sure you've got that Roth IRA since it's at $1,000. How do we get that now to $7,500 by the end of the year? Right, that's the move. And then that money is going to compound for you tax-free throughout your entire life. Austin, you're crushing it. And I'm going to have a little bit of a different take because I do like acorns because I feel like it is the gateway.

Starting point is 00:33:17 But I think it's cool. And what I would do is transfer the money to public.com to be able to get. get the Roth and everything up and running because, as Austin alluded to, public is way more robust. So many cool tools. You can cover all your bases in public. But I would still keep the Acorns account and do the roundup. So for me, I have both. A lot of the big heavy lifting is done in public, but I still have my roundups in Acorns.

Starting point is 00:33:43 And I have $25 a week in Acorns. Robo advise away, have a blast because I feel like I've just been doing it for so many years. And I like having it over there. But for all the heavy lifting, definitely public.com, way better overall platform and lower fees. Because remember, Acorns has a standard monthly fee. Public does not. Acorns has higher fees in some commissions on some of their ETF trading and some of that stuff that public does not. So keep that in mind.

Starting point is 00:34:12 Overall, as you grow your wealth, public is way better. But if you like Acorns and it's something that's going to keep you doing the roundups and getting some money in the markets, I'm okay with that. Yeah, no, 100%. Like we said before, we don't care what technique, what platform, what strategy. Like, just get invested. Just get invested. And that, that's the point.

Starting point is 00:34:31 Just get invested. If Acorns, Austin, is how you get invested and how you stay invested, then use acorns. Like, it just, just get invested. That's the point. Now, our final question here comes from Jacob. Jacob says, I have a Roth IRA on Schwab, but being managed by mainstay capital management LLC. I know that you don't recommend using an account manager and that it's costing me valuable retirement money having to manage it for me. That being said, they've been doing it for over 20 years,

Starting point is 00:34:56 and I've never managed it myself. Can you give some insight and options for a future without active management from an outside vendor on the account? I have just under $500,000 invested. It has done very well for me, and the management company has been doing great, but I know that in the future, if I do this myself, it could save me over $100,000 in fees. I just turned 48 years old. The Roth is my main retirement savings account. I also have 245 and a 401k and a taxable brokerage account with $80,000. Good, good question. Here's the thing, Jacob. And Robert, feel free to chime in and correct me on anything. But like, I guess it kind of goes back to what we're just talking about with Austin over here, which is like, Jacob, if you stay invested and you feel happy about your experience here with mainstay

Starting point is 00:35:44 capital management, that's fine. Just rock and roll and keep doing what you've been doing. And yeah, you probably will pay six figures in fees, but like that's the price you pay for perhaps not having the time or the willingness to maybe learn what index funds to buy or the discipline to stay invested during times of market turmoil or, you know, things that mainstay capital management has helped you do. Now, on the flip side, if you're like, listen, guys, I could totally just do this myself and I really want to do it myself, but I want to get your blessing. Like, duh, yeah, go roll it out, put it in a normal, I don't know you have to roll it out at all. I think maybe you just tell them to go away and you can maybe sell everything they've got

Starting point is 00:36:26 and put it in just some index funds like V-O-O-O-Q-Q-Q-Q-D-I-A-Q-I-Q-Q-U-S, and you're just off to the races, right? You're 48 years old. You want to be compounding with the market, so no need to be in cash or bonds and have a good time. But if you're like, hey, they've been doing a good job. They've been outperforming, but like, I just, I don't know. Like, what's going on?

Starting point is 00:36:46 like that's just a decision you have to make. You know, we're not anti-financial advisors and anti-you know, wealth management, especially if they're helping you kind of look at your whole financial picture. What we're anti are people that have got 10, 20, 30, 50, 100, 200,000 with an Edward Jones that's charging a one and a half percent fee when that person could have just put it in VOO and forgot about it, right? But you've got half a million bucks. And maybe that half a million is invested in some type of way for you. and you're really comfortable with that personally, right? I self-manage much more than half a million dollars.

Starting point is 00:37:21 And hundreds of thousands of dollars of my portfolio just sits in index funds and ETFs and just goes up and down with the market. And I'm cool with that because I'm 30 and I just want to compound with the markets for a big chunk of my portfolio for the next 30 years until I can retire. And so if that's your situation here at 48 where you just want to compound, ride the wave and do that, then just go do that. I don't know if mainstay capital is doing some sort of strategy for you. that you've been excited about or like maybe they only invest in like growth stocks or

Starting point is 00:37:51 international like out of no idea everyone's a little bit different here but if you just want to like ride the wave it's very easy and simple and cheap to do that yourself great breakdown so here's my take jacob you're 48 years old you're doing very well for yourself you're accelerating your financial net worth and it's going to keep growing over time so mainstay capital they are a fiduciary so I like that for you because that means they're not charging commissions on the ins and the outs, and they're not going to be changing your portfolio constantly just to make more commissions. So I like that for you, but also keep this in mind. When you get that account from $500 to $1 million to $2 million to $3 million over the next 15 years,

Starting point is 00:38:30 you're going to want somebody not just to help guide you on what to own, but also how to manage it. What are the tax advantages? How should be you doing other things? because that's where a fiduciary and someone that's giving you active wealth management comes into play. And of course, I think it's worth the fees if they're charging you at your level, probably a percent or maybe 85 or 90 basis points. I personally think it's worth it unless you're going to spend the time to learn everything

Starting point is 00:39:00 and understand what are the complexities that you're going to be facing in the future to be able to self-manage versus letting someone else help you. obviously my family crow capital we have a fiduciary firm and a lot of people as they get over that 500,000 or a million dollar mark just want somebody to help guide them so they don't leave a bunch of money on the table or make tax mistakes so that's my breakdown you're doing a great job mainstay capital is very good at what they do fee only so you don't have those commissions and they're fiduciary so personal finances personal but that's my take yeah i think i'll round it off with like real numbers here half a million

Starting point is 00:39:39 dollars invested at 1% is $5,000 a year that you're paying, right? $5,000 a year to mainstay capital for them to do whatever you're doing or whatever they're doing on your behalf. If you just put all that same money in V-O-O and rode the markets, you would be saving $4,850 of that. So $4,850 more every year would stay in your account and that would get invested and growing for you over a long period of time over the next 20 years, right? And that's every single year. And that number goes up as your portfolio goes up. Those are real numbers you need to be thinking about. Do you want to give someone 400 bucks a month to manage your money? Maybe if they're outperforming a ton, why not? Sure. But if they're just parking you in index funds that you could park yourself in, maybe not.

Starting point is 00:40:26 We don't know enough information here to really give you some direction. But I hope we've given you enough to chew on to allow you to make a decision for yourself. I mean, that's the Rich Habits podcast, is like, we want to ensure that everyone has full information to make an educated decision with their money. And that's the whole point of the show. So everyone, thank you so much for joining us on this week's episode of the Rich Habits podcast, question and answer edition. Don't forget, if you want to have your questions answered, guaranteed every single week, please consider joining the Rich Habits Network. We have a seven-day free trial where you can join for seven days. Join us on a two-hour-long Zoom call live stream. You can ask us questions in the chat. You can turn on your camera and

Starting point is 00:41:06 microphone and say, hey, my name is Drew, and here's what I have a question about. Like, it's, it's a time for you to get your questions answered. We also do these weekly office hours, one hour every Friday. Robert and I jump on and we just chat and hang out and answer questions or talk about, you know, Spain beating Argentina. Like, we're just hanging out and having a good time. But, you know, that's the point of the Rich Habits network from a question and answer perspective. And from an investment perspective, we have done some awesome, awesome investments. We've invested into SpaceX four times before the IPO. We're investing in this really interesting 3D printing company at 3E prints houses, which is really interesting. This other company that's like a Neo Cloud

Starting point is 00:41:46 that uses like ASIC type chips to do inference at like 2,000 tokens per second. Like there's all these like really cool little things we're doing in there. So if you are someone like Juan Carlos and you've built your base and you are ready to diversify into different types of investments outside of just public equities. We've got some really cool opportunities as well inside that Rich Habits Network link in the show notes below or just Google Rich Habits Network and check it out for yourself. Yeah, I think the Rich Habits Network is definitely the cheat code for people of all levels, but especially for people that want to level up, they want to diversify, and they want to have more options and understanding of what is out there to be able to level up their

Starting point is 00:42:25 finances and their business acumen. Of course, we're very excited about it. We've been growing like crazy and just so many cool investments within the rich habits network so make sure you check out that seven day free trial thanks everyone and we'll see you tomorrow for our episode of the rich habits radar

Rich Habits Podcast - Q&A: Selling A Business for $1M, Acorns vs. Public & Investing in Texas from California

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