Rich Habits Podcast - Q&A: Settlements, $1,400 Car Payments, and $35K of Credit Card Debt

Episode Date: March 28, 2024

In this episode of the Rich Habits Podcast, Robert Croak and Austin Hankwitz answer your questions! If you want to ask us a question for a future episode, feel free to send us a DM on Instagram (richhabitspodcast) or an email ([e-mail])!---To listen to Public's new podcast, ⁠The Rundown, click here!⁠⁠⁠⁠---Public has finally released options trading on their platform! To learn more about all of the product features Public offers, ⁠⁠⁠⁠⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠⁠⁠⁠⁠---⭐ Download our FREE Budgeting Template – click here⭐ Earn 5.1% on your savings with a High-Yield Cash Account – click here⭐ Automatically buy stock where you shop with Grifin – click here⭐ Protect your family with term life insurance from Suriance – click here⭐ Use code “Spotify” for 15% off our 4-module video course – click here⭐ Optimize your portfolio with Seeking Alpha – click here---👤 Explore everything Austin does – click here👤 Explore everything Robert does – click here❓ Ask us questions for our Q&A episodes – @richhabitspodcast on Instagram📬 Inquire about working together – [e-mail]---Options are not suitable for all investors and carry significant risk.  Certain complex options strategies carry additional risk. Options can be risky and are not suitable for all investors. See the ⁠⁠⁠⁠Characteristics and Risks of Standardized Options⁠⁠⁠⁠ to learn more.For each options transaction, Public Investing shares 50% of their order flow revenue as a rebate to help reduce your trading costs. This rebate will be displayed as a negative number in the “Additional Fees” column of your Trade Confirmation Statement and will be immediately reflected in the total dollars paid or received for the transaction. Order flow rebates are only issued for options trades and not for transactions involving other assets, including equities. For more information, refer to the ⁠⁠⁠⁠Fee Schedule⁠⁠⁠⁠.All investing involves the risk of loss, including loss of principal. Brokerage services for US-listed, registered securities, options and bonds in a self-directed account are offered by Open to the Public Investing, Inc., member FINRA & SIPC. See ⁠⁠⁠⁠public.com/#disclosures-main⁠⁠⁠⁠ for more information.Hankwitz Group LLC has an existing business relationship with NEOS Investment Management LLC. The opinions expressed are those of the author, and the author owns several NEOS ETFs.

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As a quick reminder, as you guys actually probably saw already, we had to move the webinar from this week to April 2nd at 4 p.m. Eastern Time. The reason Robert and I had to move the webinar was because we got invited to the White House to speak with the Biden-Harris administration about student loan forgiveness and their repayment plan. You'll see more about that here pretty soon. So stay tuned. But we couldn't say no to that opportunity.

And so because of that, we had to move the webinar. It's actually the same day as the webinar at a very similar time. It just would not have worked out. So thanks, everyone, for your patience and your understanding. And don't worry, the webinar is still going to happen. Again, it's moved to April 2nd at 4 p.m. And we're really, really excited to be talking about building an investment portfolio from scratch.

If you've already registered for the webinar, you don't have to do anything. You're automatically moved to this new time, this new date. Everything's great. You're going to be just fine. We can't wait to see you there. So with that being said, Robert, before we jump into this episode, I did want to remind everyone that the all-in-one investing platform, public.com, recently launched options trading. And this is your final reminder that you can get a rebate of 18 cents per contract traded.

Remember, you have to lock in your lifetime rebate and activate options on your public.com account before March 31st, the end of this month. Monday's episode is going to be after. So you got to do that. Don't forget. Yes, it's so, so simple. Create a public account if you already haven't. Activate options and you're set.

Every time you trade options on public, you'll earn 18 cents per contract. Plus, unlike other investing platforms, there's no commissions or per contract fees. So instead of paying big fees to place options trades elsewhere, you actually get something back. Get your lifetime rebate of 18 cents on every option contract traded. But again, this is your final reminder you only have until March 31st at public.com. Now, of course, this was paid for by public investing. You must activate your options account by March 31st for the revenue share.

Options are not suitable for all investors and do carry significant risks. Do not forget that. If you want to read the full disclosures, be sure to check that out in the podcast description below. And this is for U.S. members only. Yes, we love public and they just keep introducing more and more great ways for you all to invest in so many of these cool features. So that's why we're always talking about public and we love working with them. Now, with that being said, let's jump into our very first question coming to us from Janet Kay. Janet said I recently rolled over my old employers 401k into a traditional IRA.

It's worth about $300,000. I was wondering if I should start dollar cost averaging. out of the target date funds they have me invested in and begin instead buying the index funds you all talk about. Or instead, should I just sell all $300,000 worth of the target date funds at once and then take that lump sum and buy these index funds in a single trading session? Robert, what do you think about this? I love the idea of dollar cost averaging out of these target date funds. You all know how we feel about this and into the index funds that we always talk about because no one can time the market, but I want to touch on the target date funds, for instance. They're just not responsive to

markets. That's why it's a target date. It's targeted long into the future. So many times they're so safe because they're more so trying not to lose money than they are trying to optimize your money. So they underperform the markets. And that's why we just don't like these funds because I'd rather have my money in V-O-O-O or Q-Q-Q or something that gives me a better chance of earning a higher yield. So I love that part of it. But Austin, I think we should also mention the new Robin Hood IRA program. Talk about that a little bit because I think it's really important for all of our listeners to hear about this because I've heard no one on the internet talk about it. And we were shocked when they introduced it recently because it's literally free money.

So touch on that for a little bit. Yeah. So Janet, here's the deal, right? I totally agree with what Robert said. It's probably not the best idea to just all in one go sell $300,000 worth on a single. single trading session of your target date funds and then take that same amount of money, the same trading day and just dump it into index funds. That's essentially saying, I'm time in the market. I'm getting in. We want you to kind of dollar cost average out, dollar cost average in.

And to give you some real numbers here, perhaps you do $30,000 every time. So 10 trading sessions, maybe you can do two trading sessions a week, which means you'll be completely out of this over the next five weeks and into your index funds over the next five weeks as well. But Robert called something out that was incredibly insightful, which is the Robin Hood 3% IRA rollover bonus. I think we mentioned this a couple episodes ago, but Robin Hood, the online brokerage platform, is offering their gold member subscribers, which cost $60 per year, a 3% match on any 401k or IRA that's rolled over into their platform. So again, you would open up a traditional IRA like you already have done because you've

rolled it over into some other platform. So open up a traditional IRA on Robin Hood, roll over the $300,000 from wherever it's at right now, onto Robin Hood. Make sure that before you do that, you are a Robin Hood gold subscriber, pay the 60 bucks, you'd be good to go. And then in exchange for that 300,000 rollover, they will match 3%, which is $9,000 paid to you upfront in cash deposit to your brokerage account that you can now invest. I mean, that's a straight up 3% return on your money right then and there.

Of course, there are some stipulations. Again, you have to be a gold subscriber. The money has to be there for the next five years. And I don't think you can end your gold subscription during that time, which is still fine because it's only $60 a year. You made $9,000. The math is definitely working out in your favor here. So go check that out.

And I hope we answered your question. And I want to add one more thing. And that is the fact that you have full autonomy on this money and what it's invested in. And that is a key thing that most people with these 401ks don't have. If you leave it in the old program, you just don't have the ability to choose what you want to choose for the most part. And you're going to be restricted to certain investment vehicles. So that is another key feature here is you have full autonomy to do what you want and invest

in what you want. So I want to make sure we understood that. 100%, Robert. And you're alluding to a question I know we have up later, which is a really good one, kind of breaking this down for people that might not have that autonomy. But we'll get there very, very soon. So our next question comes from Nick A. Nick says, hey fellas, my name's Nick. I'm 32 years old and I live in Nashville, Tennessee. I love listening to your episodes on my commute to work every single day and it's really changed my mindset toward money. I bought a house in 2021 and I had my first child in 2022. My wife is a stay-at-home mother and we're living off of just my income. However, we found ourselves with $12,000 in high-interest credit card debt and $1,100 per month in car payments with more than $40,000 in car payment debt. I've since buckled down and have paid.

off $4,000 of the credit card debt, and I transferred the remaining $8,000 to a no-interest intro credit card to give me some momentum going forward. With that being said, is it smarter to begin investing over the next year or two while this credit card debt is at this zero interest intro APR? Or should I do something else? Robert, this question definitely got our hearts pumping and got us excited when we read it, so I'll let you kick this one off. Yeah, so I would say for now, forget about investing. You can't out-invest high-interest debt. I know you hear Austin and I say this over and over again. I think it is one of the key things we say on a regular basis.

So what I would do first and foremost is I would focus on cleaning up the disastrous credit card debt and figure out how to get your honest budget using the template that's available in the show notes and really figure out where you're at so you can chunk away and get this high-interest credit card debt gone as soon as possible. And with the budget, you'll also know. where all your money is going and allocated towards. So every month you can work towards building three months of that emergency savings to get you on the positive side.

You hear me talk about positive cash flow and positive arbitrage of your money. This is where it all starts by getting rid of the bad debts first. I love that perspective, right? I mean, this is a guy who probably found himself with a kid. He's like, oh, my gosh, didn't see this happening or the diapers were this or I had to go get this. I understand, man. We're not here picking on you.

we do want you to know that 12,000 or 8,000, whatever it is right now in high interest credit card debt, despite it even being at a 0% interest rate because it's an intro APR to a new credit card that you rolled over the balance to is still debt. That is a ticking time bomb. I don't know if it's 12 months, 18 months or two years, but when that intro APR expires and it goes back to the 27, 30, 35%, you are now back in high interest credit card debt. You found yourself with a little bit of momentum here, kind of a breather. it's not exactly, you know, biting you on the ankles now, which means you've got the opportunity to pay off this $8,000 quick and fast. I want you, I don't know, driving Uber, delivering for DoorDash, perhaps you're delivering pizzas or, you know, doing Instacart. Maybe you're doing some landscaping

around the neighborhood for your neighbors, like whatever you can do to earn some extra money to make sure that when this intro APR expires, that you have this completely paid off. That's what I want you to be focused on. And finally here, I'd also encourage you to have an honest conversation with your wife about the two cars you guys do have and the need for these expensive car payments. You all obviously went into credit card debt for a reason, right? You couldn't afford something you were doing. Maybe again, it had to do with the baby or something we're unaware of, but I would really consider getting rid of one of these car payments and doing that by either selling the car and financing a much cheaper car. I actually did that. I had a $20,000-thousand-dollar car back in the day. I sold it because I couldn't

afford the $440 month car payment with the $275 month insurance. right? Like, I just, I couldn't do it. I sold it. I bought a cheaper car in cash. No sweat off my back. So, like, that helped me buy my next house, which was really cool because I freed up what Robert was talking about, that positive cash flow every single month. So for you, I want to really like help you conceptualize how important it is to free up this potential total of $1,100 a month. So think about this for a second, Nick. $1,100 per month invested. So you're paying this right now to the bank for your cars at $40,000 total in debt. $400 per month instead invested from age 33 to 65 is $4.7 million in retirement.

That's what these cars are costing you, right? You are literally driving your retirement. You and your wife are doing that right now. So think about this. I'm not saying that maybe she has to drive. I don't know the situation here, but really have an honest conversation and sit down and be like, wait a second, can I figure this out? Is there a way that I can free up this, you know, $500, $1,100, $1,100 a month to begin

investing more aggressively? Yeah, and really, I like the fact that you talk about having this honest conversation. And you have to ask yourself, we're assuming with limited information, you have two nice cars. Do you really need two nice cars? So many families end up in this position where they have a one-year-old car, a two-year-old car, and then maybe one of the children have a four-year-old car. And they end up in this situation where they have all these car payments. Couldn't you find a car that was $200 a month or a $5,000 car that you could pay cash for

that was still nice enough that it's going to not break down and it's going to hold up because you just have to consider do you need all of these nice cars? If you're going to events, sure, you want a nice car. You're going on a road trip. You want a nicer car. So it's stable. But do you need two or three of them? That's the question you have to ask yourself because we always want everyone to, we're not asking or telling anyone not to live well. We're just telling you to think through it and be honest with yourselves because of the fact that if you have too much expense every single month that lifestyle creep gets in the way and you just can't work towards your wealth building and your retirement. So just think it through and have that conversation.

And Nick, just make sure we're all the same page. You're $8,000 in credit card debt. You're not going on road trips, my guy. You're not going to nice events. You don't even to worry about that right now. I want you paying off this debt, dude. Like that is what's really important. I mean, if you didn't have the credit card debt, it was the car payment. It's like, okay, whatever. Like maybe guys, that's your splurging every month, right? I think that's so important, too, to talk about here, Robert, for a second before we go on to the next question. Everyone has sort of their recreational spending kind of flexibility in their budgets, right? And then we choose how we want to spend that.

For me, I don't care about clothing. I don't care about shoes. I literally have the same pair of shoes I've been wearing for the last three years. I just cleaned them every day. I don't care about those things. I care about food. My girlfriend and I were foodies. We love to eat out, try new restaurants.

Like, that's my thing. My girlfriend's the same way. She's like, I don't care about the car I drive. She drives like a five or six year old like Jeep. It's like, I don't know, it's like eight or ten grand. It's like just a normal car. Like she doesn't care about those things. But instead she likes to make sure that she can go get some cool groceries so we can try new recipes at home or eating out.

Cocktails, drinks, oysters. Like that's how we splurge and how we choose to spend our money. So, you know, for you Nick and I know Robert, I'd love to get your take on this as well. Like figure out, have that honest conversation with you and your wife and say, what do we want to really allocate our money to? Because right now you're allocating it toward your cars, which if you're you're You love your cars and you're a car person, that's totally fine. But there was obviously something missing there if you had to go to $12,000 in credit card debt anyway. You know what I'm saying?

Yeah. And my takeaway on this, and I deal with it on a daily basis, is seeing so many people that think because they have a lot of nice things, that that means they're financially stable. And generally, it's the opposite. And again, we're not telling you not to have a nice car or decent clothes or wear five-year-old shoes. We're just telling you to understand your debt to income ratio. And just because you have nice things does not mean you have net worth.

There are many, many, 30, 40 and 50 year old couples and families out there that have a zero net worth or worse because they have so much debt on everything. Think about it this way. Let's say you have solar panels. You have a loan on them. You have the home. You have a mortgage on them. You have two cars. You have car payments on them.

You have credit card debt. You have a toy. Let's say you own a jet ski or a small boat. doesn't have to be lavaged, you have a payment on that. So at the end of the day, you basically own nothing and all of your money and all of your opportunities for wealth building are out the window because you're living beyond your means. That's why we always talk about understanding the difference between having nice things and actually owning things and having a net worth.

And that's one of the keys here to understand is you can't put the card ahead of the horse and that's what most people do. That's why as they progress in their income earning, let's say you're just, W-2 employee, then they start increasing what they own and what they spend rather than taking a window when you get that bump in income or you get that big bonus and making sure you're setting up your investments. It's just really critical to understand the difference. And Robert, that's again why we always talk about building your base first. Yep. It's okay to own a jet ski, right? It's okay to have a cool motorcycle or, you know, have these cool things, but you want to do that after you've

covered your bases and your money is working for you because if you say, uh, I'm not going to really invest yet. I want to go buy this jet ski and have a $300 month payment on it. Or I'm going to go have these two cool cars and have $1,100 month payment on them. Well, quickly, your monthly payments on things that are going down in value is $1,500, $2,000, $2,500 a month. I mean, just this guy is $1,100 a month for 30 years is $5 million in retirement. Imagine what $2,000 or $3,000 a month are. So that's what people are sort of like not connecting the dots on is they think, oh, I have the money or I can afford the payment. I should go buy it. I should go spend it. When that's fine, you can do those things, but only after you have your money working for you in a meaningful way, which is that $50,000 to $100,000

base that we always talk about, Robert. That's why the wealthy people understand this and they really understand buy assets first that make you money to pay for the liabilities because you don't want to put the liabilities first because you're never going to get around to owning the assets that make you money. And so that is the trick. Get the items that are out there. Let's say you want a new jet ski or you want a new car that Mercedes. Go find an asset that'll cash flow more than enough to pay for that. That way you're circumventing you going backwards financially to own that jet ski or that cool car. Couldn't have said it better myself, Robert. Our next question comes from Trapper B. Tropper says, I really appreciate the podcast. It's been incredibly informative and I'm eager to learn more from you all. Before I dive into some questions, here's a bit more about my financial background. I'm 26 years old, living in Phoenix, Arizona, earning $58,000 a year before taxes. My investments are managed by a certified financial planner, who is also a family friend in former high school basketball coach. I've got $24,000 in mutual funds and $32,000 in a Roth IRA with them. I also hold $8,500 in a public high yield savings.

account in $2,000 in their treasury bills. Additionally, I'm exploring diverse investments, including cryptocurrency, music royalties, ETFs, dividend ETFs, and everything in between with the combined total of about $2,200 across platforms. Wow. First, before we get to the questions, Trapper, great work, dude. You're 26. You're making, you know, call it $58, $60,000 a year pre-taxed, and you've got now nearly $60,000 in savings and investments. Like, dude, so cool. Okay, so here's this question. I'm about to inherit $50,000 from the sale of my late uncle's house. How should I best allocate this inheritance and given my financial setup, should I continue working with my financial advisor? Robert, let me take a stab of this one first. I'm seeing

from Trapper here that he's already got his base bill, $60,000 essentially in investments, which are incredible. How should I best allocate this inheritance? One, I would make sure that you are not in any sort of debt. You didn't mention if you have student loans, you didn't mention if you have the credit card debt or any other sort of things like that. So one, I'd make sure that, you know, if you're given a gift of $50,000, like use that as a way to make sure that you're moving in the right direction from a net worth perspective versus just blowing it off on something fun or lavish. So if you do have student loans that might still be lingering and they're kind of biting

you on the ankles every month at a $300, $400, $500 month payment, you obviously love investing, wipe them out and then just keep that money invested. So that's the first thing I'd consider if you don't have any of that. I mean, what I would really consider doing here, you're 26 years old. You obviously are very good with your money. I'm not sure if 10,500 just considering your expenses is enough to have in a savings account. I'd like to see that closer to 15,000, perhaps 20 eventually if you want to get there. But I just, you know, I'm seeing 10,500 is kind of on the small end for you. You want it to be between three and six months of monthly expenses. I lean toward the six months just because you can't exactly predict what the U.S. economy is doing. Unemployment's ticking higher. Just have a little bit of a cushion, right? And the last thing I would do, I didn't see any mention of a, I'm trying to save for a house or I'm trying to save for real estate. Robert and I talk about all the time how important it is to own real estate in your diversified portfolio. And when we say real estate, we're not always talking about single family homes.

Robert and I love the idea of, I mean, you're 26, dude, go buy yourself a duplex, live in one unit and then rent the other unit out. It'll bring your monthly payment down. It might even make you cash flow positive depending on what you can charge for that other unit. it will appreciate in value. And then once you've figured out how you want to move forward from a living situation, you now have two rental units that you can rent out in cash flow against for the rest of your life while the price of the duplex appreciates in value over time. So I would really consider, you know, if you've got the debt figured out, if you've got the savings figured out, maybe it's time to think about owning a chunk of land or digging your roots deeper somewhere

around the country as it relates to buying some real estate. So great way to cover this question. Austin, you nailed it. And what I would say, the key takeaway for me for this question, Trapper, is diverse. You said you want to diversify. I'm exploring, diversifying my investments. And I think you nailed it, nailed it, nailed it. Austin's right. You should look if you're going to be buying a property soon.

We don't know if you're renting now or what you're doing for your living situation. I love the house hacking strategy. But I also love the fact with your age and where you're at right now is getting some of this money into cryptocurrency. I think there is so much opportunity into cryptocurrency that that should be first and foremost one of your diversification strategies. And it doesn't have to be a lot of it. It could be 5% of your net investable income. Something like that I think is really good.

Get yourself in there and own a piece of these, you know, the Bitcoin and Ethereums and chain links of the world XRP. And then look at other items. I wouldn't start with going super aggressive into every diversification strategy, but at least get two or three them implemented with this money. And then also stay on the right track with what you're doing with the ETFs that we talk about, the VOOs, the QQs, maybe the AIQs, and really just get some of that blended into your diversification as well. And congrats and just keep doing what you're doing and add some of these strategies and keep us posted. Yeah, you also mentioned Trapper, you know, given my current financial setup, should I continue working with a financial advisor? I mean, yeah,

man, if you want to have 24,000 in a mutual fund, like, I really want you to know, like, one, these mutual funds, depending on what it's invested into, might be underperforming the market. So, like, I don't care how cool your high school basketball coaches and how he's like so nice, thanks for the money. Like, make sure that you're invested into assets that are appreciating in value, which means the index funds and ETFs we talk about, VTI, VOO, QQQ, GT. And then obviously, the 32,000 in your Roth IRA, that needs to be 100%. invested into QQQ, VO, and VTI or VGT, if you want to throw it in there too.

But like, that needs to not be in any sort of mutual fund. It needs to be all in on the market. You're 26. You have another 40 years of investing ahead of you. You don't need to have any diversification from a bonds or T-Bills perspective with that at all. Go into the S&P, forget about it and just keep going after that. If you want to stick to the financial advisor, that's cool. Just make sure that you're not underperforming the market while also paying a high expense

ratio on these mutual funds while also paying this. guy a 1% or 2% management fee. Yeah, the only takeaway I would have is because you mentioned that he's a basketball coach. So that means he's your buddy and your friend and you trust him, which is great. But it doesn't mean you shouldn't question the fees. Understand what you're being invested into because guess what? At 26 years old, you're not going to be lifelong friends with this person probably assuming he's 20 or 30 years older than you.

So you have to keep in mind of what is best for your long-term financial growth and not what he's selling you now. So just double check it against the markets. See what your returns are. See what he has you in and how they perform against the broader benchmark. And then also dig into what his fee structure is because you'd be shocked. Sometimes family friends will charge you above retail for these fees. And you should just at least know what they are.

Couldn't have said it better myself, Robert. Trapper B. If you love our podcast like you say you do, another podcast we highly recommend everyone to listen to is the. The Rundown. Our friends at public.com launched the rundown last year, and it's incredible. Austin and I both listened to it. It's hosted by Zaid Edmani, a hilarious but intelligent fellow content creator who has a knack

for keeping you entertained while delivering financial news. So a new rich habit you can work on on your daily routine is listening to The Rundown Publix's new financial podcast. It is only five minutes long and you're going to walk away totally caught up on which stocks are making the biggest moves and the biggest economic stories that matter most for your portfolio. They recently broke down what's happening between the Department of Justice and Apple. They're suing for some antitrust stuff. I think Boeing CEO is now stepping down. Reddit's IPO that happened last week. They broke down all this stuff. If you care about like real time,

everyday financial news and like trying to keep up with the markets because you want to know why your portfolio is in the green or in the red. The rundown by public.com is a great podcast to listen to help you do that. So check out the rundown wherever you listen to podcasts and we'll also be sure to share a link in the description of this episode below.

Definitely go click that, check him out, click the follow button. And if you do like Zaid, he has a cool Instagram account. Admani explains is his Instagram and he's got some really funny clips over there too.

So definitely check that one out. Now, our next question comes from Dakota M. Dakota says I absolutely love the podcast. I'm 27 and make $120,000 per year. I have two children, ages three and six. and my employer currently offers a 401k with a 4% match, but they only give me the opportunity

to invest into mutual funds that I've frankly never heard of. For example, there's FIASX and FICMX. What the heck should I do here? Austin, do you want me to take this one away? Take it, Robert. All right, Dakota, the funds you mentioned are terrible. Both have underformed the S&P 500 over the last 10 years dramatically. And I wouldn't touch these with a 10 foot pull. We always talk about our investing priority list. Match beats Roth beats taxable. So you just have to understand these are not very good and we need to find a way for you to get more control over your money. So if you invest up to the match to get the free money, everything above that should go into maxing out your Roth IRA using the index funds that you

hear us talk about every day. QQQ, V-O-O-V-T-I-V-G-G-T, and S.E-E-G-T, and S-E-E-E-R-E-E-E-G-T, and Everything over that should be deposited in your public account and invested into the same funds. We really, really have to get people to understand that a lot of times when you have these investments that underperform, anytime you get a chance to have some autonomy and say in what they're invested in, you should take that opportunity because regardless if you do it on your own or you have help, you want to make sure that you're optimizing your earnings every single year. I would be so upset, Robert, if my employer was like, we got you the 4% match, you're doing great, look all these benefits, but they only give you dog crap or horse crap. Which one do you want to put your money into? I mean, I'm not being like too mean here. Am I? I mean, we looked up the funds. FICMX has gone down by 20% over the last 10 years compared to the S&P 500 being up 200%, right? And FIASX has only gone up like 15%. versus the S&P going up 200%.

So like, I'm really not trying to be mean here, but like your employer is offering some terrible mutual funds. It's just not something I'd get excited about. So Robert laid out the playbook perfectly. Match beats Roth beats taxable. If you have to put money into something, get the free money in return, right? Like that's 100% return on your investment right then and there. Get the free money.

That's going to be great. Everything above that, we want it to the Roth because we want autonomy. We want to make sure we're investing into the index. funds we talk about and you make 120k per year, which means you're going to max out your Roth IRA and still have some money left over. So when you max it out and have money left over above that $7,000, put it into public.com. Buy the AIQs of the world if you want, maybe diversify a little bit into some SPY or QQQQI or maybe even buy a single stock that you've been really excited about. But we want to make sure that you are taking your money and putting it toward funds and ideas and strategies that

are going to build your wealth over time, not deteriorate it by 18 or 20% over the next 10 years like these funds obviously have done in the past. Yeah, I love this conversation just because if you really think about the broader market, I would be willing to bet a substantial amount of money that 90% of the people out there that have these 401ks by simply investing the rest of your money in V-O-O-QQ-Q-G-T and V-T and V-I-I-I-I-E-I. with maybe AIQ in there if you have a little bit higher risk tolerance, you would outperform every single one of those 401ks. 100%, I'd be willing to bet that money.

And what people don't seem to understand is even if your portfolio outperforms one of these 401ks or targeted date funds or whatever it is, even if you outperform by 3%, which it's normally vastly higher, let's say 3%. Over 20 years, that's a 60% greater gain. on your money, let's say if you're 30 or 40 years old, and you've got 20 years left before retirement and the need for this money. So it's just so critical for everyone listening to understand you have to optimize your money at all times because 2%, 3%, 4% a year just compounds

so greatly and it can mean the difference between hundreds of thousands and millions of dollars in retirement that you won't have by trusting that a 401k is a great retirement strategy. And that even too, Robert, goes for some of these high fee financial advisors. You guys follow Jeremy at Personal Finance Club on Instagram. He does a really good job of sharing like these visual sort of charts and graphs and things. And he shared one recently about how much money you will save over the life of your investing journey by not using a 2% financial advisor, but instead going with a half

a percent or 1% right? And I mean, we're talking like 400 grand, dude. Like this is real money. that is just going pixie dust away to someone because they want to charge you a higher fee. And it's the same deal. It's like that one, two, three percent that Robert's talking about by underperforming the market, sure, it's like, oh, I didn't make the $400 extra dollars or $4,000 extra dollars this year in the markets. I'll try better next year. But you do that for five, 10, 15, 20 years. Oh, my God. What happened to my $600,000? What happened to my $300,000? So that's the type of like mentality we

want people to switch. Like, we talked about the $1,100 car payment as opportunity cost in relation to retirement investing. Same deal with your mutual funds and your 401k. If you are consistently underperform in the stock market, go to Seeking Alpha.com, type in the ticker symbol, the letters of whatever funds you're in and just scroll down on that website. It's going to show you how that fund has performed in relation to the S&P 500. If it's outperformed, wonderful. Keep it in your portfolio. If it's underperformed, not great. Maybe it's time to weigh the options of figuring out what to do next, right? So like, you just have to be on top of these things because no one's going to do it for you. And the people that drift through their lives of like, oh, yeah, I know, Robert and I talk about

this all the time. 401Ks are not like a retirement strategy. I mean, sure, it's a retirement account, but people make the mistake of just blindly investing their money toward whatever is given to them. And they're like, wait a second, I've been investing like, you know, 400 bucks a month now for last 10 years and I've only got this much money. I thought I'd be up more. Well, I'm only up 5%. It's because they've put you in this just manure of mutual funds that underperform, like both of these that Dakota mentioned before, FIASX and FICMX, like terrible. Just please people pay attention. Pay attention.

Yeah, I want to touch a little bit further on all this. And I know this is running long, but it's worth it for everyone that follows along and is listening. And it's two part. You have to understand that you have to keep an eye on your money. You can't be in this set it, forget it position where you're just like, oh, it's all taken care of. it's in my 401k, and you're not optimizing the money because, like we said, that 2, 3, 4, 5%, percent sometimes even greater means so much over the years. And secondarily, understand your fee structure if you do have financial advisor. So like with Croke Capital, for instance,

you know, we charge fees, we're fiduciary, et cetera, et cetera, but understand if you need a financial advisor, like Austin says, it could be on the fence. If you can self-manage and you have a pretty simple strategy, then you might not need an advisor. If you own a bunch of businesses and you have kids and you need a succession plan and tax strategies and all that, then you might want a financial advisor. My key takeaway is this, because I've been in and around it with my family's office for 30 years, is understand this, understand the fees and do you need it, understand the importance of your structures and strategies, and do you need help with that? And then just overall is just really make sure to understand the difference between a fiduciary and a non-fiduciary when it comes to an

advisor and read up on that because I think that is the critical point to understand if you should have an advisor and what type of advisor. I love it, Robert. Our next question comes from Leslie K. Leslie said this question is actually for my son. He's about to graduate college to be a teacher. His salary is going to be around $50,000 a year. Now, through a structured settlement, he was able to save $250,000 over the last few years. It's invested mostly into the ETFs you all talk about like V-O-O. He will continue to get monthly payments from the settlement of $12,000 per year tax-free for the rest of his life.

He's ready to move into a house. Rent at the moment is around $1,700 a month. He could pay cash for a house, but it would use almost all of his cash available to him. Is it better to continue renting for the next few years or something else? What's the best plan going forward? I love it and congratulations. That is awesome, Leslie. Thanks for the question, but here goes. I would never, ever, ever use all of that cash. It is very difficult to get 250K put together, saved up and ready to deploy for the rest of your life, especially at a young age. That's number one.

Number two, I would not buy a property right now. I would continue to rent unless my son could get financing. maybe you could help him, et cetera, et cetera, in which then I would do like the Fannie Mae program, which is a 5% down program and go get a duplex, triplex, or a quadplex? Because at the end of the day, you have this big nest egg. You have the opportunity to continue to add to this large nest egg. So why would you ever, ever, ever go put it down on a single family home? So if you're considering buying, I'd prefer he rents for now for a few more years to build up the portfolio, maybe buy some rental properties in the meantime.

But if he really wants a home, I would house hack first and foremost while taking this money and continually building and diversifying into the funds we talk about, get into some cryptocurrency, have a great portfolio there, and really build this base up with this great opportunity

rather than taking it all and dumping it into a house because then you miss out on opportunity cost. That money is tied up for years and years. And the only way to get it out is through a helock or selling the home. And again, with limited information, Leslie, we don't know if you'd be buying a home that has a great capital appreciation rate. So at the end of the day right now,

with so many opportunities in the markets to make, you know, 8, 10, 12, 15% and higher, I personally would keep as much of that cash on hand and continue doing what you're doing and just diversify further. What an incredible answer, Robert. And while you were doing that, I was doing some quick math here. just so Leslie and her son understand what's going on.

$250,000 invested into V-O-O-V-G-T-V-T-I, right? The S&P 500 in these index funds we talk about, on average, will double in value every seven years. That's like the rule of thumb, right? Whatever you invest into the S&P is going to double, on average, every seven years. Your son said he's about to graduate college to be a teacher. Let's pretend he's a little bit older, 25 years old, little bit of conservatism, right? That $250,000 when he is 65, 66, 67, if we use the seven-year

double mark there, is going to be worth over $16 million if you don't touch it. You don't add anything to it, and it's going to be worth over $10 million. That's unbelievable. Now, if you want to be super conservative, think it goes up about 8% per year, inflation, blah, blah, blah, it's closer to $7, $8, $9 million. But that's what we're saying here. By keeping this nest egg invested into the markets and working for you versus taking it out of the markets and using it to buy cash for a house, it can work for you throughout your son's entire 40 year life of investing before retirement, right? So what would I do? I mean, he's a teacher.

Call it 50K a year. I would keep the 250 invested. He's making $1,000 per month right now from this settlement tax free. So, you know, maybe there's a world where he can save a down payment between 30 and 50, maybe $30,000 and $60,000, perhaps purchase a house for $300,000, $350,000. He'll borrow, call it $280 to $300,000. Maybe he can do this 5% down duplex thing. Like, it really depends on what he wants to do.

But there's absolutely a world where this new college graduate, who's probably 22 or 23 years old, doesn't exactly need to buy a house right now, can kind of live his life a little bit, be aggressively saving his money, allowing him to maybe in his late 20s or even early 30s, say, okay, I'm ready to buy a house. I'm going to lay down some real.

I'm going to do the duplex thing. Maybe I want a house hack. Maybe I want to do a single family home. Maybe he's married at the time. I don't know. But by having the $250,000 always invested and working for him for the rest of his life is going to guarantee his future. We never want to borrow from our future to pay for today.

Therefore, I totally agree with Robert here. I would keep the money invested. This is a gift. And I would completely let it be while aggressively saving and investing to potentially buy a house over the next three, five, ten years, depending on your son's life circumstances. I want to close this out because it always resonates with a story from my youth. And that is, delayed gratification is the most important wealth building thing you can implement into your life.

100%. If you come into a situation early on where you can put aside money or if you're gifted some sort of settlement or something or inheritance where you get a love. sum. I promise you, if you delay gratification with that lump sum, it will guarantee you financial freedom later in life. And I tell this story, and we can do this at another time, but I had a girlfriend when I was 21 years old and she was 20 that got in an accident. She netted $25,000 and that was 30 years ago. I pleaded with her to take that money, don't touch a dime of it. I think I told her spend 10%, which was $2,500 and give the rest again to croak capital, even back then, and put it away.

And she'd be a multi-millionaire right now. She didn't. She bought an appreciating asset. She bought a brand new convertible that, you know, five years later was worth $8,000 or $6,000, never invested the money. And now today she's living a pretty standard normal life where she's going to have to struggle in retirement because she didn't listen to me. So just keep that in mind that if you're younger and you get this lump sum, please put it away and delay gratification. It'll pay off 10, 20, 30 fold down the road. I love it, Robert.

Before we jump into our next question, I want to remind everyone that public is officially the cheapest way to trade options. That's because they're doing something no other brokerage has done before. They're sharing 50% of their options revenue directly with you, the customer. So whenever you trade options on public, you get something back minimizing your transaction costs. So go to public.com and activate options trading before March 31st to lock in your lifetime rebate. That's public.com the cheapest way to trade options. Now our final question comes from Marcus T. Marcus says, I discovered the podcast a week ago and I haven't been able to stop listening.

I'm so excited to finally be able to ask you all a question. Here's my deal. I'm 45 and I have five kids. I retired from the army after 22 years of service. Marcus, thank you for your service. I have $30,000 in a 401k, $25,000 in cryptocurrency, $20,000 in a brokerage account, $5,000 in a CD earning 5% and $5,000 in savings. I also have $35,000 of high interest credit card debt. I pay $3,500 per month in rent and utilities, and I pay $1,400 on the three cars we own every month. I recently landed a new job, however, that will bump my monthly take-home pay up to $16,500 or about $200,000 per year. I'm ready to start taking my finances seriously. What should I do over the next five to 10 years to maximize my retirement options? All right,

I'm going to kick this one off, Robert, and I'll let you rely behind me. So here's what I'm hearing from you, Marcus, right? You're taking home a lot of money. $16,500. Of that, $3,500 is going to rent and utilities and call it another 1,500 of that is going to your car payments. So you have $5,000 a month and just like fixed costs every single month to just like exist. That's a lot of money. Then I'm going to also assume you're paying probably $3,000 or $4,000 a month in variable costs. Think groceries for the kids, eating out, doing this, doing that, kids soccer games. Like, I don't know how old your kids are or whatever, but let's call it three or $4,000 a month as go into that, which leaves us now at this new $16,500 a month. Take them $8,000 a month in free cash flow in your budget to save, invest,

but more importantly, pay off your high interest credit card debt. So if you take this $8,000 a month over the next four or five months, you can completely wipe out your $35,000 of credit card debt, which is going to be insanely useful for you. I'm telling you, high interest credit card debt is going to be the ban of your existence if you keep it around much long. And $35,000 of credit card debt is nearly $10,000 a year in interest, my dude. That is bad, bad, bad, bad, bad. So I see you've got the investing again. 30K here, 25 here, 20K here.

Like, that's great. Let's call it $70,000 invested. That's fine. Leave it be. Let it do its thing. I don't want you to worry about investing right now. I want you to be solely focused on paying off your high interest credit card debt. So by call it the end of the year, you have no credit card debt at all.

The next thing I want you to be thinking about is how can I keep up this momentum throughout my 40s and 50s. So think about it like this. $8,000 a month, let's say you've already paid off the credit card debt and you have no more high interest credit card debt, right? This $8,000 per month of free cash flow every month invested toward the S&P 500 or these index funds we talk about from age 40, call it 47 to age 65 is nearly $5 million in retirement. You want optionality in retirement. This is how you get that optionality. You continue to live a life knowing that you are making a lot of money. You're living just fine, right?

You got this $5,000 a month in fixed costs, another $4,000 a month in variable. Like you're not pinching pennies right now, but you're giving yourself the opportunity to build wealth and really catch up now in your 40s and your 50s knowing that retirement is around the corner. Yeah, I love this. And you crush that. And really when you spell out the math, it's just so incredible to see what people. can do if they really plot out a plan. And in this instance, Marcus, and anyone else listening

that's in this situation, it's really important to understand that if you don't let that lifestyle creep get in the way, you can really, really set yourself up for financial freedom. And in this instance, you have to think about your five kids. Because if you're going from this salary that you had, let's say, when you were in the service, to all of a sudden the $16,500 a month in take home pay, What you don't want to do is immediately let your lifestyle catch up to the 16,500 because that is going to put you in a very difficult situation down the road and not set your children up. And that's the key here. If you do what Austin just spelled out, your children will be set for life and so will you. And it's just really important to take that action now right as you're coming into this new money and having that plan.

Yeah, something else to consider too, right? as you mentioned, there's three cars causing this $1,400 month in car payments. Figure out a way to free up that $1,400 a month, dude. I don't know if that means selling any of the cars, paying any of the cars off early. I'm sure you've got a couple cars for the kids that you bought them. Like, maybe it's time that they try and pay it off. Like, I don't know the situation. But over the next call it year or two, I'd really like to see your car payment

monthly outlay dwindle away from 14, maybe closer to 500 or even to zero. Because if you can free up that $1,400 extra dollars per month in your car payment and add it on top of that $8,000 that we talked about, your $5 million in retirement has now boosted to nearly $7 million. You know what I'm saying? Like, that's again what this car payment is costing you over the next 15, 20 years. We talked about that with an earlier question and we just want people to understand. You should not be driving your retirement. And if you do want to drive it, make sure it's something that you're really, really excited about because that's then what you choose to spend your money on versus also going out, also going on the vacations, also eating this, also doing that, right?

that's where you get into the $35,000 of credit card debt. I love it. Well, thank you everyone for following along and joining us here at the Rich Habits podcast each and every week. We are so excited for all the great things we have moving forward for all of you. And for the money mindset community as well, make sure you go to the link in my bio either on Instagram or TikTok and check out the details for our upcoming event on April 26 and 27th.

Austin will be there with me sharing the stage, and we will be having a blast with a bunch of other great speakers and really digging into all of these subjects with all of you. There is a live and a virtual component, and we'd love to see you join in for this money mindset event. And again, thank all of you for following along, sharing the Rich Habits podcast, and really just keeping us at the top of the charts as we try to provide the best information we can on the internet every single week. And don't forget to register for the free webinar. that we'll be hosting on April 2nd at 4 p.m. Eastern Time. We'll be talking about building an investment portfolio from scratch. It's going to be an absolute blast of an event. And we already have 900 people

registered. Only 1,000 of y'all can join us. So get after it. Be quick here now with your registration if you want to attend that. There's going to be a link in the show notes below. So don't forget. Thanks, everyone. And have a great rest of your week.