Rich Habits Podcast - Q&A: Tax-Free Income for Kids, Our Frugal Life Hacks, & Franchise Dos and Don'ts

Starting point is 00:00:00 The 2026 Chevrolet Tracks is the stylish SUV for those on the move. And with the standard Chevy safety assist package, you have the backup to handle every turn with confidence. The 26 tracks, start your build at Chevrolet.ca. Hey everyone and welcome back to the Rich Habits podcast, a top 10 business podcast on Spotify. This week's episode is our question and answer edition, which means Robert and I are sitting down and once again answering your questions. We're going to dive deep. We've got, I think, eight or nine questions in this week's episode. We might be on the little bit longer side, but you guys say you like it.

Starting point is 00:00:35 So we're going to keep coming with the longer Q&A episodes if you guys enjoy them. Yes, these episodes have become quite the hit over the past, let's call it, eight months. And so they just keep getting longer and longer. So make sure you tell us if these start getting too long and we can always cut them back. But we really enjoy these episodes because we just get to really engage with so many of you that bring us these hard-hitting questions. questions every single week. Well, speaking of engaging with people with their questions, Robert, don't forget, we've got the Rich Habits Network as a wonderful solution for that. A lot of people now, Robert, I think we're at 429 members are inside of the Rich Habits Network. Unbelievable amount of

Starting point is 00:01:16 people. So many questions, so many introductions, so many DMs being asked and thrown around. It's just been so much fun in the Rich Habits Network, Robert. We have consistently now 10, 15, 20 people, every single post chiming in helping each other out. It is what it is, right? It's a network. It's a network of rich habits, podcast listeners that want to help each other grow that also want to learn alongside us. So it's been a lot of fun. I think that's the coolest part of what we've built here and we're building right in front of you before your eyes, all of you that listen each and every week, is building this network of very smart, educated people, whether you're in the beginning stages of your investment journey, middle or even later stages. And everyone is just helping each other. And I love

Starting point is 00:01:56 it. It's great to see when I can pop in there. And I appreciate all of you that are just reaching out with all of your questions. So it's so much fun. So if you want to join the Rich Habits Network, there's going to be a link in the show notes below. You can just go to Google, type in Rich Habits Network. But again, there's over 420 community members already inside of there, excited to learn, network. And the coolest part is there's people that are 22, there's people that are 65. There's entrepreneurs. There's W2. I mean, everyone from all walks of life are in here. And it's just so inspiring to see their stories and get to interact with them on a daily and weekly basis. So be sure to check out the Rich Habits Network using the link in the show notes below. So before we get into this

Starting point is 00:02:33 week's episode, a quick heads up, time might be running out to lock in that 6.9% yield at public.com. And right now, bond yields are at highest level since 2009, and you can take advantage of that with a bond account at public.com. But here's the thing. The Fed has signaled potential rate cuts in September, and there will probably be more to come this year and into 2025. But the good news is that with a bond account on public.com, you can potentially lock in a 6.9% yield until 2028. And when the Fed lowers interest rates, your yield remains the same. That is the key point here is you are locking in that rate no matter what happens with the Fed. But you must act fast to take advantage of some of the highest bond yields in years. Discover how you can lock in a 6.9% rate.

Starting point is 00:03:23 until 2028. The new bond account only at public.com forward slash rich habits. All right, everyone. Our first question comes from Nicole T. Nicole says, I have a question whether it's worth to pay down my mortgage. I'm already maxing out my retirement accounts and I have now money invested into a high yield savings account for an emergency fund. And I'm also investing my bridge account. However, I have a $600,000 mortgage at a 7.25% interest rate. I have $300,000 in cash. trying to decide whether I should put all this money in the market or if I should pay off a chunk of my mortgage. But if the rates drop here as the Fed cuts them, then I could potentially refinance my mortgage and then even begin arbitraging more of that into the markets like you and Robert say. But what do you guys think? Robert, I'll let you kick this one off.

Starting point is 00:04:11 Nicole, great situation and even better question. Let me take a stab at this. I personally would not pay any of the payments down. I would get that $300,000 in the markets. because remember the S&P 500 alone is already at 19% gains for the year and we're only three quarters of the way through. So keep that in mind. We always talk about that positive arbitrage and this is one of those situations where you're going to take advantage of it. Even though 7.25% on your mortgage is quite high, I don't think it's time to look at refinancing just yet because with the Fed rate cuts, I would wait a little bit longer for those rates to come down

Starting point is 00:04:47 enough to make it worth your while to refinance and cover the fees of refinancing. refinancing and for now get that $300,000 working in the markets and utilize that positive arbitrage to your benefit. Right there with you, Robert. And I mean, think about it like this, Nicole, you've got $300,000 sitting on the sidelines that if you had started investing earlier this year, you'd be up nearly $60,000 in profits against that. Now, here's what I would do if I was in your situation. I would likely set aside 20, maybe $50,000 of this $300,000. So when the rates do begin to come down, let's call it over the next nine to 18 months to maybe four and a half, five and a half percent interest on these 30 year fixed mortgages, you can go and refinance it, have some cash

Starting point is 00:05:31 set aside to pay some of that refinancing fee, and then maybe even chuck a little bit extra onto that mortgage if you want to lower the payment, assuming that it might be overwhelming right now. As you know, we don't want that to be more than 30 to 35 percent every single month, and a $600,000 mortgage at 7.25 percent might be more than that. So when you go to refinance over the next nine to 18 months, make sure you put enough down alongside the refinance where you have now some more flexibility in your monthly budget to invest and not be housebroke. I love that. I love that so much. And that is such a great way to wrap up that question, Austin, just because people need to think through the total ownership cost, but also the opportunity cost when they're thinking about

Starting point is 00:06:13 what to do with their extra money and where to invest it. So it's so important. Our next question comes from Viral S. Viral says in episode 12, you guys had mentioned that parents with a small business can claim up to $12,500 from their business profits and begin using that to pay their children even without putting them on payroll. If the child does not run through payroll, what is the path to claim the payment as a business expense and how do we prove it as earned income for the child since a Roth IRA contribution requires earned income? So my immediate thoughts here, Robert, let's assume that you're not doing the Roth IRA. Let's just assume you want to just pay your child every single year from your business.

Starting point is 00:06:52 I want to keep the money in the family. You want to have a little bit of that business deduction. I believe, and again, I'm not a CPA, but you can just issue that 1099 to your child assuming they do not want to participate in a Roth IRA contribution. However, if you do want to participate in a Roth IRA contribution, you can try to add them to your payroll, you can make them a W2 employee, and you could pay an extra couple hundred a year in taxes around them as their employer. So assuming you pay them less than 13,600, they will not owe any federal income taxes on that because that's the standard deduction for the

Starting point is 00:07:26 year. It's below that sort of line where you'd have to pay taxes on your income. But they would, however, still have to pay some of those Social Security and Medicare taxes, right? But in our opinion, it's like, come on, just figure out the extra couple hundred bucks every year and make it so that if they are on a payroll and if you really want to get after that Roth's, IRA. All the year ducks are in order and you're able to now allow them to realize that income has earned income. It's taxable income, right? You just paid your Medicare and your Social Security taxes on that income and now they can invest that into a Roth IRA. And Austin, just a quick note, I didn't want to interrupt you because you were crushing this answer, but the standard deduction

Starting point is 00:08:04 amount for 2024 is actually 14.6. I didn't want to interrupt you, but it did go up. So I just wanted to get that out there to make sure for anyone that's doing the deduction for this year. And then one thing I would like to add is that if the business is an S corp or a C corp, you're not exempt from paying the employment taxes. Both of you, the business owner and the employee will both have to pay Social Security and Medicare taxes. However, the child does not pay federal income tax as long as it's up to the amount of the standard deduction.

Starting point is 00:08:37 I think we could talk about this topic for hours. I love it so, so much. because in my travels in education, I don't know that 10% of the people out there actually utilize these tax benefits for their small business when they have children. And I'm not saying you should get yourself in trouble. And, you know, if a kid is doing normal chores that they would do, that's not considered real work. But if you have a business and you can put them to work, whether they're in social media, they're cleaning, they're organizing, any of those things that are real tasks that you would have to pay someone to do for your company. This is a great way to help your kids build wealth,

Starting point is 00:09:14 get them on the right track, especially if you set up that custodial raw for them and get that maxed out every year. The next question comes from Priyanka K. Priyanka says, how should we split the money between our bridge account and our retirement account? We want to retire in the next 10 years. My husband and I are in our mid-30s and every single year we invest about $60,000. 40% of this goes to our retirement accounts and 60% of this goes to our bridge account. Help us figure out if this is a good allocation when it comes to investing so that we can retire early, but also have enough money in our retirement nest egg so that we don't ever really run out of money. Now, Robert, this question would be so much easier to answer if I had any more information about their financial situation,

Starting point is 00:09:57 but we'll just take a stab at it. Well, let's do this. Let's base it on the $100,000 mark because I think that makes for easy math. Okay. So let's do. So let's just. say that the average listener right now is, you know, taking home $100,000 a year. And you are investing 15% of your take home pay every single month. That means you're investing $15,000 a year. In my opinion, as we come back to this sort of rule when it comes to investing priorities, we say match beats Roth, beats taxable. And we say that order because the match gives you 100% absolute return on your investment into your 401k in the form of a match from your employer. So we want to make sure we get the free money. So go up to the match. Next, we have the Roth IRA. That's $7,000 a

Starting point is 00:10:41 year. And then after that, assuming we have autonomy on the 401k, we go back and we max that out if we can afford to. If we do not, and it's all on these underperforming target date funds, then we park the money in what we call a bridge account on public.com, which is a normal taxable brokerage account that's used as a way to bridge us from an early retirement into our 59.5 age bracket where we can finally start tapping into our Roth IRA and our 401k. So that's just the quick and dirty on what we think. Now, if we were making 100,000 a year, investing $15,000 of that toward our retirement accounts, we of course would go up to the match with our employer. So, let's say they match that 3% of our $100,000 salary. You're now investing $3,000 to that 401k. Then it gets

Starting point is 00:11:21 100% match from your employer. So you have $6,000 invested. And then you go and jump to the Roth IRA at $7,000. So you have the $3,000 here plus the $7,000 here. Now you're at $10,000 total invested out of your $15,000. Now, let's assume that you do not have autonomy, and the 401k is in a bunch of target date funds, and you don't want to over-allocate to that. So in that instance, in my opinion, I would take that other $5,000 you have and park it into a public.com brokerage account and invest it into the index funds we talk about. But if you did have autonomy and you could make sure that the 401K was invested correctly

Starting point is 00:11:56 into the cool ETFs we talk about in the index funds, then it would be a good idea to take that other $5,000 remainder and park it back into that 401k. So you've got all this money now in retirement. Now, here's the real question, Robert. If we just take $15,000 a year and we're investing it, we don't exactly have that much left so we can park money into a bridge account. So what's your perspective on this? Do you think people should then maybe under-allocate toward a 401K,

Starting point is 00:12:24 more allocate toward a bridge account? I mean, how does the math work in your eyes? Yeah, this is, I think, one of the most important questions, a huge portion of American citizens, let's say, 35 years and older face, and they don't understand. You and I broke it down really well in the net worth millionaire episode of the podcast. I don't remember which one that was. Who's our biggest disagreements with Dave Ramsey? Yeah, our biggest disagreements with Dave Ramsey.

Starting point is 00:12:50 And this gives me goosebumps and chills because it's so damn important. And here's why. So many people blindly go through their careers, maxing out their 401ks and being. proud of it, paying down their house and being proud of it. But then they have all of this equity and all of this money, but they have no accessible capital from those investments from those retirement accounts until they actually retire. So you're actually cash poor all along the way. That is why we preach to the mountaintops to understand and have the bridge account, something you control, something you have autonomy on, and something that you can take money from whenever you need it,

Starting point is 00:13:30 want it or want to do whatever you want with it because of the fact that you control it. It is so important. So when we talk about the numbers, I think the way I would look at it is this. As you're building the 401k and the Roth IRA, I think probably the best strategy is once you get to $250,000 or $300,000 in the 401k, then I think you could take your foot off the gas a little bit and start then really putting money in to build the bridge account. Because what you don't want to do is ignore having that autonomy in that account and being able to build it to a very nice level in case you want to retire early or you want to do anything that you'd want to do as you get up in the years. So it's very, very important.

Starting point is 00:14:12 But until you have that base built, then obviously the 401k, you want to get the free money all along the way. But just don't take your eyes off of the future and knowing the importance of the bridge account. So to put some real numbers around this, Robert, I just did. some math here. If you're investing, let's call it back to this example of that 100,000 and you want to allocate 15% to your investments and you are doing a 3% match with your employer. So you're investing $6,000 a year on that $100,000 salary. Again, because they match your investment. You'll be looking at about a half a million dollars in this 401k after doing that for about 20 years. Now, if you want to increase that maybe up to 4% or 5%, right, assuming you do have autonomy over your

Starting point is 00:14:56 investments because again, we don't want to overallocate money into an underperforming account that invest into bad funds, then maybe you're starting to look at having $700,000, $800,000 in this 401k retirement account over a 20 year period. Okay, great, we've got the money just like what you're talking about, Robert. Now it's time to take the foot off the gas, right? This money is going to work for us if we want to invest toward it or not, right? It is large enough. It's going to double every seven years, and we've got time on our side still. We're probably at this point in our late 40s, maybe early 50s. And so now it's time to really begin thinking about putting that same foot on the gas with the bridge account. How now do we grow that to $250,000, $350,000, allowing us to focus that money on income producing ETFs that can pay us $3,000, $4,000 a month and supplement a potential early retirement?

Starting point is 00:15:41 So again, I know this was kind of long, Pryanka, but we wanted to really break it down for you here because I think at the end of the day, a lot of people could be confused about the purpose of a bridge account and when it's an optimal time to begin kind of reallocating funds. away from a retirement nest egg and into a wait a second, I can afford an early retirement bridge account. Well, and I think one of the most important takeaways from this and why I get so excited about it is this really illustrates why so many business owners and people that don't have 401ks end up more wealthy than people with 401ks. And that is because so many people are led to believe that a 401k is a great retirement strategy. And it really isn't because they underperform the market so poorly. But because you're getting that free money, if you know how to do the balance between how much to put in the 401k, how much to put in the bridge account, how much

Starting point is 00:16:35 to max out the Roth IRA every single year, you can find a really great balance to build wealth and be able to take advantage of the 401k as well. I love that, Robert. Now before we jump to our next question, I need to give everyone a heads up. Time may be running out to lock in that 6.9% yield on public.com. When you invest in a bond account, you can lock in this rate until 2028. But with potential rate cuts on the horizon, you might want to act quick. Discover how you can lock in a 6.9% yield until 2028. The new bond account only at public.com forward slash rich habits. There's going to be a link in the show notes below. Our next question comes from Nareh P. Noreh says, as the high yield savings interest rates are about to go down because the

Starting point is 00:17:17 Fed rate cuts, I started to think about alternative ways to earn a high. high yield on my money. I've been chatting with Austin regarding this private debt fund from F Street, where they pay you a 10% interest rate on your money every year. However, they make it by lending out your money at a 15% interest rate. They do hard money lending. Do you guys think this is a good idea? Robert, we've never talked about F Street. I don't use F Street. I've never looked into F Street. So let's keep F Street out of the equation for a second. I think what would be more important, though, is for us to explain, one, what hard money lending is, two, what private credit is. and sort of how that took the world by storm over the last couple.

Starting point is 00:17:53 I'll call it 18 to 24 months. And then three other alternative ways to earn a high yield that might be less risky. Well, I'm going to start with the risk. Noresh, I don't think you should be doing private money lending until you're at a $2, $3 million net worth where you're fully diversified into all the things we talk about on a daily basis. Private money lending can be very lucrative, but it's also very risky. Because you are lending this money, whether you're lending it directly to a company

Starting point is 00:18:19 that is borrowing funds or you're lending it through Yield Street or one of the other websites that does it. But it is very risky because you are betting on these real estate markets or other diversified categories that may not be as mature as I'd like to see for someone starting out. I look at hard money lending, private lending, private credit, and even investing in startups as something that you do later after you have all of your bases covered and you're really, really secure in your base if that's $2 million, $3 million to get to this sector of investing. And yes, you can get higher yields. Sometimes hard money lenders will get 15, 16% on their money.

Starting point is 00:19:01 But the problem is when they do this in a real estate deal or for a local syndication, if that company fails, your money is gone. And unless you really, really want to spend your time in court, you know, being the second or the third mortgage on a property to be able to get your money back because you're never going to be first, the bank is probably always going to be first or the syndication, you have to be very, very careful. Not saying don't do it. I'm saying move with caution because I don't know where you're at and your investing journey at this point. And I certainly wouldn't be looking at this strategy early on. Let's say Nuresh is really focused on this 10% annual yield. So sure, if you want to

Starting point is 00:19:40 do some hard money lending and get real risky with it and, you know, cross your fingers that whoever is taking your money to flip a house or whatever they're doing with the money pays you back, be my guest. But it is not uncommon to see some of these fix and flips fall through where they can't sell like they wanted to in those first three or four months. And now you don't get your money back because the house still hasn't sold yet. Or they do sell the house, but they break even on it. Now they can't give you your money back with interest. And so there's all these bad situations that can happen when it comes to hard money lending from an investor perspective. Here are some other ways to make some yield with your portfolio, assuming you don't want to do the public.com bond account.

Starting point is 00:20:16 First one, covered call ETFs. We've talked about SPY. We've talked about QQQI and IWMI. These ETFs will pay you an annual yield higher than your 10%. And if the S&P 500 or the NASDAQ, the actual indices trend higher throughout the year like they did this year and last year, the actual prices of these covered call ETFs will rise as well. I think the price of SPYI, the actual price of the ETF is up about four, four and a half percent this year. And that's on top of the 12% it's going to pay you. So you're looking at what a 16% total return here in 2024 so far with SPYI. That's a great alternative. Another one for you to consider REITs. Robert and I talked about REITs a lot over the last couple episodes. These are real estate investment

Starting point is 00:20:58 trusts. You won't get that same 10%, but you will be getting 5, 6, 7%, and it'll still be in real something you might be interested in because you want to do some of this hard money lending. And now your customers aren't Uncle Bob and Miss Rebecca over here. But instead your customers are Walgreens, Costco, and Kroger. And you now own a share of this larger real estate investment trust that owns commercial real estate in a meaningful way. So those are just two ideas, Neresh, that you can kind of run with yours as it relates to generating some more yield in your portfolio. Yeah, this is a great question for everyone to pay attention to. And I have seen so many of my wealthy lawyer friends and doctor friends and people.

Starting point is 00:21:37 in those fields that make a lot of money and want to diversify. So then they find a local contractor that may or may not have the experience of doing these flips or doing these deals and they invest $50,000, $100,000 with these guaranteed returns only to lose all their money. And the way I look at it is once you get sophisticated and you have millions of dollars, then I think you can take the higher risks to get the higher returns. But until then, I'd rather see you do what Austin said or even just put it into V-O-O and QQQQ because we know over time they're going to make 10, 11, 12%, you're going to win, and everyone's going to be

Starting point is 00:22:11 happy. Our next question comes from Connor L. Connor says, what financial decision would you change? For me, it was back in 2020 and 2021 when I made the decision to invest a few thousand dollars into some meme cryptocurrencies while they were at all-time highs. In hindsight, I realized this wasn't the wisest choice, especially given my financial situation. I had less than 5,000 invested in my retirement accounts and only $30,000 saved in an emergency. on. Instead of chasing the hype, I should have just focused on building my 100K base, buying the ETFs like V-O-O-O-V-G-T, MOTS and others that you guys talk about and are much more credible.

Starting point is 00:22:46 Looking back, I understand that in the grand scheme of things, a few thousand dollars might not seem like a lot to some people. However, when you're just starting out and you don't know how much save like I did, every dollar counts. I got caught up in the hype of a potential quick gain without fully considering the risk of the importance of having a strong financial foundation first. Does anyone else have a similar experience? Robert, I'll let you kick off this one. What is your biggest financial sort of decision that you would change throughout your life? Yeah, I think this question is great. And I'm going to tell you right now, most people do it backwards. They start out with all the crazy investments and all of the hype and trying to like five X their money right out of the gate with some, you know, investment that they shouldn't even be considering rather than doing the basics.

Starting point is 00:23:29 I promise all of you that follow along from someone that's been in this business of building. wealth for 35, 40 years, consistency wins. That's why Warren Buffett said, I think his famous quote was, he was asked why not more people follow his investment advice. And he said because no one wants to get rich slowly. And I love that because everyone wants to take their shots early. And you know the message from Austin and I, and that is build your base first, start to diversify, then take your shots. So for me, where it starts out is understanding consistency and automation at a younger age were the most important factors for me in building wealth. You guys hear me talk all the time about the cycle.

Starting point is 00:24:13 The cycle is simple. People go, I'm going to get my shit together and I'm going to save money for my retirement and start investing. They save 50K, they buy a car. They save 30 more K. They buy a jet ski. They save 50 more K. They buy a boat.

Starting point is 00:24:27 And it's just a vicious cycle that they never ever get out of because they look at all money being equal. The best thing you can do for yourself is figure out a way to channel your brain and your mindset that when money goes into those investment accounts, those retirement accounts, it is locked away. You don't have the password. You don't have the key because you should not be looking at that money is money that you have available to spend on depreciating assets. Once you figure that out in your mindset and that money gets locked away and left to grow, you will always. unlock all the keys to the kingdom of building wealth and financial freedom. I love that breakdown, Robert. I think the part about the consistency is the most important because when I was just starting out in high school and in college, consistency was the

Starting point is 00:25:11 hardest part. And then even after college, consistency is still the hardest part. I guess my financial decision that I would change is I bought a new to me car right out of college. I was making $65,000 a year and I had no right to pay $700 a month. in a car payment and insurance. I just, I thought it was cool, was not that cool. And I definitely could not afford it, but I did it anyway. And if I would change anything, I would have changed that decision. I would probably have another $70,000 to $100,000 invested because of compound interest and the money I would have invested. I think at the end of the day, staying consistent, even throughout the ups and downs, like what we experienced in all different types of markets,

Starting point is 00:25:50 is the most important financial sort of discipline that you can instill in your everyday investing, every week, every month investing. And if you can stay consistent, you know, it's just what we said before, Robert, consistency and intentionality as well. That's the blueprint. Just be consistent and intentional with your money. And that leads us into Donald S's question. Has anybody thought about or put cryptocurrency into a Roth IRA

Starting point is 00:26:12 through one of the companies that provide these services? It seems like the tax savings on a potentially large return over time would be worth investigating. I would be interested in holding blue chip cryptos like Bitcoin, Ethereum, and Solana, thanks for the information. Yeah, so what a great question, Donald. I'm at 10% waiting in Bitcoin in my Roth IRA. I do this through Ishare's Bitcoin ETF. I bet beyond that, got some Bitcoin.

Starting point is 00:26:36 And I think it's called Bitcoin IRA.com or something like that. I just want people to remember that the Roth IRA is supposed to be your retirement. You should be very thoughtful on what your retirement is invested in so that you receive 8 to 12% annual returns on a long period of time. Because when you set up this account and you're investing every month into it and you're thinking about where things are going to be in 30 years, those are the assumptions you're making. But those assumptions are completely thrown out the window. If you put too much of this money into bonds, too much of this money into crypto, too much of this money into a single stock. The S&P 500 and the NASDAQ go up 8 to 12% per year. But the cryptocurrency, I mean, it's who knows what it goes up every year.

Starting point is 00:27:16 I mean, it's up all over the place. Same thing with a single stock, right? This is why people get so excited like, oh, I got all this Nvidia in my Roth IRA. What do I do? it's like probably a good time to take some profits and park it back into the money machine that is the S&P 500. If you are trying to project how much you'll have in your retirement accounts at 59, 62, 65 years old, and you use that 8 to 12% sort of annual return, you will only achieve that if you have 8 to 12% annual returning assets in your account. So just be weary about that,

Starting point is 00:27:44 which is why, again, I only have about 10% of Bitcoin in mine. I think it's a great idea to have Bitcoin in a Roth IRA. It gives you some cool upside, a little bit of downside here and there. Who knows? But I think it's worth it, right? The trade officers are there and the research shows that. And one question I have for you, Austin, what is the phrase that you talk about all the time about not robbing your future for something today when you're talking about retirement accounts and Ross? What is that statement? Yeah. So people talk about wanting to cash out a 401k, pay a penalty, and then use it to pay off some of their credit card debt or pay off this debt or or whatever it is.

Starting point is 00:28:20 And what you're doing is you're robbing future you for joy today. And it's like you didn't just work this hard to get this lump sun up to $50,000, $150,000 in your 401K, like what you were just talking about only to cash it out and go buy that boat, only to cash it out and go pay off the helock or whatever it is, right? You can pay off the helock. You can go buy the boat, but you don't do it by selling your investments that are supposed to double every seven years. 100%.

Starting point is 00:28:44 I love that. Our next question comes from Stephen C. Stephen says, hey, does anyone here have any insights or pointers regarding franchises? I need things to look for and things to look out for. I'm looking to own my first franchise over the next eight months. I'm currently working with a company that connects prospects with potential owners. I don't have too much knowledge, but any information helps. Robert, break it down for him.

Starting point is 00:29:06 Okay, let's start with things to look for. Number one, understanding the numbers. You really have to dig in and know the numbers before you buy. Number two, the growth rate versus the closure rate of that particular franchise. Because they're always going to tell you the pie in the sky numbers of how great it is. They're growing X, Y, Z amount per year, 200 stores per year. But you need to know how many stores are closing because they didn't succeed. This is very, very important.

Starting point is 00:29:36 And then number three, you need to understand the investing thesis of why you want that particular franchise. Because I have people come to me all the time. I have owned franchises for 15 years now, maybe longer, and people come to me all the time with 50 grand, 100 grand, and go, man, I just want to get that mailbox money. What franchise should I buy? Because they think all they have to do is open the doors, turn it over to the staff, and they're good to go. Well, guess what? That is so far from the truth. Can franchises be very profitable?

Starting point is 00:30:05 Yes. Can they be fully passive? Not very often. So anyone online that tells you they're passive and is selling you a course or service, you know, to buy a franchise and saying they're fully passive run because they've never run a franchise if they're saying that because guess what when it's a holiday weekend and the building catches on fire or it's a Friday night at closing and someone forgets to lock a door guess what you're going to go back and do it because miraculously your manager's phones are going to be off at that time

Starting point is 00:30:35 because they know you're only calling for something important so things to look out for Make sure when you do get the financial statements to review the numbers to understand the numbers or have your accountant help you or your lawyer help you or your broker, whoever it is that's helping you with this purchase, make sure that those financial statements are coming right from the POS and not from a third party vendor. Because guess what? A lot of business owners may have two sets of books and even though it's a franchise, you have to be careful to make sure they're not hiding anything that might cook the books in their favor to help them get a higher multiple to sell the product. And also, when you're buying these businesses, make sure you understand

Starting point is 00:31:18 what multiple to pay. So do your research or have someone help you because you need to understand should this be a 3x, a 4x multiple and on what? I generally try to buy businesses based on owner's discretionary income. What is the owner making per year? So if that owner's making a $100,000 a year off that business that let's say grosses 800,000, then I have a safe bet that I know if I can buy that business for maybe a two and a half multiple or a three multiple. I'm in good shape because I know what to expect for that business. And then lastly, I would say, don't be afraid to ask the hard questions because you want to make sure that the market is right for you, that particular franchise is right for you, and you understand what you're getting yourself into.

Starting point is 00:32:05 And anyone that's interested in franchising that's in the Rich Habits Network, please reach out to me in a DM or a chat because one of my dear, dear friends that I've worked with for decades now is one of the top franchise analysts in the country. He knows everything about everyone and he can certainly guide you along the way. So before you make that big investment, reach out to me and I'll make sure to get you set up correctly. Very, very cool. Thank you, Robert, for walking Stephen through that. Stephen, we're rooting for you. Let us know what franchise you get. I'll swing by. Maybe it's pizza. Maybe it's

Starting point is 00:32:39 frozen yogurt. Maybe it's coffee. I don't know. But I'll come support your business, my friend. Our next question comes from Leslie S, and it's pretty straightforward. Austin and Robert, do you guys have any frugal life hacks? I'll click this one off, Robert. So my frugal life hack, I will impulse buy food. I get hungry, and I just swipe that credit card, and I just buy food. So by grocery shopping on the Kroger app every single Sunday in a having all of my lunches and dinners planned out for the week, I am making sure I don't impulse Uber eats a $28 Chipotle order three times that week, or impulse buy a drive-thru at the Wendy's for $22 because I get a baconator. And so by doing that and planning things out

Starting point is 00:33:21 every single week ahead of time, I think I save myself between $3 and $500 a month of impulse buying food because I'm hangary and I really want to find something and I'm willing to pay $20, $30 for it right then and there. Right. It comes back to what we talked about on our episode on Tuesday with Jesse. It's okay to spend money on things like dining out and food and really nice, whatever. Just make sure it's what you want to spend your money on. So just kind of finding the middle ground there was really important for me. And again, it allows me to save a couple hundred bucks a month. I love that takeaway. And we could talk about the food hacks all day long because, you know, they say that show me your habits and I'll show you your future. And so many people do not prepare

Starting point is 00:34:02 their lunches, their dinners, they don't have the right food in the house. So they're always eating out or eating ass food, which is worse. And so it can be a vicious cycle. My hack, and this one is a little bit broader of a hack, but it works well for me and has for many, many decades. And that is, I love to stay active. And by doing things that resonate really well with me and my lifestyle that don't cost money is one of my favorite life hacks because, you know, I like biking, paddleboarding, tennis, walking. You guys all know I walk a country mile pretty much every single day when I'm filming. And the way I look at it is I can go out and get on my cruiser bike and we can go for a ride versus owning a motorcycle. And the point is, why not have just as much fun on a bicycle as you

Starting point is 00:34:47 can on a motorcycle in many instances and get the exercise and once you buy the bike, it's free. Whereas owning the motorcycle, you have upkeep, you have the motorcycle payment, you have insurance, you have gas, all of those things. Secondarily, paddle boarding versus owning a boat. It's the same thing. A paddle board is simple. You drag it into the water. You go out and have a blast. It's great exercise.

Starting point is 00:35:07 And it's free. You don't have to pay to do it. So I love those types of activities. And I think more people need to review their life. Because I think a lot of people sit there and go, man, I'd really love to have a boat because I want to get out on the water. But then they can't afford the boat at that time or they don't want to spend the money on the boat at that time. So they don't get on the water. You can go buy a couple paddle boards used off Facebook.

Starting point is 00:35:30 marketplace and be on the water this afternoon and get a lot of joy out of it rather than waiting until they can actually buy the dream boat there are ways to really really accelerate the quality of your life for little to know money and that is my hack i think a lot of people think that they have to spend money to have fun you will quickly realize that one your children they don't need you to go spend a bunch of money y'all can take them to the park give them a cardboard box to play in and they're having a good time right so don't feel like a bad parent for not spending hundreds of dollars on them every single week. But two, and I remember doing this, Robert, when I was in my trying to buckle down and really

Starting point is 00:36:08 have a good budget type mentality when I was right out of college, sometimes for fun, I would spend my weekends walking around the park, just kind of getting outside. And instead of going out and buying lunch or going out and drinking or doing this or that, I would pack a sandwich or I'd grab a cookie or, you know, I'd splurge on buying, you know, a churro from Subway, right? Like, it's okay to spend those things. But again, being intentional with how you spend your money and what makes you happy, I think, is the biggest needle mover from a frugal living perspective. But again, there's a big difference

Starting point is 00:36:34 between frugality and intentionality. And sometimes if you're trying to be frugal by not spending money and eating out, but you're still buying the new clothes every month, you know, you have all the 19 different subscriptions and you barely watch them. Maybe you're being frugal in the wrong places. Maybe you just need to be a little bit more intentional with how you're spending your money so you don't have to be so frugal if this is something that you are challenged with. Yeah. And when you think about the boat, and I'm sure you know a lot of them, I know a ton of of people that have a $700 a month boat payment plus insurance, lodging, storing, wherever they have to go with it, whether it's a dock fee or putting it in someone's backyard or a storage unit,

Starting point is 00:37:10 that barely ever use it. They probably take their boats out six times a year, but it's draining them. And that's why I like to really open people's eyes to building a quality of life without spending all your money on it. Because I think, and it's what we talk about all the time, having velocity on your money, too many people when the weekend comes and they don't know what to do to have fun. The first thing they resort to is brunch and drinking. That's a bad idea, in my opinion, most times. And then after that, they're like, well, let's go to the bars. Let's go to this festival. And everything is based around spending money, whereas you could do just as many fun things on a budget to be able to still get out there, enjoy yourself. I enjoy physical activity in the outdoors.

Starting point is 00:37:51 So for me, I barely spend any money on those activities. And I have a blast every weekend. What a great question coming again from Leslie S. Our last question comes from Chris W. Chris says Robert mentioned in the past that it's important to choose a business address that is not your own. So what do we use? PO Box? Do we ask a friend? Do we give mom and dad's address?

Starting point is 00:38:12 And would the resident of that address be held liable for anything? Robert, I'll let you take this one. Yeah, so Chris, great question. I know we've covered some of this in the past, but it really is about this. When you form a company, your LLC, the goal here is to. give you layering and protection because at the end of the day as you're building wealth i always talk about that the more layering and protection you have the less liability you have down the road from an inside attack or an outside attack so how that relates to your address is very similar to how

Starting point is 00:38:42 it relates to your cell phone you don't want your personal cell phone number on that new lLC and you don't want your home address on that new LLC either now here's where a lot of people get things wrong. They go to the UPS store, they get a P-O box, and they put that address on the LLC paperwork. And guess what? There are a lot of governments out there that no longer accept those UPSPO boxes as the way to have your address for your business. They just don't accept it as a viable business address. So what I suggest people do and I do is get a virtual address. That's a real virtual address. You can walk up to it. You can get your mail there. You pay for that. service or if you're doing a lot of work on your company but don't need your own office rent a

Starting point is 00:39:28 co-working space a lot of co-working spaces also allow you to receive your mail and use their physical address on your LLCs because at the end of the day if any lawyer worth a grain of salt comes after you for a lawsuit and you have your home address and your mom's address on the LLC they're going to be able to pierce the corporate bail it is very very important now another layer to this that's kind of the pro tip of all of this, Chris and anyone listening, is understanding the importance of a registered agent. You can hire this service out, but also you could use your lawyer as your registered agent as well, whereas their address at the law firm could be the business address as the registered agent. And then that gives you another aspect of layering, but also

Starting point is 00:40:15 protection by having a correct address for the business. And just as a quick reminder, I use Buffalo registered agents. They're a Wyoming-based registered agent corporation. They make it super simple for me to create new LLCs. They do all the paperwork behind the scenes for me. They're very affordable. I highly recommend them, not sponsored, just a customer that is really happy with the service that he's received. Yeah, I love it. There are a lot of ways to do this, Chris. And anyone else, just make sure you follow the rules. Because if you don't operate your businesses correctly and you start making a bunch of money and things go wrong, you want to make sure you don't go backwards and give all that money away because, sometimes someone is able to come after you personally for all the wealth you built. Everyone, don't forget, the Rich Habits Network is live. We have over 420 people already in the network. We're getting tons of DMs, tons of questions are getting answered. We've got live streams happening every single Tuesday night. We've got a ton of fun stuff to announce here coming soon.

Starting point is 00:41:11 There's similar resources. There's over six hours worth of video footage of coursework inside of here. I mean, it is the full deal. And Robert, I know we got a couple comments. actually from some folks that said, why would I pay $90 a month to be a part of the rich Habits Network? Why can't I just take that money and invest it into the S&P 500 and get value that way? Do you want to answer that question? I would love to answer this question. And I do it with a little bit of grin on my face. And that is this. Most people that have followed us for a

Starting point is 00:41:40 very long time know that we don't gatekeep. And by joining the community, you're not joining it because we're holding back information from you. You're joining it so you can continually learn from us and other like-minded people. And it's very important to understand that choosing the right ETFs to have in your portfolio is just one sliver of all that goes into building personal wealth, structuring your businesses correctly, how to get the right mindset, how to negotiate a business deal, how to buy the right franchise. That is what you get by joining the rich.

Starting point is 00:42:16 Rich Habits Network. We're not just here saying, hey, we like three ETFs and that's what you're getting from value. So if you believe that your money is better spent putting in a VOO and not in the community, then we will give you a refund and wish you the best. But the bottom line is, is this community is going to be already is, but is going to grow into being one of the most informational, well-directed communities on this planet. And the people that join and stick with it and execute on the things that we coach and teach about are going to be the ones that are the big winners five, ten, and 15 years from now. That's my explanation. It's totally up to you to understand the value add that we bring for that price every single month. Yeah, I think on top of that, it's like,

Starting point is 00:43:00 I hope you're investing at least $90 a month into your, you know, Roth IRA or your 401k or whatever you're investing into. And I hope you're investing thousands a year into these things. But if you want to invest another, it's called $1,000 a year into joining us every single week to get your questions answered live on a Zoom call or to learn about what the Federal Reserve cutting interest rates is going to do to your portfolio or to learn about the seasonality of September, something we talked about last live stream, or to learn from industry experts as it relates to tax strategies, as it relates to real estate syndications. Like, if you just want to stick to the S&P and go build wealth, be my guest, right? I'm doing it. Everyone's doing it. That's the bar minimum, right? Y'all should be doing that. If you want to go above and beyond and really, you really enjoy personal finance and you really want to learn about these things, first off, if you can find anything out there that is $1,000

Starting point is 00:43:52 a year to do it, 90 bucks a month essentially, point me in the right direction because I'm going to go join that too. Sounds like it's a good bang for your buck. But I think what Robert and I are trying to say is we've done a whole lot over the last 18 months to build credibility and show you guys that this isn't just a podcast, a fly by night podcast, that's coming around to hang out for a couple of years, but we are building a empire. We're building a network of thousands and tens of thousands of people that want to better themselves with their personal finances and want to really take it to the next level.

Starting point is 00:44:21 And we think that we can really connect the dots with all these opportunities together. We are much more powerful as a unit than we are just by ourselves. So I think 90 bucks a month is 100% worth all of our time and hanging out with us in the community. But if you don't, again, go invest your money somewhere else. We love it. We're rooting for you. You don't have to join. and we hope the free podcast that we share twice a week, right?

Starting point is 00:44:41 The six hours it takes us every single week to make these podcasts for free is totally worth it. And you guys are having a blast, right? Carve out hours and hours every week for these free episodes for you guys. We love doing it. And we hope you get value from that. That's totally cool too. I love it. I don't think anyone on the internet provides more value than we do week in and week out.

Starting point is 00:45:00 And like Austin said, we're building an empire here. And we want to take all of you along for the ride. And just our goal is to make a million people. millionaires through our education, our experiences, and all that we offer in the Rich Habits Network. So we appreciate each and every one of you, the tens of thousands of you that follow us along each and every week. And we do all that for free and have been now for nearly 18 months since February of 2023 by delivering you weekly episodes of this podcast. And we will continue to do that in perpetuity. However, if you want that leveled up experience, if you want to

Starting point is 00:45:33 be connected with us every week, if you want to learn from us directly, you want our attention to you, Join the Rich Habits Network, and we'll see you in there. Thanks, everyone. Have a great rest of your week. A bond account is a self-directed brokerage account with public investing, member FINRA, SIPC. Deposits in your bond account are used to purchase a set of 10 fractional investment grade in high-yield bonds. Yield represents monthly average annualized rate of return before fees as of August 28, 2024. Yield is subject to change daily and the yield at the time of purchase may differ.

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Rich Habits Podcast - Q&A: Tax-Free Income for Kids, Our Frugal Life Hacks, & Franchise Dos and Don'ts

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