Q&A: Handling a $100K Salary, Investing with $50 / Month, and Downsizing

Austin Hankwitz
Hey, everyone, and welcome back to the Rich Habits podcast, a top ten business podcast on Spotify. This episode is our question and answer edition, which means we're taking your questions and we give you our raw feedback. These are our unfiltered answers on all these questions. Robert we're having fun. We're not holding back.

We're giving people what we think absolutely straight to the point. And they are my favorite types of episodes because we don't exactly know the types of questions you guys are going to ask us. They're just kind of all over the place. But we're having a blast doing it. And if you have a question to ask us, you can send us an email.

It's Habits podcast@gmail.com. or send us an Instagram DM at Rich Habits podcast. Robert, I'm so pumped for this episode, man. Yeah, me too. I love it.

Robert Croak
These get more and more in depth and fun every single week, and the questions just get deeper and deeper and more complex. And I love filming these just because we don't know we're going to get from week to week. And it just is so much fun getting all of your questions and being able to dig deep and answer them and give our best shot at it. What's cool, too, about some of these questions is how far they've sort of evolved over the last year or so, right? I feel like in the beginning it was a lot of what's a Roth Ira?

Austin Hankwitz
Or like, how do I buy a house properly? Or what's house hacking? Now? They're just these very in depth questions that break down people's different financial situations. So it's going to be a blast.

We're going to jump into that. But before that, I want to remind you guys, we have an email newsletter. We had open rates over 50% on last week's email. You guys are absolutely loving this newsletter. The Rich Habits newsletter.

It's going to become the new weekly newsletter that you are going to be adding to your rotation on Thursday mornings. It's a really easy read. It's full of personal finance and investing info, as well as the easiest way to find curated affiliate offers that we've collected across a bunch of different companies for you guys. Yes. I'm so excited about the newsletter as well.

Robert Croak
Austin and I both get a chance to share our favorite call out of the week. And unless you're subscribed to the newsletter, you won't know what they are. So get there, sign up, get in with everybody else. We're so excited about this new weekly product, and we're confident you're going to love it as well. It is growing so quickly.

The numbers and the open rates are great and we appreciate all the support. Yeah. So if you want to see what this week's call out is, be sure to click the link in the show notes below. Join 40,000 other weekly readers and check out the Rich Habits newsletter. Now, before we jump into the episode, I want my option traders to listen up because I want to tell you a little bit about public.com dot and more importantly, have you ever thought about all the fees you're paying to actually trade those options?

Austin Hankwitz
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Robert Croak
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Austin Hankwitz
Options are not suitable for all investors and carry significant risk. If you want to read the full disclosure and go check that out in the podcast description below. And this is for us members only. Alright, let's jump into our first question coming from Kathy S. Kathy says, my kids are 18 and 21 years old and we're trying to figure out how to best help them financially.

We want to set them up for a great financial future, but we're unsure where to start. They both have started their own Roth IRAs, but I only have $200 a month to invest on their behalf. So should I be giving them this money for their Roth IRAs? Should I be investing it on their behalf somewhere else? Should I buy them a house?

I'm thinking about maybe ETF's. I don't even know where to start. Robert, you want to kick this one off? Yeah, I love this idea and it's a great question Kathy, and congrats for really thinking about helping your kids and get them set up for financial freedom. I love the idea, even at 18 and 21 years old, of giving them each $100 a month in that basket of index funds through the Roth IRA.

Robert Croak
I think that is a very, very solid plan and one that I wish more parents would do, because not only are you showing them and teaching them financial literacy, but you're giving them an upper hand by getting them started. And don't get discouraged on only putting in a month per child because it's a start. It's a great place to be for them. They have time on their side and compound. Interesting.

So I think it's a wonderful plan. You can always add more later or they can start adding to it, but I think it's a wonderful plan. I'm right there with you, and I really want to just hammer down what Robert said about it's okay to do this hundred, it's a start. And what's going to happen is it's going to cause the snowball effect. Right.

Austin Hankwitz
Compound interest. So this 18 year old, for example, if you're kicking them off by helping them invest $100 a month into either the Roth IRA or somewhere else on their behalf, it doesn't matter how the money is being invested. What matters is that it is being invested. So from 18 to 67 years old, Robert, that hundred dollars is going to turn into 3.3 million. I mean, talk about generational wealth here.

Cathy, same thing with the 21 year old. I'll do some quick math for you. That 21 year old with the same $100 will be 2.3 million. So isn't it crazy to see what just three years of extra compound interest can do for one of your children? That's a million dollar difference.

So get started now. Invest the money on their behalf. Give it to them to invest in their own Roth iras. It doesn't matter as long as it's getting invested. And just to make sure we're all on the same page on what it's being invested into, we talk about the same five.

Etf's voo qqq vgt, VTI, moat those are the five Robert and I love. And they're going to give you that 1011, 1213 percent annual returns over a long period of time. I love it. Yeah, that is a very solid plan. And let's get into our next question.

So this comes from Greg A. Greg says, I'm a youthful 65 year old and my children should be moving out of the house in the next five years. So I'm starting now to think more about how to best manage my assets. And investments for retirement. I own my house outright and it's worth about $430,000.

I have 1200 acres worth of mineral rights in Texas for natural gas, along with an acre of land in Orlando. My wife and I are still working and we earn about $50,000 a year combined. I'd love some advice on how to optimize these assets as we are considering downsizing in retirement. All right, Greg, I'll kick this one off and then I'll let Robert rally behind me here. Like, I really, really, really love the idea of not having a mortgage payment in retirement.

Right. Having a mortgage payment is fun, it's cool, it's sexy when you're in your twenties, thirties, forties and fifties. But when you're ready to retire, you don't want to have to still be paying on that house, that 1120, $103,100 a month payment that some people are seeing with these interest rates. Right. So, Greg, I love that you don't have a payment on your house.

However, you did mention downsizing, and I like that idea. So as I just think about, and I'll let Robert talk about the mineral rights, but as I think about the current situation with this house at 430 and making about $50,000 a year, what's important here to realize, Greg, is assuming you don't have any money in a retirement account, any money in a brokerage account, you might have to redefine what retirement might look like. Right. You said you're a youthful 65 and fingers crossed you're going to be a youthful 75 because you might be working until then, assuming you're able to sell your house, if you do want to downsize for this $430,000 and you maybe take 250 or let's say 300,000 of that to make it a round number, and you buy another house outright in cash, you're now have about $100 to $130,000 to work with in the markets. So if you're able to take, let's call it that $100 to $130,000 difference there and invest it into the markets and get that ten to 12% return, you could expect, call it that ten, maybe $15,000 a year return, but that's nothing to live on in retirement.

Robert Croak
Right? So to your point, I really think you should lean into that youthfulness. You know, you don't have this mortgage payment hanging over you. You guys are taking home $50,000 a year. Maybe it's time to really buckle down and figure out, okay, how do we carve out an extra 20,000 of that 50 to invest it into the markets for the next five years.

Austin Hankwitz
And then that money now compounds, and you have this original hundred, now you've added another hundred. And of course it's been, you know, five years or so. So the markets have gone up by then. So now maybe you have 200, 8330 thousand dollars invested for you in the markets. You have a paid for house.

Maybe you even take some part time work. And when you're older, there's a lot of ways to think about this. But I think the big x factor here is what Robert's about to talk about with the mineral rights. So, Robert, dig into those. Yeah, I'm going to cover all of it.

Robert Croak
So I like your situation and I think there's ways to fix it. So here we're going to start here you have a $430,000 property that's paid off. You could look at doing two things, downsizing into a duplex, and then that way you could house hack and the tenant in the other side pays most of the mortgage, if not all of the mortgage. And you could implement a 1031 exchange to a lower valued property to offset your capital gains that you would pay on the $430,000 sale. So that's one wrinkle that could really set you up in a great place.

The other thing you could do, and you might not want to do it, because it is great that you own your own home, paid off free and clear. But you could also look at selling the home, going downsizing into a rental, have the 430k that you could then fully invest, which would really set you up at that ten or 12% per year of earnings in the right investments of the basket of index funds we talked about. That is a completely different way to look at this. So you have some options. Now let's talk about the mineral rights.

You didn't give us a lot to go on, but let's assuming that 1200 acres of mineral rights makes the minimum, which is generally in naturally gas, around $250 per acre, that would give you $300,000 in value or profits to be able to work with. So I would look at that as what are you doing with that money? How long have you been getting that money? And if it's new to you, what is your future plan? Could you sell the 1200 acres for the mineral rights and the per acre value, which should set you up financially for a very long time.

But there are definitely some options you can do here. Yeah, I really like the idea too, Robert, of kind of taking that whole 430 and investing it, because you could park that like an spyi or something. Even if you add the 300 on top of it. Now we're talking about $700,000 parked in Spyi or QQqY. One of these dividend income ETF's that'll spit out seven $7,500 a month in tax efficient income.

Austin Hankwitz
But to your point now, there's that variable of rent. And rent goes up every single year. So you don't want to be renting for the next 20 years and have, you know, call it half that income now be eaten away because you don't have that stable sort of living situation. So it's really a give and a take, you know, but what a cool situation to be in. It's specifically with these 1200 acres of mineral rights in Texas.

I've never heard of that until this question. Heck, maybe, Robert, we should go in on some mineral acres. Yeah, it depends if you own the acreage or if you just lease the acreage for the mineral rights. It depends. So give us more information on this, Greg, and we can go deeper on the question.

Yeah, Greg, shoot us an email. Richhabitspodcast@gmail.com dot I know this was an Instagram DM, so shoot us an email and we'll dig further into that. Our next question comes from Will H. Will says, I'm a college student looking to begin my financial journey. I'm investing $50 a month toward my Roth Ira into the ETF's you all talk about.

So I want to know, what else can I do to optimize my investing, given how little money I actually have to invest? So just so we're all on the same page here, will, you know, we just did the calculations for a month from 18 to 67, even $50 a month from 18 to 67 is $1.7 million in retirement. $1.7 million after adjusted for 3% inflation, in retirement. Right. That's unbelievable.

That's just with $50. So in my head, I'm like, okay, if I can convince Will to stick to doing this $50 all through college, instead of going out to the restaurants and the bars and buying the cool shoes or whatever, but to lay that foundation that Robert and I talk about, Will's really going to be setting himself up for success, even though he's only investing $50 a month. Now, here's where things can get interesting. Will, you're in college. You're 1819, 2021 years old.

Maybe you're 22, I don't know. But you're young you are ambitious. That's because you're listening to the Rich Habits podcast. I know that for a fact. You care about your financial situation.

You want to earn more and invest more. You want to optimize. I would, absolutely. We talked about this on our last Q and a episode. There was a side hustle of a guy that was making some automations for boring businesses.

But will, I would figure out what side hustle is right for you, and I would just really, really lean in on that. If making more money is what you're really focused on, of course, focus on college. Get the good grades, graduate, do your thing, get the job out of college, whatever. But, you know, when I was in college, I was washing cars at my local car dealership. That was my part time job.

I was also repairing broken iPhones. I did that for money as a side hustle. I was also cleaning car headlights in the mall. I was doing that as a side hustle. I mean, I had so many different side hustles in college that allowed me to invest a couple thousand dollars throughout that period of time, which really set me up for success.

And so we'll learn about different side hustles that could make you go from $50 a month to investing, maybe to even 100 or $200 a month. Right. If you can get us a little bit more every single month, you are going to be a okay. Yeah. I love it.

Robert Croak
Will, we're glad you're here. Love to hear young people that are off on their financial journey and having it be a focus as part of their life. But I also want to call bull crap, because at the end of the day, just like Austin said, you're a go getter, you're diligent, and you're worried about and concerned of your financial future, which is amazing that you're thinking about it at a young age. So go get a side hustle. I don't care if it's delivery driving one day a week.

I don't care if it's dog walking, washing cars. It could be virtual assistant. It doesn't matter. It could be cleaning junk at job sites. If you did that one day a week, maybe every Saturday for 6 hours, you go out and do a side hustle.

You could then add $200 a month, 300, $400 a month into your investment portfolio, portfolios, and it would set you up for life if you did that for the remaining years of college. So I love where you're at, but $50 a month, you can do better. I know you can. Or you wouldn't be here listening to the Rich Habits podcast. So go out there, get that side hustle and crush it.

Austin Hankwitz
Evan. Yeah, well, I was working from twelve to six on Sundays, right? It like, that was my thing. I'd work twelve to six on Sundays in the mall fixing iPhones and different electronics. And I think I made like $1012 an hour or something back then.

It was 2016, right? And so I was able to make 200 and $5330 a month, depending on if I was able to hit my bonus thing for sales and stuff. And that was like, just working on Sundays one day a week, right? Like, will, you got this, bro. We promise one day a week's not going to kill you.

A couple hours, you'll be just fine. Our next question comes from Nick M. Nick says, I'm just getting started with investing. Self employed, with $0 of debt. Besides my mortgage, I have dollar 25 in a high yield savings account, and I'm making double mortgage payments every month to clear this massive amount of debt as fast as I can.

What do you suggest? My first step should be to kick off my investing journey. Robert, you want to answer this question? Yeah, Nick, I love it. But here's the deal.

Robert Croak
Stop making the double mortgage payments. We don't know what your interest rate is, but let's assume it's four or 5%. I think you'd be better off having the positive arbitrage by getting that Roth IRA set up, getting invested in the market into those index funds. We talk about taking those extra mortgage payments for two, three years and really building that up so you can let compounding do its job, and then you can go back down the road later to making those double mortgage payments. At the end of the day, right now, you want to be looking at it that if, let's say, your mortgage payment interest is 5% and you can make ten or 11% in the market, that additional 6% year over year for you, especially because you're in your younger years, will make all the difference in the world in your wealth building.

So I don't agree with the double mortgage payments. Unless, of course, your mortgage interest rate is eight or 9%. Otherwise I would be investing it into the Roth IRA. To get yourself set up later. Even beyond the Roth Ira, Robert.

Austin Hankwitz
You know, Nick, in your Instagram photo, you looked about 40. I don't know how old you are. You're on the older side, don't get me wrong. But, like, you're not in your twenties or thirties, right? You're like 40, maybe 45.

So let's say that your double mortgage payment that you're adding extra to the principal is about 13. So by pausing on those double mortgage payments that Robert was alluding to, and you took that $1,300 a month and you invested it into the s and p 500 or the ETF's we always talk about, and you did that for five years, you'd have about $120,000, right? So you have your $100,000 base already built up in a short five year period on that just double mortgage payment that you're already doing. And then even, which is so cool, Nick, if you, let's say you're 45, right, you did this from 40 to 45, you pause the payments. Now you have this $120,000 nest egg.

If you don't touch that 120,000 until you're 67 years old. So let's call it 2022 years here, $1.6 million in retirement, right? And that's just because you did this one thing that Austin and Robert told you to do for five years, and now you've got this guaranteed $1.6 million in retirement. But you wanted to like do these double payments because you wanted to get rid of the debt. The thing that people forget about is like this 1.6 million in retirement is going to make you money.

Having a paid off house only saves you money, right? It doesn't add to your bank account, it just saves money coming out of your bank account. But what if you don't have anything putting money in that bank account? What if the only way you're making money and adding money to your bank account is with earned income trading time for money. This 1.6 million, you don't have to trade anytime for the money it's going to make, right?

It's going to spit out 100, 5200 thousand dollars a year consistently because of the stock market or even spyi, this will be a lot of money every year with just that. And so that's what we're trying to, like, get you to understand, Nick, is that it's of course a great idea to pay off your mortgage. I've got a 6.7% interest rate on my mortgage. It makes me want to throw up. I hate paying on this interest every year, my mortgage.

So I want to pay it off, but it's only like 300 grand. But what I'm trying to get at here is that I know that I've got other investments making me money. So when I save the money, when I pay off my mortgage, it'll be a really good balance, right? I've already have my hundreds of thousands invested. But Nick, you said that you are just getting started with your investing journey, right?

So you don't have the extra kind of addition to your bank account through the capital appreciation, the portfolio income that you could make. And so we're trying to say, before you think about paying off a mortgage with double payments every month, let's go build our base, right? Let's go build that 5000 thousand dollars base that will then grow into over a million dollars in retirement because you can always pay your mortgage off, dude. You can't always use compound interest to grow into the millions. Austin, I think you crushed that.

Robert Croak
It's a really, really good breakdown. And you know, Nick, you just have to look at it. You have a lot of options here. We just like to always see people maximizing their gains and it's tough for people to understand that when you have that much equity trapped in a home, you really can't do anything with it until you sell it. So that is one of the keys of why we're always telling people, don't pay down your mortgage unless it's a high interest mortgage and get that money optimized.

So Austin, I think you crushed that one. Earlier in the show, you heard us talk about the investing platform public.com dot. That's where you can trade options with no commissions or per contract fees and you get a rebate of up to contract trading. NerdWallet recently gave public five out of five stars for options trading. If you want to see why, go to Public.com and start getting a rebate of up to contract traded paid for by public investing options not suitable for all investments and carry significant risk.

Full disclosures and podcast description us members only. And remember, we're hosting a webinar with Public.com quote s Options trading expert to teach us all these things we'll be learning about long calls, long puts, long straddles, call debit spreads and everything in between. I know that was a mouthful, but you get the point and it won't be a foreign language to you. So all you need to do is sign up for our webinar on June 4. There is a link in the show notes below and as always, it is free of charge.

Austin Hankwitz
I can't wait for the webinar. Robert, I am going to be learning alongside you here. And of course I've traded some options. You know, I've had some fun with my options trading in the past. I made a couple hundred bucks recently on some on cloud options.

They crushed their earnings which is cool. But yeah, maybe I can make a couple hundred, couple thousand. Let me interrupt you right there. Tell the audience what you would have made on the vital farms play you were going to make and didn't make. Dude, that was crazy.

So some of these option contracts, right, which we'll learn more about in the webinar. But essentially, options are like a levered bet on the upside or the downside. So you're essentially putting a 100 x leverage on a position if you want to think it's going to go up or down. Right. So is the stock going to go up?

You're going to bet a lot that it is or lot that it's not. And so vital farms, which is this egg farm company Robert's been using and investing in for about a year and a half now, their option contracts, I think the numbers were, if someone had bought $1,000 worth of their option contracts, I don't know, was the $35 strike or the $40 strike. I forget what the actual strike price was there, but 1000 would have turned into 180,000, which would have been insane. Robert, I didn't do that. I didn't know to do that.

But hopefully after this webinar, I'll be able to find those opportunities a little bit better and make some moves on them, which would be really, really fun. So hopefully you guys can join us on June 4 for this options webinar with public, where we learn all about these different trading strategies and how to best use options is not just a way to potentially make some, you know, educated bets and educated guesses on the stock market after we've built our base, but also to hedge our portfolio in times of volatility. Yeah, I love it. And, you know, we can't win them all, but at least we were both early to the vital farm stock. I love the story, and it's just another case study that in every market condition, you can find winners if you know where to look.

I love it. Now, our next question comes from I showara S. I really hope I said that right. I'm sorry if I didn't. She says, I'm 27 years old.

I have $68,000 in student loans at a 5% interest rate. I have 1500 in my Roth Ira and 23,000 in my Roth. Four hundred one k. I make $100,000 a year. How should I go about handling my money?

What would your suggestions be? So the first thing I would do is I would create an honest budget. Right? You're 27. I just turned 28.

I was 27. Two weeks ago. I live and breathe by my honest budget. And why we call it the honest budget is because a lot of us make a budget, right? We have the Excel spreadsheet.

We've got the app, or we've got the notes tab, whatever we have on our phone. But we don't actually hold ourselves accountable to them. And I think what's really important, and it's a maturity thing, it really is, Robert, you have to hold yourself accountable to these numbers. Oh, I already spent my $250 of fun money this month, or my close budget or whatever this was. I can't go and buy more shoes or can't go out and buy more.

So you have to hold yourself accountable. You have to be an adult. You have to be a mature adult and say, I am going to delay my pleasure. We have made a whole episode about this, Robert. So again, make the honest budget.

I can ramble about that forever. First thing I would do there, figure out all the money that's coming into your bank account. So from this hundred thousand a year, you're looking at about 8000 ish dollars a month, maybe $7,000 a month, depending on what state you live in there. So of this amount that's coming into your bank account every single month, figure out what your fixed expenses are. Student loans, rent, utilities, groceries.

Right. Things you have to pay to survive and to stay current. And then your variable expenses, going out to eat, vacations, new clothes, insert fun money idea here, whatever that variable expense might be for you. And then one, make sure that you have some wiggle room there. But two, also make sure that if the wiggle room is not there, you are cutting back on those unnecessary expenses.

Right. You don't always have to go out to erewhon and get the $23 smoothie. You don't have to always go on that $4,000 vacation every year. Right? So that's what we're trying to figure out here with your budget.

And once you find that margin in your budget. Okay, great. Let's figure out what that number is. And let's now also figure out how we can get that Roth IRa up a little bit. Right?

You're still young. You're in your twenties. If you. We can start maxing out this Roth IRa, at least for the next couple of years as we build our base, right? We want to get to at least 50,000 here in your twenties, if not early thirties.

So if we can max out that Roth IRa for a couple of years, the Roth 401K is still rocking and rolling I would really focus on getting that built. Once it's built, I would then flip the focus to start paying down some of those student loans. I wouldn't do it first because, again, we just talked about that with Nick M. And his situation. Right.

We want to make sure that we have money working for us before we're paying off debt that's taking money out of our bank account, so it kind of offsets each other there. So, again, honest budget. Find the wiggle room in your budget. Start rocking and rolling with that Roth Ira. Congrats on making $100,000 a year at such a young age.

That's wonderful. And then I'd really start inching toward that 50,000, you know, sort of base that we talk about here before you begin to aggressively pay off these student loans. Yeah, I love it. And the honest budget is very, very critical. And once that's complete and you get that debt to income ratio figured out that Austin alluded to, then it's really just all about maximizing what you can put away every month and sticking to the budget.

Robert Croak
We like to see 15% to 20%, but whatever you can do, realistically, we'd be happy to see, just because you have to let compound interest do its job. And at 27 years old, you have the great benefit of youth on your side. So the more you can get put away now, the less likely it is you'll be a greeter at Walmart later on. So that is the goal here, is to build the base early and often, like we talk about all the time. I mean, I know we just keep giving these examples of what numbers could turn into.

Austin Hankwitz
But at 33 years old, right? So let's call it in six years, five or six years, depending on where you are at 27. This $50,000 base that we're kind of talking about here, Robert, could be worth 2.8 million in retirement if she doesn't touch it again. Right. Just 50,000 invested.

33. Forget about it. For 34 years until 67. Congrats. You now have $2.8 million.

Like, that's what we're trying to be focused on, versus taking 68,000 and paying off your student loans. Right. That might take you four, five, six years, and you've lost out on these crucial years of compounding. So want to make sure you get that base built. Want to make sure that you have the honest budget set up.

And then once you've done that, pay off the student loans. Right. You've got the 2.8 already guaranteed here for you. Pay off some student loans, then maybe it's time to think about buying your first house. If that's house hacking, if that's a duplex, if that is maybe a single family home, I really don't know what your situation is going to be then.

Right? That's five, six, seven years in the future. But get that honest budget working for you. I love it. Our next question comes from Jesse S.

Jesse says, I'm 32 years old. I have 63,000 in a traditional IRA, 19,000 in an online brokerage, 7000 in crypto, 5000 in a high yield savings account, and I'm $12,000 in credit card debt. My dad has always said to invest through a traditional IRA so I can write off the contributions against my taxes. So my question is, do I move this 63,000 into a Roth IRA like you all suggest, or do I just keep the money there and begin contributing directly to a Roth IRA from here on out? Additionally, out of what account should I pay off my high interest credit card debt?

Because you guys always say I can't out invest high interest credit card debt. What a good question, Robert. I'll let you kick us off. Yeah, this is a great question, Jesse, and you have some wiggle room. So here's what I would do, because as Austin always alludes to, you can't out invest high interest debt.

Robert Croak
So I think what I would start with is I would probably take half of the crypto, assuming that you're probably up a bunch if you've been listening to us all along. So I would take half of the crypto and I would probably take the rest from the online brokerage account. I would dump what you can in there to be able to get these credit cards paid off. And then thirdly, I would look at a second job, maybe one or two days a week to be able to then kind of replenish the accounts as soon as you get the credit cards paid off. That would be the strategy that I would implement.

That I think is the best to get you out of this high interest debt quickly and then also get some money to replenish. And I think whats really important to remember here, too, Jesse, is that, you know, youve got this online brokerage. Im not sure if its ETF's or single stocks. Youve got this cryptocurrency. I mean, obviously you cant out invest high interest debt.

Austin Hankwitz
We dont want you to pull anything from your high yield savings. Its only five grand. You probably have a family at 32 years old, so you want to have some wiggle room and room between you and life with that high yield savings. So being able to liquidate, lets call it eight or 9000 out of the online brokerage account, two or three, maybe 4000 out of the crypto, you're going to pay off the high interest credit card debt. But more importantly here, you're going to really have a conversation with yourself and say, why am I $12,000 in credit card debt?

What's going on? Is my family overspending every month? Was there a tragedy? And I had to like what caused this $12,000 of credit card debt? Because, you know, we talk about not investing and pulling the investments to pay it off like blah, blah, blah, that's great.

But it's not great if in nine months you're back to 12,000 in credit card debt, right? We don't just want to treat the symptom, we want to treat the cause. Right. And the cause of this credit card debt, I don't know what it is. Only you know what that is.

And of course, if it was a one off tragedy, I had to go to a funeral. Something crazy happened. I get that. But if it's because you guys have that lifestyle creep or you're trying to keep up with the Joneses or you guys don't have an honest budget, right, that's a completely different story. So get that figured out.

And then, Jesse, to answer your question about the traditional IRA, oh, it's a tough one. I, at your age, you're still so young, you have 30 more years of investing. I would honestly convert the traditional IRA into a Roth IRA because, Jesse, I don't know what the tax brackets are going to be like in 30, 40 years when you actually have to pay taxes on this, what will eventually become millions of dollars. Right. Right.

Now Joe Biden's been talking about some capital gains taxes on earners that make, you know, however much money. I get that. But it's a slippery slope until, oh, you're now paying capital gains if you're, you know, profiting on a trade over 50,000 or 100,000 or whatever that number might be. So I just want to make sure that we're all on the same page, that the reason Robert and I enjoy the Roth IRA over the traditional IRA right now is because we have a very clear understanding of what we're paying in taxes versus, I don't know what the tax brackets are going to be like in 40 years. I just don't, I would assume they're going to be higher considering the deficit that we're in right now as a country because that's the only way they're going to make more money is through taxes.

But, like, I just don't know what that is. And so I want to make sure that I'm paying my taxes now. Don't have to worry about some looming tax man that's going to come, you know, get me in retirement and just get that out of the way. And then once you've made that conversion, Jesse, I would just continue to sort of deposit and invest through that Roth IRa into the five ETF's we talk about. Yeah, I love it.

Robert Croak
I think it's a great breakdown and just really helpful. And, Jesse, you're doing great. There's just some small tweaks to make and get you on the right track. You're crushing it, Jesse, 100%, dude, 32 years old, you got your base built, certainly working toward that awesome, awesome base in your IRA. And, you know, obviously the credit card debt, we're going to take care of that.

Austin Hankwitz
But, dude, you should be so proud of yourself. You're crushing it. Last question here comes from Jake B. Jake says, I have $140,000 sitting in the public high yield cash account because I'm in the immediate market to buy a house. However, I'm toying with the idea of parking some of that money into Spyi or QqqI so it can earn some extra yield.

What do you guys think about this, this idea? I need the money, though, to be pretty liquid in case I come along a really good deal, and I need to act fast. So, Jake, just so we're on the same page, right. Spyi and Qqqi both track the indices of the S and P 500 in the Nasdaq. And those indices can have drawdowns.

Right, where a high yield cash account, high yield savings account on public doesn't have any drawdowns. It only goes up in value because you get paid interest. I would say if you're in the immediate market to buy a house, and this goes for anyone, right, there's no need to park your money in the markets if that's Spyi, QQQI or VOo or whatever else. Because, I mean, Jake, the S and P 500 went down 5% in the month of April. And if you had that $140,000 in the markets and it went down 5%, congrats.

You lost ten grand of your buying power, dude. So that's what we're talking about here, right? Spyi and Qgqi obviously are less volatile. I get that. You earn the yield, it gets paid to you every month.

That's great. But it's still an investment, and investments go up and down in value over time. And so we just want to make sure if you're in the immediate market to buy a house, like pretty liquid, in case I come along a deal and I need to act fast, I would not have it, you know, have the exposure to lose 10,000 of that in a week or two. Right. Just not a good idea.

But this now goes to answer the question for other people that are like, well, I'm saving for a house and I'm doing, you know, a hundred or $500 a month for a down payment. And at that rate, I'm not going to have my down payment saved for five or six, seven years. Well, that's the case. Park your money in the markets, right? Put it to work, grow it.

Robert Croak
Right. We need to do that, and that's the only way you're going to be able to buy a house, considering how houses have gone up in value so much. But, like, Jake's situation here, I wouldn't do it, man. I think it's a little bit too much volatility for your appetite. But, Robert, want to hear your perspective?

Yeah. I think the key takeaway here is the word immediate market to buy a house. If he said, I'm saving to buy a house and I have it parked, I agree with you 100% I wouldn't do that. I'd have it in the markets. But the word immediate means he's looking daily.

He's on the hunt. He's probably got a real estate agent out there looking. So I love the strategy of having it sitting in the public high yield cash account, because so many people that are on the house hunt leave their money sitting in a checking or a savings account making nothing. So this is very, very intelligent, having it in there, making that five and a quarter percent, because also your gains are not taxed from a state or a local level on that money with public. So I really, really like that.

So I think it's a great question and a really good strategy. And Austin, I think you covered both sides of the equation of what to do, and I really like your thinking here, Jake. Yeah, I mean, Jake's getting an extra $600 a month right now just parking it in that high yield cash account, which, by the way, if any of our listeners aren't yet using public's high yield cash account to earn extra yield on their savings, they just have it parked in a checking account or cash under their mattress. Head over to public.com richhabits. Scroll down and open up your public high yield cash account, and I think you get a bonus of maybe ten or $20.

Austin Hankwitz
So go check that out. Everyone, thanks so much for tuning in to this week's episode of the Rich Habits podcast, question and answer edition. Be sure to join us on June 4 at 04:00 p.m. eastern time for our exciting options trading webinar with Public.com quote s option trading experts. Don't forget to sign up for the Rich Habits newsletter.

40,000 of you are part of that. It's a growing community. We're adding hundreds of emails every single day. It is so exciting and we can't wait to grow this into a massive community. Do massive giveaways.

We're already sharing our call outs of the week exclusively to our newsletter subscribers, so be sure to go check that out again. As always, we appreciate each and every one of you. However, we'd love to see more of those five star reviews. We did the math today, and there are still 55,000 of you, you know, who you are, that have not left us that five star review. We would appreciate it.

Robert Croak
It helps us grow, keeps us at the top of the charts, and is great for our business, and it's free of charge. It takes you a couple seconds to give us a glowing review. And again, thank you all for following along on the Rich Habits podcast and the community we're building. We are so, so excited for the future. Thanks everyone, and have a great rest of the week.

Austin Hankwitz
Thanks everyone, and have a great rest of the week.

Q&A: Handling a $100K Salary, Investing with $50 / Month, and Downsizing

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1: Introduction

2: Handling a $100K Salary

3: Investing with $50/Month

4: Optimizing Assets for Retirement

5: Conclusion

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