114: Swipe Smart; Using Credit Cards Without the Debt

26:28And it gave me like a nine-page report. It was really cool. It's crazy to think that so many people are fearful of AI. And after you shared that document with me, I was blown away. It probably took Grok a minute to provide and it spelled it out item by item for the entire trip and how many points it would take in the dollar amount value. And so for people to not understand how beautiful that is to have AI be able to do that, how many hours, let's think 10 years ago, how many hours would it take to have done that same task that took Grok a minute. So anyone that's afraid of AI, think about this story, because I was blown away at how incredibly detailed Grok was able to present that to Austin.

27:14And it was like instantaneously. So, so, so cool to see. 100%. So if you're someone who is trying to figure out how to become a credit card person, you're responsible with paying off your cards, you're doing all these things, highly recommend looking into right now, there's a bonus offer for a hundred thousand points on the Chase Sapphire Preferred card. I recently opened up the Capital One Venture X card, I think, and I got like 80 ,000 bonus points and like a$350 companion credit for flights. Like there's a bunch of really interesting perks that come with opening these cards. Just again, make sure you're not opening a card and spending money you don't have to get one of these perks.

27:53You're not going to become a millionaire from points and miles and perks. You become a millionaire from investing consistently over a long period of time and living on less than you make. Now, before we jump into our first question in the Q &A section, which by the way, if you have a question to ask us, email us at richhabitspodcast at gmail.com, send us a DM on Instagram at richhabitspodcast. That's actually where we're getting all of these questions from for this episode, or ask us a question inside of the Rich Habits Network. Let's take a moment to hear from this episode's sponsor, Masterworks, Because according to a recent Bank of America survey of wealthy individuals, by next year, some of these ultra-high net worth people could be devoting up to 11 % of their portfolios to fine art and collectibles.

28:37Now tariffs will of course have its own impact on the markets, but lucky for us, art has historically been an asset class celebrated for its lack of correlation to other popular assets for the last three decades. Sotheby's just had their first big auction of 2025, and it topped their highest end of their internal estimates. Not to mention the co-founder of Blackstone has been buying up art for himself for very impressive prices. Now, it's important to keep an eye on multiple asset classes, not only because we talk about diversification, but because we have our own investments in artwork as well.

29:08We've both been using Masterworks' art investing platform to diversify for five years now. That's right. Both of us invest through Masterworks, the sponsor of today's episode. and we've even interviewed their founder and CEO, Scott Lynn, on the show. Since then, they've crossed over a billion dollars in capital raised, featuring artwork offerings that typically range from half a million to$20 million. Although with Masterworks, you don't need to spend millions or be an expert in art. Masterworks has offered investments in over 450 works and exited 23 works as of today, with investors realizing annualized net returns, including 17.6%, 17.8%, and 21.5 % on those works held longer than one year.

29:56So join over 1 million Masterworks users at masterworks.art front slash rich habits, which is also in the show notes below. As with any investment, past performance is not indicative of future returns. Investing involves risk. Sale returns are not inclusive of unsold works. Important regulation A disclosures can be found at masterworks.com front slash CD. All right, let's now jump into our first question coming from Katie asked on Instagram. Katie M says, Hey guys, I'm loving the podcast. I'm learning so much and it's really easy to follow along with how you explain everything. We have owned a rental property for about nine years now.

30:34And two years ago, we tapped into our equity and took out a HELOC to invest into a business. Unfortunately, that business is not doing so well. We also have high interest credit card debt along with this HELOC that we're trying to pay off. Should we sell the house, use a 1031 exchange and snowball that HELOC payment into high interest debt? Do we hang on to the asset? How do we get ourselves out of this situation? Robert, I'll let you kick this off. This is a hard one to kick off, but I'll try. First and foremost, does the business have assets? Can you sell your percentage? Does it have equipment?

31:09Does it have a building? Could you sell the business to be able to get out of the HELOC and the credit card debt? That would be my first question. Secondarily, are there other assets that you could sell where you've made a profit in the past or you've purchased in the past, but they still have a lot of value, maybe a classic car, maybe another piece of equipment, something to get you out of this mess because what I don't understand here is the 1031 exchange to snowball that HELOC payment into high interest debt. I don't get that part of the question, but I just feel you need to do a complete inventory of where you're at and you need to make drastic changes.

31:48Now, if you're talking about the 1031 exchange to maybe go to another property that is a lower value and a lower payment to help you get out of this mess. That I could see making sense, but I feel like you're just overcomplicating things. Right now, I would do the inventory, figure out exactly what moves you can make. Austin alluded to earlier in this episode, maybe there's a way where you could do a balanced transfer into a zero interest credit card on the high interest debt. For the credit cards to get out of that portion of this, that would give you an 18 month window for that portion. But you really just need to have a very, very difficult conversation.

32:27Go through each item of your financial situation and figure out how to stop the bleeding as soon as possible. And I don't know if that's just selling the property outright. The 1031 exchange, I'm not really sure. We'd have to have more information, but that would be my take of taking this seriously and figuring out how to get out of this mess. So do you think that Katie should sell the rental property, take the equity that they have in the rental property to pay off the HELOC and the credit card debt? Yes. I would sell the property, pay off the credit cards, pay off the HELOC, step back a little bit, get that base built, and just not try to get so fancy.

33:06HELOCs a lot of times don't work out. People pull their equity out. They get the HELOC. They forget that you're not just getting your equity. You're getting charged to get your equity. And normally it's 7 % or 8 % interest, which is pretty hefty. And people just, I feel, don't consider enough how much that payment adds into their monthly budget. And that's why they end up falling behind because they're using it to invest on something that's a maybe. You should never borrow money with higher interest to invest in a maybe. It just doesn't make sense. And in this instance, you use it to build a business or buy into a business that's not doing well, and now you're stuck.

33:44So that's my take, that's what I would do. And just really do a deep dive and figure out what's next and how to get out of it. I totally agree with you, Robert. They've had this rental property for nine years. I'm sure they've got equity in it, right? Nine years later that they can use now to pay off the HELOC once they sell this rental property and pay off this high interest credit card debt. But I want to just reiterate, it's never a good idea to get a HELOC to go throw it into a business venture that you think is going to turn into something like we talked about this like three episodes ago.

34:17Like I'm such a big believer of not going into debt to start a business. Like there's so many things you can do before going into debt to start a business. This is a prime example of what happens when you do go into debt to start something that doesn't have a for sure ending to it. You know, you start this business or you partner with someone and the business goes belly up. Not only does the business have debt, but you went into debt yourself to go start it. And it's just like you move backwards financially like five years time because you made this mistake. So I just, I try and sell the property, take the equity and use that to pay off the HELOC and the credit card debt.

34:50Yeah. For me, I always want to see people take the risk on themselves, but I think a lot of people get ahead of themselves, especially now in modern society, we have so many incredible tools, so many educational ways to understand what to do. So like you said, it's just tough for me to think it's a good idea to pull the equity out of your home for a maybe like we discussed. So in this instance, I would have rather seen them build the base further. And if they were going to take a HELOC out on a property they've had for nine years, I'd rather see that go into buying another property because at least you have a tangible item that more than likely is going to go up in value rather than a business that you don't know the future.

35:32I own a lot of businesses and I've failed a lot in business and lost hundreds of thousands of dollars on investments in businesses. But until you really get your base built to where that business failing doesn't really affect you very much, I think it's a bad idea. And that's why I agree. I think they should sell the property, start over, get the base built and just try to stay out of harm's way for a little bit longer. OK, we're going to linger on this a little bit longer. Do you think that they should sell any investments to try? Obviously, if you have investments, you should definitely sell them, assuming that they're not in retirement accounts, to pay off this credit card debt.

36:09We talk about you can't out-invest high-interest credit card debt. So if you've got a bridge account, you've got maybe some emergency funds sitting somewhere. We talked about it recently, too. Do an inventory around your house. What can you sell to get$2 ,000,$3 ,000,$4 ,000,$5 ,000 quickly to pay off this high-interest credit card debt? But do you think that they would sell investments to pay off the HELOC? Yeah. I mean, you could, especially if they're investments that have done well for you in the past and you're using profits to pay off this high interest debt. So I think that works. And I always go back to a story that really is related to this episode.

36:44when I founded Silly Bands, I originally had a group of investors that were gonna put$250 ,000 in to invest in Silly Bands and went from 250 ,000 to 100 ,000 to then they wanted to give me a$50 ,000 line of credit to be able to invest in Silly Bands. So I could have taken my own personal credit cards to launch Silly Bands, but I did the smart thing. I sold an asset. I sold a classic car that I absolutely loved. I restored it. It was beautiful. And I think I sold it for$30 ,000 back then. This would have been 2009. And I took all$30 ,000 to bet on myself for this company, Silly Bands, which has now gone on to do hundreds of millions of dollars in sales.

37:29But I didn't borrow the money with a high interest rate to do that. I bet on myself, which is fine. It was still risky. I still could have lost. But if I did lose, I wasn't going backwards and paying interest because I wouldn't have had to pay a payment on it. So keep that in mind. I think it's important to really flush out because every business idea seems great, but most small businesses fail. I don't know what the percentage is anymore, but it's definitely above 50, 60%. So keep in mind, I always want to see people betting on themselves and opening businesses, but just make sure you don't put the cart ahead of the horse and do it too soon.

38:07So our next question comes from Tina J. Tina says, Hey, Rich Habits team. First of all, I am a huge fan of your show. I've been listening to the podcast for a few months and I can't thank you enough for your insights. My husband and I are both 40 years old. We have two kids, seven and 11. He works in corporate and I'm the co-founder of an AI healthcare tech startup. We plan to retire by 55. We earn half a million dollars a year. We have$800 ,000 in our 401ks,$150 ,000 in a brokerage,$60 ,000 in a high yield savings, $20 ,000 in our checking account with monthly expenses of about$20 ,000 because our kids go to private school, which is about$6 ,000 a month.

38:45We own our home at only a 2 % mortgage rate, only have 10 years left to pay on it. We have two rental properties that are about cashflow neutral, and we've invested$200 ,000 into gold. We're just starting to invest more actively and we're considering an allocation of 40 % to the S &P 500, 20 % to the NASDAQ 100, 20 % to SCHD, 10 % to the Dow Jones, and about 10 % to Berkshire Hathaway. My question is, should we focus more on doing the backdoor Roth IRA, or should we continue maxing out our 401ks? Is it smart to do the 529s for our kids? Do we put that in a brokerage instead? We've got a ton of money, we just don't know what to do with it.

39:27We'd love your perspectives. I'll kick this off, Robert. So I love this whole setup, right? You've got 60 ,000 in a high yield savings. It's three months of expenses for you. You've got 20 ,000 in a checking account, which is one month of expenses for you. Spending 14 ,000 a month outside of the private school, that's a lot of money to spend, but hey, you do you, you make a lot, you're doing your thing. I'm not mad at it. You got a million dollars invested here. If I were you, I would do what Robert and I always say, which is the match beats Roth beats taxable. So if you have a 401k, which you said you have 800 ,000 in your 401ks, I would invest up to the match to get the free money from your employer.

40:05Then I would do$7 ,000 into each your Roth IRA and your husband's Roth IRA via a backdoor conversion. So there's no income limits. If you have autonomy over your 401k, which means you can like invest it in the things you want and not just have it parked in target date funds or international stuff or bonds and cash and things like that, but you can actually trade inside of it, which I hope you do if you have$800 ,000 in there. Go back and instead of going to the taxable, you want to go back and max out the 401k, which I think is like another, call it$50 ,000 between you and your husband. And then if you still have money left over to invest, which I think you guys probably should, then you put money into the taxable brokerage account on public.com.

40:47You said you already have 150 ,000 in your taxable brokerage. Get that up to maybe 200, 250, 300. I love the breakdown between the S &P, the NASDAQ, the Dow Jones, SCHD, and Berkshire Hathaway. It's a wonderful percentage waiting there. Do not feel bad about any of that. And congrats also on owning$200 ,000 of physical gold. If I were you, I would be, I don't know. I don't know what, 200 grand of physical gold. I would be really scared to have that much gold. What are you doing with that? Maybe you should buy the ETF or, I don't know,$200 ,000 that people can just take. I feel like that's scary.

41:24Well, I'll tell you what I did. When I first got into precious metals, I was like, okay, I want to own physical, but I also want to own the ETFs. So I bought a very expensive at the time gun safe and we had it craned into the basement of a building not to be determined because it's still there. And then we welded that and concreted that safe into the building, into the basement. And that is where I stored my physical gold and silver for a very, very long time. I like having physical gold and silver myself just because I can touch it, feel it. And I know no one can take it from me. It can't get scammed.

42:05It'd be very difficult for it to get stolen. And so I agree with them and I love this. And I think everything that Tina is doing is fantastic. It is a really, really good blueprint. And I don't think that I would change anything. And they mentioned also, is it smart to contribute to the 529 for our kids? I know you're the expert on the 529s, but I think that's a great idea to get that started as well. But just congrats, Tina. I think you guys are on the right track. You're doing a phenomenal job. I love the waiting as well as described. So I just think you guys are crushing it. Keep doing what you're doing and just make sure that everything Austin alluded to, that you're building off of that kind of blueprint that he provided because you guys are crushing it.

42:49We want to see you keep going in the right direction. Yeah, the 529. I missed that one. So what you want to be doing is depending on the state you live in, you actually might be able to write off your 529 contributions against your adjusted gross income up to a specific amount per year. Obviously, you want to be contributing as much as your kids need to go to college and just go up to the limit for the write off. But the 529 is a great way to be investing toward your kids' future. I use Vanguard for that. I think you can open up a 529 account with them with like$3 ,000 of a minimum. Right now, I've got like$8 ,000 or$9 ,000 in that account.

43:22It's super simple. You open it up, you put on the auto invest, you can select where you want it to go. I've got 80 % in the S &P 500 and like 20 % into like these growth VUG is the ticker I use. It's like a growth ETF with Vanguard, very similar to the NASDAQ. But I love the 529s because what's cool is that they don't go to college or they don't use all the college funds, or maybe they still go and you still want to do this, which I would recommend is you can roll over up to$35 ,000 from that 529 account toward the children's Roth IRAs. And so now the kids are in their early 20s, they've got$35 ,000 already invested on their behalf in the S &P 500.

44:00And if that continues to grow by 7, 8, 9 % per year over their lifetimes, they have a million dollars in retirement account tax-free that's already adjusted for inflation. I love this. I think it's a wonderful way to build generational wealth. I agree totally. What a great job. I just love seeing all aspects of personal finance, just because then we can give our take on it and try to nudge people in the right direction. So great job. Now, before we jump into our final question asked by Allie on Instagram, let's take a moment to hear from this episode sponsor, Blossom, because investing is more fun when you're doing it alongside like-minded people.

44:37From dividends to growth stocks, there's a community for everyone on Blossom. And remember, Blossom is not an online broker. They're a social investing app built around transparency, a social media platform for investors. Transparency is key when it comes to investing, and you all know how important that is because you listen to our podcast. I've already connected my personal accounts to Blossom, and I enjoy seeing how everything is divided up and performing on a daily basis. Additionally, they offer Duolingo-style educational video content for those of you still learning. They were recognized as a top 25 app for 2025 by the Apple App Store for good reason.

45:17So if you've not yet joined Blossom, we really encourage you to do so. You can see my portfolio and Robert's as well, as well as joining over 250 ,000 other investors. It's an easy way to find both your community of like-minded investors, but also manage and analyze your portfolio in a really clean way. So click the link in the show notes below to sign up for Blossom or simply type Blossom in on the App Store. All right, Robert, let's now jump to our final question coming from Ali on Instagram. Ali says, hey all, I'm a huge fan of the show and I've been listening for years. Thank you for the thorough education around complex topics and the simple tips to set us up for financial success.

45:52My husband and I are both 28 years old. We have a joint income of$280 ,000 a year. That does not include our rental income. And we've been following your advice with the goal to build generational wealth for our family from day one. We're doing a couple things right now with the first thing being house hacking. We bought a triplex recently and we're currently living in one of the units and renting out the other two. It's been an excellent investment. The total mortgage every month is 4 ,600. We bring in 3 ,550 from the other two units. So our cost of living is pretty low. One day when we rent out our own unit, we will be able to cashflow$2 ,000 a month.

46:26The second thing we're doing is we're building our base. Combined with having 160 ,000 in our 401k, we really want to build this up to hundreds of thousands of dollars. When it comes to high interest debt, we don't have any, but we do have some nice cars and we have a jet ski. So there's that. And finally, we're consistently investing into the index funds and ETFs you talk about. So here's our question. Once we've built our base, once we're done house hacking, once we've set up our recurring investments, what is next? We are considering maybe another multifamily property before we buy a single family home.

46:58We know if we live in the multifamily, we can do the 5 % down with a lower interest rate, But if we don't live there, we're going to have to put 20 or 25 % down for a single family home with a higher interest rate. So we'd love to hear from Robert what a potential long-term real estate strategy could be for us since we are open to house hacking and buying up to potentially 10 multifamilies throughout our life. Wow. What a great situation and a great question. I would say your strategy is keep doing what you're doing. I love the idea of buying another multifamily. I just think if people can get ahead of it with these duplex, triplexes, or quadplexes, there's so many great programs out there for individuals like yourself, you as a couple, to be able to get into the real estate game.

47:42And I just think if you did this and got yourself up to 8, 12, 16 doors, you could still self-manage or have someone that's very inexpensive on payroll to help you manage the doors. and it would just really set you off so well from an investment perspective to be able to build that wealth. Because like you alluded to with the first one, the first multifamily is getting that$2 ,000 a month in cash flow is so massive. Might not sound like a lot to most people, but you get that up to 8, 10, 12, 16 units. And all of a sudden you have$10 ,000 a month in cash flow from these properties. plus you have the capital appreciation each and every year on these properties.

48:26Most of the time, depending on where you're at, you're going to have four or five, 6 % capital appreciation yearly. Plus you have the depreciation on these properties to offset some of your ordinary income. So I think it's a great strategy. That's what I would do. I would keep going, but also make sure you don't sleep on what you alluded to. And that is continually and consistently investing into the VOOs and QQQs that we talk about, because we want to make sure that you're building your base alongside of building your portfolio in real estate. I love this question, and you guys are really crushing it, and we really appreciate this.

49:03So you guys are making$280 ,000 pre-tax. Let's call it$200 ,000 a year post-tax. It's about $17 ,000 a month. My girlfriend and I are in the same age range as you all are, and we easily live off of$7 ,000 a month. We have no children. You didn't mention you have children or not. I'm going to assume you don't have any children. I'm sure once people have children, costs go up dramatically. But that means that you can save and invest here about$10 ,000 a month, theoretically. That's$120 ,000 a year. So I just want to make sure you might feel good about where you are right now with your rentals and the multifamily and the potential cash flow and the money you're making in your investments, but do not feel like, oh, I got a good headstart.

49:46We're ahead of our peers were doing great. We can pull back on the gas, we can hit the brakes a little bit, we can strike, we can, you know, just kind of hang out and glide. Do not do that. Now is the time before you have children before, you know, all these big life events happen that you can really begin to build wealth into your early 30s. So here's the long term goal. The long term goal is to retire early. Well, what does it mean to retire early? In anyone's situation, retiring early means the money your portfolio is generating for you on a monthly and annual basis completely offsets your monthly and annual living expenses.

50:21So if I'm spending$7 ,000 a month to comfortably live my life, my portfolio income would need to make after taxes$84 ,000 a year or$7 ,000 a month. And theoretically, I would be financially independent, retire early, things like that. And so that's your goal, right? Figure out, okay, how much every single month do we spend? Is it 7 ,000? Is it 8 ,000? Is it 9 ,000? Is it 6 ,000? Like what's your number? Figure out what that looks like on a monthly basis and an annual basis and lay out a five to 10 year plan using multifamilies, using NEOS funds, using other investments and other things that's going to provide monthly income to you that will be able to provide so much monthly income that it will offset in its entirety the six, eight,$10 ,000 a month that you expect to spend.

51:09Now, of course, whenever I say like retire early, make sure I'm super clear here. Retiring early means you no longer have to trade time for money doing things you don't like, right? I know a lot of people hate their jobs. They hate their boss. If you are retired early, that doesn't mean you just sit on a beach and drink your margarita all day. What it could mean though, however, is that you now have time to pursue passions, to work a job you really enjoy, even if it pays less, right? Do things that actually bring you joy on a daily and weekly basis, not having to worry about a paycheck or having to worry about trading time for money to just get by in life.

51:48So you guys are really, really crushing it here, Ali, super excited for you and your husband, you have a great income, you've got a great amount of money invested so far, stay out of the credit card debt, and do the multifamily thing, get four or five, six different multifamilies, 10, 12, 15 doors eventually, and then also start picking up some Neos funds that are going to be paying, call it$1 ,000,$2 ,000,$3 ,000 a month, depending on how much you have invested in them. And you are going to be retiring in your late 30s, early 40s. Wow. So I want to tell a story. I think that most of the world does it backwards.

52:24And that is, we see people every single day, millions and millions of people, it's kind of like the wrong way to live. And I don't know how to put it eloquently, but it's basically you get out of school, you're in your twenties, you go out drinking on weekends, you're partying all the time. You wake up, you're in your thirties. You're fighting off the fact that you're not ready to completely get serious about life yet. Then all of a sudden you're 33, you're 34 and you have that oh crap moment. And you're like, I got to get my business together. And then you wake up in your 40 and you're like, oh, I'm way behind financially and you get the drill here.

53:03I love this question in this scenario, similar to you, Austin, because I think people do it backwards. I think you should, as soon as you can, make as much money as you can, take as much risk as you can and build your finances early. So then later you have it easy. So many people screw around till they're 40 and then go, I have to catch up. Otherwise I'm going to be a Walmart greeter at 70. And I just hope this episode helps a few people not do that because when you have no kids, you don't have all of the things that go along with a busy, busy family life. That is when you should be on the grind.

53:46You should be making the money and building that wealth early because trust me, when you can own your own time sooner than later, you're going to have so much better quality of life later on. I could not have said it better myself. I am the biggest believer. I remember working my nine to five job out of college. And I wrote about this on my sub stack because I was still working my nine to five job. And I was thinking to myself while I was writing, like, is this really all life has to offer going to this desk every day and getting a paycheck of, you know, four invest some of it and like, golly.

54:24And so like, I'm just so thrilled to hear that people are taking notes and taking action. They're house hacking, they're doing the Roth IRA, they're doing the NEOs funds, they're doing the side hustles. They're like, they're doing these things that on a day to day basis seems small, but over the course of years and decades are going to compound into hundreds of thousands, if not millions of dollars that they can now use to begin to pursue their passions, retire early, take care of their family, like do things that make them really happy. So what an incredible episode. So, so good. And I want to make sure all of the older listeners, this isn't to say that it's too late.

55:01We all make mistakes. Life gets in the way. And sometimes you end up in your older years where you're not where you wish you were financially, but that's okay because everything we teach and everything we talk about can help all walks of life at all levels of financial freedom or non-freedom because you can implement these strategies and these tactics so easily. That is why we enjoy breaking it all down and giving you the insight from two guys, two different levels of experience and a 30-year age gap so we can cover all of those age gaps and help people understand it's never too late and it's never too early to get started.

55:42With that being said, everyone, thanks so much for tuning into this week's episode of the rich habits podcast if you've not yet joined the rich habits network we're still running a seven day free trial over 150 of you have joined us over there we hop on a zoom call once a week it's two hours long we answer your questions we give you market updates headline news everything that we think you all should know there's also eight hours of video coursework inside of the rich habits network covering how to build your base how to build a portfolio from scratch, how to analyze stocks, how to invest in businesses, like all the stuff that we talk about here on the show.

56:16And then also we offer some private investment opportunities, if it's in real estate or pre IPO companies or other private things like you're gonna like that. So go check that out. There's gonna be a link in the description below to learn more about the seven day free trial of the rich habits network. With that being said, thanks, everyone. Lemo Lemo And Doug Here we have the Lemo Emu In its natural habitat Helping people customize their car insurance And save hundreds with Liberty Mutual Fascinating It's accompanied by his natural ally, Doug Uh, Lemo? Is that guy with the binoculars watching us?

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57:31Rinse. It's time to be great. And have a great start to your week.