Q&A: 10-Years in Prison, $3.4M Mortgage, & Becoming a Millionaire Firefighter

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0:42Oh, Hilton stay, oh, Hilton stay. When you want holiday comfort you can count on, it matters where you stay. Enjoy comfortable rooms and friendly service when you stay with Hilton instead. Save up to 25 % this season when you book with Hilton. Hilton for this day. Terms apply. Hey everyone and welcome back to the Rich Habits Podcast, a top 10 business podcast on Spotify. This episode is our question and answer edition, which means you're asking us questions via email at richhabitspodcast at gmail.com or maybe on Instagram DMs at richhabitspodcast or you're inside of the Rich Habits Network and you're asking us questions in there.

1:22Link in the show notes below for more information about that. These episodes, Robert, are one of my favorites because we get to just spit off the dome, answer some real questions in real time, and have some fun along the way. I mean, these are some of my favorite episodes. Well, I like it because I feel like it gets us in the trenches and closer to our audience. We already have the school community with the Rich Habits Network, and that's all awesome. The DMs, they're great. Instagram is great. But this is, like you said, off the dome, nitty gritty. We We don't rehearse. We don't practice. We just read these in real time and knock it out.

1:56And I think it's the best way to provide a ton of value because for our listeners, it's just awesome because they don't know what's coming in the episode either. So it's not like a topic where they can just turn off the episode and say, well, I'm not interested in that or it doesn't affect me. These episodes affect everyone because it's all about anything that's thrown at us. And that's why I love it so much. Well, these episodes too, Robert. I mean, sometimes like we try and take some notes in the beginning if it's like a question that we maybe need some more clarification on. But, you know, 99 % of the time, this is us in real time digesting a question and talking about it out loud and trying to figure it out with each other here.

2:34So I think it gives people sort of like a sneak peek into the brains of us and sort of how we approach problem solving as it relates to money problems and personal finance and investing and everything in between. Now, speaking of investing, if you're serious about investing like Robert and I are, you need to know about Public.com. This is where you can invest in everything. Stocks, options, bonds, and cryptocurrency. They even offer some of the highest yields in the industry, like a bond account that pays 7 % or higher, and that yield remains locked even if the Federal Reserve cuts interest rates.

3:06Now, what sets Public apart is how they give you tools to make informed investment decisions. Their built-in AI tool called Alpha doesn't just tell you if a stock or asset in your portfolio is moving. It tells you why it's moving. So you can actually understand what's driving your portfolio's performance on a daily, weekly, and monthly basis. Yeah, Public is a FINRA-registered, SIPC-insured, U.S.-based company with a customer support team that actually cares. And this is so important to me because I lose my mind when I try to reach out to somebody about my money and I can't figure out what's going on.

3:42So that's one of the many reasons why I love public. So the bottom line is your investments deserve a platform that takes them as seriously as you do. So you can fund your account in under five minutes or less at public.com front slash rich habits and get up to$10 ,000 when you transfer your old portfolio. That's public.com front slash rich habits paid for by public investing, full disclosures and podcast description. So if you want to make a couple hundred bucks, a couple thousand, it's all free. Just go move your money into public and it's the exact same experience with better tools and resources.

4:15So we cannot be bigger proponents and believers in what public is doing. Major shout out to public.com forward slash rich habits. So our first question is coming from Jared H. Jared says, greetings from Georgia. First things first, I appreciate all the amazing insights you both provide on the show, and I'm looking forward to listening and learning throughout the upcoming year and beyond. I'm 26 years old, newly engaged, and I'm a mortgage lender. I switched to the mortgage side after two full-time years in real estate sales, in which I averaged about$60 ,000 in commissions. We also began a real estate photography company that earned us$30 ,000 in 2024.

4:52I'm hopeful about my earning potential in my new role, and I have my sights set on beginning my investment journey this year. I have about$600 in monthly debt across my auto loan, my student loans, and my credit card monthly payments, and a$24.55 per month mortgage that is currently being evenly split between myself and my fiancé. For someone in my position whose income can fluctuate dramatically month to month depending on my production and my businesses, how would you approach the balance of investing and paying off debt? Which one would you choose? Is there a middle ground? How do I think about this?

5:25I'll take a first stab at this one, Robert. We get this question all the time from people that are on more of like the commission side of the equation for their compensation, right? Some months they make$3 ,400. Other months they make$34 ,000. It's all over the place. How I like to think about budgeting, paying off debt, and investing when I'm someone making variable commission or variable compensation on a monthly basis is by working backwards. Here's what I mean. Go open up your honest budget, right? You all know what that is by now. and it shows you everything that you're spending every single month.

6:00What I want you to do is work backwards. I want you to look and see, okay, during the month of January, I'm supposed to spend$4 ,700 because that is what I've budgeted. So what I want you to do is focus on earning that 4 ,700 and once you've earned that, now it's time to take everything above that and say, okay, here's what I now have left to begin paying off debt or invest. So I guess what I'm trying to say is like, by knowing what you need to have to live will allow you to figure out what you have extra to pay off debt and invest. So the other way around is like people say, okay, I know I make this much money, let's call it 6 ,000 a month is what I get paid every month.

6:40And now you gotta figure out how to divvy all that up. By flipping that on its head, you know exactly how much you spend, therefore how much you need to earn that month to cover your basic living expenses and all the stuff that comes with that. Before you can now say, okay, everything above that, I now have the flexibility to pay off debt and begin investing. Now, again, we always want to encourage everyone, build the base, assuming it's low interest debt, keep it around, build your base. You did mention credit card debt. So that is absolutely what you should be focused on paying off. You cannot out invest a 30 % interest rate.

7:13Yeah. And I would say one other piece of the puzzle I would add to this is you're in your twenties. You have a lot of time horizon for your investment strategies and your future and your retirement. But right now, you need to focus on getting out of high interest debt and making sure that under no circumstances, you let that grow again. You need to be putting away that 10, 15, 20 % of your net income every single month. And until you can do that, it's really hard to grow your wealth and be financially free. So in my opinion, you've got the main job, you've got the side hustle. Guess what? I would look for a third source of income, even if it's only$1 ,000 a month and you have to do it every Sunday during the month or every Saturday afternoon, I would find a way to knock that out as soon as possible because the longer you delay putting money aside for retirement, the less time you have for it to compound on itself.

8:09And that is the most important thing when you are young is to invest early and often. I also want to call out, you know, you made$30 ,000 in 2024 with your real estate photography side hustle. That's huge. That's amazing. Now the question is, how do you double that in 2025, right? How do you go from$30 ,024 to$60 ,025? Maybe it's time to start running some ads. Maybe it's time to reconnect with some old real estate agents. That to me, Robert, is the biggest upside potential that Jared has with his income is really getting that real estate photography business off the ground and running super smoothly throughout this year.

8:47Yeah, he could try digital ads. They could try adding new services. Maybe they offer drone services or something else to be another a la carte item to add on top of their photography. There's a lot you can do with real estate photography, especially right now, because everyone needs help selling properties. And so many real estate agents are still running behind in the technology part of real estate sales, and they're just not doing a good job. And you educating them, maybe through content or a YouTube channel would also help you get further clients. Ooh, I didn't think about that. Some content.

9:23That's a good idea. So our next question comes from Brian T. Brian says, hello, Austin and Robert. My name is Brian T. And I've been listening to your podcast since 2023. Thank you both so much for your incredible information. I really appreciate it. Last week, I started a public.com account and I'm depositing$100 every two weeks. I also started a Roth IRA and I have deposited$100 into it so far. I'm 37 years old and I'm a disabled veteran. So I receive a monthly stipend each month. I don't have any money in my savings and I'm working on my honest budget here in January to start the year. Now currently my job does not offer a 401k so I need help with my investing.

10:00I know on the podcast you say I should be diversifying between the S &P 500, some cool ETFs, some cryptocurrency and other things like that. And I know they offer fractional shares on public, but I'm stuck as to where I should really first start investing. Do I really just diversify my$100 deposit into four or five different options every time? Or do I take the whole$100 and invest it into a single thing and try to remember the different weightings of everything that I've invested my money into? My goal is to build and grow my wealth as I've been struggling to have a solid plan that works for me, but I'm ready for real change.

10:36Thank you all so much for your assistance. It's really appreciated. Heck yeah, Brian. Thank you so much for your service, my friend. That is awesome. Robert, you want to take this one? I like it. I think your head's in the right place. I don't think you can have a bad strategy of either breaking up the$125 a piece into four different ETFs that we talk about. I don't mind the fact of investing the $100 every two weeks into an individual ETF that we talk about and then flip-flopping them every two weeks. I think either way is good. It's all about consistency and getting yourself in the market. Like I've said many, many times, you can still become a multimillionaire if you're younger, if you do it a hundred dollars a month,$200 a month.

11:15And as you grow over time and let it compound, you can still get there. So I love the strategy and I think either way works for me. Yeah. I think the only piece of advice I would give Brian is to make sure that you're not making the mistake of putting$100 a month in the Roth IRA and$100 a month in your bridge account, right? Those are two separate accounts. If you only have$200 a month to invest, that is less than the 588 per month on average, you'd need to max out your Roth IRA at 7 ,000 a year. So in my opinion, Brian, you should put all$200 into that Roth IRA because we want to make sure we max out the Roth IRA every single year.

11:53It's the most tax advantage way to retire a tax free millionaire is how I like to describe it. It is a wonderful account that allows that and public has that in their platform as well. So if you have 200 bucks a month, and you're doing 100 in the Roth IRA and 100 in a separate account, like a trading account or something, don't do that. Sell everything that's in the account that you have a bridge account, trading account, whatever, move all of that cash into your Roth IRA. And to Robert's point, you can be buying$25 dollars into VOO, a hundred dollars into VOO, it doesn't matter. But as long as you're in these tried and true ETFs and index funds like VOO, QQQ, SPYI, VTI, Moat, things like that, you're going to be just fine.

12:36But to Robert's point, consistency is the key here. Don't just get excited because it's the first of the year, you're putting some money aside, and then summertime comes along and you want to go on the vacation or you want to go out with the buddies or now find net$200 every month and stay consistent with it. So real quick, I want to put something back on you, Austin. What do you recommend for our listeners when you're starting out small with that couple hundred dollars a month to invest in putting it into all of it into the Roth IRA, since you're not going to be able to max it out anyway at$200 a month each year, where do you recommend they get to before they start to build that bridge account so they do have some money that is pre-tax and still liquid if they were to need it down the road versus the Roth IRA?

13:23Yeah, that's a good question. So first off, this$200 a month, assuming from 37 to 67, so 30 good years of investing ahead of you, is$700 ,000. So you would have contributed$72 ,000 into your Roth IRA, and it would have grown to$700 ,000 of tax-free money for your retirement. So like 200 bucks doesn't sound like a lot, but we're talking about nearly a million dollars in your retirement here. So the question is back to this idea of like, do you go all in on the Roth IRA? Do you split it up with a bridge account? Like, how do you approach that? In my opinion, you should have enough money to do both.

13:59And that means you have an income problem. If you don't have enough money to do both, I think you have an income problem. You need to either get your income up, right? How do you raise your household income by 15, 25, 50 % over the next three, five, seven years? Have a plan for your career. We talked about side hustles. We did a whole episode on that. Or two, do you have a spending problem that's taking away from your investing? I'm a really big believer in having these different accounts and being able to have the autonomy over a Roth IRA and a bridge account and a crypto and a 401k and all that stuff.

14:29But having that autonomy only happens if you have the income for it. And if you don't have the income for it, you need to have a plan in place that allows you to get the certificate you need to get the extra$7 an hour or get the new certificate to go lateral into a different job or whatever's going on to grow your income. Maybe not in the next 12 to 24 months, but definitely the next 36, 48, 72 months. I love the coverage there. And what it really illustrates for me is we don't want people continuously borrowing from their future for the present. and that's why I like your philosophy of getting it all into the Roth as much as possible when you have that small of an amount.

15:08But I also wanna make sure that people understand whether it is the Roth or the bridge account, the goal is to not put it in, grow it and continually take it back out because then that's lifestyle creep, that's the shiny ball syndrome and you're not integrating delayed gratification which is very, very important. I see it all the time. People build up to 100 grand, they get their base going, it's looking good, then they spend 60 on a new car, Then they build it up again, and then they spend 60 or 40 or 50 of it on a boat or whatever. The goal is put it away, forget it exists, keep growing it, so you are set up for the future.

15:43Couldn't agree more, Robert. Now, our next question comes from Conrad. Conrad says, I love the podcast. My name's Conrad, and I'm a 49-year-old fireman, and I have a question regarding my retirement accounts. I own my home, which is valued at$825 ,000, and my wife and I own our vehicles and we have zero debt all around. I have a 457 through my employer, which has about$320 ,000 in it. I invest$16 ,600 a year into my 457, and each year I try to add a little bit more based on annual raises that we get. I also have a 401k from an old part-time job that I no longer work at. It's worth about$14 ,000 and I recently moved it into an IRA and it's evenly distributed into the funds that you guys talk about, VOO, VGT, VTI, and QQQ.

16:32So here's my question. Should I start putting a small amount of money every month into this IRA as well or should I just concentrate on continuing to put more and more money each year into my 457? This is a really good question. So a couple quick call outs. The first one is you didn't tell us what this 457B is invested into, which makes me nervous, right? Maybe this is invested into some target date funds or some international stocks or bonds or some stuff that you don't need exposure to. So the idea of just funneling more and more and more money into this could be an underperforming strategy.

17:06So if you have full autonomy over your 457B and you can invest it into the S &P 500 or some mega cap or large cap stock blend or something where you actually own American capitalism at its core, I think that's totally cool. shovel some money into that. But you should also in tandem want to max out that Roth IRA or that traditional IRA, whatever that 14 ,000 is in, you should want to max that out every single year, because that is again, this like tax advantaged way to have a big retirement nest egg that you don't owe any taxes on once it's grown into hundreds of thousands of dollars, right? So again, you have autonomy over that IRA.

17:45It's super easy to do. You can go to public.com and transfer this existing 14 ,000 into that. You'll get a couple hundred bucks as a bonus, which is cool. But again, you'll have the autonomy and it will grow tax-free over time. Yeah. And I also want to go back and touch on the house. $825 ,000 and it's paid off. Man, at your age, I would really look at a couple things. What is the house appreciating a year? What is the average rate of capital appreciation on that property every single year? Is it 4 %? Is it 3 %? Is it 5 %? Is it 8 %? If it's under 6%, I would consider downsizing the house. Go from an$825 ,000 house, maybe down to a$425 ,000 or$525 ,000 house.

18:29Take the additional$300 ,000,$400 ,000, get that into the markets because assuming we can make 10%, 12%, 15 % in the markets over the next 10 or 15 years, you really, really then help your chances of getting financially free sooner for retirement because that is a lot of money to be sitting eking out a small living now i realize you don't have a house payment but you have to consider the differences of what you could do with that much cash flow in the markets in equities making you more money yeah you could definitely find yourself a 400 500 000 house somewhere in the southeast region right call it south carolina georgia tennessee alabama right That's a beautiful home.

19:10To Robert's point, you sell it for$825 ,000 cash. Let's call it$800 ,000 after commissions. You take$400 ,000, so half of that, you buy a house in cash, and now you have this additional$400 ,000 that you can go invest aggressively for the next, call it six, seven, eight years, which over the course of seven years will double because that's what the stock market does. And now you have$800 ,000 invested in your bridge account. You've got 300 something thousand. Well, actually it'd be 600 now because seven years would have gone by. So you now have one and a half million dollars between your bridge account and your retirement account in a paid off house and you're in your mid fifties.

19:47Like that is a cool place to be all because you're a fireman. Shout out to our fireman. I got a friend named Jonathan's a fireman. Yeah, that's a dreamy situation and something to consider because, you know, you can hold the house forever and maybe it keeps appreciating to a million million two, which still works, but you just want to make sure you're accelerating as much as you can with your money. So something to consider. Well, listen up, folks. Time could be running out to lock in a 6 % or higher yield at public.com. You can lock in a 6 % or higher yield with a bond account, but remember, your yield isn't locked in until the time of purchase.

20:19So you might want to act fast. Lock in a 6 % or higher yield with a diversified portfolio with high yield and investment grade corporate bonds only at public.com forward slash rich habits. So our next question comes from Edith D. Edith says, hi, Austin and Robert. I've been a huge fan of your podcast for six months now, and I've never missed an episode. Your insights have been instrumental in helping me build my investment portfolio across my 401k, my Roth IRA, my brokerage account, and even my HSA. Now I've recently been offered the opportunity to purchase the company I currently work for as the owner is retiring.

20:55However, I'm struggling to determine if it's the right fit for me. The deal would not require a down payment and the purchase would happen through a gradual buyout over a 10-year period. For the first five years, the owner would retain the majority of the profits, allowing him to pay himself back, with ownership gradually transferring back to me by the end of that 10-year period. However, there's a minimum total of$2.5 million he wants to get paid during this 10-year period. The business is a service-based company with no physical assets, and there are fewer than five employees, including the owner.

21:28Now, I'm the primary contributor to this company. So my dilemma is whether I should seize this opportunity, knowing that it would tie me to this commitment for the next decade with essentially two and a half million dollars of debt, or I should continue working for a few more years and try to build my own business. Now, for context, I'm 35 years old, I'm married, and we have a two million dollar home with a million dollars of equity. Our combined annual income is$400 ,000, of which I bring 65 % of that to the table. We've invested around$300 ,000 across all of our accounts. We have 100 ,000 in our emergency fund and I would like to continue investing with the goal of an early retirement.

22:04My main concern though about this opportunity is if I don't take it, the business might close and I won't be able to earn as much at the other companies that I could work for with my set of skills based on industry standards and it'll slow down my retirement planning. Ooh, what an interesting question. Robert, I'll let you kick this one off. Yeah, this is a tough one because I always wanna see people have ownership in companies if they can, because it's so much better and safer in most instances than just being an earner or a high earner within a company. But here's a few of the wrinkles and things I want you to consider.

22:42Number one, buying this on owner financing over a 10-year period scares me because market share can change, sentiment towards the company could change. There's so many variables that come into play here, but it scares me that he gets to take home a majority of the profit for the next 10 years while you do all the work. So here's my thought process and where my brain goes. If you believe this company could close, if you don't buy it, I would want you to call the bluff, go back to him and say, Hey, Bill, Hey, Larry, Sally, whatever their name is say, you know what? This opportunity is just not right for me.

23:18Love the company. I've really enjoyed being here. Would love to stay, but I think 2.5 million over 10 years is just too rich for my blood and what I believe the situation allows for. So I think I'm going to have to pass. And then over time, let's say you have a 90 day window, 120 day window, then you could revisit the conversation and say, or at the same time, say, Hey, I would be happier if we could arrange something that's a shorter window of maybe five years. And then we have a balloon at the end once all the equity is migrated over to you because then at least you own something. But the other part of this that's scary is being service-based.

23:58You don't have any equipment. You don't have anything of a secret sauce mechanism that has value that if you're wrong and you fail, you can sell. And I've seen it many, many times over the 30 years of doing this and buying small companies, selling small companies is people will buy a company like this service based or they'll buy a law firm or they'll buy a dentist office and then the owner leaves and he was the one that built this database of customers and a lot of staff and customers leave with them and just start looking elsewhere because you're not their person maybe and that's where I would really really look from within and ask yourself is a lot of the customer base if you're one of the big proponents of this customer base in the services, would they come with you if you started over?

24:47So if you call the bluff, he says he's closing, you go to all the customers and say, I'm starting new ABC Nuco doing the same exact thing. Would you come with me? Then that is an opportunity where you own it right away. You own all of it and you're not paying$2.5 million over 10 years, which you have no idea if that's a good deal or not. I love this perspective, Robert. it. I agree. It is frustrating because I feel really bad because like, you know, Edith D over here is making$260 ,000 a year. So that's what she's bringing to the table at her family household, right? So$260 ,000 a year is what she's making working at this place.