Q&A: $320K of Student Loans, Broke Boyfriend, and $300K of Google Stock

0:28Shopping is hard, right? Get your mother-loving ears on because your big-time radio DJ's got news. PayPal lets you choose how you want to pay for all the stuff. With PayPal, I can pay in-store, pay online, or pay over time. What's that? You want this translated into song? I hope you're sitting down. You can pay your own way. You keep those ears on, you hear? Don't just pay, baby. PayPal. Learn more at PayPal.com. Hey, everyone, and welcome back to the Rich Habits Podcast question and answer edition. As always, this episode of the show is us answering your questions. Questions we get from Instagram, Rich Habits Podcast.

1:13Be careful. There are scammers and impersonators out there. We're never going to DM you. Or questions you send us via email at richhabitspodcast at gmail.com. Robert, speaking of emails, we sent out an awesome email newsletter last Thursday talking about investing at all time highs. We love the newsletter. We think you guys love it just as much. But Robert, how much do you love this newsletter? What's your feelings about it so far? We're about a month in. It is up there as one of the things I'm most proud of in my lifetime. I'm going to say it now. I think it's going to be one of the biggest newsletters and most enjoyed newsletters in the country within the next six, eight months.

1:50I'm so proud of Christian and the team and you and everybody that's worked on it. And it's just so awesome because some of the highest level people that I engage with in business and in finance around the country have made the time to DM me or call me or text me and say, your newsletter is incredible. Congratulations, et cetera, et cetera. So it's really, really cool for me that we've taken the time to build it out. And behind the scenes, we're putting together the school community and all of our tools and all the things we're putting together. So I'm very excited about the coming months and just can't wait to dig in more to everything we're building.

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2:57Already, I think now over 2 ,700 of you have subscribed just in the last week. It's kind of bonkers. But before we jump into the first question of this episode, Robert, introduce this episode's sponsor. Yes, I am so excited. If you trade options, you've got to ask yourself, why wouldn't you choose an options trading platform that puts investors first? At public.com, there are no commission or per contract fees. And more importantly, it's the only platform where you can earn a rebate on every single contract traded. That means you can save on your options trading costs and keep more of your capital in play.

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4:12This was paid for by Public Investing. options are not suitable for all investors and carry significant risk. Full disclosures are in the podcast description below. So Robert, our first question is from Sophia. And I think Sophia is in a spot that a lot of people in their 20s and 30s find themselves. So let's dig in. Sophia says she's 26 and has no credit card debt, no student loan debt, and is almost done paying off her car. She has$25 ,000 in a CD at 5%,$20 ,000 in a high yield savings account for an emergency fund, and$28 ,000 in Robinhood in stocks and ETFs. She's also contributing to her 401k and claims she'll make 230k a year at 65.

4:52She might be alluding to an annuity. We'll talk about that in a second. But here's her question. Her boyfriend is on the opposite side of the aisle. He has$17 ,000 in credit card debt,$20 ,000 in student loan debt, was unemployed for a while, started a business, it failed, and now he's looking for another job. Sophia asks, what can we do now to ensure that we live financially healthy lives when we get engaged and married over the next three to four years? Well, Sophia G, we're going to be a little hard on you today. So what I would do first and foremost in this situation, it's not a rare situation.

5:26It's very common, actually, where both sides of the relationship are not on the same page, don't have the same habits and don't have the same level of financial literacy. So in my opinion, your next step financially is to have the hard discussion. You've obviously figured things out. You've dug in over the years. You've really set yourself up with a wonderful situation. And your boyfriend, who we don't know the name of as of yet, has not. Doesn't mean he's not trying. Doesn't mean he hasn't made an effort by starting the business. It could have gone the other way. But that does not dismiss the fact that you're on one side of the financial fence and he's on the other.

6:03So in my opinion, your next step is to have a very, very difficult conversation with him. And it has to be handled now rather than later, because the last thing you want to do is get into the marriage where you combine your efforts and then all of your hard work gets sucked out the window because he is not on the same page with you about saving and building for retirement. So that's where I'd start. And Robert, when Sophia has that conversation with her boyfriend, what are maybe some main talking points that you'd encourage her to share? For me, I think the credit card debt is probably the biggest one because if you are$17 ,000 in credit card debt, it's one thing to be a couple hundred, maybe even a couple thousand dollars in credit card debt.

6:49Something bad happened, emergency came up and you just kind of fell behind. But$17 ,000, Sophia, is a habit, right? This much credit card debt only comes when someone spends more than they make. And I get it. This guy has been unemployed for a little bit. Maybe a lot of that credit card debt was startup costs for his business that failed. I kind of give him some leeway on that. But if it is because maybe he's overspending every month, he does have a spending problem, you know, if it's because of that, that is going to be a hard line in the sand that I'm going to draw Sophia and say, listen, if you want us to move forward relationally toward engagement and marriage, for me, I need you to be on the same page with money.

7:29Sophia, you probably have a budget. You're obviously very good with money. You've got all the stuff figured out. So it's time for him to do the same. And again, I give the guy some grace. Being unemployed sucks. I've been there. I get it. I think we've all been unemployed at some point in our lives. It's tough. But having$17 ,000 of credit card debt and student loan debt, I mean, the guy obviously went to college, does he have a degree? Did he drop out? If he dropped out, why did he drop out? Is that a character trait? Does he always like start things and fail them? We have two kind of back to back instances now.

7:57Like, I don't know, right? Not trying to beat up the boyfriend here, but I just really want to get to the root cause of why he has such bad financial decisions. And only when this man will say, I am sick and tired of being sick and tired, look myself in the mirror and just disgusted with the financial situation I'm in is the time that he's going to actually start moving forward in his life, both relationally, monetarily, and hopefully career-wise. Yes. It's a very difficult situation to be in, but you have to look at it this way. If he's willing to live beyond his means by himself, he's going to live beyond his means with your money too.

8:32And I know that's not what you want to hear, but that's normally what happens in these relationship situations. So you have to be protective. You may be completely and utterly in love with this person, but you still have to protect yourself. And so I would think long and hard of how to have this conversation and put together some guidelines, whether you go through his financial situation with him, which he's not going to want to do, get him on a budget. There's a free budgeting tool in our show notes, get that figured out first. So you can get a plan together and say, look, if we're going to get married or get engaged in a year or two, all of this needs to be resolved first and foremost, because the last thing you want to do is get married.

9:13And then all of a sudden your years and years of work goes out the window because it's not figured out. So that's what I would do. And I wish you the best of luck because this happens all the time. So he doesn't need to be beat up on. It's just a matter of getting it right. So you can both live happily ever after without you going broke to support his habits. Yeah, Robert, I think you said something that was really powerful, which is, you know, gotta look out for yourself. Sophia, under no circumstances, under no circumstances, will you co-sign a loan with this person before you guys are married?

9:46Under no circumstances, will you just be like combining finances and paying off his debt? And like, don't do any of that until you guys are married. My girlfriend and I, we are as close as it gets. We're not engaged yet. We certainly will be very soon. But like, we have not combined finances despite being very on the same page with money. And so, I mean, we know where we're going and we still haven't done it. And we're on the same page and you guys aren't on the same page. So Sophia, please watch out for yourself. You're 26 years old. You've worked very hard to get to where you are. And again, we're not trying to beat up on this guy too much, but it's very important for things to stay separate until you guys are actually married, courthouse, you sign the paperwork, and then you can begin to combine things because at that point you guys are a unit.

10:25Good question, Sophia, and best of luck to you. Our next question comes from Jerry. Jerry says, I'm 34 years old and I have $100 ,000 in an old 401k. It's been returning between 5 % and 7 % per year over the last six years. I earn too much money now to contribute to a Roth IRA, so I'm thinking about doing a backdoor Roth IRA. Should I roll over the$100 ,000 into an IRA going forward and then do the backdoor every single year? Jerry, I think you should. If you're 34 years old, assuming you're making all this extra money, that means you probably could take the tax hit and have it not impact your life all that much.

10:59You could, of course, pull some money aside from that 100K and hold on to it until next April. But yeah, I mean, you're young, you have 30 more years of investing till you have that 65 sort of age for your retirement. The only thing that's really concerning though, to me, Robert, is 5 % to 7 % per year return over the last six years. The market did 30-ish percent last year, we're up 14 % this year. Sure, we had a COVID year of 2020. But before that, I mean, the markets were averaging between 8%, 10%, 12%. So as you move this$100 ,000 over into a Roth IRA and you actually have control of it. Robert, tell Jerry some of the ETFs that we really like that we encourage our listeners to have in their Roth IRAs.

11:35Yeah, I love this. And it's a good question, Jerry, and great explanation, Austin. It really just comes down to you hear me say, and Austin say all the time, is that you want that positive arbitrage in your bank account, not somewhere else. And so 5 % to 7 % might seem good for this 401k, but at the end of the day, you're still leaving quite a bit of money on the table just because you're not optimizing your gains because of what you're invested in. So for me, we always talk about a basket of index funds. What that basket looks like can vary, but for the most part, it's VOO, QQQ, VGT, maybe MOAT.

12:13If you wanna have some AI exposure, AIQ is one that I like, but this gives you a well-rounded portfolio and you're gonna have generally higher gains than that five to 7%. So that's why I agree with Austin. And I would definitely look at getting some money into that basket of index funds. Just don't make the mistake of rolling it over from a normal 401k to a Roth IRA and not saving money for taxes because that 100 ,000 will now be considered taxable income because you got to write it off for the last, I guess, 10 years you've been contributing to a 401k. So you have to set money aside for taxes.

12:51Think about that now. Budget it out. plan it out. Maybe it comes from the Roth IRA itself. Who knows? But please, please, please don't get surprised by Uncle Sam when you have a tax bill for 10, 15, maybe$20 ,000 in April of next year. Like we always say, especially at a younger age, it's better to get it out of the way now and have all of that money building tax-free into retirement and for the rest of your life, because you can kick the tax man down the road, but guess what? We don't know what's going to happen 10 or 20 or 30 years from now. So we want to get as much money in that type of tax-free environment as we can early on.

13:28And that's why we are big proponents of telling people to get into the Roth IRA as soon as you can. 100 % agree. Our next question comes from Daniel H. Daniel says, we're parents in our 40s and just started our Roth IRAs a few years ago. We have $120 ,000 invested into ETFs and single stocks, but we've only begun to make a dent on our mortgage and our two cars. So here's our thing. Our daughter's going to Northwestern College and it costs$80 ,000 a year in tuition. Do we try and pay for her college as much as we can, which would mean selling our stocks and ETFs? Should we encourage her to sign up for student loans?

14:04Do we get parent plus loans and take on those loans ourselves? What's the wisest choice in this matter? You know, Daniel, when Robert and I were picking some questions for this, we were talking about your question beforehand. And Robert brought something up that I wasn't even thinking about when we were brainstorming on the answer for this because we like to prepare for these episodes a little bit beforehand. But the thing Robert brought up that completely took me off guard that I didn't even think about was who's gonna take care of Daniel and Daniel's wife in retirement if Daniel and Daniel's wife have to sell all of their investments they've worked so hard for to pay for their kid's college partially.

14:39So Austin, yeah, you're right. It's just something that bothers me and I see it all the time. So Daniel, you really have to think this through. Four years at$80 ,000,$320 ,000 that you're going to put out for this degree. If that were the case, and I don't think it is, this degree would have to be directly tied to law, engineering, or maybe medical. Otherwise, I just don't think it's worth it. I think the days of having and needing a college degree that's generalized are coming to an end. And I just don't see a situation based on the information you've provided where you financially can give them that money.

15:18Because if you have the$120 ,000 in your ETFs in single stocks, who's going to take care of you 10 to 20 years down the road if over the next four years, you're trying to build your wealth, but you're spending it all on their college degree. So that's where it gets tricky because you want to help the kids, but who's going to help you? So for me, it's a big no. I wouldn't do a parent plus loan either. If you look at those right now, they're eight, 9 % interest. And we always say you can't out invest high interest debt. Well, guess what? That's high interest debt. So I think you're backing yourselves into a corner.

15:53And unless there is a specific degree with a specific job attached to it, or if the kids are going to pay you back a low interest amount on your money, maybe instead of getting student loans, they're going to pay you back three, 4 % on your money when they get the degree and get the job. I just don't think this is a scenario that's right for you or right for them. Yeah, I just I hate this scenario too. Like, let's pretend you're 45 years old and this 120 ,000 is invested in the S &P 500 until you're 67, right? Retirement age. We're talking about$1.8 million, right? This 120 turns into 1.8 million if you don't touch it.

16:28But if you do touch it, it turns to a half paid for college education from your daughter who's wanting to go somewhere that's$80 ,000 a year, Northwestern College, which I think is a Christian college in Iowa. If you're in the state of Iowa and you live there, maybe you could get in-state tuition at Iowa State University. So I just looked up the in-state tuition for Iowa State University. And for 2024 and 2025, tuition and fees are$10 ,800 per year, right? And that semester per year. So we're talking about, let's call it$45 ,000 versus$320 ,000. I just, Daniel, please believe me as someone who is 28, I had to go through paying off my student loans.

17:07My girlfriend's 25. She's paying off her student loans. I am right there in the weeds. Do not do this to your daughter. Do not have her have hundreds of thousands of dollars of student loan debt in her early 20s. She will be constricted financially. She will be just burdened with this mountain of debt that doesn't even feel like you can pay it off. It's this constant monkey on your back that you can never get rid of until you actually get rid of it. And at$320 ,000, it just doesn't seem attainable, right? This is a three to 4 ,000 a month payment after she graduates college, three to$4 ,000 a month that she's going to be paying now.

17:47It's just, please don't do that to her. So if I were you, I really would look at alternatives. Iowa State University here is literally an eighth of the price. I'm sure there's other cool universities in the state of Iowa or colleges in the state of Iowa that are much, much cheaper. And I really hope that your daughter is studying something that she can go earn 60, 70,$80 ,000 a year in the marketplace when she graduates in three, four, five years. I don't know how long she is now in college or whatever it is, but just don't do this. This is a terrible idea. I'm telling you, Daniel, do not do this.

18:19Yeah, that was a great response and very heartfelt, obviously. And Daniel, you know, one last thing to look at is so many people, this is not a unique situation. So many people out there really struggle with paying off their student loan debt for decades. It's not something that goes away generally in four or five years after college. Some people are stuck with it and saddled with it for decades. And then they try to out-invest it by investing over here when they still have high interest debt on the student loans. So just be careful. I don't think it's a good move. Austin doesn't think it's a good move.

18:53I would rethink the entire strategy and find a way to do this in a more cost-effective way so you're not hurting later on and your kid isn't hurting later on either, being saddled with this debt for decades. But Daniel, I will tell you, if she does still go to Northwestern College, do not take out a loan for her. Let her take out the loans. Let her go into the debt. let her live her life because you have your own life in retirement to worry about. Okay, she's a grown woman. She's in college, right? Ever heard the term of in case of an emergency, when the plane, the mask comes down, put your mask on before you help the others around you.

19:33Daniel, you have$120 ,000 mask that's going to grow to a$1.8 million mask. And if you don't put it on, you don't take it seriously, it's going to be a$0 mask. Okay. So if she does do this still, despite us really trying to convince her not to here. Do not help her. Let her do this on her own because you have a retirement to worry about, you have a wife to worry about, and you have to worry about yourself. You really do. And hopefully she makes a lot of money out of this and becomes the best doctor, lawyer, or whatever she wants to be in the world. And she can pay this off super quickly. I hope that's the case.

20:06But if that's not the case, the last thing I want you to do is be starting over at 50 years old. You have no money now in retirement because you took the whole 120K to help her pay for it. And now you're starting from scratch and you only have 10 or 20 years of compounding ahead of you. You don't want to do that. So make sure that if she does do this, let her do it on your own. Watch out for yourself and your wife. We are definitely answering the hard questions today. We're killers today, dude. We really are. But we are here. I don't want anyone to think we're being harsh or negative. We are here.

20:35You guys all know we don't gatekeep. You all know we tell the truth. And we're here to make sure that these decisions don't fall on deaf ear. We are here to help you figure these things out because the decision you make today may affect the rest of your life or your kids' lives. And we just want to make sure we give you our best shot from all the information and items that we study and have experience in to be able to help you figure it out. So don't take it harshly. I promise you it's because we care and we want to make sure you make great decisions. Thank you for the clarification, Robert, because I think the people are starting to hate me after some of these answers.

21:13No, we have to because if we tell everyone what they want to hear, we can't make a big enough difference in their lives. Mic drop. There's the quote right there, everyone. Okay, so our next question comes from Yi. Yi says, my husband and I work in tech and we just sold$300 ,000 worth of our Google RSUs. We want to diversify this money into other big tech companies, i.e. the Magnificent Seven, Microsoft, Amazon, Tesla, Nvidia, Apple, things like that. So Robert Austin, what's the best way to buy these stocks without having to worry about maybe some lofty valuations in the stock market as well as other volatility?

21:51Robert, I'll let you take this one. Yeah, Austin, you know, we talk about this quite a bit where people are so afraid of a market being at the top, buying at all time highs. And, you know, we do a lot of research. We're just not throwing darts at walls here. And I just don't worry about market tops. I don't worry about NVIDIA being at all-time highs. There's always going to be a new all-time high when a company is growing at the rate of NVIDIA or even Microsoft, Meta, some of these companies that have just been crushing it for the last couple of years. So I don't worry about it as much. I more am concerned about dollar cost averaging and being consistent with my investing in these companies.

22:30I just put more money in NVIDIA and I've been talking about NVIDIA for years. I just put more money in MU, AMD, Microsoft, Tesla, all of these companies that are in and around the Mag7. So I wouldn't worry about it as much if you're fearful of trying to time the market than dollar cost average and break it out over six months if you want. But I wouldn't leave the money if you decide to do this just sitting in a savings account. I would at least have it in a high yield savings account during that dollar cost averaging period. But for me, I don't worry about market volatility or lofty valuations simply because I feel like I am good enough at selecting the companies that I believe are going to continue to crush the markets and beat the benchmarks.

23:16So for me, I don't worry about it. So Yee, I think some tactical advice here is put that money in a high yield cash account on public.com, get your 5 % plus over that six month period. And if you do want a dollar cost average over a six month period, that'll be about$7 ,000 to$8 ,000 of interest that you'll accumulate on this$300 ,000 or so. And maybe you can start, you know, deploying$10 ,000,$20 ,000,$30 ,000 a month, maybe$50 ,000, $60 ,000,$70 ,000 a month into some of the names that you are excited about. Another way to think about this that I just kind of thought about, Robert, here was, you know, instead of buying Mag7 specifically, maybe you just really like tech.

23:55And so you could buy VGT, which is Vanguard's like Big Tech ETF, which their top 10 holdings are Microsoft, Apple, NVIDIA, Broadcom, Salesforce, AMD, Adobe, Cisco, Accenture, and Oracle. And those top 10 holdings make up 60 % of the ETFs waiting. So that's another sort of strategy there as well. I just don't see Tesla in there. But yeah, there's a bunch of ways to sort of skin this cat. Obviously, dollar cost averaging is going to be the way to go. I understand you're like, oh my gosh, stocks are trading at all time highs. as Microsoft's up here and videos like a vertical, you know, just parabola, just, you know, all these different things are kind of spooking you out.

24:33And I get it, we all get spooked as investors. But the way to go about deploying this capital in a responsible manner, in our opinion, would be to dollar cost average it over the next six, 12, maybe 18 months, depending on how conservative you want to be. But just make sure again, put it in a high yield cash account or high yield savings account on public.com to make sure that this money is not just dead money over that six, 12, 18 month timeframe. And one more thing for me that I think helps people a lot from an illustrative perspective, type in any one of the stocks you love that are tech stocks that might be in the mag seven or not, and then go to the chart.