Q&A: Feeling Behind on Life Goals, Work Bonuses, & Medical Challenges

0:00Hey, everyone, and welcome back to the Rich Habits Podcast, a top 10 business podcast on Spotify brought to you by public.com. These are our Thursday episodes where we answer your questions as if we were in your shoes. This means you can email us questions at richhabitspodcast at gmail.com. You can ask us questions on Instagram via the DM feature there. Rich Habits Podcast is our Instagram account. If you're not already following us on Instagram and watching the clips and the stories and the replays, like what are you doing? Go do that anyway. But these episodes are a blast. We've got seven awesome questions teed up for you, and I'm ready to just dig right in, Robert.

0:37Yeah, let's get into it. But before we do that, got to give a shout out to Public.com, the investing platform for those who take it seriously. On Public, you can build a multi-asset portfolio of stocks, bonds, crypto, options, and now generated assets, which allow you to turn any idea, any idea at all, into an investable index with AI. And it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20 % year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one-of-a-kind index, and even lets you backtest it against the S &P 500, all within a few clicks.

1:19Generated assets are like ETFs with infinite possibilities. They're completely customizable and they're based on your thesis and not someone else's. So go to public.com slash rich habits and earn an uncapped 1 % bonus when you transfer your portfolio to public. That's public.com slash rich habits. Paid for by public investing, full disclosure in the podcast description. And Austin, public just keeps bringing the heat, building such cool tools. So for everyone out there watching and listening, make sure you check out public.com. So our first question comes from Jessica K via email. Jessica says, Austin and Robert, I've recently started listening to your podcast and value the wisdom and insight you share with your audience.

2:01I'm writing to seek your advice on a strategy for my family as we attempt to rebuild our lives from a difficult financial position. My husband and I have worked hard to build a life for our two children, ages five and nine months, but we face significant medical challenges. My husband is a type one diabetic and a below-the-knee amputee. He also suffered a near-fatal heart attack at the age of 38. Due to his health, he's often unable to work for several months of the year. After being denied short-term disability insurance, we made the difficult decision for him to stay home and apply for social security disability while he attempts to reinvent himself professionally.

2:37To stabilize ourselves, we've been aggressively trimming our budget and currently live off-grid with my mother to pay down debt. We have no savings, no mortgage, and a$15 ,000 car lease. We're also paying back a 401k loan. Our primary financial resource is my reliable income of$32 ,000 a year after taxes and premiums. We also expect a significant tax refund this year. We recognize that we're in a unique moment in time with the AI revolution and we're trying to learn as much as possible, but we feel like we're starting from scratch. What advice can you offer someone starting with only a modest income and a tax refund.

3:13How should we prioritize this refund and our limited income to finally create a foundation for the American dream that we've been chasing? Thank you for your time and the guidance you provide. Best regards, Jessica K. Oh my goodness, Jessica, I am so sorry to hear about the ups and downs and deep downs that you've been experiencing as a family. Congratulations on the nine-month-old baby. It's very exciting to welcome new humans into the family. I cannot imagine though the terror and roller coaster of more of emotions that came with this near fatal heart attack and now the the below the knee amputee and just what's going on you probably thought you were going to be a widow and the kids oh my gosh i'm so sorry to hear that this has been your reality something that we really strive to do with the show is give people hope and jessica robert and i are gonna do our best to give you hope and that hope is going to come in the form of a blueprint, right?

4:12A plan, a strategy, something to follow and clearly have actions on. So let's dig into that. You're making$32 ,000 a year after taxes and premiums. You're expecting a significant tax refund this year, which is very exciting. The first thing I would do is I would create a little bit of buffer between you and life. This means a very small emergency fund to ensure that you do not have to go into high interest credit card debt if you find yourself in a pinch. This means$1 ,000,$2 ,000,$3 ,000,$4 ,000, maybe$5 ,000 sitting in a high yield savings account. This can be on public, it can be on Wealthfront, it can be on Ally Financial, SoFi, I don't care what you use.

4:55Make sure you're earning three to four percent on this high yield savings and it's a couple thousand dollars for you there. The goal with this is with your, I don't know, what's going on with your mom and you got maybe the five-year-old has a unexpected something where you got to take him to the doctor and this is a$114 visit or needs a prescription for your husband with his diabetes and that's a$400 something like you don't have to swipe a credit card to do that. You can pull that from your high yield savings account emergency fund. So that's the first thing I would do with this tax refund. To be quite honest, I'd probably put all of it, depending on how large it is, into a high yield savings account.

5:33So you're starting to have a little bit of predictability. Speaking of predictability, the best way to have predictability in your financial life is to have a budget. This honest budget Robert and I talk about all the time is going to allow you to begin to understand exactly down to the dollar how much money is entering your bank accounts on a monthly basis and how much is leaving your bank accounts on a monthly basis, what that margin is. And once you figure out what that margin is, then you can begin to put it to work. But you can't know the margin unless you got the honest budget and you are actually budgeting on a monthly basis.

6:09If you are really trying to, you know, trim down the budget here, get rid of those subscriptions, audit your spending, audit your bank accounts, audit your credit cards, like any Netflix, any, you know, AT &T 95 bucks, heck no. See you later. Visible wireless 25, right? Like Mint Mobile, like do whatever you can here to find that 250, 350 per month in your budget that's been hiding in the subscriptions and the other things that you can optimize. Call your insurance companies and say, hey, you're, you know, I'm paying X amount of dollars for car insurance. I'm going to leave unless you give me a better rate.

6:42Everything you can do here to find that two, three,$400 extra per month in your budget. Now, once you've got that margin, you've talked about like, how do you guys kind of build here? You're starting from scratch. Clarity into what you are spending and making on a monthly basis, which means how much margin you have. And then saying, here's the goal I now have with this margin. In my opinion, you don't need to be worrying about retirement investing. You don't need to be worrying about buying a home or doing, no, none of that. You need to have three to six months of expenses in an emergency fund sitting for you because disaster is going to strike again, unfortunately, but it will strike just like it does for everybody.

7:18And when it does, you're going to have$15 ,000 between you and a terrible time, right? So with that margin, I want you to then be adding it to this three or 4 ,000 you got from your tax refund and use that to build up your emergency fund to three to six months of expenses, maybe closer to six months. I don't know how much you're spending right now because you said you're off the grid. you don't have a mortgage or rent, like pretend you've got those things and put that now into an emergency fund. I think 15 to 20 ,000 is probably going to be a good place to be here, but it's totally up to you. And then now you're like, cool, we are doing the right stuff here.

7:54We've got our plan. The next thing I want to encourage you guys to do, and then I'll let Robert chime in here. Think about this income,$32 ,000 a year after taxes and premiums, which means you're probably making$18 to$22 an hour, which like, nice, that's not bad at all. But I'm thinking about your husband here. I would imagine your husband's a very capable man. He's just had life thrown at him in the wrong ways. And that to me means that perhaps there's a world where he can start doing, you know, some sort of customer support job with call center stuff, or maybe something on his computer, or maybe there's something where he can do online sales for high ticket items, or maybe there's something where I guess I'm trying to say is like, I understand that he's got a lot, you know, kind of pushing against him right now.

8:41And you mentioned the social security disability, which I think might have to do with income. So like, make sure like you're not, you know, I don't, I'm not a lawyer here. So I don't know all the nuances of that. But if you are earning income and the disability, like maybe they go against each other. I don't know. But if you can earn money, if your husband can earn money, I would argue between like sales, online high ticket item sales or tech sales or, you know, customer support or, you know, there's a lot of things, in my opinion, that you could be doing on just a laptop that you buy on marketplace for$418 because you haggled them down from$650.

9:17That's going to put an extra$200,$300,$400,$600 a month in your bank account because your husband is doing these things. I could be off base here. Those are the places I would start if I were in your shoes, Jessica, praying for you guys. And thank you so much for listening to the show. Wow. Heavy, heavy question. I would say tactically you crushed it. I agree with everything you said, and I think you covered all the bases. I'm just going to go a little bit the other side of this from a mindset perspective. Jessica, you are on top of this based on how you wrote this question. I know your mindset is in the right place.

9:54You had all the buzzwords and all the things that makes me realize you are ready to fix this problem and do whatever you need to do. So please make sure you're following along with everything Austin laid out. And I just want to add a couple little things and they're not negative. It's just from where I'm picking up on what you wrote. I would not worry about your husband reinventing himself. I would worry about, like Austin alluded to, if he's capable, even though he's going to have some down times and he's going to have some rough patches, I would get a job, any job, working online, working from a laptop, working from home to get revenue.

10:33Doesn't have to be a reinvent job where he all of a sudden becomes an AI expert. He can do that on the side. I would get a job to produce income. It can be any one of hundreds of online jobs. That's what I would do first and foremost. And I would also have the tough conversation of if he's going to be working at home with his condition, then can you go get a second job while he handles the kids while he's working from home? And you have mother present, I'm hoping sometimes to be able to help along the way as well. So I think your head is in the right place. I commend your efforts and for writing this question and proposing it to us so we can try to add value and help.

11:11But I know your mindset's in the right place. Get the budget in order. get the additional revenue up and running, start saving towards the future. And I think you guys will be able to figure this all out. Yeah, I want to emphasize something Robert said. Any job, you can be making eight, nine, 10,$12 an hour or a hundred or$200 per project. Any money right now is awesome. And there's no job, no project, no nothing that's below your line of like what you're working on here. I just pulled up on Gemini, customer service reps at Amazon and CVS, transcriptionist or captioner, platforms like Revan, TranscribeMe, data entry specialist, maybe a virtual assistant, content moderator.

11:52Like this is just what I looked up on Gemini in two seconds. Like go to Gemini, ChatGPT, Claude, whatever, and just do a ton of homework to find what is best for your situation. And don't forget, like you can just talk to these things. Hey, what's going on? I'm Jessica. Here's my husband's thing. Here's like our entire situation. Just talk to it for two or three minutes. More information, the better. And then allow it to offer you some solutions. So yes, AI is your friend in this situation for sure. So our next question comes from Ben B. Ben says, Hi, Robert Nauston. I'm a longtime listener of about two years and I'm a huge fan.

12:23Your podcast has genuinely helped me navigate money and investing in my 20s. I'm 25, almost 26, living in New York City and I work in sales earning around 180 ,000 a year. I've been fortunate to grow quickly in my role and I've been intentional with saving and investing. Currently, I have$130 ,000 invested across my bridge account, my Roth IRA, and my 401k. 80 ,000 is in my bridge account, 16 in my Roth IRA, and 30 ,000 in my 401k. Half of it is in VOO and QQQ. The other half is in individual MAG7 stocks with a couple growth stocks as well. Plus, I've got a little bit of Bitcoin and a little bit of copper.

12:59I've leaned more toward growth than dividend stocks given my age, but I do have 5 % in SCHD for passive income. This past summer, I was hit by a drunk driver and I had to get surgery on my shoulder. Thankfully, I'm doing much better now and I'm receiving a$65 ,000 settlement check soon. I want to be very smart with this lump sum and not waste the opportunity. My initial thought is to invest all of it and put about half into index funds that you talk about and the other half into some high conviction growth stocks like nvidia and amazon since i feel like i've built my base is it time to put more into individual stocks maybe real estate or crypto or some other asset class i don't have a ton of time to manage a property so maybe i don't do that but for someone my age with a long-term time horizon how do you recommend allocating a 65 000 lump sum to maximize long-term returns while still being diversified and responsible robert what a cool question i'll let you kick this one off.

13:55Yeah, I'm doing the math right now to see where we'd be at. So I want your assist on this. You have the numbers. But yes, I love this situation. And I have a story about this from an ex-girlfriend who was 23 at the time. She got hit by a car, had some minor damage. She received$45 ,000. And I pleaded with her to not touch any of it, put the money away, ride it out in the S &P 500 until retirement. She'd have millions of dollars. She didn't listen, but I know based on this episode and your question, you're killing it for your age. You're doing all the right things and you're spot on with where I know you're thinking, put this money away, get it somewhere safe, let compound interest work.

14:38It's magic. And I agree with you. I would probably do this with VOO, QQQ, and maybe VTI or VUG or something like that, a mix of three or four of these funds and let it ride until retirement and you'll have millions of dollars. But just always remember when you get a lump sum at any age, especially early on, you want to take as much of that away and get it out of your hands because too many people go, oh, I'm getting 65K. I'm going to go upgrade my car and put 10 grand down. I'm going to go buy a motorcycle and spend 15 grand. I'm going to do this. And then they put away this little pittance of that lump sum.

15:17Always remember this for all of you listening at any age. If you get a lump sum, try to pretend you didn't get it because if you start spending it, it's hard to stop and you won't put it away for retirement in the future. And it's really difficult to get a high number lump sum at any part in your life. And it usually either comes from two things, an accident or an inheritance. So when you get it, put it away because it'll do so much for you in the long run. And I really appreciate what you're doing, Ben, and appreciate the question. No, this is great. So let's do that math here. So Ben, if you had that$65 ,000 and invested all$65 ,000 in the S &P 500, which since inception has returned 11.88 % average annually, right?

16:02Ups down, left and right, but over a long period of time when you average it out, almost 12%. If you assume a 3 % inflation rate, which is higher than the 2.4 % it's at right now, but lower than the crazy inflation we had COVID, so I think 3 % is a good place to be. You're looking at$2.2 million over a 40-year period of time. So it's 65 years old, adjusted for inflation. So that's$2.2 million in 2066 money. It's adjusted for inflation. So 2.2 sounds pretty good to me from a$65 ,000 settlement I had in a very unfortunate situation. I'm really sorry to hear that happen to you. I think that is the most selfish thing people can do is drive drunk.

16:40It's terrible. So I'm really, really sorry to hear that happen to you, Ben, but I'm glad you're doing better. Surgery went well. Time to take your 65 ,000 and set yourself up for millions in the future, like Robert said. So our next question comes from T. T says, hi, if you could refer to me as T on the podcast, that'd be great. You got it, T. T says, I just started listening to the show this year and I'm a very big fan. I've already taken advantage from your green flag, red flag episode and I started tracking my net worth. It's been a super helpful habit. I'd love to know your thoughts on how to handle work bonuses.

17:12I received my year-end bonus around mid-March. In the past, I've allocated a small portion of it to my 401k. Last year, I allocated about 5%, but I did put most of it in a high-yield savings account, and I kept a small amount for fun. How would you recommend splitting a bonus between my savings, my investments, and fun? This year, I'm anticipating my bonus is$30 ,000 pre-tax. This is a cool question, Robert. So he's getting a$30 ,000 bonus in mid-March and he's trying to figure out how much do I use for travel and fun and all that stuff? How much do I put in a savings account and how much do I put in investments?

17:48So let's make sure we're all on the same page about something. If your emergency fund, which is sitting in a high yield savings account, is already fully funded, three to six months of expenses, there's no reason to add more money to it, right? You don't need nine months of expenses, 12 months of expenses. You just need three to six. and when you spend the money in your emergency fund and it goes down, you then put more into it so it goes back up to where it's supposed to be. So T here, unless your emergency fund is lacking money, then you don't need to put more into a savings account. If it is lacking, then yeah, get it up to that three to six months of expenses.

18:20So really, assuming it's not lacking, you're trying to say how much gets invested and how much do I save for fund? In my opinion, I don't know much about your situation beside a couple little extras here. You said that you've got about$150 ,000 salary, you're maxing out your 401k annually to get about a half a million dollar net worth. Seems to me like you're doing a really great job. If you wanted to take, heck, 20, 25 ,000 of this and, you know, go invest it somehow, some way, 401k, or maybe in a bridge account or whatever you want to do there, rock and roll. But you're very, I mean, you're doing great.

18:56Half a million dollar net worth at 30. Like you could also just use this money to celebrate how hard you've worked for the last, I'm sure, five, seven, 10 years and the wealth you've accumulated. Maybe you want to upgrade your car and go pay cash. Maybe you want to go on an extravagant once in a lifetime trip to Japan. You could afford to do those things. Your net worth is half a million dollars at 30 years old. So if I were in your shoes, I would find a good split. Maybe I'd spend five up to$10 ,000 of this$30 ,000 pre-tax. So do the taxes there and figure out what it looks like, but I'd probably spend several thousand of it enjoying my life.

19:32You've done a great job so far. You don't feel like you need to really get things done, do anything too crazy here, but yeah, go invest some of it. I don't think it's as deep as you think. You're going to be a millionaire regardless of how much you end up doing on one side or the other. I love that breakdown and I'm going to add a little bit of color to it. He is killing it for sure. T, great job, 30 years old, crushing it. Amazing. I just shared my net worth at 30 years old with Austin the other day and you are crushing it. I love this. I like to see people when they're getting a bonus like this, maybe spend 10 or 20 % and get the rest invested.

20:04So like Austin said, I think you can find plenty of places to add to your capital in these retirement accounts or in your regular brokerage accounts, but I love it for you. Enjoy life a little bit, but I wouldn't just go blow it all. Too many people get the bonus and they don't invest any of it. My general rule of thumb is 10 to 20 % is fun, vacation, upgrade the car, whatever it is, like Austin alluded to, and the rest gets invested and you pretend you never took it. And then that way you're up and running and you're on your way to being a multi-multi-millionaire. Well, I think the best part about it is it seems to me like T, and this is just a great strategy for everyone listening right now, that get annual bonuses.

20:44I've got a good friend that gets an annual bonus that you just got like$60 ,000 of a bonus as a lawyer and you live your life assuming you don't get the bonus, right? All of your monthly expenses are in this normal, you know, your salary. And I think T mentioned he's over here at$145 ,000 base salary. So live and invest in everything in this 145. And then when you get the extra 30, you're like, whoa, this is it's free money, essentially, right? And so if you're someone that does get a bonus, having that strategy or mindset toward budgeting is awesome. Because then when you do get the bonus, you can like actually go put it to work in a meaningful way.

21:17Yeah, we just talked about this before filming and we see it every single day with athletes and people that get a million dollar signing bonus and then they just go blow the million dollars as if that's all their money and they don't set themselves up for the future. A friend of mine got drafted in the major leagues as a pitcher, got a$300 ,000 signing bonus and he was going from zero to 300 ,000. He went and bought a Ferrari. Right away, he bought a Ferrari, spent all$300 ,000. Eight months later, he got hurt, lost his contract, never recovered, and then had to sell the Ferrari. Don't do that.

21:51Put some of the money away. Always be investing for your future because we're going to live longer and we want you to live a wonderful, comfortable life later on as well. So our next question comes from Raul P on Instagram. Rul says, hello, just found your podcast on Spotify and I love it. Unfortunately, I'm way behind in my life goals. I'm 44 years old. I'm married and I have a job that currently has a pension. My wife and I own two homes. We rent one of them currently below market value and my wife wants me to sell it, but I just want to raise rents. We bought it for 180. It's now worth 300 ish and maybe more if I fix it up with some curb appeal and other renovations.

22:32But what do you guys think I should do? Keep it and raise the rents or perhaps sell it and take advantage of this 100 ,000 or so of equity after selling costs. Robert, you're the real estate guy. Do you think he should keep it, raise some rents and be a landlord? I know it's only limited information here or maybe sell it and take a hundred grand. Yeah. If I were Raul and we have limited information, so I don't know what their total net worth is, what the overall situation is, but I would probably sell the property because I'm guessing having that net worth and that money, whether it's a hundred K or whatever it ends up being into his pocket, allows him to probably outperform the rental and the growth, the capital appreciation of the property.

23:10So for me, I'd probably lean towards selling the property. Now it's a totally different game if they already have a million dollars in net worth and they've got all these other investments, but I wouldn't want to be betting on rental income because it's just so small each month as a way to build wealth in this situation. Maybe it's a good idea, Robert, to spend some time talking about how hard it might be to raise rents, how people might want to move out because they don't want to pay the new rent. You got to find a new tenant. So maybe spend two or three minutes explaining your perspective on raising rents and below market value and things like that.

23:46Yeah. I just actually yesterday dealt with this. One of the neighboring houses in Ohio, where I was, where I'm from, the tenant was moving out. I said, why are you moving out? And she said, the landlord just raised our rent$300 a month, and we simply can't afford it. And I said, well, what did he base that on? And she said he based it on comps. So I think it's important to understand, and I'm gonna try to keep it short, but break this down. He raised the rent based on comps, yet this is an older home that needs a renovation. So I believe he was basing it on a comp that was probably a nicer home and it was unfair to them.

24:22So they were forced to move out. And a lot of times when people say, oh, I'm just gonna raise rents to make more money, they don't realize you might lose that tenant and you might spend months and months getting a new one because you don't know or you find yourself in a situation where you have to do all of these renovations to raise the rent. So make sure when you're basing your rent increase on other comps in the neighborhood, they are equal comps because there might be several homes that are fully renovated in the last two, three years. Your home might be an older home that hasn't been renovated in 15 or 20 years, but yet you're trying to get top dollar for it.

24:58So make sure you understand the difference and really do your research so you don't put yourself in harm's way. Because so many people that own properties have a carry cost every month for insurance and property taxes and a mortgage. And if you go three, four, five months without any income on that property, that could set you back two years in cash flow in making up that four or five months that the property sat empty. That's a really good call out. And your wife does want you to sell it. you know the phrase, happy wife, happy life. So Raul, hopefully she gets excited now that you've decided that your friends here on the podcast want you to sell it to.