Q&A: High-Risk Investing, Millionaires in Credit Card Debt, & Washing Your Crypto

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0:42Because Marshalls believes everyone deserves access to the good stuff. Visit a Marshalls store near you or shop online at marshalls.com. Hey, everyone, and welcome back to the Rich Habits Podcast, question and answer edition. These are our Thursday episodes, which are comprised entirely of questions from you all. You guys can ask us questions on Instagram at richhabitspodcast, just shoot us a DM. You can email us your questions at richhabitspodcast at gmail.com, or you can ask us a question inside of the Rich Habits Network. The cool thing about that is your questions always get answered inside of the Rich Habits Network.

1:21As a reminder, we're still running a seven-day free trial over there, so definitely go check that out in the description below. Robert, I'm most excited about this episode because I feel like the questions we're going to be answering are across a range of topics. We've got questions about personal finance, some business stuff, some real estate stuff. It's all over the place. Yeah, I enjoy these episodes, especially when there is a wide array of questions because we can throw the gavel down on people because we've got some questions people are not going to like our answers. and so but it's all about education and helping people with their problems with their situations with their growth no matter what it is we are here to break it down right off the dome and help people figure out what to do because as we always say personal finance is personal and it is not always easy time money life gets in the way and we're here to help that's right well two quick call outs before we jump in.

2:16The first quick call out is our friend John Hu, the CEO of Stan. We had him on the show a couple months ago. His company, Stan, stan.store is their website. They're still hiring. They're hiring for a head of product, a product manager, creator marketing, events and programming lead, product marketing manager, full stack data scientist, video editor, content creator, AI content creator, professional memer. I mean, they've got a lot of open roles. If you're someone who's a top 1 % human being looking to go build equity in a really awesome startup, consider applying for an awesome job over at Stan.

2:51There'll be a link in the show notes below to go do that as well. And then finally, our second quick call out is that if you are looking for an online broker that's actually built during this century, you need to give public.com a try. Because on public, you can invest in almost anything. That includes stocks, bonds, crypto, options, and more. And if you're like us and you keep an emergency fund, you can actually take advantage of that 4.1 % APY that they offer via their high-yield cash account. Discover why NerdWallet gave Public five stars for its ease of use and investment selection. Fund your account in five minutes or less and earn up to$10 ,000 when you transfer your investments over to Public.

3:30And for a limited time, Public is offering a 1 % match on all IRA contributions. So if you're finally investing towards a Roth IRA this year, do it on public and earn up to 1 % match on all contributions. Paid for by public investing. Full disclosures in the podcast description. We are almost wrapped up with the month of April for 2025. If you've not yet started investing and contributing toward your 2025 Roth IRA, time to get started, right? Go get that 1 % match over at public. There'll be a link in the show notes below, or just go to public.com slash rich habits, and you'll get all the fun, cool perks of being a listener of the show.

4:08All right, Robert, our first question comes from Monica G via email. Monica says, hi, Austin and Robert. I just discovered your podcast, and I wish I would have known all these things 45 years ago. I'm 60, and my husband is 62. We have$2.4 million across our 401ks and IRAs. Our home is worth$650 ,000 and we owe$200 ,000 at 2.8%. We have$25 ,000 in credit card debt,$100 ,000 in a HELOC, and$28 ,000 in student loans that we're paying for our children. We don't have a savings account. We just finished paying our last tuition bill for our youngest child and would now like to start working paying off some debt that we've accumulated, putting these three kids through college so we can hopefully retire in a few years.

4:52Now, I've recently changed the elections for a 401k's to only invest up to the match, and I also plan to pay down this debt aggressively. Between my husband and I, we make about$400 ,000 a year between our salary and our bonuses. At the moment, we're still paying about$3 ,000 a month in rent and expenses for our youngest child in college, but hopefully we'll be able to cut that back here pretty soon. So here's my question. How would you prioritize paying off this debt and building an emergency fund? Do I do it all at once using our retirement funds, or do I do it over time as we earn money via our income?

5:24And how should I reallocate our retirement accounts with retirement three years down the road? Robert, you want to kick this one off? Yeah, this is a tough one because although it's exciting that Monica G and her husband do have this$2.5 million socked away, I love that, and that's awesome. But what I don't like to see is we've got this HELOC that's out there at 9%. We've got this credit card debt of$25 ,000. So that's tough for me to really swallow because I feel like they've got the nest egg, but then they've got all of this debt that we consider high interest debt. And also they're kind of freewheeling with everything for the kids as well.

6:02And although$2.4 million sounds like a lot, it is not a lot considering that, you know, your current lifestyle is going to carry over into retirement in the next two, three years. And I think you're going to have to be really, really cautious what you do in the next two to three years to make sure you're still set up well for retirement. So in my opinion, to answer the question, I would first prioritize, how can I get rid of the credit card debt? Maybe you do a balance transfer to a zero interest card for 18 months to get rid of that, try to hurry up and get that paid off. But then also looking at the HELOC, you don't want to let it 9 % that HELOC go for too long because that is going to eat you alive in interest as well.

6:45That's my situation. I'd like to see those two things paid off first before they think of anything else fancy towards retirement because you got to knock these out before you start thinking of any other ways to benefit yourself in retirement. I entirely agree. I think one of my favorite sort of slogans when it comes to personal finance is that only 20 % of it is a math problem. The other 80 % is behavior, right? It's pretty elementary school math here to think like, okay, if I make$400 ,000 and I spend$450 ,000, then I'm going$50 ,000 in debt. And so I just want to make sure, Monica, like you all are$153 ,000 in debt.

7:25And if we are going to pay this off and be smart with our money by paying this off, you all are not going back into the debt, right? You're not getting another HELOC because you want to redo the kitchen. You're not going back into credit card debt because you want to go on the vacation, right? You're doing things that actually make sense for you financially. So here's what I would do, honestly. You have$153 ,000 of this high interest debt between the HELOC at 9%, the credit card debt at probably 30%, and the student loans that are anywhere between 5 % and 7%. You have$2.4 million in your 401ks and your IRAs, and you're over the age of 59 and a half, which means you can tap into that money without paying sort of a penalty or whatever that might look like from the IRS.

8:05Depending on the type of retirement account, you'll still have to pay taxes on the money that you take out. So I probably would take out the $153 ,000 from your 2.4 million. You'll still have 2.2 million, right? Sitting in that account, which is a great amount of money. Maybe even take out 200 ,000 besides just that 153. So you can take the other, call it 47, 45, whatever there and put that in an emergency fund, right? You said you don't have a savings account. If you're making$400 ,000 a year, you absolutely should have a savings account of$20 ,000,$30 ,000,$40 ,000. The only thing I want to make sure you're super aware of is that all the money that you're taking out of this$2.4 million 401k IRA, assuming it's not a Roth retirement account, just a normal traditional account, you'll owe taxes on.

8:52And if you make$400 ,000 a year, you're probably in the effective tax rate closer to that 30 % range. So just make sure you've got an extra$60 ,000 or so set aside for Uncle Sam in April of 2026 to offset the$200 ,000 of extra income that you received via your retirement accounts to get yourself out of this mess. At$400 ,000 a year in salary and bonuses, you absolutely should be able to set aside$60 ,000 over the next 12 months. So that's what I would do. I would take out the 200k from the retirement accounts to wipe out this debt and then I would set aside$60 ,000 from my earned income right the take-home pay that hits your checking account put some of that money aside right that's$5 ,000 a month and I would do that for the next 12 months to make sure I've got extra money set aside for the tax bill that will come and then again just want to reiterate how important it is to solve the underlying illness the problem of overspending right because like being in credit card debt, having a HELOC, having these student loans, that's a symptom of the problem.

9:57The problem is your spending behavior. And so if you and your husband, and I totally respect that you guys want to put your kids through college, and I'm assuming this hundred grand of the HELOC was for college, right? It probably wasn't just for some willy nilly things around the house, like a kitchen remodel or a boat, which I respect. And I think that's great. And hopefully we don't have this again in the future, but just really want to make sure you guys are solving the problem of overspending and going into credit card debt as you all are now approaching an awesome retirement. And then beyond that, congrats, you've got 2.2 million, you make 400K, you're going to make another let's call it five to 750 grand after taxes over the next three years with this salary and bonus and things like that.

10:39Go sock away half of that, you'll be back to that 2.4 before you know it. So you guys are setting yourselves up for a really great situation. The biggest thing again, is just make sure you're making the right decisions. going forward. Yeah, this really brings me back to something you say a lot, and that is wealthy people forecast and poor people react. And I think this is a situation of it's kind of a hybrid. And for any of you listening out there that have kids that are going to be going to college and you know what college they're going to be going to, maybe they're staying local at the, you know, nearby college.

11:11Think ahead, forecast. What's that going to cost? What does that look like? What's the real estate market around that college like? Because you could look ahead and say, hey, we're high earners. How can we get rid of some of our tax bill? Well, you could go there and buy a duplex, buy a triplex, buy a quadplex on the college and have a unit ready for your kid to use during their four or five years at college. That would be a great way to look at and forecast a way to save money, but also build equity, have some depreciation, have some appreciation, and be able to set yourself up and forecast ahead of a better way to spend money.

11:51Because I love the fact that you guys are high earners. That's the hardest part of the wealth bucket to figure out. But now that you've got that figured out, it's time to start forecasting better and not have these high interest debts. Our next question comes from Abel E. Abel says, Hey, Austin and Robert. I'm a huge fan of the show and I've been watching for a couple months now. I'm 19 years old and I've been doing what you guys talk about. I have$5 ,000 invested, most of it being into the NASDAQ and a little bit into Bitcoin. My question is, I currently have$5 ,200 sitting in a special rate savings account paying 2 % yield.

12:24But I hear you all always talking about these accounts paying 4 % or 5%. So my question is, for my$5 ,200, is it worth paying the$60 a year to get Robinhood Gold to get their 4 % yield, or should I do something else? I also live at home and make$3 ,000 a month after taxes, and will be in this situation for about two more years before I move out. Huge fan of the show. Thank you all for the help. Yeah, so Abel, great question. No, you should not pay$60 a year for Robinhood Gold to get their 4 % yield. You should pay$0 a year, go to public.com, open up a high yield cash account with them paying 4.1 % and have your$5 ,200 in there.

13:02Now, the big thing though that I want to make sure we're on the same page about because a lot of people, you know, this is asked a ton in the Rich Habits Network because we're always the type that want to make sure people know the hacks, the strategies, everything they can do to optimize their saving, their spending, you know, their investing, everything along the way. And we take pride in being able to share those ideas with you all. But one of the things that just always cracks me up is there's people out there that are like, yeah, guys, I've got like 15 grand in this high yield savings account at 4%, but I moved it over to this one that's paying 4.5 % so I could start making some more money and like, you know, all these things.

13:39And I'm just like, wait, did you do the math on that? Do you understand that by like going through all those hoops and ladders of trying to figure out how to move from one account to another to get an extra half a percent on$15 ,000 is only$75 a year. Don't get me wrong,$75 is a lot of money for a lot of people, and I'm not trying to say it's not, but make sure that when you're going through some of these steps that you are accounting for the brain calories and the time spent and like all those things. I mean, you could go work a job paying 15 bucks an hour, work that job for five hours throughout that same 52-week period of time, right?

14:14That same year that you would get that 75 extra dollars, five hours making 15 bucks an hour and get the same 75 bucks. So I don't know. I just like to always think through and encourage people to not feel bad if they're not perfectly getting the PICO amount that they need, right? 5.1 or 4.2 or 4.6 or whatever it might be from a savings perspective. What matters more than the 0.2 % more APY is the fact that you even have an emergency fund, right? That's what you should be focused on. I am all about, and we talked about this with me in the episode where we talked about credit cards. I'm not optimized.

14:54I should be better suited and optimized on my miles and what to do here and what to do there. So I think the moral of the story here, and I'm glad you touched on this, is getting people to understand sometimes you're gonna leave money on the table. You can't get to it all right at the right time. You might have missed out on the big run for treasury bills or, you know, you didn't get the investment into the Bitcoin when you wanted, but you did do it. Don't worry about that. At the end of the day, as long as you have good habits like Able does, you are crushing it, especially at 19 years old. I love this because at the end of the day, it's all about teaching yourself and becoming an investor and not just a consumer.

15:36So in this instance, you're doing great. You're on the right track. Don't worry about those little things. Obviously, we want to see you open the public account because it's just a better overall strategy for your high yield savings account and you're going to make more money. But don't worry about the little minutia from day to day because people will spend hours to save pennies and that is not a good use of time. You guys hear me talk all the time about ROI, return on investment. What is the return on investment for you to sweep that floor if you own a business versus is having someone else sweep that floor.

16:11Understanding the time and value of every hour of your life is really important as you grow in your financial journey because then you can get rid of all those tasks that don't live up to what your time is worth. And I think that's very important to understand. I think the phrase is stepping over quarters to pick up nickels or something like that, right? That's what you're doing is like you're overanalyzing and you're overindexing on the importance of the small things. there are major things that if you do them correctly over a long period of time, like contribute and max out your Roth IRA and invest into the S &P 500, like having a savings account, like opening up retirement accounts and, you know, doing all the right things and earning more income.

16:54Like there's some major broad stroke actions that you can do with your life and your money that are going to set you up for success, even if you don't perfectly optimize everything. Just being self-aware enough to understand where you are and what's important to you. Yeah, it goes back to an old story, you know, and I've always been a financial guy and really into understanding how to optimize my time. And when my mother and I ran a restaurant together when I was in my 20s, she would drive to the Nichols Bakery to buy our bread every two, three days to save like 15 cents a loaf. So I finally stopped.

17:29I'm like, mother, they deliver. You're driving eight miles each way in traffic. Who knows what could happen? Wear and tear on the car. You could get in an accident. Just let them deliver and charge us the 15 cents more. It's literally$2 a week. Why are you spending this time to go get these loaves of bread? So it's always about ROI and understanding because there's only so much time in a day. And we want to make sure you guys are living your days with the best possible quality of life you can. 100 % agree. So our next question comes from Tanner. Tanner says, I'm 20 years old. I'm an actor living in Los Angeles with my parents.

18:07I only have$500 a month in rent and I have no debt. I skipped college because I went straight from high school into acting. I've got$30 ,000 in a brokerage account, and I have one individual stock, which is Palantir, that I got close to$24 a share. I have$7 ,000 in my Roth IRA,$5 ,000 in crypto, and I just wrapped a film last month and expect to make$20 ,000 from it. I'd love your advice on how I should think about distributing out this money. I want to invest a sizable chunk for the future, but I also want to keep some cash on hand for audition coaching, acting classes, some living expenses, and other costs.

18:43Since my income varies project to project, I'm never quite sure on how much to save versus to spend. Of course, I want to build a$100 ,000 base, but I'm really hesitant about putting a large chunk of this income, like$10 ,000 for example, into the volatile stock market today. Robert, what do you think is Tanner's best approach for having these large chunks of cash deposited to his checking account at such a young age and trying to balance investing with self-development and forecasting for the future? Yeah, I love it. Great job, Tanner. This is so cool. We get these questions for younger people because I see it every day where there's people in their late thirties and forties that are still kicking the can down the road and not setting themselves up for success financially.

19:29So I love the fact that you are actually considering already at your age, what should I be doing with this money? How much should I put towards self-development? How much should I invest in this situation with this$20 ,000 coming in, I look at it, I would go right to the public high yield cash account. I'd open that up, get that four and a half percent, whatever it's making right now. And then I would take the other part of that and you could either put it there or keep it on hand in your checking account or your traditional brokerage account because you have access to that money anytime you want it.

20:02And I would get that invested because we always want to try and see everyone dollar cost averaging even during a time when the markets are volatile because it'll just keep you invested and prevent you from trying to time the market. So that's what I would probably do. I'd keep 10 in the high yield cash account, 10 into the traditional brokerage account to keep building that to get you closer to your base. And then with every single time you get a payday, keep doing the same thing because you don't want to have too much in high yield cash. You want a couple months, maybe three, four months worth of your total expenses, but also So in your case, maybe a little more.

20:40So you have the money available for the coaching. You have the money available for some of these things. Maybe it's travel to go do an audition or whatever. So that's what I would do in your situation. And just really appreciate that you're crushing it and you're setting yourself up so well by doing all the things we talk about on a daily basis. I totally agree. Tanner is doing a great job for 20 years old. Guess who didn't have 30K in his brokerage account at 20? This guy, right? So Tanner, you are doing great, my friend. This is the framework that I like to share when it comes to people who are self-employed and have unpredictable income.

21:16I'm gonna just share the general framework. It doesn't exactly apply for Tanner because he's only paying$500 a month in rent, lives with his parents, things like that. But for other people listening right now who are self-employed, hopefully this framework can help you. The framework is this. Figure out on a monthly basis exactly how much you need to spend to live your life. right so for me for example I need to spend just about seven thousand dollars a month and my life is good right if I spend seven thousand dollars a month my bills get paid I get to hang out with my friends I'm eating great groceries utilities my phone bill my streaming services right seven a month and like life is good and so when it comes to these windfalls of cash via you know you're self-employed, maybe you have commission only, projects, things like that, bonuses.

22:07How you should be treating those windfalls of cash is how many months of spending does this windfall cover. So for example, I always think that if you have very unpredictable income, truly unpredictable, right? It's like it's a commission on a sale or like you're a realtor selling homes or maybe you are an actor in Los Angeles. I like to encourage people to have six months of expenses saved set to the side because you could go six months without selling a house or six months without getting that next audition. Like that could very well happen, which is why we say three to six months of expenses.

22:38Three if you've got a very stable job, six if you've got more commission based unpredictable thing. So in my instance, having$42 ,000 sitting in an emergency fund, six months of expenses would make sense for me, right? Assuming that I was a completely self-employed person, that it was on commission only, and I couldn't predict my income. So the framework of switching the, oh, I've got this money coming in, how do I spend it? And switching that framework in that mindset now to here's how much I spend on a monthly basis. If I have a$30 ,000 windfall, how many months of expenses, normal spending, does that buy me?

23:13And if it buys me, you know, more than however much I have in my savings account to replenish it back up to that, you know,$42 ,000 or six-month threshold, then that addition is what you can go invest or that addition is what you can go save elsewhere, put in a sinking fund for your whatever else, right? And so when it comes to your situation, Tanner, you unfortunately are kind of an anomaly here. So I can't give you like too much of this framework because you're only paying 500 bucks a month in rent. You're not really like you're living with your parents. So it's a little different there. So I'm going to lean into what Robert said, which is like, yeah, put 10, maybe$15 ,000 set aside into a high yield cash account on public, assuming these auditions and acting classes and some other expenses that go into self-development could be a little bit more expensive.

23:58You're already doing a wonderful job when it comes to your brokerage account and your Roth IRA. The only thing at this point that I would focus on when it comes to investing, like straight up, you have to do it is the Roth IRA. I think the bridge account is like a cherry on top. I think the crypto is like a cherry on top. Definitely do the Roth IRA because at 20 years old, every dollar that you're investing right now into your Roth IRA turns into$35,$45,$50 at 65 and 70 years old. So literally, by putting thousands of dollars into this account, you're making hundreds of thousands over the next 40, 50 years because of compound interest.

24:34This really illustrates for me, and we talk about it daily, that so much of America lives beyond their means. And we talk about this all the time. and thinking about Tanner living with his parents and having$500 a month rent. I don't care if you're 20, 30, or 40 years old. If you don't have yourself set up financially where you're gonna be able to achieve financial freedom at some point and retire well and be able to have dignity and live the life you wanna live, you have to make that consideration at some point in your career. You just do. Whether it's 20 years old, 30, 40, sometimes 50 years old, you can't keep kicking the can down the road and living beyond your means because at some point you're going to run out of gas and you're going to be in a tough situation.

25:24So I love these illustrations of the$500 a month because I'll tell you what, if you can find a place that's suitable for your lifestyle, but it's a hack or a way to save money on your overall expenses, whether it's not buying the new car and buying an older car for a few years or house hacking with someone where you're renting a room instead of having your own place, I strongly suggest doing that because it just gives your money more time to compound over a longer period of time to allow you to have more financial freedom later on. I think we talked about this in last week's episode where I told everyone the time to really buckle down is in your 20s and 30s because then it sets you up for your 40s, 50s, 60s and beyond.

26:11And most people do it backwards. They mess around till they're 35. Then they start to get serious about their money. And I think that is a huge mistake. And people should look at it more seriously in their younger years because it'll just set them up way better later on in life. To piggyback on that, though, Robert, I think it's important, though, to make sure people in their 40s, 50s and even 60s that are feeling behind with their money doesn't always mean they are behind with their money. For example, maybe you have an encore career, right? Maybe retirement looks a little bit different than sitting on a beach and drinking margaritas all day.