Q&A: Investing $200K of RSUs, Buying a Failing Biz, & $1.4M Net Worth at 34

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0:57Hey everyone and welcome back to the Rich Habits Podcast brought to you by Public.com, a top 10 business podcast on Spotify. This episode is our question and answer edition, which means we take your questions via Instagram DMs, emails, or inside of the Rich Habits Network and we answer them as if we were in your shoes. Now the majority of the questions we're actually taking in today's episode were emailed to us over this like holiday break. We had about 40 of them that were sent to us in the last two weeks. And we included like six or seven in this episode, email specific for you guys. So if you've not sent us a question via email yet at rich habits, podcast at gmail.com, definitely do that.

1:37We try our best to read all of them. And speaking of emails, Robert, we have the rich habits newsletter, which I would argue is the best newsletter all of 2025. Definitely. I spoke to several people over the holiday that are in the Rich Habits Network and people that we've gotten to know. And so many of them commented on the newsletter, which was amazing because they were like, this is the best newsletter out there. And so it is really rewarding to see that we have created this community, but also the newsletter is so helpful for so many people along the way. So I'm excited about 2025 and all of the amazing things we have in the works for everyone that follows along.

2:15So if you want to subscribe to the newsletter, it's completely free. Just drop in your email address. You can Google Rich Habits newsletter and it'll pop right up or there'll be a link in the show notes below. You can subscribe that way too. Every single Thursday, mid-morning, mid-afternoon, we send you an email. It's succinct, illustrations all over the place. It's perfect. So go check out the Rich Habits newsletter. Now, if you're serious about investing, you should not just be reading the Rich Habits newsletter, but you should also know about public.com. Public.com is where you can invest in everything.

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4:04Now, to earn that much money, you need to have a big portfolio, but the average person will get a couple hundred bucks. Super simple. You guys can go figure that out. Public.com slash rich habits. Thank you so much, Public, for sponsoring the show in 2025. Now, our first question is coming from James D. James says, Hi, Austin and Robert. I appreciate all you do with your show. Your dedication to explaining the intricacies of personal finance in layman's terms doesn't go unnoticed. With the average 30-year mortgage now around 7%, how would you approach a down payment? Say an individual has the ability to put down upwards of 70 % on a property.

4:39Is it in their best interest to do so and pay off the mortgage quickly to avoid significant interest in the long term? Or is it better to put down, let's call it a 20 % down payment and keep the lump sum invested knowing that the rate of return over the 30 years has a strong chance of beating the interest rate? Now, I know I could always refinance in the future, but there's no mortgage like having no mortgage. So, Robert, what's your take on this question? Yeah, I love this question, James, and it really is something that comes up a lot. So let me take a stab at what my take is on this. And it's really important to understand you're absolutely on track.

5:15I believe you should put down the 20%, not the 70%. Take all that extra cash, get it into the markets because you're right. Over time, a long period of time, the markets are going to outperform six or 7%. But also on the flip side of that, you're absolutely correct that we're going to see in the next one to two years, interest rates come back down in which you could refinance. And just keep in mind that the wealthy get wealthier by leveraging their credit and good debt. So I am not of the belief that having no mortgage is a good thing, especially because in a year or two from now, let's say you get it back down to four and a half, 5 % and the market's in a bull market making 12, 15%, all of that positive arbitrage going to you is going to help you build your wealth faster.

6:02So in my opinion, people should not bury all their credit and bury all their cash in a property because then it is locked up and you cannot get that money out or use that capital until you sell the home, or you would have to take out some sort of a HELOC or home equity loan. So that's my take on it. I like the fact if you have the cash and you want to put down the 20 % to avoid the PMI, great. But I would never put down the 70 % because to build that wealth, you're always going to have debt. And as long as it's good debt and it's low interest debt, that is a very, very key structure in being able to build wealth for the long term.

6:41Good debt and low interest debt. Those were the two key terms there, right? I believe there's such a thing as good debt and there's such a thing as bad debt. Good debt is used to buy appreciating assets. Think businesses, think real estate, things of that nature. Bad debt is used to go buy things that go down in value. Think auto loans, boat loans, credit cards, appliances, furniture, stuff like that. And then the other side of this equation, Robert, you know, personal finance is personal. So I am someone who is with a 6.6 % interest rate on his mortgage of about $325 ,000 right now. And I wholeheartedly want to pay off my mortgage as quickly as possible, because I pay about$25 ,000 a year in interest on this mortgage.

7:25And it sucks. And I realize that. But I also realize if I took$300 ,000 and I put it in the stock market in 2024, it would have returned about$65 ,000 back to me. Now, of course, that was an anomaly, right? The stock market on average goes up between 8 to 12 % per year. We've had two awesome back-to-back years of 20 plus percent, which is, again, an anomaly. But I guess it really comes down to this idea of, and this is how I justify in my head, Robert, why I think it will be okay if I pay off my mortgage at the 6.6 % interest rate over the coming years. The reason I think it would be okay is because I have three times my mortgage balance right now already invested in the markets, right?

8:09I'm just around a million dollars invested in the markets at the moment. And assuming I keep that money invested, and that money continues to work for me year over year over year, I already have the exposure, right? Like, I guess I could put another, you know, 200, 300 ,000 into the markets. And like, that's cool. But like, I guess I'm at that point now where I can choose, I have the flexibility, I have the autonomy to say, no, like, my money is already working for me. Now, it'd be a completely different story. If I had no money invested, I had not built my base, and I wouldn't put 70 80 90 % down on a house.

8:38Like that to me seems silly. I would much rather have that money invested and building wealth for me over time. Because again, the big difference here, Robert, between money that we invest in the markets and the interest rates we pay on the mortgages, the money we invest in the markets compound and grow exponentially. The interest with a mortgage is simple interest. It's a flat every single year. And so once you understand the difference between compounded interest and compound growth and simple interest on debt and arbitraging that difference there. I mean, that is where wealth begins to unlock for people.

9:08Yeah. And that's why if you think about it, some of the wealthiest people in America have mortgages and they have loans on their yachts and they have loans on their buildings because they're leveraging this low interest debt that we talk about and arbitraging the difference into their own accounts. So I love the explanation and the two sides of this. And it's just really important for everyone listening to understand that because it's all about not what you make, but what you keep and how you maximize your gains along the way. So our next question comes from Manicon V. Manicon says, Hi, Austin and Robert.

9:40First off, happy new year. I'm excited to hear all about the great episodes you've lined up for 2025. I recently had newborn twins and was looking into opening custodial IRAs for them. However, during my research, I found that each child must have earned income to qualify for these accounts. Is there any way around this or do we need to wait until our twins have earned income. I also looked into the 529 plan, but I'm more interested in the custodial IRA in case they don't want to go to college. I know that Austin mentioned that we can roll over up to$35 ,000 of the unused 529 plan funds into a IRA account once they turn 18, but what happens if there are remaining funds in the 529 plan?

10:19Would we just withdraw the remaining funds as income and face the additional 10 % penalty fee when the time comes? Any insights would be greatly appreciated. Thanks for all you do. Best regards. This is a really great question and let me just take a first step at this one. So you're completely right. You have to have earned income to contribute to your IRA and unless your newborns are Gerber baby models, they're likely not making any money. But I would be very surprised if you can't find a way to spend this 529 money after, right, rolling over that 35 ,000, right? So the money you have over, left over, which is what you're so concerned about, I'd be surprised if there's not a way for you to spend this in a manner that furthers your children's development.

10:59Think trade schools. Think certificate programs. Maybe study abroad programs, apprentices. Even K-12 tuition for private schools even before college, right? Up to$10 ,000 per year can be withdrawn tax-free to cover tuition expenses for private, public, or religious, elementary, or secondary schools. So the 529, like let me just be very clear. It's a very flexible way for you to save and invest on your children's behalf. And again, I'd be really surprised if you just simply can't find a way to spend this money in such a manner that further develops your children's learning and career opportunities.

11:37Yeah, I think that's a great takeaway. 529s are a really great tool and there is so much flexibility with them. And that is why they work even if the kid doesn't go to school. So keep that in mind. I think it's a great question. Austin, awesome takeaway. way and just really do your research to understand and make sure it's a good fit for you. So our next question comes from Dinesh V. Dinesh V says, Hi, Robert and Austin. I'm 42 years old. I work in tech and I'm based in Seattle, Washington. First, I want to very much thank you both for helping me fix my 401k, which was drastically underperforming.

12:10After listening to your podcast, I've diversified it into VOO, QQQ, SPYI, QQQI, and other awesome index funds and ETFs that you recommend. I'm already excited with the results of the new strategy. I've already saved six months of expenses in an emergency fund. I've automated my investing and maxed out my 401k for 2024. My certified financial planner says I'm even on track for an early retirement. I have two children and my wife also earns just about as much money as I do. I have a rental property and it's net cash flow neutral, but I also own my own house. Both mortgages are less than 3 % interest.

12:46I could not be in a better situation because of you all. Now here's my question. I'll be making about$200 ,000 from my vested RSUs at my job after taxes in January of 2025. All of this money is from company stock that I am selling because I wanna diversify out of this single stock. I'm torn between putting the entire 100 % of it into SPYI or even splitting it across SPYI and VOO equally. I do love the passive income considering cash is king. I'll be hitting the highest tax bracket next year, largely because of my stock RSU appreciation. I might not get such a large vest for future years as I'm hitting my cliff.

13:27What is your advice on investing this$200 ,000 if you were in my situation? Robert, I'll let you take a first stab at this. I love this question. And at 42 years old, you have a long time horizon for investing. So I'd really like to see you have more diversification with this$200 ,000. I love VOO. Nobody talks about it more than Austin and I. I love SPYI because of the income you get, but I think you should have more diversification with this money. So I would like to see you add in some more funds into this and break it down with a little bit better weighting rather than just 50-50 or all-in-one because there are other categories that I think you could cover as well.

14:08Maybe look at the NASDAQ, maybe look at some global economy stuff, and really get some diversification. We didn't talk about crypto, and at your age, and depending on your risk tolerance, maybe a portion of this goes into some crypto funds. I bet we love, and there's some other good ones coming out right now. So I love where your head's at, but I would just get a little more diversification if I were you. I like this answer, Robert. The perspective I wanna share is it seems like, and I only mentioned this because he mentioned it himself, but it seems like he wants to retire early. And to retire early, two things have to happen.

14:41One, you have to have monthly expenses that you have clear visibility in that likely aren't going to increase dramatically in the future. And two, your portfolio income, your passive income, has to be more than those monthly expenses. So if this person was making$7 ,000,$8 ,000 a month in passive income and their monthly expenses were$6 ,000, then theoretically speaking, they could retire and they would have that$2 ,000 of sort of flexibility every month to spend or save. If you are someone wanting to retire early, I totally agree, right? Go with the diversification. That's a great idea. But also consider what your mortgage might look like, what cash flow might begin to look like, what, you know, your income might begin to shape up as.

15:26I guess what I'm saying is it's really hard to retire early if you're paying$4 ,000 a month with a mortgage or, you know, you're paying, you know, maybe sometimes your cash flow on this rental is neutral. Maybe sometimes it's negative. So just like figure out what big debt expenses you have in your life. And if it makes sense in the next, call it, you know, two, three, four, five years, pay those off if you do want to retire early. Now in that two to five year period, invest the money, make the money grow. Money doubles every seven years on average in the stock market. So I love this idea. I love the idea of retiring early, having income paid to me by SPYI and much of these other NEOS funds allows me to be on track to retire early as well.

16:07But I will not be able to retire early if I have, call it, my existing mortgage of like$24.50 or whatever I pay every month. It's just you want to get rid of that before you retire. And also for anyone else listening that's thinking about what their retirement looks like, we talk about the 4 % rule and all of this. Please keep in mind, and this isn't a scare tactic, but keep in mind that things are changing. People are living longer. We are getting to a point where with better medicine and better care, the average age of people is going to be extended. So you need to make sure that you understand that when planning for retirement so you don't run out of money.

16:44Because, you know, in the old days when the average person would, you know, live to be 76 years old, the average male in the U.S., that is getting extended year over year. And in the next 10 years, we're going to have dramatic breakthroughs in medicine. So keep that in mind when you're thinking about retiring early, but also looking at how your retirement, what that looks like, and how to maintain the life that you want to live in retirement. I love that perspective, Robert. And just a quick plug for your boys here. Episode 33, how to calculate your freedom number is a wonderful place to start if you're someone who wants to retire early, right?

17:19This freedom number is the amount of money you need invested to be able to say, wait a second, I can stop working and just live off of my portfolio income, assuming the 4 % rule, things like that. So go give episode 33 a listen. We published it on October 9th of 2023. Our next question comes from Joe F. Joe says, Hi Austin and Robert, a friend connected me with your podcast and I love all the great information you share. Thank you for what you guys are doing. My question is this, when investing in the major ETFs you typically mention, think VOO, VGT, VTI, and QQQ, regardless of whether if this money is in a retirement plan or a bridge account, would you distribute your investment equally across all for?

18:00Or would you follow some other allocation? For context, in case it impacts your advice, I'm 47. I plan to work for 20 or so more years and I have a traditional 401k that I'm maxing to the full match as well as two bridge accounts that I DCA into monthly, but I'm considering changing the allocation of my investments. So please let me know your thoughts. This is a really good question, Joe. One of my favorites actually, because every year, and I shared this with Robert a couple of days ago, I write a long reflection piece as to how my portfolio performed during the previous year. And so in 2024, my portfolio delivered 74.9 % total returns, which was amazing.

18:39And the majority of that was driven by Bitcoin because it was up like 100 something percent there. So don't like think I'm crazy here. But you know, I did have some 100, 200, 300 % return stocks, but it was mostly just Bitcoin. But in that piece, I sat down and I said, wait a second, something I need to get better at in 2025 is understanding weightings inside of my portfolio. Because one of my biggest winners was HIMS and Her Health. It was H-I-M-S. I think the stock was up like 180, 200 % or something from my average cost in 2023. So I think the total return was like in the 200 % there from what my average cost was, but I only had a three or 4 % weighting in it, right?

19:17It wasn't a big enough weighting to make a difference. And so for Joe's question here, I would really encourage him to look more and learn more about the core satellite portfolio strategy. Core satellite portfolio strategy. What that means is think about your portfolio as the earth and then satellites that are orbiting the earth. Okay, so the earth of your portfolio is the vast majority, right? That's the 50, 60, 70 % weighting. You want the vast majority of your portfolio's weightings to be in big ETFs and index funds, blue chip stocks that are going to be here for a long time, and things that have great track records of strong performance.

20:01Because we want to make sure that a lot of our money is invested into good ideas. Now, the satellites come in, in the sense of call it this 15, 20, 30 % weighting of these more opportunistic, diversified ideas that you might have. Think cryptocurrency, think real estate, think masterworks or Fundrise or, you know, things of that nature, right? Maybe a single stock that you have an idea on that you're really optimistic about. So that's how I try and approach building a portfolio. I try to have 50, 60, 70, 75 % in these blue chips and the other, you know, call it 25, 35 % in these ideas. Now, with Joe's question, he's talking about all blue chip index funds.

20:39So Joe, if you want to have, an equal split among all of them, I think that's great. If you want to be more heavily weighted to the S &P 500, I think that's cool too. If you want to be more heavily weighted to VGT or QQQ, that's fine. Just know that those are a little bit more volatile in nature. So just be ready for that. But I think this is a wonderful way to approach investing. Having these big index funds and ETFs in your portfolio and having them be the real core to your investing strategy is really important. Yeah. My big takeaway, Austin, great, great answer is that core. We're talking about that bridge account or that 401k where it's the meat and potatoes of your wealth.

21:18As you're building, you want to make sure that you have these blue chip accounts. So when you look at like VOO, VGT, VTI, QQQ, we love all four of those. If I were going to weight those in my portfolio, I would look at it as something like maybe VOO is 40%, QQQ is 30%, and then VGT and VTI are 15 and 15, because I would weight a little heavier to the tried and true S &P 500 and the NASDAQ, because over time, those just really do well. They're very stable. They're going to average 10, 11, 12%, and that's how I would do it. But like Austin alluded to, you also want to make sure that with this weighting, you understand why.

22:02Because so many people, me included, I'm guilty of it. I'll take a nibble on something that I think is gonna do really awesome. And then it goes crazy for two years. But like Austin alluded to, it's only 3 % of my weighting in my portfolio. And if I would have just adjusted that further. So for instance, with me, my portfolio for 23 and 24 was probably around 8 to 10 % just in NVIDIA, Palantir, and Micron. I was very fortunate over the last two and a half years, they have absolutely torn the cover off the ball. So it was great. But then in retrospect, you say, man, I should have just upped that, got that to 15 or 20%.

22:43But then you're in a situation where you're very risk on highly volatile sectors. So just keep that in mind. So that's why that's what I would do if talking about these four funds, how I would weight them personally moving forward. Now, Robert, the cool thing about Joe is he has a follow-up question. It's this. Would you ever try to buy out a franchise that is failing due to improper management? There's a chance that a business that I used to work at, which was an auto retail franchise, will go under unless there's a change in ownership. This business was thriving five to seven years ago and making a bunch of profit before the current owners bought it.

23:18In addition to that, is it worth trying to take out an SBA loan in order to pay for the initial down payment of the$75 ,000 to$100 ,000 for acquisition. I wish I could say that I had more capital, but I just started getting everything in order and I'm a little bit late to the party. I wanna make sure that this is an overall good idea before I even fully approach the current owners to start discussing acquisitions. Robert, that is right up your alley. I'll let you answer this one. It is, I am waiting. So yes, I think it's a great question and the answer is very complex, but let me try to break it down succinctly.

23:49I love the idea of buying failing businesses as long as the business isn't failing because it's a bad service or it's an antiquated service or it's something that just isn't a growth proposition for the future. But if you know and you have experience like you do in this instance, that the owners did a poor job, but that the audience is still there, then I love this idea. And the way to look at it for everyone listening is look at value engineering. When you go look at a property or you go look at a small business, really look around at all of the simple things first. The numbers are important, but what is simple is understanding the value proposition of your improvements.

24:32So like when I bought the pizza store last year, when I pulled up to see it, they had old lights, the grass wasn't mowed, they didn't have great signage, they didn't do a good job with social media. So immediately I knew that I could improve that business almost overnight by integrating modern technologies and modern sales tactics and modern marketing. And the same goes for this business. So if you can buy it right, even though it's losing money and you can turn it around with good management and good marketing, I think it's a win-win, but just make sure you understand something. When you're getting your financing order, you need to make sure that you have at least six months to a year of cash burn because of the fact that if it loses money for you for a while, let's say it loses five to$10 ,000 a month.

25:21You need to have that on top of the cashflow because otherwise you're going to be coming out of pocket every single month to baby that business along and get it to profitability. So be very, very careful because a lot of people buy businesses with the thought they can turn them around, but they don't turn them around fast enough. And they end up having to either take on more debt or sell the business at a loss because they weren't prepared financially to be able to harbor those losses because everything takes longer than you think and costs more than you think when turning around a small business.