Q&A: Investing for a Newborn, $100K in Cash, and Utility Patents

0:00If you used Babbel, you would. Babbel's conversation-based techniques teaches you useful words and phrases to get you speaking quickly about the things you actually talk about in the real world. With lessons handcrafted by over 200 language experts and voiced by real native speakers, Babbel is like having a private tutor in your pocket. Start speaking with Babbel today. Get up to 55 % off your Babbel subscription right now at babbel.com slash Spotify. Spelled B-A-B-B-E-L dot com slash Spotify. Rules and restrictions may apply. Welcome back to the Rich Habits Podcast, a top five business podcast on Spotify.

0:35My name is Austin Hankwitz, and as always, I'm joined by my co-host, Robert Croak, and you're tuning in to this week's Q &A episode, which means we take your questions and we answer them. You can send us questions via email at richhabitspodcast at gmail.com. You can join our Discord group in the show notes below and ask a question that way, or you can send us an Instagram DM at richhabitspodcast on Instagram, and we'll definitely try our best to get back to And if you're not following us on Instagram, why aren't you doing that? We have great clips, great content. We're always doing a little story action.

1:06Go check us out there. But Robert, I am so excited about today's episode. We have a bunch of awesome questions teed up. Yes, but before we jump in, I want to take a moment and really just talk about mindset and perspective. We've been down a little bit of a bumpy road these last couple of months in the markets. And I don't know about you, Austin, but my inbox is inundated with people saying, what are we going to do? What are we going to do? What do we do? And it's just really something I want to touch on today to everyone following along and listening. I think it's just so important for everyone to understand, are we in a recession?

1:38Are we not in a recession? What's going to happen with student loan debt? What's happening with the stock market is to get everyone to just take a break. Breathe for a second. Realize that the markets go up, the markets go down. But guess what? if you have good information and you follow along and you take notes, you're always going to win because you understand the fluctuations and the ups and downs of every market cycle. So I just wanted to take everyone, let's usa, let's breathe a minute and just take that moment to understand that that's why we preach dollar cost averaging, making sure it's time in the market, not timing the market.

2:16Because if you take all of this and all of this information and you really hone in and make all of this automated, it's almost sleepy how easy you will become wealthy and financially free. I think the key word there was automated, right? At the end of the day, we want everyone to know what's happening the next month already, right? We're filming this Tuesday, November 7th. This episode will be live Thursday, November 9th. I already know what I'm gonna do with every dollar that I make between now and December and how that's gonna get allocated to my savings and my investing and my mortgage and things like that.

2:54I have mental clarity. And in times of uncertainty, if it's the stock market, if my friend loses their job, if I'm seeing the bad headlines on CNBC or the great headlines even, I'm all good because I'm controlling the controllables, I have a plan and I know where I'm going. So to your point, Robert, automating, understanding and how to create that plan and not just create it, but automate it is so important. That is so incredible. I think we should just end the internet right now, shut it down, and everyone just listen to that and there's nothing else to do. I love it. Okay, with that being said, let's jump into our very first question.

3:27So our first question comes from Katie I. Katie says, I was recently laid off from my job where I have$15 ,000 invested into a 401k. I just became a mother as well. Congratulations, Katie, praying for a happy, healthy baby. But I'm trying to figure out if I should roll my 401k into a Roth IRA or a traditional IRA because I don't like the offerings. There's no VOO, there's no index funds, and I'm paying$300 a year just to keep the 401k plan. Good question. Robert, what's your take? For me, I would say roll it over and take the tax hit now. Katie, I think it's a smart play that you're considering what to do here, and we appreciate you asking us.

4:06In my opinion, take the tax hit now while the account is smaller, Roll it over and then don't touch it again and just keep building that account until you retire. It's all tax free and you'd be in a great, great financial situation. But Austin, I know you like to dig a little deeper tactically. So let's break it down. 100%. So couldn't agree more, right? Do the Roth IRA, roll that over. Now, to Robert's point, pay the taxes down. What are those taxes? Well, they're going to be anywhere between 10 and 37 % depending on your tax bracket. But let's say you're about in the middle. Call it 20%. So 20 % taxes on a$15 ,000 rollover like that is going to be$3 ,000.

4:44So let's say you do this rollover sometime in 2024, right? You're anticipating, you're doing your research, you do it next year. You do this rollover within the calendar year of 2024, which means that you're going to owe$3 ,000 to Uncle Sam in April of 2025, right? The following tax season. Now you've got this$15 ,000 from your 401k and you're going to roll it over into the Roth, but now you got to pull out that 3 ,000 or so and set it aside to make sure that you're not blindsided by that tax liability. What I do personally, if I ever have an anticipation of a tax liability is I park it in a high yield savings account like Wealthfront.

5:20It's paying 5 % right now, which means that you can earn, call it$150 or so on that$3 ,000 in the meantime, while you're waiting to pay Uncle Sam. $150 isn't going to make you a millionaire, there. But$150 is$150, Robert. I love it. I love it. Let's get to the next question. But great job, Katie. And I think you've got some studying up to do and let's make this happen. All right, Robert, this question, actually, they called you out. So they want you to answer it. Jenna M says that I'm developing an improvement to an existing product, something that solves a couple problems and what I think is going to be a simple solution.

5:56I've dug through existing utility patents, and I'm pretty sure there's nothing like this that is in existence. I've built some prototypes and I would love to secure a utility patent and bring it to life, but it's so new to me, I'm not sure what to do. Would you recommend getting a patent attorney to help? Is it smart to do utility and design patent? What's the play-by-play? Jenna, this is the best question we've had in a little while and this is a very slippery slope on this one. So I'm gonna give it all to you from my 25 years of experience and dealing with product development and patents. Here's what I would do, and we could spend hours on this, but I'll keep it short and sweet.

6:33I would get the design patent first and foremost because it's a lot more affordable to do, you can get it done quickly, and you give yourself a decent level of protection. Number two, the utility patent could come later, but you might wanna consider pausing it or at least starting it while the design patent is already in play because of the fact is sometimes these patents, these utility patents might take two to three years to get approved or denied. And so the nice thing about a design patent, you're up and running, you have protection, and you can really flush out the concept and see if it's a winner before you spend all that money on the utility patent.

7:12And keep this in mind, I've had products in both stages with the design patent approved and the utility patent filed and people still knocked me off, still came after me, still knocked the price down on my product and flooded the market with fake knockoffs. So it's not a one-all be-all protective mechanism, but it certainly helps. So the takeaway here is do the design patent first, get the product to market so you can start seeing and flush out the market and see if the need is there. And then once you know and see, wow, this is going to be a big winner, then you can take some of that earned income from the product and dump it into the utility patent to protect yourself for the long term, because it's not like the old days where you can come out with a product and just crush it for years and years.

7:59You will have knockoffs like that if the idea is really good. So I hope that helps. Okay. So what about the question about the patent attorney? How do you get your design patents? How do you get your utility patents? Do you have an attorney? What's the play-by-play from that perspective too? Love it. Thank you. So yes, I have several patent attorneys depending on what type of product it is. We do all of our design drawings in-house. Don't ever, ever, ever reach out to someone on Alibaba with your idea. You want to make sure you're fully protected first because you will lose control of your own product.

8:33I've seen it happen time and time again. So I would say, yes, flush out a good patent attorney. Make sure you have a design agreement with whoever is doing your CAD drawings or your design drawings. Have an agreement with them as well before you ever release the concept, even if it's a napkin drawing. Protect yourself. Because what you don't want to do is have this multi, multi-million dollar idea that gets caught up in the vapor and you lose control of it. So yes, I'm the attorney. Find a good one. Protect yourself with whoever the initial designer is for your CAD and your drawings with a design agreement with them that you own 100 % all rights to the product and the drawings.

9:13Because they might say, well, the drawings are mine. You own the product. Don't let that happen. Very, very important. Now, I guess my last follow-up question is like, how much does that normally cost? I've never got a utility patent or a design patent. I know attorneys can get expensive. What's like the rough ballpark there? Yeah, so a design patent you can get done for$300 to$500. It's going to be rudimentary, but it's going to give you some coverage. A utility patent with attorney fees could be$15 ,000,$20 ,000,$25 ,000 and up. So that's why you want to have the different stages of what to do here and the different levels of protection.

9:50The biggest mistake I see with a lot of people is they will go out, come up with a product idea, let their passion take over because they think it's the next silly bands. And they go out and they spend$100 ,000 on drawings, lawyers and everything, prototypes, get it done without any testing or understanding if the market even wants the product. And worse is when you take two years waiting on those patents and your lawyers and all the work. And then by the time you get the product out there, the craze or the phase of why that product could be popular is gone. So it's all very, very tricky. And, you know, anyone that wants more information on this, reach out to me and I'm always there to help.

10:30I love it. Good stuff, Robert. Thanks. So our next question comes from Terry B. Terry says, how would you recommend managing and consolidating all the various investment platforms and services? For example, would software like QuickBooks help me manage my Fundrise, Coinbase, and public account? I'm thinking about this from an estate planning perspective. So I'm going to kind of give you a quick rundown what I think Terry's asking, Robert, right? What I'm hearing is Terry has, probably like a lot of us, four, five, six, seven different sort of websites and platforms that Terry's contributing to and investing with, if that's Fundrise or Wealthfront or VinoVest or Public.

11:08And Terry's kind of like, hey, I got a lot of stuff to keep track of here. How am I really going to keep track of this? So, Robert, that's my interpretation. If that's the case and you believe so, what's your answer? Yeah, this is a great question and a huge problem because there isn't a great solution that's an aggregator for all of those platforms and information. For me, I use a spreadsheet. I know it's kind of antiquated and, you know, I update it like every three, four, six months. For me, so much of my investments are automated, except for my angel investments and real estate and restaurant stuff.

11:41So it's very automated, so I don't need to check it as much. But I do get up every single morning and I look at all of my bigger main accounts, see where they're at, see what adjustments I'm going to make. Am I adding some different positions this week like we've been adding with Chainlink and Bitcoin this week a lot? But other than that, for Terry's question, I use a spreadsheet. I have not found a solution. QuickBooks definitely doesn't do it. And I think it's just all about figuring out a way that works best for you to track them and automate as much as you can. Really good answer. I'm definitely in the same boat, right?

12:15On one side of the equation, I use Google Sheets because you can do like the Google Finance function that will automatically update like a price feed of publicly traded companies, which makes it really easy sort of to track your portfolio on a, just on automatically any given time. I also have a separate spreadsheet that I guess like that spreadsheet plugs into where I track the actual balances of like my Roth IRA and my retirement accounts and my crypto accounts and my Fundrise accounts. And like every month I'm like sitting down on a Sunday and just like going through one by one. Wait, wait, wait, wait, wait, wait.

12:51Every month? You're a psychopath, boy. Every month? That's crazy. Every month, man. And I said, I like to know where I'm at. I like to know where I'm at. I like to sit down and get it done. I wish I could do that. We'll get back to you, Terry. Hold on. I wish I could do that. On my public live a few weeks back, we were talking about after the episode about seven sources of income that the average millionaire has. And all of these people ganged up on me. And they're like, how many sources of income do you have? And I wasn't trying to be coy or gatekeep. I didn't know. So I went back and figured it out.

13:24and you and I talked about a little bit. And I have like 28 sources of income right now that come from various places and they're not all large sources of income. Trust me, I wish they were, but I look at them as all buckets. And so to aggregate all of those buckets into one place would be great. But I think the spreadsheet you alluded to, Austin, is the best way that I know of right now, but definitely I hope that helps a little bit. 100%. Yeah, Terry, if I were you, especially from an estate planning perspective, right? I have a safe somewhere, not going to say where it is, somewhere in that safe for the logins right to all of my accounts.

14:00It has all my private keys for my crypto. It's got all the instructions where if I was to be hit by a bus tomorrow, what my heirs could do to access my money, access my crypto, as well as, you know, just be able to enjoy it as beneficiaries. And so if I were you, Terry, I would have some sort of document that you write up with all your logins, all your private keys, all your everything. So from an estate planning perspective, there's a central hub, a central location that says, go to this website, type in this username, this password, it will get you in. Go to this, you know, crypto account, type in this, log in for it.

14:35And if you need to move the money, here's the private key, whatever it looks like. Robert, I feel like you probably have done something similar. Yes, I definitely have a treasure map. We talk about it all the time with my cousin, Tim, because he would be the one to unravel, you know, all things Robert Croke. And so we definitely have a treasure map to make sure that everything is very well protected. So definitely, I agree with everything you said, Austin. And I think, you know, in Terry's instance, you just have to put in the work and create a system that works for you since there is no one-stop shop aggregator app that works.

15:08That's what I would say. Treasure map. I like that. I'm going to start saying that one. A treasure map sounds better than Blueprint because, God forbid, anything happens to me. I want to make sure that all of the goodness is put to use if something were to happen to me. 100%. So our next question comes from Evan B. Evan says, thanks so much for the podcast. I think you've touched on this before, but I'm looking for a little bit more insight. I'm trying to think about my future children and how to set them up financially. I know opening a custodial Roth would be a good idea, but would only make sense if they're making an income.

15:40And I'm looking for more solutions as to when they're born. Is opening up a 529 something I should be considering? How do I think about that? And are there any tax implications? Okay, so Evan, yes, touched on this before. Happy to touch on it all the time because I actually love the 529. I opened one up personally, Austin Hankwitz, on Vanguard's website. They required me to have a minimum contribution of$3 ,000 to open it up. So just be prepared for that. Save up for it, do whatever you gotta do. So I deposited the$3 ,000 and I made myself the beneficiary, but I opened it up for my nephew, right?

16:14So when I did that, it prompted me to invest the money. Now, instead of putting it into a target date fund, like it might suggest and things, you know, we don't like that. What I did instead is I put it inside of the S &P 500 and into Vanguard's technology ETF, VGT. VGT has outperformed the S &P by like 250 % over the last 10 years. And the S &P is up like 180, 200 % in that same time period. So having a little bit of both is gonna be great. That's what I did personally. I invest$150 per month toward that because I know by the time my nephew turns 18 and is ready to go to college here in 17, 18 years, assuming the same historical return of call it 8 to 9%, and I continue to invest$150 per month toward that, they're going to have$90 ,000 to spend toward tuition and other school-based expenses upon entering college.

17:07Now, if they don't want to go to college, right, here's the kicker, that's totally fine. They can go and jump right into the workforce and they now have the opportunity to roll over$35 ,000 of that$90 ,000 into their own Roth IRA. And that leaves, what is it,$60 ,000-ish left,$55 ,000,$60 ,000. That money can now be used for my niece and my other nephew and all of his little brothers and sisters, right? So that's what's so cool about a 529. It's like, it just, it's so flexible. Oh, oh, Robert, tax implications. I need to do a little bit more research on this. I'm not positive, but I think Robert might know the answer.

17:43Yes, so basically the tax implications are as follows. For the nine states that don't have income tax, they also don't have any tax deductions for the 529 accounts. So that's all you have to be wary of is depending on what state you're in, is that if you're in a state with no income tax, then you won't have the tax deduction on the 529 account. Other than that, it's pretty straightforward. Really good question, Evan. And I know you had a follow-up question here as well in this email saying, I also am thinking about opening up a custodial taxable brokerage account. And if that's a good idea for a newborn.

18:16You also mentioned though that you've never done this before for yourself. I'm like weirdly big believing into take care of yourself before you take care of others. So if I were you, I would figure out how to begin investing on your own, right? If that's a Roth IRA, that's 401k at work, like what does that look like for you? Just listen to our episodes. We break it down pretty easily. Actually, we just made an episode, I think it was last week, called Investing the Rich Habits Way. So go listen to that one here, Evan. And once you've already begun investing for yourself and you've done the 529, and if you still have extra money left over, then sure, figure out the taxable brokerage account for your newborn and rock and roll with that.

18:53You will have to pay taxes on gains. That's why it's called taxable. But definitely take care of yourself in your own future before you think about like trying to, You know, you don't want to be that mom or dad who's mooching off their kids because they didn't set money aside for their own retirement. Right. I love this conversation around this question. And I just witnessed it firsthand of a gentleman that I knew in Louisiana, very, very wealthy for many, many years. And his kids all received ten thousand dollars a month in salary stipend as just a monthly bonus that they got every single month, all of them for years, if not decades.

19:29And then this lovely, lovely gentleman, the last few years of his life, he went broke and none of his kids came and moved in. None of them came to help him and none of them helped him financially. So he was in a situation where he almost couldn't keep up with his home and his in-care help because of the fact that he went broke. And this was such a tragedy. And I wanted to help more, even though I barely knew this man. And I was glad I never met his kids because I was so pissed about this, that he did wonderful, wonderful things for them for decades. Then when he was in need, they didn't come to help.

20:06So that is why you always have to make sure you take care of yourself first, because no one's going to be there to help you in a lot of instances. Yeah, Evan, definitely not saying that your newborn is going to be that inconsiderate, but definitely make sure you take care of yourself. A hundred percent. Really good question, Evan. This question of the Rich Habits podcast is brought to you by Grit Capital. Go check out gritcap.io. It's an awesome newsletter. You gain a financial edge in just five minutes. It's where Robert and myself get our market insights from a former$100 million plus portfolio manager and her team.

20:39So if you're not yet reading the newsletter, go read their newsletter. Now, the question comes from Leah. She's actually a finance content creator. If you don't follow her, you definitely should. Go check out financiallyfreelee on Instagram. She says, I have a question for the podcast. I've got$100 ,000 in a high yield savings account. I thought I was going to buy a house last year, but now I want to try living in a different area, which means I don't want to settle down just yet. I feel like I'm going to probably want to buy a house in about three years when I have kids, but I hate that the money is just sitting in this high yield savings account only getting 5%.

21:16Do you have any suggestions as to what I should do with it, knowing that I do want to buy a house in about three years. Robert, I'll let you kick us off. Well, you know where I'm going to go with this, Austin. I'm always a believer of being in the markets because you can't time the market. It's time in the market, not timing the market. And so for me, I would say Leah should leave$20 ,000 of that in the high yield savings. I would probably then take, if we take 20 out, I would probably take 20 of the next 20 and I would put that into treasury bills right now. And then I would probably say I would take 20 and put it into a blended portfolio of kind of the larger cryptocurrencies that we love.

21:55Chainlink, Bitcoin, Ethereum, maybe those three, maybe add in a couple more like XRP, XLM. So that's 60 ,000. That leaves you 40 ,000 left. I would get that into a really good portfolio of index funds like we talk about VOO, QQQ, VGT. I'd throw a little moat in there, M-O-A-T, and then maybe some AIQ. And yes, I do realize the markets are a little unstable right now, but I just think with a three-year window, it's a great place to be. And that would be good diversity that is certainly going to beat that 5 % that you're going to get in a high-yield savings. Yeah, I mean, at the end of the day, it's trading certainty of 5 % a year, five and a half percent a year with uncertainty of potential, you know, I mean, year to date, we're up 15%.

22:46Last year, we were down 20%. So you got this kind of uncertainty around that. If you want to buy a house in three years, what I would do is I would put about 65 to 75 ,000 of that and keep it in these like treasury high yield savings accounts, make your five to five and a half percent right then the other call it 25 to 35 000 i think i would park it into an asset like spyi that is guaranteed to pay out 12 over the next 12 months because they do their covered call option strategy only because i think that in case of uncertainty and if we do see like the stock market goes down six seven eight nine ten percent next year you still have that 12 of like sort of guaranteed income that can offset that decline just in case.

23:36I think that's what I would do because to Robert's point, you definitely want to add three years. That's a long time to not be invested, especially with this kind of money. But I don't know if I'm dabbling in cryptocurrency and VGT and stuff like that. Those things are all over the place for sure. If you want a little bit of certainty out, that's a lot. Well, I'll tell you what we can do right here, right now on the Rich Habits podcast is we can take Austin's takeaway with 100 ,000, my takeaway with 100 ,000. We place a time-sensitive bet that in three years from today, we see who wins and it's a steak dinner, it's a jet ski, it's a Rolex, whatever Austin wants it to be.

24:10And we place that bet based on our unbridled answers that we just riff right off of your question and see where we're at. Not going to lie. I do want a steak dinner. So let's do that. All right. There you have it. Everyone listening and following along, mark your calendars and I'll let you know what steakhouse I choose. Okay. Our next question comes from Cora M. Cora says, hey, I find your podcast. I love it. I look forward to every new episode that comes out on Mondays. Thank you, Cora. We appreciate it. What are your opinions on the investment plans that Public offers? Are there any that stand out to you?