Q&A: Money Fights w/ My Spouse, UTMA Accounts, & Switching Careers at 63

0:28You're about to make a trade. your list. Even those who are hard to shop for. Toys and jewelry to new beauty brands and styles, these gifts go seamlessly from our stores to under your tree. Seriously, with these savings, why shop anywhere else? Hey everyone and welcome back to the Rich Habits Podcast brought to you by public.com. These are our Thursday episodes, our question and answer episodes, where you guys ask us questions on Instagram at rich habits podcast in our DMS. You also ask us questions via email at rich habits podcast at gmail.com. And we also get cool questions inside of the rich habits network, our community for our biggest fans.

1:11We've got seven awesome questions teed up for this episode, a ton of different topics that I think we're going to have a lot of fun with, and I can't wait to dig in. Yeah, I'm excited for this episode. So many cool questions and just as always love seeing people support the Q &A episodes because I feel like we get to dive into everyone's issues, whether it's business mindset or financial, because personal finance is personal. So let's dig in. Well, Robert, before we get started, it's really important that everyone understands the reality that investing toward your financial future is the only way you will ever be able to retire.

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2:25So that 401k you haven't touched because you got the new job and you forgot to roll it over, roll it over into public, get your free 1 % match. And fund your account in five minutes or less by heading to public.com front slash rich habits to claim your 1 % match today. Paid for by public investing, full disclosures in the podcast description. So our first question comes from Matt on Instagram. As a reminder, if you have a question to ask, you can DM us on Instagram at richhabitspodcast or email us at richhabitspodcast at gmail.com. Matt says, hey guys, I love the content. Quick question. My name's Matt.

3:00I'm 30 and I need to upgrade my wife's used car to a newer used car as it's nearing its end. Should I buy something now in November and December to hopefully take advantage of some year-end negotiating power and finance a portion of it, or wait another four or five months to finish saving and buy that used car completely in cash. Thank you so much. Well, Matt, if you haven't already, my friend, tune into Monday's episode, right? We just broke down the math between buying versus leasing, the real math behind, you know, your next car purchase. So Matt, I'm sure you have listened to that already because you're a loyal listener of the show and you're talking about buying a used car, which again, Robert and I believe is the best way for the average American to own a vehicle.

3:46In my humble opinion, I'm not mad about doing something now, assuming that you can get a screaming deal on some sort of used car. Now, the trade-off to think about here, Matt, is twofold. The first one is the interest that you will be accruing while you have debt against this car. and then two, will the deal you get, that potential awesome deal that you're gonna get because it's the end of the year and you got all these promotions going on, is that deal gonna be more advantageous than the interest you will accrue on the debt during the time of having the debt? Because it seems like in just four or five months, you'll just be able to pay this off regardless, like you're not gonna keep this payment around.

4:30So that's kind of how I think about it, right? As I go around, I think like, okay, will I be able to save one, two, three, four,$5 ,000 because maybe it's December 23rd in that Toyota dealership. Monty's trying to get that nice year-end bonus, needs to sell one more car, and so he's ready to just give it away at invoice or whatever's going on there. So there's a lot of different ways to think about it, but that's how I'd weigh my options, right? Will I get such a great deal that it will more than offset the interest I'll accrue by taking on this debt? But Robert, what's your take on Matt's situation here?

5:01Yeah, I agree with you 100%, Austin. I would look around for the deal and weigh my options. In thinking about a short-term loan and paying the interest, I think it's going to be nominal on a used car purchase. And there are always really good deals, incentives, sales quotas they've got to meet like you alluded to. But also there are lower interest rates sometimes at the end of the year because they're trying to push that old inventory out. So I would start kicking some tires, going to some car dealerships, finding a car that you really like that fits what you're trying to buy and go from there.

5:35I'm doing the exact same thing right now. My lease is up in January, but I am looking at vehicles as we speak to be able to weigh my options before my lease is up on the current vehicle. So I love this. I think you should just go ahead and start the shopping now, see what deals are out there and go from there. And additionally, Matt, something else to consider here, too, is like, OK, what if it was not the end of the year? What if it was a random March or what if it was the beginning or whatever, right? You wouldn't get one of these deals. Then every single time it's like, yeah, like why go into high interest debt?

6:09Like, and you have the cash to save a couple more months and buy it. So knowing that we're giving you the blessing of taking on some, what could be considered high interest debt at that seven, eight, 9 % for a couple months, because you're going to get such a screaming deal because you're purchasing this in December, not too mad about it. So our next question comes from Willie W. you. Willie says, I've been listening to the show since the start. Thank you all for the incredible insight. My question is, I'm trying to get my fiance in the mindset of investing for our future, getting that$100 ,000 base and letting it grow over the years.

6:44Can you provide some insight on how to translate the knowledge you've given to your listeners to educate a spouse? It's a good question, Robert. I'll let you kick this one off. Yeah, this is a tough one. And everyone that's thinking about getting married needs to have this question before they're married and during the marriage. Because I feel like so much turbulence in a relationship happens throughout the marriage because of money more than anything else. I think there's a bunch of studies that prove this. And I think it comes from a lack of communication of what your desires are and what their desires are.

7:18Because you might have one person in a marriage that doesn't really pay attention to budgeting and the other person is really trying to build the base like Willie W is talking about here. So Willie, I think you have to have the hard conversation. Say, look, here's the reasoning. We have to set ourselves up for the future. I don't know how old you are, but you need to have this 100K base at minimum set up and building for your future and making money while you sleep. And it just really starts with showing them. I would write it all down, type it all out, whatever works best to communicate with your spouse and go through it with them of why it's so important.

7:55Go into ChatGPT and show them, let's say you're 35 years old, show that spouse what does that 100K turn into in 25, 30 years when you're ready to retire. Once they see the real numbers and they understand the 4 % rule, maybe you show them that as well and break that down, I think you'll be in a better place to get them on your side to understand the importance of building your base and investing consistently over time? I would approach it where it is not a you thing. You need to do this. You need to figure this out. You need, this is what you should do. You, you, you. I would flip it and make it a me thing.

8:32Hey, spouse, I am so afraid of something that means so much to me and that is retiring broke. I'm very afraid of not having enough in retirement. This is something I'm vulnerable about. This is something I really wanna have conversations about. I trust you as my spouse. Here's what I'm doing myself right now to ensure that, you know, this big fear of mine doesn't come true. You know, my parents were broke in retirement, my brother, like whatever, right? So it's like, this is something that is very near and dear to my heart. And it's something that I'm working through right now. It means a lot to me.

9:05So I'm going to educate you as to why it means so much to me and what I'm doing to ensure it doesn't happen to me. And during that education process, Willie, I would imagine that your spouse would sort of have a light bulb moment of, wow, that actually makes a lot of sense that you're doing this. I really appreciate you opening up to me and sharing, you know, all these actions that you're doing with your money to ensure that you are retiring with dignity. What can I do, right? As your spouse, how do I support you? How do I do this for myself and ensure that we both are moving in the right direction?

9:36I think it's never, in my opinion, a good idea to tell your spouse what to do and putting them in that situation of like, you need to do this. You need to be this. Like, if you can put it back on you, that's always like, I'm definitely scared of this thing happening. And here's what I'm doing to ensure that it doesn't happen. And I'd love to be vulnerable because, you know, we're married and share with you something I'm really, really scared about. I really want to ensure that I retire with dignity one day and hear the four things that I'm doing right now to ensure that happens, I'd love for you to support me in this endeavor, right?

10:10Nine times out of 10, they're going to support you. Now on the flip side, you know, the reason why Robert talked about money problems and money fights, hey, honey, you need to save more money. You need to stop shopping. You need to stop doing this. You need to do more of this. It's like, that doesn't fly, right? Let's be adults. Let's have conversations. Let's talk more about, you know, why we think things are important versus just pointing fingers and telling people what to do. So that's how I would approach it. I love that. And I see it every day when I do these one-on-one calls where the couples are not on the same page.

10:41And sometimes it could be the man's fault where he's not sharing the actual financial outlook with his spouse. And it goes both ways, but I think it's important to have that conversation that is definitely not a you or a me thing. It's an us thing and get on the same page so you can build for a really wonderful future. So our next question comes from Nicole. Nicole says, I want to start by saying thank you for everything you do and for all of the wonderful insight you provide through your podcast and your newsletter. I've been trying to learn more about finances for years, but haven't really known where to start, nor have I been very motivated.

11:16However, after finding your podcast, I find myself more motivated than ever. I love your show and tell everyone about it when people ask me what I've been up to or what I do for fun. Oh, what do you do for fun? Oh, I listen to the Rich Habits podcast. That's so funny. I appreciate that, Nicole. Thank you so much. I do too. So Nicole says, I recently had a change in employer and was given options for what to do with my existing 401k holdings. I have$50 ,000 in my 401k. I opted to receive a paper check so I could roll it over into a traditional IRA. I plan to do two separate Roth conversions into my Roth IRA, one this year and one next year.

11:59I'm planning into breaking it out into two separate years here so I do not ever exceed my modified adjusted gross income impacting my ability to contribute to my Roth IRA. I currently have that$50 ,000 sitting in my traditional IRA, but it is not invested into anything. My question is, what should I do with this money while waiting to convert it? Do I place it into ETFs? And if so, are there any that you recommend for this? I thought about putting it into VOO until I'm ready to convert it, but then I got worried about placing all of my eggs in one basket. I have a lot of analysis paralysis, as you can tell, so please help.

12:40Thank you so much, Nicole. This is a cool question, Robert. So let's just set the table a little bit. Nicole's saying, hey, I switched jobs. I've got a 401k at my old employer that's got$50 ,000 in it. So to roll it out of that, I've opened up a new IRA, which I hope you opened up on public, so you can roll it over and get that free 1 % match we always talk about. But because it's pre-tax 401k, she has to roll it over into a pre-tax traditional IRA. And that pre-tax traditional IRA is different from the post-tax Roth IRA. Now, whenever you do a conversion from a pre-tax IRA into a post-tax Roth IRA, whatever amount that you convert from the pre-tax to the post-tax, right, that traditional to the Roth, you have to realize as income on your taxes because you wrote it off your taxes in the past.

13:35It's essentially Uncle Sam getting all their money back for all those deductions you've been making whenever you contribute to your 401k. So Nicole here is pretty smart. She's saying, listen, I'm not going to realize$50 ,000 in one calendar year because that's going to bump me above my modified adjusted gross income. It's going to put me in that higher tax bracket. I'll end up paying more taxes than I really need to. I'm going to break it out into two years. I think that's a wonderful plan. You are 100 % correct on how to do this. This was really well thought out, Nicole. You probably have spent a lot of time thinking about this and we just want to give you that pat on the back, the double thumbs up.

14:10This is really smart here. Not only are you now making it possible to continue to contribute to your Roth IRA because you've not exceeded the income limits with your modified adjusted gross income, but you are also being strategic about your tax brackets and things like that. So one, first thing I do here is make sure that that IRA that you roll your 401k into said you already have the funds here. Hopefully it's on public. I'd make sure it's on public at that 1 % match. There's nothing wrong with getting a free 500 bucks essentially, right? So do that first. Now you're over here saying like, what do I put the money in until I can do this conversion?

14:44This money after it's converted is going to be in your Roth IRA. You can't touch your Roth IRA until you're 59 and a half, but people normally don't start touching it till about 63, 64, 65. I would imagine that you are probably in your 30s, maybe in your 40s, which means that you've got another 15, 20, 25 years of investing ahead of you before you can even begin to realize your profits in this retirement account, which tells me it doesn't matter what you put it in. Just invest it, right? Just get it invested in the S &P 500 via VOO or, you know, SPY or whatever other variants of the S &P that you personally enjoy.

15:25We think VOO is the best. It's a very cheap way to invest. And then once that money is ready to convert and roll over, you can do that conversion. If you're up, down, left, right, and in circles on your investment, it doesn't matter. After the conversions over, just reinvest that money back into the S &P and you're off into the races. Robert, why don't you round off my answer talking about why the S &P 500 is not placing all of your eggs in one basket, like she states. Yeah, I like this and great coverage on that because this is a really good strategy. But the cool thing about the S &P 500 is you're betting on the 500 biggest companies in the United States by market cap.

16:03So this is a really good strategy. If you wanted to mix it up a little more, I suppose you could do VTI, VOO, and throw in some QQQ to get some NASDAQ coverage as well. But you would be totally fine just with doing VOO. I don't think you should ever look at VOO or SPY as being all your eggs in one basket because you have a lot of coverage throughout these funds. So my takeaway, if this were me, great strategy, I would probably mix it between two or three funds, like I mentioned and Austin alluded to, and that would give you more coverage. But VOO is a great start. Before we get into our next question, listen up, folks.

16:43You can lock in a 6 % or higher yield with a bond account on public. But remember, your yield isn't locked in until the time of purchase, so you might want to act fast. Lock in a 6 % or higher yield with a diversified portfolio of high yield and investment grade corporate bonds only at public.com forward slash rich habits. So our next question comes from Sylvia on Instagram. Sylvia says, hello, Austin and Robert. Thank you so much for taking the time to answer my question. I've listened to you since the beginning and I've been hooked ever since. I wish I knew these financial tips when I was younger.

17:16I'm 38 years old with one child. I bought my house in 2021 when interest rates were lower. The house was about$250 ,000. I was bringing home$5 ,600 a month. Things have changed since then. I recently lost my job, so my income dropped to$3 ,700 a month, making it harder to pay the mortgage. Additionally, the HOA is$310 a month. I didn't know HOA dues are high for townhomes. Turns out they are. I've accrued over$100 ,000 of equity in this home. I've been thinking about selling my home, but the going rent seems higher than my mortgage. My mortgage is$2 ,006 when you include that$310 HOA at a 2.9 % interest rate.

17:57My son runs track at his high school, so I would prefer not to transfer him. But I also know I got to do what I got to do. Is it best to sell my home? Should I keep it? Your advice is very much appreciated. Robert, kick us off. Yeah, this is a tough situation, but I would definitely not sell the house. You're in a really good position. You bought it right. You have equity. you have a great interest rate that we may never see again, at least not in the next three, four, five years, I would find a way to get a side hustle, start a side hustle, or do something to offset the$2 ,000 you lost in income before I would ever transfer your kid and sell the house.

18:36I think it'd be really easy for you to go out and find some side hustle, I don't know what your skillset is, that you can make that$2 ,000 a month, stay put, stay in the house that you love, keep your equity and rock and roll moving forward because you are in a pickle because your debt to income ratio is so high now with the income loss. But it's always a better strategy, in my opinion, to find a way to replace the income than just pack up and move, especially because with your payment being at$2 ,006, it's probably going to be difficult, as you mentioned, to find something to rent that's going to be comparable in the school district you want at the same price.

19:16So I would stay put, get the side hustle, work some nights, work some weekends and make up that money. Yeah, my head immediately goes, Robert, to you're making$5 ,600 a month before and things have changed. You lost your jobs, your income dropped. What can you do to go do it again? I mean, you did it before. Let's do it again. Right. You have the experience. You've got the aptitude. You've got the charisma. You've got everything you need to do to make that$5 ,600 a month. You were doing it before. What can you do now to set yourself up in 2026 to be in that new career where you're making maybe even more, maybe$6 ,000 a month?

19:55I'm not too sure exactly what happened behind the scenes here. But in the meantime, yes, I agree that Robert's take is the best one to start with here, which is like just get your income up. I think keeping the house is going to be a great idea. maybe there's a world where every Sunday you can drive Uber and make an extra 200 bucks and now you're making an extra$800 a month. Maybe there's a world where you can throw boxes or you can deliver pizzas or you can, you know, do whatever you need to do at 12, 15,$18 an hour at one of these big box retail stores or Amazon or Chipotle or one of these places where you can earn an extra $1 ,000 a month,$800 a month, and you're not in this bind.

20:36But again, this is just a season of your life. I really, really want to encourage you to find that new opportunity in 2026 that's going to put your salary, your take home, like everything where you're feeling good again, north of that $5 ,600 a month range that you know you can do. We know you can do this, Sylvia. We know that you are a very capable person, right? So let's go figure out how to do that again next year. Now, worst comes to worst, right? You said your son runs track in high school. If I was a betting man, I would bet that your son is just as smart as you. And so your son would want to go to some sort of college and, you know, go move on with their life once they turn 18 years old.

21:14So if you do have to sell, consider selling after your son graduates high school. So there's not that weird, you know, shift out of school, new team, new friends, new things like that. And then take that what might be at the time even more than$100 ,000 of equity and perhaps use that on a down payment of something smaller with a lesser mortgage. Maybe it's in a cheaper area. We can figure that out later, but I really think that you've got a good situation going here. You just need to figure out the little bits and pieces around your income and how to increase it by an extra$500 to$1 ,000 a month for the time being.

21:48Our next question comes from Carter C on Instagram. Carter says, Hey guys, great podcast. Really became a diligent listener at the start of this year and I can't get enough. I'd like to throw a question your way that pertains to setting up growth accounts for my two daughters, age 10 and 7. While I'm focused on growing my wealth, it leaves little for me to start growing my children's wealth simultaneously. So my parents, who are both retired, would like to start a fund that they can contribute to monthly. So my question is, what's the best route to take? I want to avoid a set use case like education.

22:19I want to have something easily transferable to my children when we deem the time to be appropriate. And I appreciate any insights on this topic. Thank you in advance. What an awesome situation to be in, Carter. Let's go, dude. That's so cool, right? So you got two kids, 7 and 10. You want to make sure that they're investing for their future. And your parents, their grandparents, like, listen, we got some bands we want to throw at the kids. We want to make sure they're growing their wealth over time as well. We know the power of compound interest when you start early. So let's set up that account.

22:50You mentioned you don't want restrictions around a set use case of the account, which throws the 529 off the table, right? 529 accounts are accounts that you put money into. They come with some cool tax advantages sometimes depending on the state you live in. And all of that money has to be used for education. So that doesn't work in a situation. On the flip side, there's something called a UTMA account, a Uniform Transfers to Minors Act account, which essentially is a custodial account that you open on behalf of your children. You, your grandparents, anyone else can put money into this account.

23:27They can invest, they can save, they can use it however they want. It does not have to be used for education. It is very flexible. You can use this money for anything. It doesn't really come with that many tax benefits, if at any. But the thing that you need to be super aware about with these UTMA accounts, The adult manages the account. The child owns the account. So you're the one that's putting money into this. Your parents are putting money into this, but the child legally owns the account, which means depending on the state you live in, once your child turns 18, they could flip you all the bird and say, my money, do what I want, see you later, buy.

24:05That very well could be like, that could happen. Maybe it's 21 or 25, depending on the state you live in, but they can literally say my money, I want to do what I want with it. Like, sorry, you mentioned specifically that you want to have a way to easily transfer this money to them when the time is appropriate, preferably not 18, I'd imagine is where your head's at here as they continue to grow older and understand the world around them. So in my opinion, I don't think a UTMA account is the right answer either. So now you essentially have like two options. You've got option one, which is to create a trust or option And two, just keep the money in your own brokerage account, but like earmark it for them in the future.

24:45So let's talk about each one of those. You've got a trust which controls when they get access, if it's 25 or 30, or maybe they get staggered inheritance or staggered access to this money. You can control how they use it, if it's education, if it's housing, if it's to start a business. And you can control who manages it. You, your parents, a financial advisor. You get a lot of control with the trust. Those are the kind of breakdown of that. And I would say there's a lot of pros in your situation. A con of that is they're kind of expensive to start. Now, the flip side of that is, listen, you just got a brokerage account on public and it's in your name and it's just kind of earmarked for your kids in the future.