Q&A: Stock Lending, Power of Attorney, and Buying a Home in Cash

0:00Rinse takes your laundry and hand delivers it to your door. expertly cleaned and folded so you could take the time once spent folding and sorting and waiting to finally pursue a whole new version of you like tea time you or this tea time you or even this tea time you said you hear about Dave or even tea time tea time tea time you so update on Dave it's up to you we'll take the laundry rinse it's time to be great when you walk into a Burlington you're walking into amazing prices and great gifts. That's main character energy. Because at Burlington, the holiday savings aren't the only things turning heads.

0:41Discover quality finds and perfect presents for everyone on 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 question and answer edition. In these Thursday episodes, we sit down and answer your questions as if we were in your own shoes. Robert and I love answering our questions. We get dozens of questions every single day. So if you have a question, be sure to ask it either in the Rich Habits Network, link in the description below, email it to richhabitspodcast at gmail.com, or send us a DM on Instagram at richhabitspodcast.

1:26Also, Robert, we're crushing it on Instagram. We got the Instagram reels going, little clips here and there of the interviews, some cool static images of charts and graphs and all the fun things in between. And you guys know we love making some fun Instagram stories for you as we just navigate the week to week that Robert and I always do. So be sure to follow us on Instagram. We very much appreciate it. Yes, I'm having probably the most fun I've ever had on the internet, through social media, with everything that we're building for the Rich Habits Network. And I'm just so excited for the future.

1:58We're growing so quickly. And I'm just so proud of the information we're putting out there and all of the educational tools and the things that we are doing to help each and every one of you that follows along on this journey with us so we can all do really, really well, even though it is September and the markets are a little rocky right now. And be sure to let us know about Monday's episode. We interviewed Paul Rabel. We thought it was an awesome, awesome interview. you. He was just a wealth of knowledge as it relates to the intersection of sports, entertainment, and money. And if you like us bringing on sort of these more high-profile guests that can talk about things that personally I didn't know much about sports and money and entertainment and things like that, just let us know.

2:38Obviously, we always want to be introducing you all to the coolest people as it relates to not just analysis and the economy like BlackRock and things like that or YNAB, right, but also some pretty fun people like Paul Rabel and others that will soon join us on the show. And before we jump into this week's episode, time might be running out to lock in the 6.8 % yield at public.com. Right now, bond yields are at their highest level since 2009, and you can take advantage of that with a bond account at public. But here's the thing. The Fed has signaled potential rate cuts in September, and there will probably be more to come this year and into 2025.

3:15But the good news is that with a bond account on public, you can potentially lock in 6.8 % yield on your money until 2028. And remember, when the Fed lowers interest rates, your yield remains the same. That's why we love these accounts. But you must act fast to take advantage of some of the highest bond yields in years and discover how you can lock in a 6.8 % yield until 2028. The new bond account only at public.com front slash rich habits. And just so we're on the same page, Robert, a bond account is a self-directed brokerage account with public investing and they are a member FINRA and SIPC.

3:52Deposits into your bond account are used to purchase a set of 10 fractional investment grade and high yield bonds. Now the yield we're talking about represents a monthly average annualized rate of return before fees as of September 9, 2024. The yield is subject to change daily and the yield at the time of purchase may differ. All investing carries risk. This is not an investment recommendation and please visit public.com to learn more. All right, everyone. Our first question is coming from Paige Mitchell. Now, Paige, before we kick this off, just want to thank you for being such an awesome member of the Rich Habits Network.

4:24You've been a longtime follower of our podcast. We're always in the DMs. You're always in the live streams. We're super, super grateful that you're along for the journey with us, and we can't wait to answer your question. So Paige asks this, I have a CD worth$21 ,000 expiring on September 7th, and I'm unsure what to do with it. I could roll all$21 ,000 though into a nine month CD and earn 5%. I don't think I'm interested in the public bonds because I don't want to be tied up for three years. Am I better off putting all$21 ,000 then in a bridge account with VOO, SPYI, QQQI and others? Or is there something else you all recommend?

5:00For more context, I've built my base and I have my IRA maxed out for the year. Congratulations, Paige. You are a rock star. She's crushing it. So Robert, here's my perspective. I would not keep rolling this, you know, CD money into more and more CDs. 5%, 4%, 6%, whatever you're earning, like don't get me wrong, it's great to earn that money and have some of that guaranteed yield on your money, right? We wanna diversify our portfolio into different sort of yield bearing assets. I totally agree with that. But having$21 ,000 tied up, even after you've built your base like that, I just, I wouldn't do it.

5:33So personally, I would roll it into that bridge account. And though, if you are looking for a consistent income, it could be worth considering putting that money into like what you mentioned, spend SPYI or QQQI to get paid a monthly distribution. Make sure though that you have your emergency fund completely funded up to six months of spending, as well as being completely out of high interest debt before doing so. Yes, I love this answer. And Paige, you know, you hear us talk about diversity all the time. I'm with Austin though. I don't think you should roll it over back into the CD. I think there's just better places to put your money.

6:06And I really love the idea of the SPYI and QQQI that you mentioned. These are two NEOS funds that Austin and I both own and like. And so I think it's a good idea. And then that way you can set yourself up for better gains and still get some income out of it. So I'm with you on this one. Our next question comes from Sylvia and Kayla R. Their question is this, what is the best way to pass down assets to your children without a large tax implication? Additionally, I want to know the differences between power of attorney, will, and a trust? When should one be used over the other? I'm just starting to think about this for the first time, and I'm excited to learn more.

6:44Robert, I'm going to let you just roll with this. Yes, we could spend hours on this question, but let me take a shot at it and try to keep it succinct. This is a great question, and it really starts by having proper structure in your assets long before retirement, and then not having to worry about passing down the assets. You're on the right track by wanting to learn more about trust, wills, and power of attorneys, and here's why. Let's start with the trust. In my opinion, the trust is the most important aspect of the three mentioned because a trust is a legal document that governs your wishes as to how you want to transfer your assets upon death.

7:22This is very important, and the reason being is you don't want to leave any assets just in a will, or even worse, without a will, because all of those assets will be subject to probate court, which can be very lengthy and very costly for anyone that's ever gone through it. They know what I'm talking about. So I would check with an attorney or your financial advisor, get with them and have them look at your estate planning to make sure you have the proper trust structure set up for your situation. Because remember, personal finance is personal and everyone is different and you need to understand these differences between a revocable trust, an irrevocable trust, and so on and so on.

8:01Number two comes the will. A will is a legal document simply that shows how you want your property and other assets distributed after your death. And as a reminder, a will does not keep your assets out of probate. So you make sure you have the trust as well. And wills are important to spell out the details and distributions of any assets and can be used as a pour over account with the above mentioned trust. So what does this mean? This means that let's say we're talking about a parent and they have their trust set up, they're doing great, but there are some additional assets that never made it into the trust, but they're in the will.

8:40You can then make those, use the will as the pour over into the trust to help you avoid that probate court that we talked about. And number three, the power of attorney. This is just an authorization to represent or act on someone's behalf in private business and other matters of legal nature. Although this can be important to make sure you have someone to act on your behalf or your parents' behalf, the power of attorney is definitely, in my opinion, one of the least important aspects if you're the direct beneficiary. So keep that in mind. All three of these are important when you're thinking about retirement and protection, because I assure you to anyone listening, you don't want to end up in probate.

9:21I ended up in that situation with one of my parents. It was ugly. It took forever. And it was very costly. So just be careful and make sure anyone listening is thinking ahead on this too, because you don't want to wait till the last minute and then not be able to facilitate these options to protect those assets. So I guess a quick question for me, Robert, is back to your example with the parents having the additional assets not included in the trust, but like their wishes are shared in the will. Why wouldn't the parent just like edit the trust, right? Why don't they just like write them in? Can you do that with a trust?

9:53Yeah, I don't know. So I would ask an attorney on that one if you could just make an edit, but it goes back to the same thing, Austin, if you think about it. How many people just get busy living life and forget to update their wills? It happens all the time. Maybe you go through a divorce and you update the will, but then things happen over a five, 10 year period and you forget, or you come into a lot of money and you start to really make a lot more and have a lot more assets. You forget to do those updates. And sometimes that can be very, very bad later on. Got it. Got it. Well, with all that being said, here are the best ways to pass down assets to your children without those large tax implications.

10:30For starters, you and your spouse can each pass down$13.6 million to your children without taxes getting involved. Inheriting a home is not a taxable event. When the property is inherited to your children, the cost basis on the property is stepped up to whatever fair market value is at the time. So with all that being said, if you have more than$10 million of an estate that needs to be figured out, go sit down with a licensed professional. Go sit down with someone that can really hold your hand and walk you through every single matter. Cross your T's, dot your I's, trust, will, power of attorney.

11:04Everything needs to get figured out. If you just have a couple hundred thousand dollars, then maybe this is something that you could do on your own. Yeah, definitely. And that's a great roundup for this. But I want to add one more thing. And that is retirement planning and wealth building is more than just picking stocks and index funds and what cryptos to buy. There is a lot that goes into it. So please make sure that you do your own research. You get with a good professional and just have that extra help as you start to build your wealth to make sure that you're in the right place. Because there's nothing worse than getting up in years and then all of a sudden going backwards financially because you did not have the proper structure in place.

11:40So our next question comes from Hannah T. Hannah says, is there a simple list or even a blueprint to follow when buying your first primary residence? I want to avoid overpaying and just making any mistakes in general. So Robert and I made our own list. Robert, I'll let you show yours first. Yes, I am excited and we should probably make a blueprint of this because it is so, so important. But let's just go off of what we think is kind of mission critical. And that is number one, understanding how much of your monthly take-home pay you can afford to allocate towards a mortgage. Do not be house poor for everyone listening.

12:15Don't buy the amount of house that you're allowed to buy. Buy the amount of house that you should buy based on your debt to income ratio and what money you have. The sweet spot is kind of that 30 to 35 % in our opinion. Number two, always get an inspection done. Even if it seems like a waste of money and they tell you they've already done it and everything is great and rainbows and unicorns because guess what? You want to have an independent inspection to make sure that you're getting all the tea on this property. Has there been issues with the underground sewer lines? Has there been electrical upgrades that might not have been done correctly?

12:52You need to know this from a third party because remember, that real estate agent is not your friend. They're going to tell you they're your friend. They're going to put some Costco cookies on the counter and maybe get you a bottle of wine with your name etched on the label or something like that. But they're not your friend. They are there to sell you a property. So they're going to, in most instances, tell you what you want to hear. So be careful, get your own independent information. Number three, shop your rate aggressively. You have to be able to know and understand, just like with a real estate agent, the mortgage agent is going to do their best to sell you on this amazing project.

13:29You have to be able to make sure that you're at least getting two or three estimates to be sure. This just happened with a client of mine and a friend of mine. I helped them through it and it was crazy how much money we saved her by shopping around. And don't forget to look at rate buy downs with the seller either. This is a great way to be able to save money in that first two or three years of the home purchase. And then I would say my last thing would be to make sure you work with a local professional so you completely understand the market conditions and the comps related to this house because you do not want to overpay.

14:03You're excited. You want to get that first property. And you just want to make sure that you understand you make your money in real estate when you buy the house, not when you sell the house. I think that was a great breakdown, Robert. A couple points that come to mind for me. Try not to pay more than 1 % of your total mortgage in fees to the bank that's lending you the money. Those loan origination fees. I had a friend who recently bought a house that paid$6 ,000,$7 ,000,$8 ,000 of loan origination fees. And I was just, no, don't do that, right? You should probably pay half of that. beef up your emergency fund by five to ten thousand dollars home ownership is fun until it's not that water heater or that dishwasher robert right you never know when that thing's gonna just go out and just home ownership man let me tell you the next point to me is to make sure you fully understand the bylaws of your hoa and how they impact your wants or desires for renovations to the house this was something that impacted me i wanted to sort of build a gazebo outside of my house sort of like attach it as like kind of an overhang but i realized because the bylaws the HOA, the ceiling of that sort of additional structure had to be removable.

15:07So we used this like cloth sunshade versus an actual overhang there as a ceiling. It was kind of weird, but I didn't understand that when I bought the house. And so only after that I was doing my research with the HOA bylaws did I realize that we had to scratch the original plans and do something different. So if you're buying a house within an HOA community, one, be prepared, do your research, do what you can do. But more importantly, two, also know that those fees are going up every single year. When I bought my first house, the HOAs were$125. That same house has HOAs now of$186, a 50 % increase in about five years.

15:39Now, the last thing I want to share is to shop your homeowner's insurance. This for me was major. I was paying$1 ,500 a year on that first house. It was actually $1 ,100,$1 ,100, bumped to$1 ,500. I was like, what the heck? Why is it so much money? It went up 50 % in a year. That doesn't make any sense. I took the exact same policy. I shopped around and now I have from Allstate at$950 per year. So shop your homeowner's insurance. The first quote isn't always the best. And more importantly, and Robert, maybe you can touch on this, share with Hannah what the homeowner's insurance covers as it relates to disaster and destruction of a house.

16:16Yeah, that is a great call out. And I was just gonna say two things. When talking about the homeowner's insurance, make sure you're checking, especially like in Florida and some of these waterfront areas, make sure you're not in a floodplain because you might have to have additional insurance for that like we do in Florida if you're near the water. And then make sure you understand what coverages you do have because you might wanna look at additional insurance and umbrella policy or something else because not all insurances are created equal. And it's very important to understand that because you wanna read through that really thick document to understand exactly what your coverages are now versus later.

16:52And I like what you called out on one of our other episodes. I like to go and renegotiate my insurance policies once a year because as they go up, they're just like, yeah, we've got this person dialed in. Let's bump them up 10%, 20%, 30%. And then a lot of people just kind of accept it and go, oh, insurance prices are high and they don't fight back. Remember what I say all the time. You don't get what you deserve in life. You get what you negotiate for. So it's very important to keep that in mind. And then I want to wrap this question up, Hannah, by saying, understand for anyone listening, always understand the total ownership cost of any big ticket asset, whether it's a car, a boat, or your primary home.

17:32So many people just look at the monthly payment, the insurance, the HOA, and maybe the PMI and a little bit of other fees, and they don't take into consideration grass maintenance, or maybe you have to do the driveway every X amount of time in your HOA or whatever it might be. So always try to flush out what the total ownership cost of that property or asset is going to be because most people are really far off from what the total ownership cost is and what they believe the ownership cost is. I love it, Robert. Our next question comes from Danish K. Danish says, with the S &P 500, we know we're betting on the top U.S.

18:10companies and the strength of American capitalism. But when it comes to Bitcoin, what are we actually investing in? I've got my money in crypto, but unlike the S &P, it's hard to actually win an argument on why it's a solid long-term bet. For those who've gone deeper, what's the real bet with crypto? What makes it worth investing in and how can we justify it for the long term? I love this question and I want to take this and take the lead on this one. For me, the real bet with crypto is the disruption that it creates in all of our financial markets as well as the future adoption rate due to this disruption.

18:43So for instance, in Bitcoin's case, I believe the scarcity of it makes it a great hedge against inflation and is another alternative to preserve wealth like gold. So that's one of the major things for Bitcoin. As far as crypto in general, though, you have to look at all of the categories of our financial systems that are being disrupted. We're currently pivoting from the SWIFT payment system that's been around for decades to the ISO 22 payment system. Then you've got Solana and some of the problems it solves. You've got fractional ownership for real estate and fine art that Austin and I talk about a lot on the blockchain.

19:20So there's just so much disruption. So that is why I believe that the biggest wealth transfer of our lifetimes will happen in the next three to 10 years. And why I am invested in cryptocurrency, because we are changing and making, we're kind of leveling the playing field. If you think about it, Austin with blockchain and the associated cryptocurrency, because even if you were to look at masterworks and buying fine art or some of these other fractional ownership companies, people like everyday investors can now invest$1 ,000,$2 ,000, $5 ,000 and have fractional ownership in multi-million dollar assets, where before blockchain and cryptocurrency, that was just for the ultra wealthy people.

20:04So I think there's a lot we could talk about here, but that's my takeaway. So my perspective is Bitcoin's been around since 2009. It's 2024, which means there's 15 years of validity, 15 years of historical price action, and 15 years of trends as it relates to exchanges and holders and adoption and things to just observe from a data perspective that shows that, okay, if something was going to go wrong, I feel like it would go wrong by now. If someone was going to hack Bitcoin, I feel like they would have done it by now. And so in my opinion, I buy Bitcoin to own an asset class that has proven resilience and upward momentum.

20:48It's a new asset class, which is why I don't encourage anyone to just bet the farm on it. But I don't see this asset class going away anytime soon. And it's a way to diversify my net worth into an uncorrelated asset class away from the stock exchange or gold or things like that. Now, you might say, that doesn't make sense. The stock exchange is down. So is Bitcoin, Austin? What the heck? They're very much correlated. Sure. I mean, if you want to look at it like on a day to day, but if you zoom out and look at it over the last 10, 12, 15 years, the price action is very uncorrelated. It has a very low beta in relation to the S &P 500.

21:23Jay Jacobs talked about that when he was on the show a couple months ago. I think for me, it's just a way, just like I've got real estate, just like I've got farmland or whiskey or whatever else to diversify my net worth. Owning Bitcoin specifically is a way that I've been able to diversify my net worth into an uncorrelated asset class with now 15 years of historical data price trends and resilience. That is a great take. And I really love that perspective. And I look at it this way. And this is why we get to enjoy this 30 year age gap between us is I've been through all the ups and downs of all the different markets.

21:57And if you take the great recession of 2009, I watched so many people that argued with me even back then about diversifying because I've always been diversified because I don't ever want to go broke and be homeless. And I saw people that had their Lambos and their big portfolios of real estate all go broke because they were over leveraged and under diversified. And this is so important because some people are saying, you know, they're going to tell you, you should be all in on one thing. I just disagree with that. I think diversifying once you have your base built is the magic of being able to sustain the ups and downs of the markets, whether it's in cryptocurrency, the stock market, or the real estate market.

22:35And that is why people like Austin and I talk about it and educate about it because it's so important to understand with diversity, you have that insulation that if any one sector goes bad for a couple of years, you're going to be okay. And I think it's so important for everyone listening to understand that. And if you want to go down the rabbit hole of crypto, read the Bitcoin standard. Now, before we jump to the next question, I got to give you guys a heads up. Time may be running out to lock in your 6.8 % yield on public.com. When you invest in a bond account you can lock in your rate until 2028.

23:05But with potential rate cuts on the horizon, you might want to act sooner than later. So discover how you can lock in a 6.8 % yield on your money until 2028 through the new bond account on public.com. Only at public.com forward slash rich habits. And just so we're on the same page, Robert, a bond account is a self-directed brokerage account with public investing, and they are a member FINRA and SIPC. Deposits into your bond account are used to purchase a set of 10 fractional investment grade and high-yield bonds. Now, the yield we're talking about represents a monthly average annualized rate of return before fees as of September 9, 2024.

23:44The yield is subject to change daily, and the yield at the time of purchase may differ. All investing carries risk. This is not an investment recommendation, and please visit public.com to learn more. Our next question comes from Rebecca B. Rebecca says, This is my situation. I'm 45, I'm debt-free, I'm single, and I've got three children all in college full-time. I am an empty nester. I sold our family home and am building a new home at a great price considering the market. This is my downsizing. Now I have the profit from the home I sold sitting in a high-yield savings account. I'm also properly invested in my retirement accounts and have an emergency fund in place.

24:20I also have a small amount of investments in a bridge account. Should I pay for the house with cash? And if not, what should I do instead? I'm a travel nurse and I work by contract. There is plenty of work out there for me, but I do like to have a month or two off in between these three-month contracts. I'm tempted to pay my builder in cash so I have a minimum monthly expense because my end goal is to find financial freedom as soon as possible. Robert, I'll let you kick this one off. Rebecca, Rebecca, Rebecca. No, I don't think you should pay cash for the house. I just look at it this way. If I can borrow money for less than what I can make with my own money, I'm always going to borrow.