Rich Habits Podcast – 29: The 3 Simple Steps to Wealth

Intro

In this episode of the Rich Habits podcast, the hosts share three simple steps to wealth that anyone can begin working on today. These steps include opening a Roth IRA, investing in real estate, and diversifying your portfolio. They also discuss the importance of understanding your student loan situation and generating passive income. Tune in to learn more about these wealth-building strategies.

Main Takeaways

Step 1: Open a Roth IRA

• Open a Roth IRA and contribute $6,500 per year towards it.
• Roth IRA is a retirement account that is tax-advantaged.
• Head over to an online broker like Vanguard, Fidelity, or a RoboAdvisor like Wealthfront or Betterment to open a Roth IRA.
• Invest in index funds like VO, QQQ, and VTI.
• Rinse and repeat this process annually for the next 25-40 years to retire comfortably.

Step 2: Invest in Real Estate

• Consider house hacking by purchasing a duplex, triplex, or quadplex.
• Live in one unit and rent out the others to live for free through rental income.
• House hacking can be a great way to get started in real estate investing.
• FHA loans can help first-time buyers get into duplexes, triplexes, or quadplexes with low down payments.
• Couples can each buy their own rental property before getting married to take advantage of FHA loans.

Step 3: Diversify Your Portfolio

• Diversify your portfolio to protect against market crashes and maintain financial stability.
• Consider real estate, cryptocurrency, stocks and ETFs, fine art, and other collectibles for diversification.
• Allocate about 25% of invested assets to new asset classes.
• Income-generating assets like dividend-paying stocks and ETFs can offset losses in capital.
• Optimize for income in your investment portfolio to offset fluctuations in various markets.

Summary

Building Wealth with Simple Steps

The Rich Habits podcast shares three simple steps to wealth that anyone can begin working on today. The first step is to open a Roth IRA and contribute $6,500 per year towards it. A Roth IRA is a retirement account that offers tax advantages, allowing you to pay zero taxes on your profits when it’s time to retire. By investing in index funds through an online broker or RoboAdvisor, you can harness the power of compound interest and retire comfortably in the future.

Real Estate Investing and House Hacking

The second step to building wealth is investing in real estate. One strategy mentioned is house hacking, where you purchase a property with multiple units and live in one while renting out the others. This allows you to live for free through rental income and build wealth by investing in more properties. FHA loans can be beneficial for first-time buyers, as they offer low down payments for duplexes, triplexes, or quadplexes. Couples can also take advantage of this strategy by buying their own rental properties before getting married.

Diversification for Financial Stability

The third step is to diversify your portfolio to protect against market crashes and maintain financial stability. Diversification can include various asset classes such as real estate, cryptocurrency, stocks and ETFs, fine art, and other collectibles. Allocating a portion of your invested assets to new asset classes, around 25%, can help balance your portfolio. Additionally, focusing on income-generating assets like dividend-paying stocks and ETFs can offset losses in capital and provide a steady stream of income.

Other Strategies and Considerations

The podcast also touches on other strategies and considerations for building wealth. It emphasizes the importance of understanding your student loan situation, especially as interest starts accruing again and payments will resume in October. Unsubsidized student loans, which accrue interest while in school, are considered bad debt and should be paid off. The hosts suggest investing remaining savings in T-bills on platforms like public.com.

Conclusion

Building wealth doesn’t have to be complicated. By following the three simple steps shared in this episode of the Rich Habits podcast, you can start your journey towards financial success. Open a Roth IRA, invest in real estate through strategies like house hacking, and diversify your portfolio to protect against market fluctuations. Remember to understand your student loan situation and consider generating passive income to supplement your wealth-building efforts. Tune in to the Rich Habits podcast for more tips on wealth building and join their live sessions on TikTok every Thursday night.