Intro
In this episode of the Rich Habits Podcast, Robert and Austin answer questions from listeners about bankruptcy, HELOCs (Home Equity Line of Credit), and student loans. They provide valuable insights and strategies for managing finances, investing, and avoiding bankruptcy.
Main Takeaways
Budgeting and Saving
- Robert suggests setting aside a percentage of leftover funds each month for unexpected expenses in a high yield savings account.
- Austin recommends having a kid-specific piggy bank for unexpected expenses and setting aside a small amount each month for miscellaneous items.
- Honesty with budgeting is key to avoiding overspending on miscellaneous expenses.
- It’s important to prioritize investing and saving even with unexpected expenses.
- Lifestyle creep can make it difficult to budget, but setting clear financial goals can help stay on track.
Helping Family and Friends
- Balancing monetary support for family members with personal wealth building can be difficult.
- It’s important to know where the fine line is between helping and putting oneself at risk.
- Gifting money instead of loaning can avoid potential awkwardness or strain in relationships.
- Helping family and friends with money should not come at the expense of your own financial goals.
- Consider offering education, resources, or programs to help loved ones become better with their money.
Investing and Retirement Planning
- Setting up a Roth IRA and investing in a mixed bag of index funds such as VOO, QQQ, VTI, and VT is a good starting point for investing.
- Setting up an Acorns account and a Public.com account to invest in treasury bills and Bitcoin is also recommended.
- Building a budget and calculating your debt-to-income ratio is crucial to figuring out how much money you can put into investing.
- Building an emergency fund of $5,000 to $10,000 is crucial to avoid high interest credit card debt or desperate acts when unexpected expenses arise.
- Focus on investing after securing your emergency fund, utilizing Roth IRA and compound interest.
Real Estate Investment
- Consider real estate investment by making a plan for a down payment on a duplex, triplex or quadplex, and taking out an FHA loan.
- Cash-out refi and HELOC are both good strategies to take out equity from a primary home, but cash-out refi has higher risks of foreclosure.
- Money tied up in equity in a home is dead money, so it’s a good idea to pull it out and invest in more real estate.
- Pulling out equity from a home to invest in real estate mathematically works better if the interest rates are low.
- With current interest rates at 9.7%, it may not be a good idea to take out equity and invest in real estate.
Student Loans and Bankruptcy
- If student loan debt is currently at 6% or less, paying the minimum payments and making sure they’re timely is recommended.
- Exhaust all efforts to settle with debtors before considering bankruptcy, as it can bury credit for seven years. Reach out to debtors and try to restructure and repay rather than filing for chapter 11 bankruptcy.
- Credit card debt is caused by a high debt-to-income ratio.
- Consider finding a side hustle to increase income and pay off debt faster.
- Selling a car for top dollar and taking out an unsecured loan can help with car payments.
Summary
Budgeting and Saving
Robert and Austin emphasize the importance of budgeting and saving. They recommend setting aside a percentage of leftover funds each month for unexpected expenses in a high yield savings account. Additionally, having a kid-specific piggy bank for miscellaneous expenses can help instill good financial habits. Honesty with budgeting and setting clear financial goals are crucial to avoid overspending and lifestyle creep.
Helping Family and Friends
When it comes to helping family and friends with money, it’s important to find a balance between supporting them and prioritizing personal wealth building. Gifting money instead of loaning can prevent strain in relationships. However, it’s essential to ensure that helping others does not come at the expense of your own financial goals. Offering education and resources to loved ones can also be a valuable way to empower them to improve their financial situation.
Investing and Retirement Planning
Robert and Austin provide insights into investing and retirement planning. They recommend setting up a Roth IRA and diversifying investments with index funds. Acorns and Public.com are suggested platforms for investing in treasury bills and Bitcoin. Building a budget and emergency fund are crucial steps before focusing on investing. Real estate investment is also discussed, with suggestions for down payments and utilizing FHA loans. However, the risks and interest rates need to be carefully considered.
Student Loans and Bankruptcy
When it comes to student loans and bankruptcy, it’s advised to pay the minimum payments if the interest rate is 6% or less. Exhausting all efforts to settle with debtors before considering bankruptcy is recommended, as it can have long-lasting effects on credit. Finding a side hustle, selling assets, and restructuring debt are alternative strategies to consider. It’s important to prioritize debt repayment and avoid bankruptcy whenever possible.
Conclusion
This episode of the Rich Habits Podcast covered various aspects of personal finance, including budgeting, investing, helping family and friends, real estate investment, and managing student loans. By implementing the strategies and insights shared in this episode, listeners can make informed financial decisions, avoid bankruptcy, and work towards building wealth and financial stability.
