Rich Habits Podcast - 110: The Spending Trap: Escape the Psychology of Broke

Starting point is 00:00:00 Great news. The federal EV rebate is back. Eligible customers get up to $5,000 with the federal EVAP rebate on select 2027 Volt and 2026 Equinox EV models. Visit your local Chevrolet dealer today for more details. Hey everyone and welcome back to the Rich Habits podcast brought to you by public.com, a top 10 business podcast on Spotify. My name is Austin Hankwitz and I'm joined by my co-host Robert Croke. Robert is a seasoned entrepreneur in his 50s with lifetime revenues.

Starting point is 00:00:30 of over $300 million, and I'm an entrepreneur in my late 20s with a background in finance and economics. Since quitting my full-time job in corporate finance a few years ago, I've built a seven-figure media business and actively advise some of the most well-known fintech companies around the world. Now, as the show name might suggest, every episode. We talk about rich habits as they relate to business, finance, and mindset. However, we try and bring you two unique perspectives, one from an industry veteran, which is Robert, and the other myself, someone who's still in the process of building wealth and figuring it all out. All right, Robert, what are we going to be talking about in today's episode? In this week's episode of the Rich

Starting point is 00:01:08 Habits podcast, we're going to demystify the psychology of spending, specifically overspending, and letting lifestyle creep ruin your chances of retiring with dignity. There's much more to this episode than lifestyle creep, especially as we lean into the the mindset side of the equation. Robert, I feel like when I first got started in my career, there was a lot of overspending that took place. And we'll get into some of those examples here pretty soon. But throughout the episode, we're going to challenge you on every single one of these things.

Starting point is 00:01:39 We're going to give you some actionable things, advice, ideas, things that you can do in your day-to-day life. That's going to help you rewire your brain to stop overspending and also learn some strategies and techniques that'll help you dial in your budget and take a little step back. from the fear of missing out or FOMO, as people say. I believe that mindset is one of the greatest problems people face when trying to figure out their personal finances.

Starting point is 00:02:06 So I believe this episode will resonate really well with our audience. Just because we break it down in a way, I believe that it'll help people overcome these hurdles in a meaningful way and help them get on the right track. So let's dig in. Before we dig in, Robert, we have to remind everyone, April 3rd in Toronto, Canada at 4 p.m., we will be speaking at the Grit Money Summit alongside Sahil Bloom, Cody Sanchez, Chris Camillo,

Starting point is 00:02:32 and a ton of other incredible people like the managing partners at Nios Funds, Katie Stockton, some like CNBC talking heads, like some really cool people are going to be there, and it's completely free. So if you're in the Toronto, Canada area, there's going to be a link in the show notes below to get your tickets. Again, they're free. And if you are not in the area and you still want to watch the live stream, it is free to tune in as well. There's going to be a link as well in the show notes to register, for that, get the reminder, watch it. It's going to be streamed on YouTube so you shouldn't have any problems with it. Super, super simple stuff. It's going to be a blast, Robert. We'll talk investing

Starting point is 00:03:03 2025 stock market outlook, entrepreneurship, the rise of the DIY investor, and 10x ideas for the next 10 years. That's going to be my favorite one for sure. And by the way, again, Robert and I will both be there in person. So if you want to meet us, if you want to hang out with us, there's like a cocktail hour afterward. We get some drinks. It'll be cool. Meet us there. It's completely free. And we can't wait to meet you guys. panel is incredible. So many who's who of people in personal finance and business. And so I'm super excited to take part in this and just really share everything we can, all of our best stuff and knowledge of where the markets are now, where they're going. What are our big ideas moving

Starting point is 00:03:42 forward? So it's going to be a blast. I'm excited to do it with you and share the stage with so many other great speakers. Let's jump into point number one. The first reason why people find themselves overspending and under-saving is because they think about spending money as part of their identity. People spend to signal who they are or who they want to be. Studies like those from the Journal of Consumer Research show folks often buy to align with an aspirational self, even if it tanks their finances. And I can't wait to dig into this point. I completely agree with this one, right? Why are people overspending? Because they look at spending money as part of their personal identity. I am the person that can afford the lattes or I am the person that can go on vacation

Starting point is 00:04:28 twice a year. I am the person that can buy the new shoes, eat out, go do these different things because that's who I am. That's my identity. I identify with that type of rich, right? That's what rich means to me. And I think that's a mistake. It's not the way that we should be looking at ourselves when it comes to defining what rich is. So do you have any maybe personal stories or examples as to how I'm sure in the past, you know, you've been doing this for a while, you probably overcame this hurdle of spending money as an identity. Yeah, I did and I definitely was that person. I took it one step higher. I was the person that felt that even at 21 and 22 that I had to have the Rolexes, I had to have the fancy cars and I had all of it. At 23 years old, I had a brand new

Starting point is 00:05:14 SUV. I had a Porsche. I had two or three Rolexes. And now, in retrospect, even though they were at that time assets I thought, I definitely learned and I talk about it every day now. And I challenge people every day now that I don't believe you should own any of that stuff or spend money on any of it until you at least have $250,000 saved and invested. And so many people believe they need these expensive items to show what their identity is. And I don't think that should be the case. So for me, how I overcame it was really, realizing that I needed to save more money and invest more. And for me, I'm very happy with the result because I think it was around 23 or 24 years old is when I really made the switch.

Starting point is 00:06:03 And I started really basing my identity around my investing knowledge. And it was such a great pivot for me from a mindset perspective because then it was kind of like a party trick. People like, oh, what are you up to? Oh, I'm investing in this. Oh, I'm renovating this duplex. And it was really all about that rather than talking about things, realizing the problem, fixing the problem, and overcoming it through mindset shifts that we're covering today. I completely agree. Having that weird tendency of spending money as part of your identity or I am the person that does this, I can afford these things. I understand how important it is to manifest. And, you know, I know, I know, Robert, for example, for you, you bought one of these like Porsche key chains. So, you know, you want to have a new Porsche one day and call it six months later, you got it. because the key chain remind, I understand manifesting, but there's a difference between vision boards and manifesting and like spending money you don't have and overspending and under saving, under investing. And so that's the big key shift we're trying to really implement here is like remind people you should have more to your identity than just what you're buying. It took me, I want to say three years, two or three years out of college to make this shift.

Starting point is 00:07:14 I remember because I graduated college. I was like, listen, guys, I got this new job. I'm making 60 grand. I'm moving. into Nashville, get me the Lexus, I want some suits, I want some Brooks brothers, I want to have all these cool things, like, I'm going to be that cool person. And it was my identity to spend and have a big car payment. It felt like my identity was to go eat out and do these things. And it felt good in the moment, but I found myself looking back, wow, I didn't max out my Roth IRA last year. What was wrong with me? Why did I do that? You know, I carried credit card debt. That's not normal. Why did I do that? And so like reflecting upon those things and being able to say, that's not the type of person I want to be. I want to be more humble. I want to have more

Starting point is 00:07:51 ambition toward things that will grow my net worth over a long period of time versus impress people I don't care about that don't even think about me to begin with. Rich is loud and wealth is quiet. And I remember when I was 22 years old and I was a car salesman. It was right when there was special financing like 2.9% financing. And I had the first bay by the door. the busiest door of the dealership. And I was the kind of guy. I was always bouncing off walls, just like you see me today. And I was the kind of guy I would wait on anyone.

Starting point is 00:08:22 I never, ever cared what they look like, what they were dressed like. And I remember vividly to this day, this farmer-looking guy in overhauls and a t-shirt with no sleeves, gets out of this truck. He walks up to the door and everyone's scattered. I was like, what's up, man? Come on in. Let's talk. So we talked for like 10 minutes.

Starting point is 00:08:40 He goes, I want to buy a new Corvette. And everyone was kind of chuckling. I could see him in the distance. I'm like, let's go take a look. We go outside. We walk around. We do our thing. He had a bag of cash.

Starting point is 00:08:52 And he literally was like, that's the one I want. Came in. I didn't judge him. He bought it. Paid cash for it. I said, I'll be back to pick up my truck, drove it out of there, the happiest person ever. And it always stuck with me because people judge so much based on what you drive, how you dress. And I'm not saying anyone here listening needs to go out and buy Walmart.

Starting point is 00:09:12 clothes or go to Goodwell. I'm not saying that, but I am saying that this is so important for people to understand not to make these depreciating assets and these big time purchases of luxury clothes or luxury cars or whatever it may be as part of their identity. I think it's so important to understand that. So here's the challenge. If you're someone who's struggling with overspending, because it's part of your personal identity, it's time to rethink what it means to be rich. Are you rich because you're a constant learner and you're trying to always learn new things? Are you rich because you have a strong friend group and support system in your life? What we're trying to get at here is being rich doesn't always mean you're spending your money and buying things for validation.

Starting point is 00:09:58 It should mean building your life, the life you desire and not what you perceive society thinks your life should be. This is one of the biggest things that I've overcome to be able to do what I've done in my career. and become what I am today. And I think it's so important. Build the life that's authentic to you, not what you think others think it should be. Because at the end of the day, I promise you,

Starting point is 00:10:22 they're all broke living beyond their means, and you need to do what is best for you. Build the life you desire, not what you perceive society thinks your life should be. Boom, mic drop. Okay. So before we jump into our second point,

Starting point is 00:10:36 quick 15 second reminder, we are running a seven-day free trial right now inside the Rich Habits Network so you can hang out with us completely for free for an entire week, join our weekly live streams, watch eight hours of video coursework, or even send us a message, a DM, ask a question, it's completely free. You can cancel it if you hate it, no hard feelings. There's a link in the show notes below to join the Rich Habits Network. Now let's think about the second one here, which is people that are chasing instant gratification. Maybe they're not spending money on the lattes because they think it's their identity. Maybe they've kind of figured some other

Starting point is 00:11:08 stuff out with that, but they're still chasing that instant gratification. Dopamine hits from buying stuff, even if you don't need the stuff, are very real. Neuroscience backs this up. I think it was a 2023 study from MIT that showed the brain lights up more from a purchase than from saving or investing. But after that high begins to fade, you might now be looking at yourself like, wow, did I really just go into debt for this? Or, man, I feel regret even buying this in the first place. Here's something I say all the time. Children do what feels good in the moment. Adults devise a plan and stick to it. I probably said this phrase a hundred times now on the show and I know a portion of you probably still aren't executing upon that phrase in your daily lives. You see the shoes on sale at Hoka or on running and you go

Starting point is 00:11:53 buy them even though they're not in your monthly budget and let's be real you're only running once a week anyway. Or maybe you immediately buy whatever the video on TikTok is trying to sell you with a TikTok shop. You're scrolling your feed. The person's got a phone charger or a wallet or a foot massager and you're just like, I need to buy it. And it's so easy to hit the Apple pay, little face ID and it's at your house two days later. I get that. But at the end of the day, having a definition and a clear line and a strategy around what I want to buy and putting parameters around that versus that instant gratification of buying or spending money is super, super important when it comes to building wealth over a long period of time. I love this. The other way

Starting point is 00:12:35 to look at it too is instant gratification comes from two other things, boredom and laziness. A lot of times, that's why Amazon and all these websites make it so easy for you to click the buy it now button because they want you to do it in this instant moment. And so I talk about it all the time that eating out randomly because you didn't go to the grocery store or ordering Uber eats and paying all the absorbent fees because you didn't plan ahead to cook, all of these things also fall into this category that really can diminish your financial being by not allowing you to follow a budget. You need to forecast. You need to understand where your money is supposed to go so you don't fall victim to this trap. And Robert, you mentioned like the eating out and the laziness or the

Starting point is 00:13:21 boredom and things like that. I just want to make sure we're all on the same page about what spending an extra $400 a month on Uber Eats or Grubhub or DoorDash or even just like delivery or, you know, eating out on a Tuesday because you don't want to cook or whatever that is. $400 a month is all we're saying here, $400 invested in the S&P 500 from 35 to 65. So that 30 year period of time, $400 a month. That's all we're talking about. $1.1 million. So when people are like, oh, I don't have the money to invest, I can't afford it. We don't have a retirement savings. We don't do these things. Yeah, you do. You're just eating it. You're eating your retirement every time you swipe the door dash or open up Uber Eats or go out and do the happy hours.

Starting point is 00:14:06 Like that's your retirement and you're eating it. And so I want people to understand that. Only $400 a month is what we're talking about here. That's the difference between over a 30 year period becoming a millionaire or not. Yeah, this is such a great illustration because it's not just food. People nickel and dime themselves. You mentioned TikTok shops. I think that is one of the greatest drainers of bank accounts right now because people see all of these things.

Starting point is 00:14:31 they're like, oh, that's so cute. Click. Oh, I love that. Click. Oh, here's that supplement I saw. Again, it's so viral. Click. Most of this stuff doesn't go to use. Most of it doesn't help your health or your wellness or any of that. And yet it's just a big drain on your bank accounts rather than making the effort to be consistent. And I don't care what people spend if they were putting away 15 or 20 percent of their monthly income first and then spend the rest. But most people don't have it dialed in. We talk about automating your spending and automating your investing every month. So for me, it's all about if you're putting away 15 or 20 percent a month, then go ahead and order the Uber Eats. But if you're not, you should never be doing that. So here's the challenge that Robert and I want

Starting point is 00:15:16 to share with you when it comes to overcoming this instant gratification spending habit, right? This overspending habit of instant gratification. I need this. It feels good. I'm spending hundreds of dollars a month on TikTok shop or Amazon, right? The 48-hour rule. I have a page on my notes app and my iPhone that I write down a list of all the really big, important purchases I want to make. So instead of impulse buying them, I write down, Austin wants to buy a couch for $3,000, and I write it down in the notes app. And then if I find myself coming back to that 48 hours later, and I still want to buy it, right? Two nights of sleep have taken place by this point.

Starting point is 00:15:55 I slept on it twice and I still want it, then I'll further explore how to afford it, how to buy it, where it fits in the budget. But if I'm like, man, I want that foot massager on TikTok and then I'll write it down in my notes app, then I forget about it. I never really wanted the foot massager anyway, right? It was just a fomo, right? An instant gratification thing on TikTok. And so that's what we're trying to help you guys understand is instant gratification's real. We get that. But by implementing something like the 48 hour rule, hopefully you can cut back a little bit on that instant overspending, allowing you to,

Starting point is 00:16:25 to save and invest more over time. A hack that I use all the time, and I don't know how many people that are listening know this, probably most, but I'm going to share it anyway, is if you have a high-ticket item you're going to buy online, integrate the 48-hour rule, but when you think you're going to buy it, put it in your shopping cart,

Starting point is 00:16:42 because so many big websites out there that sell these high-ticket items, if you put it in your cart and you abandon the cart, they will email you almost immediately within 24 or 48 hours, a discount code to get you back, and that will save you some money on this high ticket item if you don't already do that. Okay, so let's go to our last point of overspending, and that is social pressure and FOMO, fear of missing out. This point is so impactful to your wealth building journey.

Starting point is 00:17:09 I see far too many people kick the can down the road over and over again because of the social pressure they deal with on having to drive a certain car, live in a certain neighborhood, eat at certain restaurants because it's the cool factor. even though you know you don't have the budget for those $200 dinners two times a week. All of this really comes into really damaging your ability to put aside the money. You guys hear me joke about it all the time. When you're in your neighborhood and you see lines and lines of the Mercedes and the new jeeps and the BMWs, don't worry about that.

Starting point is 00:17:43 Worry about you because at the end of the day, you need to make sure you and your family are set up for financial freedom later on. many of you hear me talk about the cycle of the season. So I want to touch on that for a minute. And what I mean by the cycle of the season is this. We're in springtime right now. Wedding season is upon us. So right now you're thinking about you've got to go to this wedding, this wedding, this wedding, and this

Starting point is 00:18:05 summer. And you're already thinking about how am I going to pay for it? Because you have to either drive there, fly there, you've got to get hotels, Airbnbs, going out. All of that is very expensive. And what do you do? You swipe the credit card. Then when after wedding season is over, you've got to

Starting point is 00:18:20 couple months, you start paying down the credit card, you think you're getting back on track, and then boom, it's holiday season. So all of a sudden, you start racking up the credit card for the holiday, and then you've got to spend months paying that off. And this cycle repeats over and over every year, and there is never a break from the cycle. So this is why it's so important to get rid of the fomo, get rid of the social pressure. Sometimes you just have to tell people, it's not in my budget to come to your wedding. I would love to be there, but I cannot. do it. I am sorry. Write them a nice letter. Send them a small gift and just like the holidays. Don't overspend on the holidays. Make a list and budget for the holidays because so many people just

Starting point is 00:19:01 randomly go shopping see all kinds of cute things that they want to buy for the nephews and the cousins and the sisters and the brothers. That's all great. But if you don't budget for it, you're going to find yourself constantly in the cycle of the seasons and not be able to get out of it, especially if you're putting the debt on credit cards. And I think the FOMO aspect, is more of like a personal thing where the social pressure is like an outside thing. If you have good friends, the social pressure, they will understand, right? So for example, I don't want to name names. So there's a guy in my friend group who does not make nearly as much as everyone else.

Starting point is 00:19:35 And he's a really good friend. He's a homie. Love this guy. But I've noticed this year because we've talked about, you know, he's got some credit card dead. He's trying to pay off his car. He's trying to do these money moves and be smart with his money. I've noticed now we said, hey, man, we're going to go get some drinks for St. Patrick's Day. we're all going to go to Broadway, have a good time. You want to come. He's like, no, guys,

Starting point is 00:19:51 I can't afford it, but y'all have fun. Let me know how it goes, wishing you all the best. And I respect that. I respect that. And so, like, that's what we're trying to help you guys understand is, like the social pressure of going out for the happy hour. And let's go on this vacation or this trip or this wedding or everyone's going to go do this thing. I have to go with them. We're planning a beach trip right now for this summer. And a couple people like, hey, guys, can't afford it. I'm trying to save some money. This is not in my budget. Spending $2,000 on a vacation is not what I had planned for the summer. y'all have fun though wishing you all the best and i always hope to be that friend that's like good for you whatever i can do to help like let me know happy to review your budget or whatever like no shame in your game and i think the phomo thing though is what people probably struggle the most with right because

Starting point is 00:20:33 they're like oh my friends are out they're doing this i need to go join them and then you swipe the first credit card and it's like oh my gosh there's fifty dollars and then another hundred later and it's like what did i do having a plan to deal with the fomo surrounding yourself with friends that understand that they might be putting some social pressure on you, but being cognizant to know that they don't mean any harm with that, right? They're not trying to put pressure on you. Just know that you've got that invite, I think is really important. So really, like, for me, the big piece of advice I can share here is like, if you have the friends that actually care about you, they'll understand saying, no, I can't make it to the wedding, I can't make it to the trip,

Starting point is 00:21:09 I can't make it to the brunch, whatever. And you should feel comfortable in that. And then also, But two, if you do get FOMO, maybe that's like some emotional exercise you got to go through. Maybe there's therapy involved. Maybe there's something, I don't know, like you have to begin to tackle that, though, head on. Because if you have FOMO for the rest of your life with all these different things, you'll never get ahead with your money, right? You'll keep kicking the can down the road, down the road, down the road. Now, Robert, here's my challenge I have for these people.

Starting point is 00:21:35 And this is kind of embarrassing to admit, but it's honestly really fun. My girlfriend and I, we do something called these no spend days, right? So it might sound weird, but once you realize how easy it is, to not spend money, it's actually really fun. So we do something called no spend Sunday, like once a month, which means on Sunday, we'll wake up and say, cool, what breakfast can we make here at the house with groceries we already have? And then we'll say, cool, let's grab some olypops or some poppies and we'll go, you know, pack some lunch and go for a little picnic or something outside or walk around a lake or a state

Starting point is 00:22:04 park or, you know, maybe go to a farmer's market to observe or maybe here's one time. We went to Costco on a Sunday and just tried all the different samples. right so we didn't pay anything to go there or do anything but it's like we got out of the house we had some fun we did these no spend sundays and they work and so like showing yourself that you can go out meet people do things and have fun without spending hundreds or even thousands of dollars like you would on a vacation just like proves to you that like you can be alone with your thoughts and the people and like money's not something that has to be transacted upon every moment to make you happy right you don't have that set up to our first point, which was like you don't have that identity with spending

Starting point is 00:22:43 money. I love this. And it really brings me back to, I think I did a TikTok a few years ago about this, where I was trying to show people how much fun you can have with outdoors for free. Because someone was saying, man, you're always walking. You're always hiking. You're always doing this. You're always doing that. I'm like, yeah. Rather than buying a motorcycle, get good bicycles. Rather than buying a boat, go out and get paddle boards. They're awesome. Or kayaks. There's so many ways you can build a healthy lifestyle that doesn't involve spending a lot of money. I walk a lot. Elizabeth and I play tennis a lot.

Starting point is 00:23:18 We do a lot of these things that are so much fun and so good for us, but they're not expensive. And I think that's a critical part about your point that I really enjoy because, again, it gets back to people spend money when they're bored. Find ways to exercise, have fun and get out of the house without spending a bunch of money because that is the key to really building and setting yourself. up for financial freedom later on because let's face it. There will never be a day in most people's lives that they don't yearn to buy something. Trust me, there's always a car, there's always a watch, there's always a boat, there's always a house, there's always something I want to buy, but I forecast, I don't have knee-jerk reactions, I don't have impulse buys, I plan, and that's what everyone else needs to do as well.

Starting point is 00:24:03 And I think beyond that, and just to put a bow on this, too, there are so many free documentaries on YouTube you can watch. There are so many cool videos on the internet that are free games you can play. Like there's free activities are everywhere. You just have to look for them. And if you're someone that like falls victim to the phoma and the social pressure of like

Starting point is 00:24:22 let's go do this. Let's go do that. Practicing austerity, practicing once a month just saying I'm not going to spend any money today. I'm going to entertain myself with a book or apps on my iPhone or whatever else you're doing. Your shoulders are going to kind of come back a little bit more. You're going to walk different, knowing that you can do things in your life. That doesn't

Starting point is 00:24:39 involves spending money and not having that identity to spending the money. Every little bit helps. And if someone tells you, oh, putting away $200 a month or $400 a month isn't going to make or break you financially, they are absolutely dead wrong and they don't know what they're talking about. Every little bit helps. And that's why this episode is so critical. So make sure everyone understands, take notes, take action, and share it with a friend

Starting point is 00:25:02 if they're suffering from any of these issues. The first challenge we gave you was to rethink what it means to be. rich, right? Do not identify with spending money. How else can you identify with being rich? Is it you're a lifelong learner? Are you an athlete? Are you, you know, someone who has cool hobbies? Do you have a good friend group and support system? Like, what can you do to help yourself now identify as something else that you can correlate to rich? That is not, I spend money every day because that's who I am. And the next challenge was the 48-hour rule, right? If you like it, instead of buying it instantly, right, move away from the instant gratification, have a plan, and execute the plan.

Starting point is 00:25:40 Write down the thing you want to buy. You come back to it two days later, 48 hours later, and you still want it, then figure out how to pay for it. That's totally cool. But make sure you're not falling victim to the TikTok shop videos. We know you're watching them, and man, I bought too much stuff over there. But the last challenge here are these no spend days. Figure out how to implement a no spend Sunday, or maybe a no spend Saturday.

Starting point is 00:26:02 I know something big that people love trying to do is no spend. No spend January. They start the year off as frugal as they can, hoping to keep that momentum going. If you want to be an extremist and you want to do a no spend month, be my guess. Let me know how it goes. That just essentially means like you're not buying anything that's like discretionary. I'd imagine. But yeah, figure out that stuff.

Starting point is 00:26:22 If it works for you, that's great. Just know that the social pressure, the FOMO, you got to figure out how to deal with that or you'll never get ahead with your money. I agree. I love this episode. And it's just it's the little things that compound over time that help people. and so many people don't figure out the little things, and they don't take the time to set themselves up,

Starting point is 00:26:41 automate, get their spending in order, so they can retire with dignity. That is our goal here. Help everyone figure out where their pain points are, how to get ahead, and how to really fix their situation. So this is a great episode to illustrate that. So before we jump into our Q&A section of the show,

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Starting point is 00:28:30 So our first question is from Instagram DMs at RichHapst. Habits podcast on Instagram from Liz. Liz says on episode 109, you all mentioned having systems in place. I've heard this term often and not just from your podcast, but I don't really understand what it means. Can you explain it to me as if I was five years old? Robert? I love this question, Liz, and we've just discussed most of it in this episode, but I'm going to break it down. What we mean by systems in place are having a budget. We have a free budgeting tool in the podcast show notes. you can go get it for free, upload your budget and do an honest budget so you know exactly where you're at every month and stick to it. So that's number one. Number two, once the budget's in place

Starting point is 00:29:12 is understanding your debt to income ratio so you can calculate how much money per month you can put away for investing. So that is a really important second step. We want people at least to be putting away 10%. We'd love to see 15 or 20 percent. So you're putting it away for the future and investing it. And number three is automating those investments. Whether you do it through public.com or wherever you would do it is automating it so you're not leaving it to chance because if you leave it to chance, you're going to forget months at a time. You're not going to have that automation. And we want to make sure you are investing every single month and you have this dollar cost averaging strategy that is implemented into your daily life because then that way

Starting point is 00:29:57 you will have the systems, you will be consistent, and you'll be able to retire comfortably. My way to think about it is even like an extension of this sentence. Having systems in place that make wealth building inevitable. So like doing things day to day that make your wealth go up like clockwork. It just happens. It has to happen, mathematically speaking. And so Robert's point, yeah, by knowing how much you're making every month, how much you're spending every month, and automating your investing,

Starting point is 00:30:25 if it's with public or wherever else will allow you to build wealth and you will be wealthy inevitably. It's just like you have the processes, the simple systems in place that make wealth building happen. It's not leaving it up the chance of, oh, man, I had this big emergency or, oh, I have to go on this vacation, I can't invest this month, or, oh, this is happening, so I don't have the money to set aside to pay off my credit cards or, you know, none of that. We want you to have a system in place with your money, if it's budgeting, if it's investing, if it's investing, if it's earning, if it's your, whatever it might be, to make sure that you are building wealth automatically. And there's an episode. It's called episode 102. I think it's called automating your

Starting point is 00:31:06 money or building automations with your money, something like that, where Robert and I give you this step-by-step playbook on how to build these systems for yourself. I love it. Yes. It's all about automation and consistency. Everything else is there. And like Austin says, wealth is inevitable if you follow the plan. So our next question comes from Hunter. Hunter says I'm 20 years old. I'm working full time to get my wife through nursing school and myself through an online business school. We both have about a year and a half left until we graduate. We both live in a very small town where I don't feel like there's much opportunity to progress and have the life we desire. We have talked about moving to a bigger city in order to have more opportunities, but one issue I have is that business

Starting point is 00:31:45 is a vast field and I don't know where to start with my career, so I don't know what I would do once I move to this bigger town. So what advice would you give someone like me who's right out of college with a business management degree in order to perhaps find a job, be successful, make good money, and to set his family up for a good lifestyle. Thanks in advance. Robert, you want to start this one? This is one of my favorite questions.

Starting point is 00:32:07 So yes, for me, and I grew up in East Toledo, Ohio. It was cold, five months out of the year, snow five months out of the year, very little opportunity. It was a very downtrodden, kind of broken down. area. And what I tell everyone now when they ask me, what would you do different? I would move. So in this instance, I was talking 18 to 21 years old. Move. Move where there's money. Move where there's power. Move where there's growth and move where there's opportunity. Because the closer the proximity you have to power and money, the easier it is for you to possess it. Because when you're in

Starting point is 00:32:44 an area like a small town, there might not be much opportunity for you. And it's not just about making money, It's about learning and growing and improving on your skill sets, especially in the business world, because you're right. It is vast. Who knows what you're going to end up doing in 10, 15 or 20 years. But if you move now before you get too many roots growing in the small town, you might find yourself in a much better situation because business owners always lack talent. So if you're somebody that's driven, somebody that's going to work hard, somebody that's

Starting point is 00:33:18 tenacious in a big market where there's lots of opportunities, I think you'll thrive that much more. And for the wife going through nursing school, that's going to open the door for bigger hospitals, bigger medical centers, and more money for her as well. So that's what I would do. I totally agree. I grew up in a super small town called Kingsport, Tennessee. There was not much there besides working at a chemical factory called Eastman or being a doctor. Obviously wasn't a doctor. And I don't work at a chemical factory. So I moved to Nashville so much more opportunity. That's a really, really great piece of advice. Go somewhere where there is opportunity that you can afford, right? Do not put yourself in a situation to go live in a New York City where a high cost

Starting point is 00:33:59 of living or something. But maybe there's somewhere like in Georgia or South Carolina or North Carolina, somewhere in the southeast that's a lot more affordable, but it's definitely a bigger town than where you are right now. I don't really know where you guys live. Unfortunately, I didn't mention that. But tactically speaking, and this is something a couple of my friends who were in your exact situation did with their business management degrees. The Aldi store manager trainee, it's a manager trainee position. It's like 32, 35 weeks long of like this sort of program where they teach you how to be a store manager at Aldi. And then once you pass their program, you like become a store manager at Aldi making between $65,000 and $85,000 a year. Come on, dude. 21 years old is what you'll be,

Starting point is 00:34:42 making 65 to 85. That's exactly what I was doing. Graduated college making 62 and a half, 65, whatever it was. That is a really great place to be. Now, of course, you can go move up, you can go do the different things. Maybe you become a district manager, whatever. But the biggest piece of advice I could give anyone who's like just trying to start their career and they have a very general degree and they're not sure what to do. There are companies like Aldi, like Walmart, like Buckees, like Tripoli. There's some really good companies out there that they start you low, but within one, two, three, four years, you're making six figures and if you stick with it, you have the whole district to your name.

Starting point is 00:35:20 And the reason why they do that is because people don't like to stick with it. But if you can stick with it, like I know Buckees, for example, I'm sure you guys have heard like the gas station Buckees. Buckees pays their store managers over $100,000 a year. A hundred grand to manage a gas station, right? Like that's what we're trying to help you guys figure out if you're in this like, hey, I'm a recent grad I don't really know what to do. get in on one of these like, you know, Walmart store reps or all these store reps or whatever,

Starting point is 00:35:46 put in your hours, which, you know, you're 21, 22, 23, you got some time, put in the reps, sacrifice the weekends, do what you got to do early on. So then you fast forward four years. You're making 90 to 120,000 at 25. Like that is what I would do if I were in your shoes. And at 20 years old, for any of you that are younger, maybe you're 20, 18, 25, 26, your number one goal at that age is to get your first 20,000 bucks. Get it.

Starting point is 00:36:16 I don't care if you have to work weekends, side jobs, side hustles, whatever it is. Get $20,000. Get it into your brokerage account, get it invested, and then keep going. That is your goal. You should be laser focused on finding a way to get your first money set aside. So then that way you at least have your start to building your base. It is so critical. number one mission critical what to do. I could not agree more. And the second most important thing to do

Starting point is 00:36:44 is completely stay out of debt. Forget about the credit card debt. Forget about the high interest loans. Forget about helox. Forget about car debt. Like don't even touch it. If I, man, that that's, if I give myself some advice, it's like, dude, forget about all that stuff. Just go invest and build wealth. And I'm looking on Indeed's website, management trainee yearly salary in Tennessee at Aldi, $101,000. Amazing. Amazing. So before we jump to our last question from Kendall here, let's take a moment to hear from this episode, sponsor, Masterworks. Robert, I just saw a Bank of America survey.

Starting point is 00:37:18 They surveyed all these wealthy individuals, and it said by next year, ultra-high net worth individuals could be devoting up to 11% of their portfolios to find art in collectibles. Art has historically been an asset class celebrated for its lack of correlation to other popular assets for the last three decades, like the stock market. We're seeing some volatility right now. But the sector looks to rebound from its 2025 with Sotheby's just having their first big auction of 2025, and it nearly topped the very highest end of their internal estimates. Not to mention the co-founder of Global Private Equity Firm Blackstone has quietly been buying up some impressive artwork for himself. Now, we always preach how important it is to have diversification because we too have our own money invested in artwork. I've been using Masterworks now for over five years.

Starting point is 00:38:04 And Robert, we had a really good question in the Rich Habits Network. work on a live stream last night, which was, hey, should I put one, two, three percent of my net worth into artwork knowing how uncorrelated it is? The answer is, yeah, for sure. I mean, you see these ultra high net worth people putting in up to 11 percent of their net words. So finding that, call it low to mid single digit that works for you is how I would approach it myself. And that's right, because both of us invest with Masterworks, the sponsor of today's episode. And we've even interviewed the founder and CEO, Scott Lynn, on the show. And since Since then, they've crossed over a billion dollars in capital raised featuring artwork offerings

Starting point is 00:38:42 that typically range from a half a million to $20 million, although with Masterworks, you don't need to spend millions or even be an art expert. And that is why we love it, because the everyday person looking for diversification can invest with Masterworks. Masterworks has offered investments in over 450 works and exited 23 works with investors realizing annualized net returns including 17.6%, 17.8% and 21.5% on those works that were held longer than one year. Join over 1 million Masterworks users at Masterworks.art, front slash rich habits, which is also in the show notes of the episode. As with any investment, past performance is not

Starting point is 00:39:27 indicative of future returns. Investing involves risk. Sale returns are not inclusive of unsold works important reg a disclosures can be found at masterworks.com front slash cd and again robert one two three four five percent of your net worth toss it in some artwork let it go up slowly over time it's what i've done it's a great strategy and it helps me sleep better at night knowing that my portfolio isn't going up down left and right and in circles every single day as we've seen now in 2025 definitely so our last question comes from kendall kendal says hey austin and robert a big fan of the show, and I recommend it to all of my friends. I have a question for you guys. I left my job as a hairstylist at a salon where I had a 401k. I'm now an independent contractor

Starting point is 00:40:14 running my own small business, but I did a direct transfer of my 401k into a vanguard traditional IRA, but the issue is that it's invested into a target date fund, and I can no longer buy more shares of that target date fund. So should I sell the target date fund and instead invest the money into the and index funds that you guys talk about. It also has $46,000 into it. Should I roll over the traditional IRA and convert it to a Roth IRA and pay taxes on it? I'm really not too sure what to do here. Robert, you want to kick this one off? Sure. I think, and you know where I stand on this, I don't like kicking the tax man down the road just because we don't know what the federal government's going to do with our taxes in 5, 10 or 20 years. So for me, I think it's a great time

Starting point is 00:40:58 to cash it in, get out of the Target Date Fund, get that money into the Roth. IRA, get into that basket of index funds and ETFs we talk about, because at the end of the day, it's better to pay your taxes now where you know where it's at, take the hit now, and move on to the future, especially because you want this money performing better. Traditionally, target date funds are not really meant to grow wealth. They're meant to not lose your money and keep your money stable. So they underperform the markets dramatically in most cycles. So that's why we don't like to see people, especially younger people, having a target date fund for 20, 30, 40 years, because it's just not going to perform as well as some of the other vehicles we talk about.

Starting point is 00:41:44 Yeah, I think one of my favorite kind of just like investing ideologies is, and if you look at a target date fund right now, it's probably outperforming the S&P year to date because these target date funds have like the international, they have the bonds, they have the T-bills, they've got the craziest diversified worldwide mix of financial products you could believe in. because they want you to preserve your wealth. And you're like, oh, well, you guys are crazy. My target date fund is outperforming the S&P this year. Momentarily. And so I'm like, okay, jokes on us.

Starting point is 00:42:13 I guess so in the short term. But like, let's look about the last two years. Your target date fund went up 10% over the last two years. My S&P 500 went up 50%, right, 25 and then 28. So it's like, which one would you rather have? Are you want to be invested for a Black Swan event? Or would you rather be invested for, you know, just a normal, business market cycle, which is up into the right over a long period of time. That's how I'm

Starting point is 00:42:38 invested. I've got 90% of my Roth IRA in the S&P 500 and a couple other things here and there, but I believe over a long period of time, buying and dollar cost averaging into the U.S. indices and index funds like the S&P 500, the NASDAQ, Dow Jones, all that fun stuff that we talk about is a wonderful way to invest and build wealth over a long period of time. Convert the traditional into the Roth. That's cool. Just make sure that you talk. to a tax professional that can help you figure out what you'll owe in taxes. Back of the envelope math is telling me about $7,000. And what I mean by that is do not take $7,000 out of this account. Go have $7,000 saved up for this tax bill, right? You don't want to cash out your

Starting point is 00:43:20 retirement to go pay the taxes. That's not a smart idea. So just figure out what that number is. Make sure you are doing it in a way that you can afford. Maybe you don't do it all at once in one year. Maybe you do 10,000 a year for the next couple of years and allows you to kind of have a more manageable tax bill. But love this question, Kendall, and thank you so much for listening to the show. Thank you all each and every week for following along, sharing the podcast, joining the Rich Habits Network, and just really supporting us in this journey to help as many people as we can around the world, understand that personal finance is personal, help them with their business growth, help them with their mindset issues. All of this is so important to us.

Starting point is 00:43:59 to help you and bring as much value as we can. And we appreciate you following along and giving us those five-star reviews and sharing with a friend. And do us a favor. If you have your own overspending psychology, tips or tricks, comment them below on Spotify. We're going to call them out on our next episode.

Starting point is 00:44:17 We're going to check out what you guys suggest. We love in the comments. You all sent us 180 comments on an episode the other week. It was really, really cool. So yeah, leave us a comment on Spotify. We always get back to them. We love reading your comments. and participating in the polls and liking and sharing and all that fun stuff as well.

Starting point is 00:44:33 So thank you guys so much for listening to the show and have a great start to your week.

Rich Habits Podcast - 110: The Spending Trap: Escape the Psychology of Broke

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