Rich Habits Podcast - 181: The BIGGEST Wealth Trap To Avoid

Starting point is 00:00:00 This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify.

Starting point is 00:00:30 The first ever all-electric 2026 Subaru Trail Seeker is the EV for the trail obsessed. With up to 444 kilometers on a full charge and DC fast charging from 10 to 80% in about 30 minutes in ideal conditions. Plus, ample ground clearance and symmetrical all-wheel drive make the 2026 Trail Seeker the most capable EV Subaru has ever built. Test drive it at your local Subaru dealer or visit Subaru.ca. Hey everyone and welcome back to the Rich Habits podcast, a top 10 business podcast on Spotify, brought to you by public.com. By the end of this episode, you'll understand why the five most expensive words in personal finance are, I'll start when I'm ready. And we're going to dismantle the three most common versions of that excuse, so you'll never fall into this trap ever again. My name's Austin Hankwitz.

Starting point is 00:01:25 I'm joined by my co-host, Robert Croke, Robert. is a seasoned entrepreneur with lifetime revenues of over 300 million, and I'm a multi-millionaire in my early 30s with a background in finance and economics. As the show name might suggest, every episode, we talk about rich habits as they relate to business, finance, and mindset. So, Robert, what are we talking about in today's episode specifically? In this episode of the Rich Habits podcast, we're talking about what I genuinely believe is the single biggest wealth trap that exists. And it's not a scam. It's not a meme coin. and it's not some shady financial product, it's a sentence.

Starting point is 00:02:00 Five simple words. I'll start when I'm blank. So fill in the blank with whatever you want. I'll start when I make more money. I'll start when I'm out of debt. I'll start when the markets calm down. They all sound different, but they all do the same thing. They give you the permission to do nothing and stay sitting on the sidelines.

Starting point is 00:02:20 And here's why that matters so much. The single most important variable in wealth building isn't how much you invest. invest, it's when you start. Time is the one ingredient you cannot buy back, you cannot make up for, and you cannot shortcut around. Every month you delay, the math gets harder and not a little harder, dramatically harder. So today, we're going to take those three common I'll start when excuses and break them apart with real numbers, real stories, real perspectives here. Because Robert, I've heard every single version of this from my friends, my family, and especially inside of the Rich Habits Network every single time the person is saying that they genuinely believe they're being

Starting point is 00:03:00 responsible by saying, oh, I'll wait until this thing happens or I'm going to wait until I'm this age or this much whatever, right? Like it doesn't feel like a trap, but it's dangerous because it feels like common sense, but it's a trap and we're going to walk through every single excuse and make sure that you don't fall for them anymore. So Robert, kick us off with this very first excuse and let's walk through it. Definitely. I think this is a very important episode in the annals of history of all the episodes we've done over the years. The first excuse is I'll start when I'm older and make more money. This is the most common one and honestly, it's the most expensive one.

Starting point is 00:03:37 The idea that you need to wait until you're making six figures or you're in your 30s or you've got things figured out before you start investing is just wild to me. We talk about it all the time in the network. And I hear this constantly. People in their 20s always telling me, Robert, I only make 50K. What's the point of investing? $100 a month. That's nothing. And I get why it feels that way. $100 a month doesn't feel like it's going to do much to change your life. It feels more like a rounding error in retirement. But here's

Starting point is 00:04:07 the real math that changed my perspective when I was first getting started. If you invest just $100 a month starting at 23 years old and you earn an average return of 10%, which is roughly what the S&P 500 is delivered historically. By the time you're 65 years old, you have over $775,000. That's just from $100 a month. You've contributed about $50,000 of your own money and the rest over $724,000 in compound growth doing the work for you. So imagine long term if you up that to $200 a month or $300 a month, you'd have millions of dollars in retirement. Now, the pain sits in as an excuse, here because this episode's about like making sure people understand the excuse they're trying to tell themselves and to like really make that mindset switch here. The pain is if you wait and you tell

Starting point is 00:05:00 yourself, I don't want to start at 23. You know, I just graduated college, 100 bucks a month. Like, that's nothing. It's a rounding air. It's not going to work. Like, I'm going to wait till I'm 33. I'm going to wait till I'm longer in my career. I'm going to wait until I'm married. I'm going to wait, right? I'll start when this other thing happens 10 years down the line. Now you're 33. You're making a little bit more money, sure. So you can invest three times as much, right? $300 a month versus the 100, that same 10% return, same 65 year age retirement, and you end up with about the same amount of money. So you contributed $115,000 this go around of your own money versus the 50,000, the 23-year-old did over that long period of time. So you put in $65,000 more to end up with about the

Starting point is 00:05:48 same amount of money in retirement. All I'm trying to get at here is because you gave up those 10 years of compounding, the I'll start when years of compounding, you now have to put over double into the stock market to come out at the same time, the same sort of outcome as if you had just started and didn't give yourself the excuse. And that is the cost of I'll start when I make more money. I'll start when I'm older, right? They all kind of blend together as one excuse here. It's not that you missed out on returns. It's not that you, you know, weren't investing correctly. It's that every dollar you invest earlier in your life, right? And you could be 40 right now or 50 right now listening to this, right? Just like, don't keep putting this off. Every dollar you invest the earlier in your

Starting point is 00:06:33 life turns into two, three, four, five, six, seven times more than a dollar that you invest later because time is a multiplier and it only works in one direction. Yeah, it reminds me of the episode where We broke it down for people that every dollar invested and saved in your early 20s can turn into $77 in retirement doing the same math using these same assumptions. So it's just crazy when we talk about the compounding effect and how important it really is for people over time. And this also applies to investing in yourself, investing in a business, investing in skills. I've met so many people who told themselves, I'll start that business.

Starting point is 00:07:15 when I have more savings, or I'll go for that promotion when I have more experience. And five years later, they're still saying the same thing. The goalposts keep moving because the goalposts were never real. They were just a comfortable reason to stay put, and that ends today. The people I've watched build real wealth, whether it's through a business or through investing,

Starting point is 00:07:36 they all start before they felt ready, every single one of them, including myself. I started my first business with almost nothing. I think I was seven, years old. Austin also started investing when he was making entry level money out of college. Neither of us waited until conditions were perfect because conditions are never perfect. And now all that said, it's important to make sure we're clear here. We're not saying to go through your rent money at the stock market, right? Go cover your basic living expenses. You need to have that

Starting point is 00:08:06 emergency fund, even if it's a little bit right. But after those basic needs are met, yeah, that extra $50 or $100, right, that's what's going to start propelling you in the right. direction. You just start. You don't feel like you need to know everything. You don't need to feel like you make the right amount of money or you are, you know, spending like whatever it might be. Just get started because the longer you wait, the worse the outcome becomes start today. Right. What's the phrase, Robert? The best time to plant a tree was 20 years ago. The second best time is right this moment. Like that's how the compounding of your retirement works because the math doesn't care how much you invest. It cares how long the money has been working for. You're going.

Starting point is 00:08:45 you. And again, every year that you wait, you're making a choice to pay more later for the exact same outcome. And do yourself a favor. Please, please, please, don't listen to fake gurus telling you if you only have $100 a month or $200 a month. It's not worth your time to invest. Do the math. Use chat, GPT, Gemini, whatever you use. Do the math, just like we've laid out here. And you'll find out that the best time to invest is right now today and let compounding do its job. So Austin, let's get into excuse number two. I'll start when I'm out of debt. The logic goes like this. I have student loans. I have a car payment, maybe some credit card debt. It would be irresponsible to invest when I owe people money. Let me pay off everything first, then I'll start building wealth. And on the surface, that

Starting point is 00:09:31 sounds like the discipline moved on the right move. And in certain situations, it is. If you're carrying $20,000 in credit card debt at a 22% interest, that needs to be your priority. Paying off a 22% interest rate is essentially earning a guaranteed 22% return. No investment reliably beats that. So let's be clear, high interest debt, credit cards, personal loans, anything above 8 or 9% that should get attacked aggressively. But to your point, Robert, here's where people get it wrong is they apply that same pay it off first, right? Let's get rid of it to all different types of debt, including low interest debt that might not deserve the same urgency as a 22% interest rate credit card. be their federal student loans that are at four and a half or five percent, maybe their mortgage at

Starting point is 00:10:18 five or six percent or a car loan at four or five, six percent, right? They put their entire financial life on hold, no investing, no retirement, no savings, no wealth building of any kind until every single dollar of debt is gone. I know I've given this example a couple times, but I've got a friend who was making and is making great money as a physical therapist. She has her DPT, so she's a doctorate in physical therapy. She's making six figures. And, And she was entirely focused getting every single dollar that she's like found margin in her budget to pay off her student loans. And she was like 30 years old with little to no retirement, no saving. Like she just student loans.

Starting point is 00:10:57 And she did a really good job of that. Like she was, she was laser focused on those student loans. But after a while, I was like, girl, you're 30 and you don't got much. Right. Like I understand like the student loans are going to be there. Let's start investing. Right. Let's like let's do the minimums on that because it's only four or five percent.

Starting point is 00:11:12 Let's flip it over here. Let's max out that Roth IRA. Let's get that emergency fund. Let's do this and let's do that. And she's since bought a house. She's since maxed out retirement. She's done the right things that she's super excited about. And I'm really proud of her for that.

Starting point is 00:11:23 But she kind of had that mindset switch that I think a lot of you might also have to kind of think about here is like, it's okay to have a serviceable debt at that four, five, six percent interest if you're young and compounding. We talk about how important it is that if you don't do this and you just focus entirely, there's a very famous guy that's bull. with a nice little goatee by the name of Dave that makes everyone focus on their debt first. And it takes years sometimes to pay off this debt. A decade or more, depending on student loans.

Starting point is 00:11:55 I know one of their personalities took eight or nine years to pay off their student loans. If I couldn't invest in the stock market for eight or nine years, Robert, I'd lose my mind. What ends up happening is, right, they spend their entire 20s and half their 30s aggressively paying down this four or five percent student loan debt. Well, the market averages 10%. Last year, it was 25. Year before that, it was 25. Year before that, it was 30, right? So it's like the market's ripping. But over here, you're focused on your student loan debt or your car payment debt at 4.5% or your mortgage on your second house at 6% or whatever it might be, or your first house, whatever, it's just debt in general, right? Low interest debt. And you're just, you're confused. And that's what we want to make sure people don't make an excuse about. I'll start when I'm out of debt. You don't have to wait until you're out of debt. You can start now. Yeah, I love that take because we talk about it all the time of getting people to understand that if they have good debt and they can have the positive arbitrage that you spoke of, go in their favor. If they have a 5% interest loan and they can make 15% in the market, we want them to be investing because that loan can only go to zero. But leaving all of that positive arbitrage of that money on the table that they're not getting by not investing is a terrible tragedy. and that's why it's so important.

Starting point is 00:13:10 And I think that's why we talk about the concept of good debt versus bad debt all the time. Because not all debt is created equal. A credit card at 22, 25, 30%. That's an emergency. A federal student loan at 5%. That's manageable debt that can be serviced while simultaneously investing, kind of kicking the can down the road because you're going to make more money with your money than what that 5% is going to cost you.

Starting point is 00:13:36 And the framework here is simple. Match beats Roth beats taxable. Get your employer match first. That's 100% instant return. Then fund the Roth IRA that we think is the greatest wealth building tool out there. Then go back to accelerating debt payoff with whatsoever's left. You're not choosing between paying off debt and investing. You're doing both and letting the math work in your favor on both sides.

Starting point is 00:14:00 The people who build wealth are not the people who wait until every liability is at zero. They're the people who understand which debt is dangerous, what debt is manageable, and they build while they pay. That's what I'm doing. So Robert's doing. Like, that's how you build wealth. That's our perspective on how people can build wealth simultaneously without having to go black and white on specific strategies. The insight here is that I'll start when I'm out of debt treats all debt equally as bad. And it treats investing as something that you get to earn the right to do after you,

Starting point is 00:14:36 pay off your debt and your financial life is clean. Investing is not a cookie for, for, you know, good behavior, right? Like, you can go invest right now. No one needs to give you the permission. You don't have to earn the right to invest. Go take $10 and invest it, right? Assuming, again, no high interest debt. It's a tool that works best when you give it the most time possible every single year that you delay because you're chipping away at that 4% car loan or the 6% mortgage instead of also contributing to your 401K or also, you know, maxing out your Roth IRA or, you know, whatever's going on is just going to make your future self not feel that great. 100%.

Starting point is 00:15:13 Okay, let's get into excuse number three. This one is kind of crazy. It's one of my favorite, and it's one that really cuts deep for most people. I'll start when the market's settled down. It sounds like you've done your research. I'm watching the market and things are too volatile right now, or I'm going to wait for a pullback, or there's too much uncertainty, tariffs, elections, interest rates. I'll start investing when things calm down.

Starting point is 00:15:39 Here's what I need everyone listening to understand. Things never calmed down, ever. There is no moment in modern market history where the coast was clear, everything felt great, and there was nothing to worry about. Go back and look. In 2020, it was a global pandemic. In 2022, it was inflation and rate hikes.

Starting point is 00:15:57 In 2023, people were convinced a recession was coming any day. In 2024, it was the election cycle. Right now, people are worried about tariffs and trade wars. There is always a reason to wait. And the people who wait for the perfect entry point end up waiting forever and sitting on the sidelines and leaving all of this money on the table

Starting point is 00:16:19 because they thought they could time the market. Robert, you are 30 years older than me. You've been through a ton more market cycles than I have and maybe a lot of people listening right now. What have you seen in these multiple market cycles when it comes to volatility and sidelines and headlines and waiting or not waiting and invested? Walk people through that.

Starting point is 00:16:36 Yeah, I mean, I've lived through the dot-com bust. I've lived through the 2008 financial crisis, COVID, the 2022 drawdown, all of it. And what I can tell you is that most people who stopped investing during those periods and waited for stability almost universally got worse outcomes than the people who just kept dollar cost averaging, putting their money in every single month, regardless of what the headlines and the noise said. 100%. The best days in the market almost always happened.

Starting point is 00:17:05 right next to the worst days. And they cluster together, which means if you pull your money out during the downturns and the bad days, then you're also now on the sidelines when the good days begin to happen and stack on top of each other. Recovery is where the money is made,

Starting point is 00:17:22 which is why we preach in the Rich Habits Network all the time to not sit on the sidelines. That's to time the market because no one can time the market. You stay invested. Here's a fun fact for you, Robert. The S&P 500 has averaged a 10% annual return over the long term, right? 10% per year. That includes the crashes, the recessions,

Starting point is 00:17:43 the wars, the crises. That includes 2008. It includes, you know, COVID. That includes everything. Right. So, like, the market has gone up 73% of all calendar years that the S&P has existed. So if you're on the sidelines telling yourself, I'll start when the markets calm down a little bit. I'll start when we start go back to those all times. That's when I'm going to start investing. and when things are just better, right? If you're saying that to yourself, you're sitting on the sidelines, waiting for the right time,

Starting point is 00:18:09 but you're betting against a market that goes up three out of every four years. That's a terrible bet. The odds are not in your favor, right? You should just be invested. I joked about it the other day with Austin off camera that I feel like I need a hotline right now. So every time there's a big headline

Starting point is 00:18:24 and everyone starts panicking, I can just charge $2.99 a minute, like back in the day, and just walk people off the ledge because the math just doesn't work to sit on the sidelines. If you miss just the 10 best trading days over the last 30 years, so that's just 10 days out of roughly 7,500, your returns get cut in half. 10 days. So that just shows you, you can't predict which 10 days those will be. Nobody can. And the only way to guarantee you

Starting point is 00:18:54 capture them is to be invested the entire time. What I always tell people is this. You're not investing in today's headlines. You're investing in the next 20, 30, 40, 40 years. of economic growth. And when you zoom out that far, the tariffs and the elections and the Fed meetings and all of this just becomes noise, it's important noise in the moment, sure, but noise relative to the long-term trajectory of the market and your mindset if you're thinking like a long-term investor. And what I think people forget to realize, too, is like, oh, I'll wait for the market to settle down. Normally, when the market's going crazy is the best time to buy, right? When the market went crazy in March of 2020, it's

Starting point is 00:19:34 dropped 34% in a month. If you had bought the pico bottom, right, which like, who knows when that would have been, there's no way you could time that, right? But like, let's say, oh, I'm going to wait for it to get better. Let's say the opposite. Let's say you got in when it was crazy, which is what we're telling you to hold on during. The S&P was up over 100% in the next 18 months. Like how it's insane, right? So like you can't time the market. We're not saying buy the top, bottom, whatever. We're just saying dollar cost average and stay invested during. During, those market crashes, the crises, the bubbles, the ups, the downs, the left, the right, and in circles because the market rewards patience and not timing. So if you're listening today, right now as we

Starting point is 00:20:15 air this, and you've been telling yourself you'll start investing once things settle down, I want you to hear this and really hear this. That day is not coming. Not because the world is broken, but because uncertainty is a normal state of the world. The markets have always climbed a wall of worry. That's literally what it does. does. Your job isn't to wait for the wall to disappear. Your job is to start climbing. So, Robert, let's bring it all together here. We've talked about every single fun, popular excuse of this I'll Start When kind of phrase. And now let's give them a framework to use as it relates to getting past those excuses if they actually are falling victim to them right now. So the first thing you need to do is be honest about which version of this I'll start when excuse.

Starting point is 00:21:04 you've been telling yourself that applies to you. Is it the I'll start when I make more money excuse? Is it the I'll start when I'm out of debt excuse? Is it the I'll start when the market excuse? Or, you know, whatever that excuse is, just like figure it out and like just be honest with yourself. Yeah, it's this excuse because I was always told from my uncle that I always had to do this. And this was, this was, I saw this on social media, right? Just be honest with yourself. Name the excuse. Because once you see it for what it is, which is like just a delay tactic, not a strategy. It loses its power and you can set that excuse to the side and really get started. And number two, start with what you have. Not what you wish you had, not what the fake gurus

Starting point is 00:21:44 tell you need to get started. I don't care if it's $50. Start with $50. If it's $100, $500, the key is you just have to get started. The amount matters far less than the habit itself of getting started, being consistent, and increase the amount later. You cannot go back in time and recap, years of compounding, but you can start today and move in the right direction with consistency. And something else you can do is automate that. So by setting up automatic transfers from your checking account into your investment account, maybe you do that through 401K contributions with your employer, but like you do it on paydays. The money moves before you even have a chance to talk yourself out of it, right? Automating that investment strategy. So you don't have to

Starting point is 00:22:28 rely on willpower. You rely on systems. And we've had a whole episode about building these systems, right? Match beats Roth beats taxable. Go get that match from your employer, fund that Roth IRA, then go get the taxable brokerage account on public. But automating that process is how you can get over that excuse before you even tell yourself

Starting point is 00:22:47 it's an excuse. Number four, stop consuming financial news as a reason to delay. Stay informed, of course. But if every article you read about the market makes you think maybe I should wait, and I know it does for a lot of you, you're using information.

Starting point is 00:23:03 to boost your procrastination. The headlines will always give you a reason to sit on the sidelines, tune them out, trust the process, and let time and compounding do the heavy lifting. And fifth, finally here, remember the cost of waiting that we were just talking about. It's not that you miss a few percentage points. It's that you have to invest dramatically more money

Starting point is 00:23:24 later in life for the exact same outcome. Your 20-year-old self-investing $100 a month outperforms your 30-year-old self-investing $300 a month. That's not an opinion. That is compound interest at work. Those are the facts. So once you realize and internalize those facts, the I'll start when this, fill in the blank here, excuse, stops making a lot less sense. And I've never heard anyone say this.

Starting point is 00:23:49 I wish I had waited longer to start. Not once in my lifetime. Every person who has built real lasting wealth will tell you the same thing. Their biggest advantage wasn't a stock pick or their salary or a market call. It was starting. period. Just getting started. Just do it. Early and often, stay consistent. So whatever your version of I'll start when is, kill it today. Open the account. Set up the automatic transfer. Put the first dollar in. Just take the action. Research your business. Learn about the promotion.

Starting point is 00:24:22 Whatever it is, it doesn't have to be perfect. It just has to be now. The biggest wealth trap isn't a bad investment. It's a really good excuse. What a cool episode, Robert, could not agree more. And I'm so glad that we are doing this because I got a funny feeling that there's some people listening right now that might be on the edge about starting that business or might be on the edge about, you know, investing about something or doing whatever, like just taking that next step. But they're saying, hey, I can't do that right now. I got to start when this happens. I promise I'll start when I'm this. Or this is how we're going to do it. I'll start.

Starting point is 00:24:53 But this has got to happen first. And you just can't do that. You just can't have that. You got to get started now. It's never been easier. Just go to public.com, 10 bucks, whatever there. or, you know, AI is going to help you with research. Like just start doing whatever the thing is you want to do.

Starting point is 00:25:07 Great breakdown, Austin. Yeah, it happened last night. Two or three people said, hey, should I just wait for the next market correction before I invest this money? No, you shouldn't. Nobody can time the market. We've established this for many, many decades. The goal is be consistent.

Starting point is 00:25:22 Don't try to time the market, dollar cost average, and let compounding do its job. So before we jump to our Q&A section of this episode, got to give a shout out to public.com. the investing platform for those who take it seriously. On public, you can build a multi-asset portfolio of stocks, bonds, options, cryptocurrency, and now generated assets, which allow you to turn any idea into an investable index using artificial intelligence. And it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year,

Starting point is 00:25:57 you can literally type any prompt and put the AI to work. It screens thousands of stocks. builds a one-of-a-kind index and even lets you back test against the S&P 500, all with just a few clicks. Generated assets are like ETFs with infinite possibilities. They're completely customizable. They're based on your thesis, not someone else's. So go to public.com slash rich habits and transfer your portfolio today. That's public.com slash rich habits.

Starting point is 00:26:23 Paid for by public investing, full disclosure in the podcast description. All right, Robert. Let's get started with some fun questions. We got our first question coming from. from Grant on Instagram. If you got a question to ask us, hit us up on Instagram, Rich Habits Podcast or email us at Rich Habits Podcast at gmail.com. We got Grant here. Grant says, I recently found your podcast while I was looking for something to listen to at work. Awesome. Thanks, Grant. That's so cool you found us, man. Grant says I'm 22, recent college grad, making $75,000 a year, get paid weekly.

Starting point is 00:26:54 My rent is $1,000 per month because I have a roommate. Next largest expense is gas due to being a commuter about 30 miles a day, three days a week. I'm remote, the other two. Five percent of my salaries going to my 401k, my employer matching, and I'm putting $250 more a week now into my Roth IRA to max it out for this year in 2006. With the $250 I have, 30 of it is going to Coca-Cola, 70 is going to VXUS, 5 to my company's stock, 10 to MNST, and, and and 135 to the S&P 500. What do you think about these investments as a young guy who's just starting to invest? Should I split my Roth IRA investments up any differently?

Starting point is 00:27:41 Good question. So essentially what you're saying here is you've got $250 every single month that's going. A 135 of that 250, so 54% of it, is going to the S&P 500. 70 of that 250, so 28% is going to international stocks, and the other 18% is going to Coca-Cola and a couple other stocks. Cool, man. Here's generally speaking what we like to say. You know, you've got your core satellite portfolio strategy. This simply means that you have a strategy of your portfolio that follows two main buckets, the core bucket and the satellite bucket. The core bucket could make up 65 to 85% of your portfolio. And that core bucket is defined as index funds and ETFs that tend to trend up into the right over a long period of time.

Starting point is 00:28:34 You're pretty much doing that, right? You've got 82% going into the S&P and international stocks. So that definitely falls between 65 and 85%. The other 18% for you seems to be in that satellite bucket, which can be defined as diversified into blue chip single stocks and other. secular growth trends that you're really excited about. And I guess Coca-Cola is something you're really excited about, which is cool. You can be excited about Coca-Cola. That's fine. So, I mean, listen, I'm not mad at it. Personally, I wouldn't do it. I personally would have all my money in a Roth IRA

Starting point is 00:29:05 invested into ETF's index funds like V-O-O and VXUS and, you know, QQ or DIA or BTCI, right, much more heavily weighted toward those index funds and then have a little bit into some AIQ or BTCI, things like that. But if you want to seriously have 82% in index funds and 18% into some other stocks that you really, really like, I'm not mad at this. You're following the strategy. This is fine. I just think you might be overcomplicating it, especially at, you know, 22 years old. I don't know. I love that breakdown.

Starting point is 00:29:37 And I get it. 22 years old, rocking and rolling out there doing all the right things. The only thing is I'm a little nervous about it. Yes, Coca-Cola is doing well. Monster energy is doing well. We don't know what the other stock is. But I think the big glaring thing that I see is missing is some sort of NASDAQ coverage to get QQ. I would rather see the individual stocks go away, have that 18% going to QQQ, have a nice balance between international S&P 500 and NASDAQ, rock and roll.

Starting point is 00:30:08 Get to that 100% base, then get back into some individual stocks over time. But that would just be my take. But what you're doing is perfectly fine. If you love Monster Energy and love Coke Zero's, then rock and roll. Keep doing it because the most important thing is that you're investing in things you understand and that you like because at the end of the day, that is an important factor in investing is understanding why you're putting money into the company. So I think, Grant, you're doing a great job.

Starting point is 00:30:38 You can leave it how it is. Take our opinions. Personal finances, personal. But that's my take. Yeah, I think what you did thereby emphasizing that $100,000 base. I mean, that's what we want to see people have is $100,000 across whatever accounts that they have invested into, right? 4-1K, IRA, brokerage account, pension, like whatever, right? Like, across all their different accounts, they have $100,000 that are sitting in index funds.

Starting point is 00:31:02 Because what do we know? Index funds like the S&P 500 index tend to go up by about 8, 9, 10, 12% on an annualized basis every year over a long period of time. So if I can have my wealth compounding at 7, 8, 9, 10% over a long period of time, adjusted for inflation. I'm a happy camper. And we want as many people as possible to have exposure to that without kind of saying, oh, I'm going to get fancy and buy some monster energy or some Coca-Cola. Now, I say that as I drink, my Diet Coke. So, you know what? What do I know, Robert? You know a lot. That's why we share our brains every single day in the Rich Habits podcast and in the network. All right, Robert. Next question coming from Jimmy B. Jimmy says, hey, guys, I'm writing in with a

Starting point is 00:31:46 somewhat unique situation. I'm 27 and I work on a yacht. Two months on, two months off is my schedule. I make $4,500 a month year round, including off months plus tips that add roughly $25,000 a year to that. My expenses are very low. Food and housing are covered by the boat for six months of the year. And the other six months, I just travel and couch surf. I have no lease. I'm free to work other jobs during my time off, everything is dandy. Since the setup lets me live well below my means, I'm trying to save and invest aggressively, very aggressively. My current numbers are this. I have $14,000 in an ETF managed account with a financial advisor. It's my dad's friend, where I contribute $2,000 a month, $28,000 in a Roth IRA, maxing out every year here at $6.25 a month, and $60,000 in an emergency

Starting point is 00:32:39 high-yield savings account. On the side, I'm also building. a transactional funding business, funding real estate deals for wholesalers and investors. So my question is this. My emergency fund feels oversized. What should I be doing with that money instead? And is it worth keeping my financial advisor knowing that I only have $14,000 with them? I pay a 1% AUM fee and I really like that I can just deposit the money and not think about it. I want to keep that hands off approach as long as I possibly can. Should I manage the money myself? Does it make sense to stick with him? I don't know. what to do. Thank you all so much. Robert, I'll let you start this one off. Yeah, I think you're looking

Starting point is 00:33:17 at this all wrong. You're doing a really good job. You're living below your means. You're putting money aside, but there's some glaring things here. You're in your 20s right now. You should not be saying, hey, I don't want to pay any attention to this money. You should be paying ultimate attention to it because the sooner you grow it, the more it's going to grow over time. Do you need a financial advisor? I don't know. At that amount, I think you could literally build a fund of four or five ETFs we talk about and not have a financial advisor. But you also have to look at with only 14,000 being managed right now, 1% is not going to hurt you.

Starting point is 00:33:55 You just have to make sure that they're investing you in the right things for growth for someone of your age because I would hate to see them putting you in mutual funds or target date funds where you're severely underperforming the market. So my take, it could go either way. I think at this point, if I were you, I would get rid of the financial advisor, keep all the money myself, build a portfolio with these four or five ETSs we talk about all the time, let it rock and roll. And then when you get to a $200, $300,000, $400,000 in that account,

Starting point is 00:34:25 then go back in with a fiduciary advisor that can help you do things the right way. And then the second part of your question, absolutely your emergency fund is oversized. You say you live below your means, but you have $60,000 in a number. emergency savings. I don't know if it's high yield savings. I hope it is, but I would carve that way down. You don't need 60,000. I would carve it down to 15,000 and get the $45,000 invested in that ETF in that traditional brokerage account. If you're already maxing out the Roth IRA, that way you're really jump starting that ETF managed account to hopefully build that much larger over the coming years rather than making three and a half or four percent having so much in the emergency fund

Starting point is 00:35:12 because you have to ask yourself this and anyone else out there why why do you have so much money sitting barely making anything when you can get it in the markets over time and make that 8 10 12 15 percent sometimes 20 percent a year and that is why you don't need such a large emergency fund i completely agree i think i'm going to go way more aggressive than like hey you should probably leave the advisor. Dude, 14 grand. Leave the advisor. You can, I promise you, I promise you, you can, you can build a portfolio in public with three ETFs, V-O-O-O-Q-Q-Q-Q-Q and VX-U-S. Or just go all in on VTI, right? Let me just be as simple as you humanly want to be here. Take all that money, put it into that one ETF and close your eyes because you're 27 years old and it

Starting point is 00:36:01 doesn't matter. And then take, to Robert's point, he said the 15,000, I thought 10, right? Take 45 or $50,000 from your emergency savings, put it all in that one ETF, VTI, the total stock market, right? And then just close your eyes and let it grow. I understand wanting to have like a set it and forget it mentality, and have a financial advisor, your dad's friend for 30 years. Like, I get that. But if I were in your shoes, I would take the responsibility of learning just a little bit about the stock market enough so that I can choose three or four funds. I can go to public. I can make these deposits. I can do a recurring deposit. They got some called investment plans. So you can just type in $2,000 a month. 50% of it goes here, 25% of it goes here, 25% of it goes here, set it and forget

Starting point is 00:36:41 it. You're good to go. Like, they've never made this so easy for people like you who want the set up and forget it mentality and just like build something once and just let it go as what exists today. So I would absolutely fire your financial advisor as kindly as you can. Hey, you're the best. Thanks for doing this for my dad. I think I got this. Now, let me come back to you with a million in the future or 500,000 in the future, and then we can talk about something, you know, holistic financial planning with accounting and estate planning and like all the other stuff that happens with financial advisors. But for 14 grand, which here's going to turn into 64, when you take 50 from that high yield savings and move it to the 14 as well. Like we're talking about less than 100 grand.

Starting point is 00:37:19 I promise you, you can do this. You're going to be able to do this just fine, Jimmy. Jimmy be on Instagram. You got this man. I believe in you. I know you've learned enough from the podcast here to do this on your own. And save. that 1% management fee. But Robert, I think it's important. I want to make sure we're on the same page here, right? So you're 27 and you want to retire, let's say at 65. And you've got $64,000 of retirement savings right now that's invested in compounding in the stock market. And let's say you want to add that $2,000 a month to it. And for whatever reason, you can consistently do that through retirement, right? Let's say that that's the plan. Growing at 7%, which is adjusted for inflation,

Starting point is 00:37:54 right, call it 2.3% inflation, that will turn into $5.4 million by the time you're 65. But that's if you do it on your own. Now let's assume that you pay a 1% management fee to this broker. That 5.4 million is now 4.1 million. You ended up costing $1.3 million of retirement money and inflation-adjusted money today, right, retirement money because of this 1% fee. Maybe you can afford that. I'd much rather have $1.5 million in retirement. For sure, 100%. So our final question comes from an anonymous listener on Instagram. They say Robert Nossin, big fan of you guys. Please, please keep me anonymous.

Starting point is 00:38:39 I love listening to your podcast in my morning walks with my dogs. So I'm 29, about to start a master's in physician assistant. So for the next two years, I won't be working because of the demands of school. Context, I have 114,000 in a high-yield savings earning 3% because I knew I was going to go back to school. and the program costs $95,000. I also have $9,000 in a 529 college savings plan, $15,000 in a $4,000 in a 401k, and $14,000 in an investment brokerage account invested in the S&P with some QQ, VXUS, things like that. I also am married and my wife brings around $4,000 a month after taxes. We own a paid-for house so we have no rent and no mortgage. My question for you is if I should get student loans and invest some of this money in my high-yield savings account into the markets. After graduating, I'm going to make about $120,000 a year.

Starting point is 00:39:37 My plan is to invest maybe up to half of my salary. I want to do Coastfire, achieve that by 45 or 50, and then have to just be work optional, could work part-time as a physician assistant. What do you recommend? Get in small debt and invest now or be debt-free and invest later. what a good question so essentially our friend here is saying hey i've got cash to buy my degree it's going to cost me 95 000 i got the cash for it and on day one after i start this job i'll make 120 000 a year call it 7 000 a month 8 000 a month after taxes and i can take 4 000 of that every single month and invest it toward the stock market or should i carve out you know 30 40 50 000 of this high yield savings 95,000, get that invested now at a 5% or 6% interest rate, I'm assuming, and then pay off the

Starting point is 00:40:32 student loans after I graduate with the money, all this. Here's my take. In my opinion, I would pay cash for the degree, knowing that you're going to make so much, and you've already got some money invested, and you plan to invest aggressively with this new high six-figure salary. If you told me that you had all this cash, same investments, but you, you were, you, you, didn't plan to invest aggressively and your salary wasn't all that spectacular, I would be like, oh, yeah, I know, maybe there's a world where you should have some student loans and this money should get invested for you because you're so young. But if you're telling me that at 31, 32 years old, you're going to invest $50,000 a year into the stock market to compound for you. And you

Starting point is 00:41:17 already have, you know, 15,000 in a Roth IRA, 14,000 in another. So 30,000 is already invested and you're going to add 50,000 a year on top of that from age 31, 32 to 50. So 20 years of 50,000. Like, that's a million bucks that you're going to invest. Like, that's more money than a lot of people invest in their whole lifetime. So I'm leaning toward pay the green cash. You got the cash. I would do that. Invest aggressively. Do the coast fire thing that you want to get after and not have to worry too much about, you know, some stuff like that. You're very blessed. That's an awesome situation to be in. I'm sure you deserve it. I'm sure you worked really hard. for this. So, congratulations. So I'm going to take a little bit of a different take. And we normally,

Starting point is 00:41:59 and I'm saying Austin's take is fantastic, but I'm going to take a different take because I always like to look at positive arbitrage of my money and how it can help me. So if I could go get those student loans for this degree, and let's say that I could get them for a blended 5% interest, then I would rather probably go get the student loans, pay the minimums, have the 5% interest, pay that and take a bunch of money out of the high yield savings account, get it invested in the market. I'd probably take 100 of the 115, get it into the markets, leaving you a $15,000 emergency fund. Get that into the markets, making money. Hopefully it's going to make 8, 10, 12, 15% for the next two or three years, compounding on itself. And then you can go back and chunk away at the student loans

Starting point is 00:42:46 because the way I look at the student loans, if they're 5% interest and I can make 10, 12, 15% on my money, I'm going to get that 5, 7, 8, 10% in my favor because I can always go back and pay off the student loans. But that's just another take. I think either way works for you because long term, you just have to break down the math of how it works. Because either way, you come out the other end with a great high paying job and very little student loan debt. Yeah, it all comes down to how aggressively and quickly you plan to invest. If you're essentially saying that you have 100, let's call it 100 grand here, program costs 100 grand, and you have to pay for it. If you're saying that you want to go get student loans, with the student loans, I don't think you have to pay interest or any payments on them until after the program's over.

Starting point is 00:43:32 You're essentially saying that you're going to put that $100,000 instead of the program, it's going to sit in the market for two years. And then you're going to now start paying off the student loans aggressively because the money your $100,000 is already invested. you'll have those student loans paid off in two years, assuming this $4,000, $5,000 a month kind of like, you know, strategy you want to aggressively invest with. So we're just talking about like two years here, right? We're talking about like a two to four year little like season of your life where like maybe the money is working super hard in your favor or, you know, arbitrage. Again, it's up to your risk profile, personal finance, personal. My risk profile would be like, I'm good. I'm just going to pay this off because I got the cash for it. I'm going to go make a ton of

Starting point is 00:44:16 money and I'm going to go get that $100,000 invested in two years' time, just like it would have been if it was with the student loans. So again, it's totally up to you here. I don't think Robert's, you know, strategy is off, you know, especially if you can get it at four or five percent, that's great. But the key to making this work, the key to making this work is that you actually say, I'm going to invest $50,000 a year and I'm going to get really aggressive with my investing now that I make all this much money. If that assumption is out the window now, then everything Robert and I, we just talked about is like, baloney. It's throw it out because now you're getting really different.

Starting point is 00:44:49 Get invested. We think it's really smart. Thank you so much for tuning into the episode. Our anonymous listener and everyone else ask questions, Jimmy and Grant, you guys are great. And everyone else listening, I hope you all really enjoyed this episode. We're so, so grateful that you come back every single week to support the show. If you really want more of Austin and Robert, you need to check out the Rich Habits Network. We're still running a seven-day free trial.

Starting point is 00:45:10 And Robert, we have 975 people inside the Rich Habits Network. 117 people joined the Rich Habits Network in the month of July. We say that again, 117 people. What are you waiting on? Why are you not the 118th person to join? Obviously, these people are joining and 98% of them stick around. We did the mat. 98% of people stick around.

Starting point is 00:45:32 So like, what do you waiting on? People that join really tend to like it. They tend to stick around. They tend to have a good time. And, you know, that's what it's all about. So Rich Habits Network, link in the show notes below or just Google the Rich Habits Network. It'll pop right up here. It's a school community.

Starting point is 00:45:45 And when you join, don't forget to watch the eight hours of video coursework and jump on a weekly live stream with Robert and I every Tuesday night, two hours. We host a Zoom call. Give you some market analysis, answer questions. It's a really good time. So again, Rich Habits Network. Go check it out. I think it's the coolest thing I've ever built.

Starting point is 00:46:03 And I've built a lot of things. And I think the reason we're growing so quickly is people are realizing there's a lot of gurus out there. There's a lot of fake gurus out there. And I think we just really. break down tough financial business and mindset matters and make it digestible for the average person at any level of sophistication of investing in business and help them understand there's always a better way you can always be learning. And that's what the Rich Habits Network is all about,

Starting point is 00:46:30 is learning, education, and community. And I really love what we've built. Thanks, everyone. And we'll see you on Thursday.

Rich Habits Podcast - 181: The BIGGEST Wealth Trap To Avoid

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.