Rich Habits Podcast - 184: Do These Wealth Building Habits Actually Matter?

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Starting point is 00:01:05 brought to you by public.com. By the end of this episode, you're going to know the specific habits that actually move your net worth, not the vague stuff like budget better or spend less, but the real, repeatable behaviors that separate people who build lasting generational wealth from people who just earn a good paycheck. And I promise there's a difference. My name's Austin Hankwitz. wind up on my co-host, Robert Croke. Robert is a seasoned entrepreneur with lifetime revenues of over 300 million, and I'm a multimillionaire 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

Starting point is 00:01:44 business, finance, and mindset. So, Robert, what are we specifically talking about in today's episode? In today's episode of the Rich Habits podcast, we're talking about the habits that actually matter when it comes to building wealth, and I wanted to be clear about something up front. This isn't a list of tips. Tips don't build wealth, habits do. And the difference between someone with a strong net worth and someone treading water almost never comes down to income. It comes down to what they repeatedly do month after month, year after year without having to think about it.

Starting point is 00:02:17 And here's the uncomfortable truth. Most people know what they're supposed to do. Everyone knows they should invest. Everyone knows that they should track their spending. But knowing isn't the problem. The problem is that knowledge doesn't compound. Behaviors do. So today we're walking through four habits in order that build upon each other.

Starting point is 00:02:35 You get these four habits right and you're consistent with it. The rest of the personal finance picture takes care of itself. So, Robert, walk us through habit number one. Habit number one is automate and start early while you're at it. The first habit is automation and underneath it is a piece of math. Almost nobody respects until it's too late. start early and invest often. Time is one variable in investing you can never buy back,

Starting point is 00:03:01 and automation is what actually makes often happen without relying on willpower. So here's why starting early matters so much. The S&P 500 is average roughly a 10% annual return over the long term for decades. That means, generally speaking, your money doubles every seven years if it's compounding and you just leave it alone. So somebody who starts investing at 25 versus somebody who starts at 35 years old isn't just 10 years further ahead. They've had an entire extra doubling cycle.

Starting point is 00:03:33 And that decade of, oh, I'll start once I make more money, isn't a 10 year delay. It can be the difference between one extra compounding cycle happening or not happening at all. And that early money ends up doing the heaviest lifting of your entire portfolio's lifetime growth. We always say in the Rich Habits Network, Park money is dead money, and this really illustrates that. Yeah, no, this is also something we talk about a lot on the show, right? The earlier dollar invested is worth much more than the later dollar, even if it's the same amount of money getting invested, which is exactly why automating your investments matter so much.

Starting point is 00:04:08 It's the mechanism that makes early and often actually happen. Willpower is an unreliable system. It fluctuates with your mood, your stress levels, or whatever's going on in your life that week. If your investing habit depends on you manually deciding to move money every single month, you might skip a month because you just don't feel like it. Then you skip two months, and now your whole system is falling apart. Systems execute regardless of how you feel, and that's why it's important to have some automation in your investing systems.

Starting point is 00:04:42 100%. Automation also works on a psychological level. The money moves before you ever get the chance to talk yourself out of it, before it ever hits your checking account and starts looking like spendable cash. Because once money is sitting in your checking account, your brain treats it as available to spend. But if it's automatically diverted into a brokerage or retirement account the same day you get paid, you never form the habit of treating it as yours to spend in the first place. That's why pay yourself first isn't just a cliche.

Starting point is 00:05:12 It's a sequencing rule that is so, so important. So automate the contribution to happen on payday before your bill. before your discretionary spending, before anything else touches that money and whatever's left, that is what you build your lifestyle around. Robert, the lesson here is super simple. Don't wait until conditions feel perfect to start.

Starting point is 00:05:32 We had a whole episode about that. I think it was the biggest trap in finance was the name of that episode, right? I'll start when. So don't wait for those conditions and don't rely just on discipline alone to keep you investing and staying the course. Start now with whatever you can,

Starting point is 00:05:49 automate it, immediately and then treat often, right, investing early and often as the standard, not the exception. 100% Austin. I just believe that the most important part about this section here is people understanding money has to have velocity. And if it's sitting in your account and the weekend comes, you're going to spend it. That's human nature because you think it's available. And I think automation is so, so critical here. So move on to the next one. Yeah, this second habit, Robert, I think is my favorite of the episode, tracking your net worth, not just your income. So when you track your net worth, it could be a shocking number to you, but a recent survey found

Starting point is 00:06:31 that two-thirds of Americans don't currently track their net worth or even know their net worth at all. And that statistic alone is telling me that either they don't know how to do it or they don't care to do it. Now, despite that, they know their salary, right? They know their paycheck down to the dollar. Oh yeah, every two weeks I get this much money exactly or every Friday I get paid this or you know my salary is this plus benefits. And I'm like, they track that. They know exactly what they make, but they have no idea what they're actually worth, what they own minus what they owe. And income is not the same thing as well. You can have a very high income, but a very low net worth if you're spending scales in proportion to your income rising over time as well. You can have a

Starting point is 00:07:14 modest income and a very strong net worth if your habits and your spending is really dialed in and you're living below your means. Net worth is the only number that actually tells you whether you're getting richer or you're just getting paid. So Robert, help me understand from your perspective, why do you think that net worth tracking gets skipped so often even by people that are high earners making $150, $250,000 a year, doctors and lawyers? Like, why do you think they just focused or maybe they skip or they don't they don't start doing that just yet i think a lot of it is fear they know they're making a lot of money but they know they're spending a lot of money and they don't want to know the result it's probably the same reason people skip going to the doctor when they

Starting point is 00:07:55 don't feel well they're afraid of what the answer looks like and so i think it's because net worth can really feel uncomfortable to look at especially early on when a lot of it might be flat or like you alluded to people have a negative net worth i see it all the time where someone's making 150 200 $1,000 a year, but their debts are so high, they have a negative net worth, and they think that they're crushing it because they have a BMW in the driveway and a nice house. But I think it comes back to that discomfort is exactly why it matters, because you always say this Austin, and I love this quote, what gets measured, gets managed. And that's why we have to get rid of that fear, because if you're not tracking your net worth, you have no real feedback loop to know where you actually are.

Starting point is 00:08:41 And you don't know if your habits from the last 12 months actually move the needle or if you've just busy yourself with spending decisions that felt responsible but didn't change your financial position at all, moving you forward towards the goals. So the fix here doesn't need to be complicated. Pick a cadence. Monthly is usually the sweet spot, frequent enough to catch trends, infrequent enough that you're not obsessing over daily market noise and total up your assets minus your liabilities. That's it. Investment accounts, cash, home equity, if you own your property, minus any debts. That's how you get that number. Do that every month, same day each time, and watch the trend line year after year. That single number tracked consistently becomes a report card for every financial habit on that list, and it is what you should be doing every single month, every single year. Yeah, I just want to emphasize this again, right? Like tracking your net worth, not just your

Starting point is 00:09:39 income. I know a lot of you listening right now know, oh, I make X amount of dollars every two weeks, or my salary is this, or I make this much per hour, like, whatever you are, whatever, what's going on with your income? Like, you know your income really, really well. But do you know your net worth? Do you know what your net worth is now versus at the beginning of this year? Maybe what it was at the beginning of last year, right? Like, I was telling Robert when we were writing this episode and, you know, figuring out how we were going to, like, portrayed these habits to you all, I found my net worth tracker from like 2021. And I was like going through it. And I was like, wow, I can't believe I was tracking this stuff. Like what gets measured gets managed? Wealthy people forecast, broke people

Starting point is 00:10:18 react. And so be someone that does not just obsess over their income, but is putting that income to work in such a way where your net worth is inching higher time over time, call it month, quarters, years especially, right? Understand what direction you're trending in as a human being from a wealth-building perspective. 100%. Robert, let's now jump to our third habit, which is what to do the moment unexpected money shows up, and that is reinvesting these big windfalls instead of spending them like they're just free money, right?

Starting point is 00:10:52 Think bonus, tax refund, maybe a commission payout at work. Maybe you came into an inheritance or some sort of liquidity event at your business, right? like anything that's outside your normal paycheck. Here's why windfalls carry so much leverage over a long period of time. If you think about it, your regular paycheck already has lifestyle built around it. You've budgeted for it. You expect the money. Most of it's already spoken for.

Starting point is 00:11:17 But a windfall is different because it's money you were not relying on to live your current life, which means it's the purest form of surplus capital that you'll ever get your hands on. And that surplus capital, if used correctly, can go. straight into your investments, start compounding for you, like all the other money in your portfolio, and you're off to the races. So now, Robert, I know I asked you before, I want to ask you again, why do you think people make the mistake of, and I know you've got a personal antidote I want you to share on this, but it's like, why do you think when people get this, you know, windfall of $20, $30, $50, $100,000, they blow it. Yeah, I think it's because they look at it as free money

Starting point is 00:11:57 and they don't look at it as the lifeline that it really is to get them to the next level of their financial dreams. And I see it all the time. And I think the biggest common mistake is mentally categorizing this windfall money differently than real money and treating it like house money you can spend loosely on things you normally wouldn't buy. And I think that's where the whole thing where people, they get into this lifestyle creep method and they go, oh, I've got, I have this 50,000 coming up next month. I know what I'm going to do. I'm going to get the boat. I'm going to remodel the backyard or whatever they're going to do. and they don't realize that at that point in their lives,

Starting point is 00:12:36 they're probably treading water. We see these stats all the time that in the U.S., you know, over 60% of U.S. households making over $100,000 a year are still living paycheck to paycheck. And if they understand the importance of this one step of using that money to invest for their future and letting it compound, rather than just blowing it and going back to normal, it changes everything for them and their family for decades to come.

Starting point is 00:13:02 I think a windfall should get the same treatment as any other capital decision, actually more disciplined because there's no automatic system pulling it into that investment account the way your paycheck would be set up to be. And you have to make an active decision. And that decision point is where most people leak the value of the entire windfall because they go blow it on something because they felt it was free money and didn't take it seriously as a way to get to the next level financially. So the habit to build here is simple.

Starting point is 00:13:34 Before you spend a single dollar on a windfall on anything discretionary, decide what percentage is going straight into investments. Some people do all of it and some do a portion and let themselves enjoy a small piece of it. But the number needs to be decided in advance. Ideally, before the money arrives, I think this is the key here. So you're not making that decision emotionally at the moment this money hits your account. I know what you're thinking. man, we can't have any fun around these rich habits, guys, but I promise you, we're okay if you spoil

Starting point is 00:14:05 yourselves a little bit. We're just pointing out what the math does for you, where you can let these windfalls compound because they don't have competing claims on them. So figure it out before you get the money, figure out the percentage you're going to play with and the percentage it's going to invest it, and then protect the rest by getting it invested as soon as it hits your account. It brings me to a story that is very real to me. This is many, many decades. ago. My girlfriend at the time, I think I was 19 and she was 18 years old. She got hit by a motorcycle. She got a settlement of $40,000. She's like, what should I do with it? I'm like, that is a ton of money, especially back then. I took her to Tim Croke, my cousin who runs Croke Capital. He sat her down and said,

Starting point is 00:14:47 look, put this into your Roth IRA, get yourself set up. You'll have hundreds and hundreds of thousands of dollars from this $40,000 at retirement. And she really wanted to buy this Chrysler convertible. She went ahead and bought the convertible, didn't listen to Tim and I. Obviously, that car went to zero in a few years like most cars do. She never saved the money, never got started. And then as of what I've heard recently is she's not in a great financial situation. So the windfall is just a lifeline for anyone listening. If you get it, I know you want to spend it, but please don't, because if you let that money compound for years and decades, you'll thank us later. Yeah, I think the windfall is an important one because it comes in all different shapes,

Starting point is 00:15:31 forms and sizes, right? Like, I've got friends that get big bonuses, 20, 30, 50, $100,000 bonuses at the end of the year. I also have friends that get big tax refunds. I've got other friends that earn sales commission. I've got other friends that are realtors and they earn, you know, commission when they do some realty stuff. Like, windfalls come in all different shapes and sizes and you need to be prepared for when you do get a windfall to have a plan with it. Maybe you spend a portion of it and you invest another portion. Like maybe you invest all of it. Like regardless, just have a plan because the wealthiest people I know, whenever they get a windfall, that money is already allocated to some sort of investment, some sort of savings account, some sort of endeavor, some sort of new thing that they're working

Starting point is 00:16:17 on or doing where it's going to compound in their favor versus, oh, I got a windfall. I'm going to go buy a boat. I got a windfall. I'm going to go upgrade the lawnmower. You know, like, whatever, right? So it's like, just make sure you're being strategic when you get these windfalls because they're pretty common. Now, Robert, before we jump to our final habit here, need to give a shout out to public.com, the investing platform for those who take investing as seriously as we do here on the Rich Habits podcast. 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, 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 let you back-tested against the S&P 500, all with just a few clicks.

Starting point is 00:17:17 Generated assets can be thought of as ETS, but with infinite possibilities. They are completely customizable. They're based on your thesis, not someone else's. And they're easy to build. So go to public.com, transfer your portfolio, and make sure you use public.com slash rich habits because maybe you find a surprise in your portfolio when you transfer, Robert, you never know. Paid for by public investing, full disclosure in the podcast description. And shout out to public.

Starting point is 00:17:42 They just came out with these AI agents that are now off the wait list. So AI agents, we had Yonick on the podcast a while ago. AI agents are completely open to the public now. And they've got a catalog of agents. So you can see what other AI agent, trader, investor, bought things that other people on the platform are using. So like, go check out Public. They've got a ton of cool tools and resources. But if you open an account, please go to public.com slash rich habits and let them know that we sent you. All right, Robert. So let's now wrap up this episode with our final habit, which I think I know I talked about the net worth versus the income side, like being really important.

Starting point is 00:18:17 But like this one is a goaded habit. And I don't think people spend enough time thinking about it. So I really hope that people take this episode and can really like self reflect and think, am I doing this habit? And that is protecting your time to keep learning. And it's one to skip easily because you're like, oh, not that urgent, automated. I can learn later, whatever. There's no numbers to track. Like, I get that.

Starting point is 00:18:41 But financial knowledge compounds exactly the same way that money does. And the people who keep learning make dramatically better decisions with their money every single time, they're faced with a fork in the road, what to invest in, when to take on debt, when to walk away from a deal, how to read the market cycles. The problem is most people's financial education stops the day they left school. That was high school or college, if it even started at school at all, because most financial education isn't even being taught places, right? So like all that stops the moment you leave because no one keeps educating themselves. But despite you not educating yourself anymore, theoretically, the tools, the tax code, the products available, they all keep changing and

Starting point is 00:19:24 morphing and doing new things. So like not only are things changing, but you're just like not even putting in the time and energy and focus to learn the new things that are changing. So someone who hasn't updated their financial knowledge in 10 years is making decisions on a 10 year old roadmap that is just not reality anymore. Yeah, I read the stat that over 45% of U.S. adults over 35 years old, don't read even one book a year. So I agree with this totally. They just stop learning because they're not forced to learn, and it's on them.

Starting point is 00:19:59 So they're spending their time watching sports and doom scrolling, and they're not updating that financial roadmap. And that's why the Rich Habits podcast and Rich Habits Network is so important to keep you guys up to date of what works now to help you build wealth, not maybe something you learned 15 years ago. So I think this habit just gets deprioritized because it doesn't have that immediate visible payoff. If you automate a contribution, you can literally watch the account balance change, but an hour spent reading about how a Roth conversion works or how a covered call strategy behaves in a down market

Starting point is 00:20:35 doesn't show up as a number anywhere. And it's theoretical until you take that action. It shows up later as a better decision you make down the road that you wouldn't have known to make otherwise. So that delayed payoff makes it easy to deprioritize in the moment, even though over a decade it might be the highest leverage habit on this entire list. Yeah. No, I like that, Robert. And the fix here is simple, right? It's treating financial literacy like a scheduled habit, not like something that you'll get to eventually. And you listen to the Rich Habits podcast. You're putting in some work. We appreciate that. We're not trying to downplay that. But blocking out that actual time, even if it's just like an hour a week to listen to our show, about an hour of week for these. Monday episodes, maybe read, follow the markets, maybe you join the Rich Habits Network and you join us for a two-hour weekly live stream. Like, I know for a lot of people, that is there, their time to learn about the markets, learn about strategies, see what everyone else is doing.

Starting point is 00:21:30 So just like finding that time and then making it real and being dedicated to it. It doesn't have to be complicated. Just, you know, read a few finance newsletters, listens to our podcast, follow people who explain concepts clearly and concisely, like Robert myself, right? Like, the goal is to not be a professional Wall Street analyst. Right. The goal is to keep your financial literacy moving in the same direction as your money, which is up into the right. Yeah. So here's how to actually apply this. Ask yourself these three questions, one for each habit we covered today. Is my investing automated or does it depend on me remembering every month? And if I haven't started yet, what's actually stopping me from starting this week instead of waiting.

Starting point is 00:22:16 Do I actually know my net worth right now off the top of my head within the last 30 or 60 days? And then the last time I got unexpected money, did I decide in advance what percentage would go to investments? Or did I blow it like most people? And when was the last time I spent real dedicated time learning something new about how money works and how it affects my personal development for my net worth. And if you can't answer one of those questions confidently, it's not a reason to feel behind. It's just the next habit that you need to start working to build out. Because wealth isn't built in a single decision. It's built in the boring, repetitive handful of habits that are done consistently over a long period of time. If you start early,

Starting point is 00:23:00 you automate the processes, you measure it, you protect your windfalls, you keep learning, right? Like none of this stuff is complicated. It all just is kind of, systematic. You just got to stay with it over a long period of time, and it's going to compound in your favor. Yeah, definitely. This whole episode reminds me of one of the quotes you kind of put together based on something I said. And I think it goes like investing to build wealth should not be like an action sport. It should be watching paint dry and then having ice cream when it's over. And I think it's just such a fun anecdote to so many people think investing has to be either difficult or they have to get too fancy to build wealth. And I've learned over 40 years of

Starting point is 00:23:45 investing that the best investments I've made have been the boring, consistent ones because they just always grow and go up over to the right for me year after year and decade after decade. So I love this episode. Can not agree more, Robert. Now, before we jump to our Q&A section of this episode, got to give a shout out to Nios Investments. And we actually had them on the show pretty recently after their announcement of their partnership with Goldman Sachs, Nios offers ETFs that seek high levels of monthly income with a keen focus on tax efficiency while providing core portfolio exposure across equities,

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Starting point is 00:24:49 consider learning more about NEOS ETFs at NEOSF funds.com. And as with all investments, investors should carefully consider their investment objectives, risks, charges, and expenses of NEOS exchange-traded funds before investing. To obtain a prospectus containing this and other important information, please visit neosfunds.com. Please read the prospectus carefully before you invest. An investment in neos funds does involve risk, including possible loss of principle. There is no guarantee the neos ETFs will make monthly distributions and the amounts may fluctuate from month to month. Cryptocurrency is relatively new and the market has its own specific risks and neos investments are distributed by four side fund services LLC. All right, Robert, now we've got our Q&A section of this

Starting point is 00:25:35 episode. If you have a question to ask us, please email us at richhabitspodcast at gmail.com or DM us on Instagram at Rich Habits Podcast. We've got three good ones. I think one, two, all three of them are from Instagram. So you know what? Instagram is just going to be what we're doing today. Rock and roll. Our first question comes from Franco H on Instagram. Franco says, hey guys, I just found your podcast and I've been binging it all week. Thanks, Franco. Really appreciate that, man. Franco says, I'm 54 years old and I made the mistake six years ago of opening a Roth IRA with my credit union not knowing that it was not actually invested. I recently transferred that $30,000 that had just been sitting there over to fidelity and now I'm wondering how I should spread it out across stocks and

Starting point is 00:26:25 ETFs assuming I'm ready to hold it for 15 years. I plan to contribute a couple hundred dollars into this account when I can afford to. Would really appreciate your advice. Thank you so much. Over to you, Robert. This is pretty common, Franco, so cut yourself some slack. I see it all the time where people hear about the Roth IRA. They think it's an actual investment. They don't realize that it's the vehicle to invest through to get all the benefits of the Roth IRA. So in my opinion, I know it stinks, six years of no gains with all that money, but we're going to fix that today.

Starting point is 00:26:58 So what I would do is I would look at getting a basket of these funds we talk about all the time. Up and running, you're 54. you've got a long horizon ahead of you to build on this money. And you could start really simply with a V-O-O to get the S&P 500, maybe a QQQM to be able to get long-term NASDAQ. And then I would probably throw in maybe something like AIQ to get you some international AI exposure and keep it simple, three, four, five of these funds.

Starting point is 00:27:27 And you'll be up and running right away. And you could break those down however you'd like. I'd probably think V-O-O-O-the-S-NP-5. 500 should be 60% of those funds and then maybe 20 and 20 with the QQQM and the AIQ. But if you wanted to add anything else into there, you could put in something for dividend building. You could put in something like in the energy sector, but there are a lot of options. But I would keep it simple with three, four, five of these funds.

Starting point is 00:27:55 Yeah, I like that. You know, I'm thinking VXUS is a really good one. It's that international, right? So it's the international stock market. You talked about international AI, but why not just international everything at that point, right? So that's a good one as well. But listen, it's okay. I've got a close friend actually that had 15,000 in her Roth IRA.

Starting point is 00:28:15 And we're hanging out a couple years ago. And she was like, hey, you know like stocks and ETFs, right? Like, can you like look at my investments for me or like just check out my accounts? And I was like, sure. And so I, you know, she opened up her account and like showed it to me. And I'm looking at it. And I was like, you do know that you just have like 15 grand in here. and it's like not invested.

Starting point is 00:28:34 It's just sitting in cash. And she was like, wait, really? What? What are you talking about? I keep putting money in my Roth IRA all the time. And I was like, yes, which is good, but you have to also invest the money. And she's like, I've been doing this for years. I had no idea.

Starting point is 00:28:50 It's okay. Like, it happens. I get it. So, Franco, don't feel bad. People make this mistake all the time. The good news here, though, Franco is you've got 10, 15, 20, 25, good years ahead of you of compounding and investing in. American capitalism and the stock market abroad. So like, don't feel bad. Robert gave you some great

Starting point is 00:29:08 names and I did as well. So our next question comes from AK. AK says, hi Robert and Austin. I have a niche question that I can't seem to make sense of. Do you know how Pokemon cards are going for thousands of dollars, how they are taxed? I have a friend who recently won a rare Pokemon card at a competition and he doesn't really know how to go about selling it. Since it's a prize, does he actually owe money on the entire value of the card because he doesn't have any, you know, money spent toward acquiring it? What would the assumed income or base cost be? We'd love to see you all discuss this on the podcast. Thank you. Robert, I know you've been doing collectibles for a while and Pokemon cards are all the rage right now. Unfortunately, I saw this video of a guy on Instagram who had posted, he's like, hey, it's 2026.

Starting point is 00:29:58 Here are the Pokemon cards that I sold out of my collection in 2020 with the eBay receipts and everything. And it was like, I sold this card for 120 bucks. Here is it now and it's now worth $16,000. I sold this box for $400. Here is it now worth $42,000. I was just like, oh my gosh, Pokemon cards are crazy again. So, you know, Robert, talk about what's going on with collectibles from a tax perspective. Obviously short-term capital gains, long-term capital gains.

Starting point is 00:30:28 But, you know, there's some nuances here. Yeah, I love collectibles. I've been down this road many times. I, too, had a big surprise in the last six to eight months because all of these, like, non-rooky Jordan cards, some of the really good cards that I've had graded over the years that were worth like 50 to 80 bucks, you know, years ago are now worth $800,000, $2,000. So the way it works, to the best of my knowledge, you should surely check with a lawyer or an accountant on this. But the way it works, you're going to pay taxes regardless.

Starting point is 00:30:58 You have to come up with what the cost basis is, whether you inherited it or got it as a gift, what that cost basis is. And then that way you can calculate where you're going here because you're going to get charged the higher rate based on your profits on that card. And so you have to look at it this way. You're going to have short-term capital gains, which is owning it and selling it in under a year's time, and long-term capital gains, which is over a year. So that's going to be one of the big distinctions your friend needs to decide is, should I hold it a year, let it keep appreciating, and then sell it for a lower tax bracket. You're still going to pay the taxes regardless, or sell it right away, get that money invested. I think you can go either way because a lot of things in this collectible fine are rare coin and stamps all get charged a higher capital gains rate at 28%. So you have to keep that in mind.

Starting point is 00:31:54 there is no way around it. It's found money for you. Pay the taxes, move on or just keep it for as long as you want and then worry about the taxes later. That's my take. I don't know if I missed anything, Austin, but if I did, I'm sure you can cover it. Yeah, no, I think it's important to know that collectibles, if you, if I bought a Pokemon card for $10,000 and two months later, I sold it for $12,000, I made a $2,000 profit. That $2,000 profit is taxed at ordinary income tax rates. for me. So that could be up to, you know, 30 something percent depending on tax brackets. That's how that $2,000 is taxed. If it is held for longer than a year, it's not at the zero, 15, 20 percent long-term capital gains that stocks and equities and bonds and investments and things like that are

Starting point is 00:32:40 made at. Collectibles are just 28 percent. So if you owe 28 percent long-term capital gains taxes on profits if it's held for over one year. And since your friend was given this card and won it in some sort of competition. Their cost basis is zero, which means your friend owes 28%, assuming they're going to hold it for a year and sell it in a year, on the entire value of the card and what they sell it for. So if they want a rare Pokemon card and they sell it in a year's time here for $10,000, carve out $2,800 of that to pay Uncle Sam because he's going to want to share. And the IRS actually defines a lot of these alternative assets as a collectible in this category. So like not just Pokemon cards, but fine art and even antiques.

Starting point is 00:33:25 Rare coins and stamps. Precious metals, which surprised me when I saw that. I did not know that. Gems and jewelry, you know, comic books, sports memorabilia, alcoholic beverages, and vintage wines. So if you're someone that's like wheeling and dealing with some of these collectibles, just talk with the CPA, make sure they sign off on what's going on here and you're actually, you know, paying the taxman what you're supposed to.

Starting point is 00:33:48 Yeah, 100%. It's always funny because people think, I just made all this money and they forget they got to pay the tax, man. So make sure you understand that and do exactly what Austin said so you know what to do, not just for this particular Pokemon situation, but anything else. If you're like me, I go to estate sales, I buy art, I invest in fine wine and whiskey, all these things. But you have to know how the tax structure works. So you know if you're actually making money and what that percentage is. Well, here's the other one that people forget about, and that is online sports betting, right? They'll say, oh, yeah, I've been betting on sports, about on the Super Bowl, I did this, I did that, whatever.

Starting point is 00:34:26 And I made $4,000 or $400, like, whatever the month is. And then they get, you know, call she or they get draft kings or whatever that sends an email that's like, hey, here's your tax form. And you're like, my what? My what? Huh? And they look at it like, oh, man, I got to report the $1,700 I made? Oh, dang, I didn't set aside. I spent all of those proceeds. I didn't set aside any money for taxes on that. And then they're scrambling, right? So it's like, just be worried about like if you're coming into money. Like normally the IRS likes to get theirs. Our final question comes from an anonymous listener on Instagram. I'm 25 years old. I'm debt free except for a car with $26,000 left at a 9.2% interest rate. I have $20,000 in a high yield savings account earning 3%. $9,500 in a typical savings. savings account and $3,000 in a brokerage account. Should I use $9,000 and pay off a lump sum off the car or should I invest that money in my typical savings account and do maybe a smaller

Starting point is 00:35:28 lump sum like $5,000? Okay. So essentially they got $20k here, $9,500 in this other savings account, take some of that payoff car or, okay, got it. I'm currently paying double monthly payments so a total of $1,300 a month to accelerate the payoff because of the high interest rate. My work offers a 3% match on the 401k. I put 8% in every month. I do not have a Roth IRA. Do I open up a Roth IRA? Do I do this 401K stuff?

Starting point is 00:35:55 Thank you off so much for the help. Love the podcast. I just have no idea what to do. Robert, 9.2% interest like that's no fun. I don't like that. I have a headache just from listening to you describe all of this. So I'm going to take a shot at this, but there's a lot of moving parts. First and foremost, I think you should just do up to the match in the 401k

Starting point is 00:36:17 and get all the other money into the Roth IRA. You need to get that set up right away. You're 25 years old. Anyone over 18 in America needs to have the Roth IRA. It is the best wealth building tool on earth. It's not an if. It is a when and as soon as possible. Second, what would I do with the car?

Starting point is 00:36:36 I don't know that I'd be lumping all of this money into. to and making myself be stretched so thin with this $1,300 month payment. Here's what I would do right now today as soon as you hear this episode. I would see what you can get for a trade in to get rid of that car. I would try to trade it in and I would downgrade a car into a lease. There's a million lease specials right now where you can walk in with zero down and no money up front and get a really inexpensive lease. so you're not putting out $1,300 a month at a 9.2% interest rate.

Starting point is 00:37:12 So look at it this way. You owe $26,000 on the car. Let's say they'll give you $22,000 trade in. So you're $4,000 in negative equity. That's where I would take $4,000 out of the lump sum you talked about to pay off the negative equity, lower your payment down to $300 a month from $1,300 a month, take all of that extra capital, get yourself fully bulletproof, get all your money back in order and then reevaluate after that.

Starting point is 00:37:42 Because with 9.2% interest, plus you're making double payments, you're a long ways away from being in a good spot with this car. And I assume you don't have any real equity in this vehicle. And it's probably upside down anyway. So that's what I would do. I'm going to take the complete other side. I don't think you need a brand new lease at 25 years old. You're 25.

Starting point is 00:38:03 You don't need to be driving a brand new car. Here's what I would do. you've got $26,000 that you owe on this car. You've got $20,000 right now in a high-guiled savings account. So if you put all $20,000, you now have $6,000 left on the balance. You've got $9,500 in a typical savings account, which means if you put that money toward this, you'll have $3,500 left over. You also have $3,000 in a random brokerage account. So now we've got $6,500 of cash available to us after we pay off this $26,000 balance on your car. You mentioned that you're putting double monthly payments, so $1,300 a month toward this car. So that tells me you have $1,300 a month to play with because you earn

Starting point is 00:38:46 enough money to do that. So if you do that for the next 10 months, instead of paying those double payments to the car, you paid yourself instead, those $1,300 a month. Now you've got that emergency fund built back up to $20,000 in only 10 months. And now you still have this $1,300, because I know you've got it in your budget. Now you're using the $1,300 to max out your Roth IRA. You're going to do that very quickly. And then the other, let's call it, $7 to $800 a month on top of that after you max out that Roth IRA, you can then take that extra $7 or $800 a month and start building back up that bridge account. Or you can contribute more to your 401k and do it that way. I see a world where you have a paid off car that's not high interest debt. You've got no debt at all because now you're

Starting point is 00:39:31 debt free besides this car. So no debt at all. So you're paid off. off all your debt, which means you've got a ton of money to play with every single month, no high interest debt. You're maxing out your Roth IRA, up to the match. You're doing the taxable thing afterward. Or you're doing the Roth, or I think you said it was a normal 401k. So now you're doing the 401k. Like now you're building wealth like crazy at probably 26 years old because now we're 12 months into the future. That's how I'd play it. I just, I feel like getting rid of this car would be a good idea and you have the cash to do it right now, assuming that 3,000 in the brokerage account with like you don't need. It's probably invested silly anyway,

Starting point is 00:40:07 no offense. But I would do that. And then I would use that 1,300 to really make some moves every month for the next year or two. I love that breakdown. And that's why personal finance is personal. And that's why we have different opinions all the time. But guess what? They always work, because it's up to you of what fits your lifestyle, your risk tolerance, and your financial goals the best. Everybody, please join us inside the Rich Habits Network. we're still offering a seven-day free trial. We're investing in some of the coolest companies. If you want to invest alongside Robert and I

Starting point is 00:40:39 into a brain computer interface company that's a competitor to Neurrelink, like Elon Musk Neurrelink, like that's cool. We're also doing a nuclear power manufacturing company that's raising a Series C right now at like over $2 billion dollar valuation. So that's exciting.

Starting point is 00:40:56 We're investing into some really cool pre-IPO companies at the moment inside the Rich Habits Network. If you're into that sort of thing, if you want to learn about the process, you want to do any of that stuff, join us over there, tons of education, eight hours of video coursework, all about personal finance investing and doing this sort of, you know, pre-IPO startup investing as well. We host a two-hour weekly live stream every Tuesday night, and we have our hour-long office hours every Friday. Robert's hanging out. I'm hanging out. I'm probably drinking some water. He's eating a bagel.

Starting point is 00:41:24 It's good vibes. We're just chilling. And again, seven-day free trial over in the Rich Habits Network. You can join us. You can check out all the stuff. and then after you've checked it out, after you've done the live stream in the office hours, you can make a decision on if you want to stay or not. Again, we'd love to have you. You'd join over a thousand other people inside the Rich Habits Network. And Robert, here's a fun fact. 116 people just this month in August have joined us in the Rich Habits Network, 116 in August.

Starting point is 00:41:52 So why are you not the 100th 17th person to join us in the Rich Habits Network person listening right now? We'd love to have you. And if you did come from this episode, be like, yeah, Wasson, in the DMs. I'm so happy I'm here. I came from this episode that you talked about me being 117. I will give you a selfie and like thumbs up in the DMs. It'll be great. I mean, it is the coolest school community on the platform if you're looking to level up your business knowledge, your mindset, your financial knowledge and getting to be able to invest alongside of us, I think is probably the icing on the cake because we get all of this deal flow into the coolest companies you hear about

Starting point is 00:42:29 in the headlines that aren't public yet. and haven't IPOed yet. So if you're interested and you're looking to level up and you like what you see in here every week on the podcast, the Rich Habits Network is probably for you. So click the link in the show notes below. Google Rich Habits Network, find it like anywhere, just figure out how to find the Rich Habits Network. You can find it. I promise it's everywhere. As always, thank you so much. We'll see you on Thursday for a Q&A episode. Two and five Canadians will hear the words you have cancer. That's why every step and dollar raised matters. On September 19th, join thousands in Toronto for the Princess Margaret Cancer Foundation

Starting point is 00:43:31 Walk. Challenge yourself, friends, and family to walk 21 kilometers in support of life-saving research. Together, we can carry the fire and help create a world free from the fear of cancer. Register today at pmcfwalk.ca.ca.com.com.com.

Rich Habits Podcast - 184: Do These Wealth Building Habits Actually Matter?

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