Rich Habits Podcast - 185: Is Your Financial Life Too Complicated?

Starting point is 00:00:00 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're going to know exactly why your financial life feels overwhelming and three specific things that you can do right now to fix it this month and make everything simple again. My name's Austin Hankwitz and I'm joined by my co-host Robert Croke. Robert is a seasoned entrepreneur with lifetime revenues 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 single 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? In today's episode of the

Starting point is 00:00:42 Rich Habits podcast, we're asking a question. A lot of you already know the answer to, even if you haven't said it out loud. And that question is, is your financial life too complicated? And here's how you know it is. You've got money spread across six or seven different accounts. and you couldn't tell someone your total balance without pulling up on your phone and adding it all up together. You've got credit cards you opened for a sign up bonus three years ago that you still carry a balance on, and you're not totally sure what the interest rate is. And you and your spouse have separate accounts, separate goals, and honestly separate financial lives running in the same household.

Starting point is 00:01:21 If you've got a business, a side hustle, or rental properties, your personal and business expenses are tangled together. in a way that makes you wince every time you think about tax season. And your investment portfolio isn't a portfolio. It's a graveyard of stocks you bought on a whim because somebody at the barber shop or somebody online was talking about. And half of them which you forgot you actually own. None of that is a character flaw.

Starting point is 00:01:47 It's just complexity that is built up over time, one small decision at a time, until one day you look up and the whole system feels too tangled to even start. untangling and that's where we're at today. Yeah, Robert, when your financial system feels this overwhelming, the natural response is to just do nothing. You sit on the sidelines, you observe, and you're just kind of drifting through life. You don't actually open any statements. You don't try and consolidate your cards. You don't set up your investment account. You just sit and drift. Being overwhelmed doesn't just feel bad, but it can become very expensive because the fix requires action and

Starting point is 00:02:27 Complexity is the biggest reason people stay frozen and do not take action. You know who you are right now. You're listening. You might have had a job at a 401k two years ago that you've yet to roll over into your Roth IRA or maybe a card to Roberts point that you opened up six months ago for some bonus points that has got a couple subscriptions on it, but you're not really sure what's going on over there. You're very complex. Everything is spread out entangled.

Starting point is 00:02:54 So today we're going to give you the three ways to fix it. So Robert, let's get into strategy number one. Absolutely. In my opinion, little leaks do sink ships, and we're going to unwind how to help you guys get back on track and simplify everything. So our first strategy today is know your money and combine it as a household. The first fix is the foundation everything else sits on. You have to actually know how much you're making, when it hits your account, how much you're

Starting point is 00:03:24 spending, and where it's all going. This sounds basic, and that's exactly why most people skip it. Most people can tell you their salary. Very few people can tell you without adding everything together manually across all their cards and statements, what they spent last month, or what day of the month their bills actually clear versus when their paycheck hits. It's shocking to me, but it is so, so prevalent. And the gap between income timing and spending timing is where a huge amount of financial stress lives. It's not usually that people don't make enough. It's that they don't know the shape of their own cash flow.

Starting point is 00:04:02 So they're constantly reacting instead of planning. So critical here. You get surprised by a bill you forgot was coming. You overdraft two days before payday. None of that is an income problem. It's a visibility problem. And it's completely fixable once you actually sit down and map it out what comes in on what day, what goes out on what day. That's it.

Starting point is 00:04:25 And I just want to emphasize. this before we go to the second point, you should have a money calendar. You should see what day does this subscription hit? What date is this expense hit? What day do I buy the groceries? What day does my paycheck come? And understand and predict how much money you're going to spend that week, how much money you're going to spend that month before the week or the month even starts. And no down to the day when those things happen. Once you have visibility like that, you feel as if building wealth and investing and saving is just like this automatic thing because you completely understand where the money is going to come from before any of the transactions even take place. So we're now, Robert,

Starting point is 00:05:08 talking about these transactions. Let's talk about the credit cards for a second because a lot of people, including myself, I'm guilty of this one sometimes. A lot of people have this problem. They're carrying five, six, seven different credit cards. They've got one for the airline miles, one for the cash back, one for the store that they signed up for at a checkout for a discount. One maybe that their bank pushed on them because they were getting swindled at the time. Each card has its own due date, reward structure, log in to some different app or website, and the mental overhead of tracking seven different due dates and seven different categories and seven different logins is why you feel like your financial picture is in a mess. You don't need five, six, seven credit cards. You need

Starting point is 00:05:53 maybe two or three that you actually understand and enjoy using. One for maybe everyday spending that earns you something meaningful. One maybe for a specific category like restaurants or groceries or travel or whatever that is. One for maybe that third thing that might apply to you, but the rest of them should get paid off and frozen, forget about it. Maybe don't close them because if you close them, it kind of impacts that credit score. But just be mindful about the cards you use. If you are moving parts means fewer things mess up and fewer things get missed. Yeah, I think of so many stories. I used to know a guy. We were friends back in the day. He seemed very successful and had all these businesses and rental properties and a multi-million dollar home. And then one time his wife

Starting point is 00:06:40 shared with me that they had $86,000 of overdraft fees in one year because they didn't do the things we're talking about. $86,000 wasted because they didn't prepare and have all of this structure. So that blew my mind and it just popped up for me. But let's get into the third piece and that is combining finances. So if you're married and you're still running two completely separate financial lives, sharing a mortgage but not a spreadsheet, you don't actually have a household financial picture. You have two individual ones sitting next to each other. And that makes it almost impossible to build towards these shared goals we're hoping to achieve with this podcast because neither person can see the entire financial picture.

Starting point is 00:07:24 So this doesn't mean every single dollar has to be joint. Plenty of couples keep some individual accounts for personal spending, but there needs to be this combined view for everything. A shared understanding of total income, total expenses, total savings rate, total net worth. If one person is the one who handles the finances and the other one has no idea what the numbers actually are, that's not a combined household. That's one person carrying the entire cognitive load alone.

Starting point is 00:07:53 And that's a setup that will eventually break down because we all know the number one cause of divorce is money fights and money problems. So the fix here is simple to state. Even if it takes an afternoon to actually execute, sit down, map out your income and expense timing. So you know where your real cash flow is. Cut your credit cards down to two or three that you actually use and understand. And if you're a household, get on the same page with. with one shared view of the numbers. I promise you this is really, really important.

Starting point is 00:08:25 And that's it. That's the entire fix. And it's the one that makes everything else in this episode much, much easier to achieve. And getting on the same page with your money, with your spouse might be hard. So here's how to approach it. You have a joint checking account. Our paychecks get deposited into this joint checking account. We have a household budget that we agree on before the month even starts.

Starting point is 00:08:48 hey, you know, we're filming this right now, Robert, August 26th, September, let's figure out what we're going to spend. What's coming in? What's going out, right? Let's go on the same page with money. We're married, right? We share a bed together. Let's share a spreadsheet together, too. And then once that money's deposited and it's earned, you're rocking and rolling. Expenses are paid as they're incurred, just like what you budgeted and the saving, investing, and everything like that always happens because it was outlined in that monthly budget. Austin, we might have some miscellaneous expenses. Sure, figure that out, not that deep. What is important is that you guys are on the same page with the money that's coming in, what's going out, what's getting invested, and you're trending in the right direction together toward a very wealthy retirement. One person isn't doing all the numbers and doing it over here while the other person is just la-di-da. I don't know anything. I'm just living my life, right? Like, you have to be on the same page.

Starting point is 00:09:42 Visibility is important. And the best marriages are ones. that have open communication about money. And before we get into strategy number two, I want to linger for a second. If you're not married yet, but you're in a serious relationship, maybe you're engaged and you're going to get married in a year or two,

Starting point is 00:10:00 these conversations all need to happen anyway. Don't wait until you get married to figure out if you're both on the same page financially for the future, because especially if you're in your younger years like Austin and Ireland are, you need to have this all figured out, in advance because you don't want that money stress five years down the road, 10 years down the

Starting point is 00:10:20 road. After it's too late, you're already married and you're not on the same page. So I wanted to linger there for a second. Before we get into strategy number two, which is separate your personal and business financial matters, this one is absolutely critical as you're building your wealth and building your assets. So this second fix is all about keeping personal money personal and business money for the business. And if you don't have a business, a rental property or a side hustle, you can think of this one as a preview for what to do when you do, because almost everybody eventually crosses into this territory of entrepreneurship and asset ownership, but here's the problem. The moment you have any kind of business activity, you now have to

Starting point is 00:11:05 have two separate financial pictures, and they need to stay separate. And a shocking number of people run both pictures through the same personal finance account and the same personal credit card. And that is a no-no that ends today. They buy business supplies on their personal card or they deposit client payments into their personal checking account and then just kind of mentally keep track of what's the business money in their head and what's the personal money in their head. And that system works fine right up until tax season. And then it becomes a nightmare. because now you and your account have to go back through 12 months of transactions to try and reconstruct what actually happens with a business expense or was it or wasn't a personal expense

Starting point is 00:11:49 and that is just really rough to do after the fact. Yeah, please don't do this. Please separate business and personal. And the fix is structural, which means you don't fix this by trying harder to remember what you spend something on. You fix it by actually creating accounts, separate things, and that separation has. happens automatically because you're using different cards, different bank accounts, different structures, things like that. If you have any business or any rental activity, that activity

Starting point is 00:12:14 needs its own checking account, ideally its own credit card. Every dollar of revenue goes into that account. Every business expense comes out of that account. If you have multiple properties or multiple businesses and ventures, each one arguably deserves its own account as well, its own LLC, its own E-I-N, or at minimum, its own clean ledger, so you can look at each one of them, individually and know how well they're performing without untangling it from everything else. And again, this matters more than just like convenience when you and your accountant are going through taxes. It matters for actually knowing whether your business or your rental property is profitable. If the money is all mixed together with your personal spending, you don't have

Starting point is 00:12:55 any idea as to what your real margin is. It's all kind of commingled together there. So that clean separation is the only way to get an honest answer to the question of is my side hustle, my business, my rental property, actually making money, or am I just kind of subsidizing it all with my normal spending? Yeah, I see this every single day where people think they're up and running and they're doing a good job. They just bought their first rental property and their personal name. Then they just opened their first LLC, but they use their home address and their personal cell number. And all of this extends to the legal and structural side of this too. So if you set up an LLC or an S corp for liability protection, that protection actually depends on how you treat it and if you treat it like a separate entity.

Starting point is 00:13:42 If you're commingling funds using the business account of a personal bills or vice versa, you can undermine the legal separation that the entity was supposed to give you in the first place. Proper operating structures, real separation, clean books. That's what actually protects you. And it's what makes tax season something you can get through in an afternoon instead of dreading it for sometimes, weeks on end, but it also protects you from any outside, you know, legal matters or lawsuits or anything else. So just please make sure you take the structure as seriously as everything else in this episode, because as a business owner like myself, I always want to make sure I have that liability protection and it starts with your structure. Now, before we jump to our third point, want to give a shout out to NEOS investments. Nios offers ETFs that seek high levels of monthly

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Starting point is 00:15:44 Cryptocurrency is relatively new, and the market has its own specific risks, and Nios ETFs are distributed by Foreside Fund Services LLC. Robert, speaking of investing, let's now jump to our third. strategy to streamline your financial picture here, which is simple, boring, investing, beating the complicated checking my portfolio every single day strategy. Unfortunately, I think a lot of you guys try and implement. So let's talk about this. Let's talk about the investment portfolio because this is where complexity does the most damage while you feel productive. A lot of people equate active investing, active management of their portfolio with being a good investor and

Starting point is 00:16:26 we want you to have active management in your portfolio, but checking the price every single day, holding dozens of individual stocks that you don't even know what they do, constantly trading in and out of positions, right? That feels good maybe, but that's not a good thing for the vast majority of people. It is just complexity dressed up as a dozen hours a week of effort that usually costs you more than it actually earns. So the fix is this. Dollar cost average into your investments with automatic deposits and check your portfolio once a quarter, four times a year. That's the whole strategy. DCA into fundamentally sound index funds and ETFs that we talk about here and inside the Rich Habits Network and then check your portfolio once every three months,

Starting point is 00:17:15 close your eyes, and let the wealth building become inevitable. I wish everyone watching this episode would just usa and be able to follow those instructions. you just laid out because we know for a fact there's so many people that knee-jerk react to every single headline, every single tweet they see, every little detail checking their account balances 25, 30 times a day and it's just crazy. So here's the deal. Set up an automatic transfer from your checking account into your brokerage account on a schedule and let that money buy into your positions automatically without you having to make a decision every single time. That's dollar cost averaging with auto deposits, and it removes the two things that hurt most investors.

Starting point is 00:18:00 Emotion and inconsistency. You're not trying to time the market. You're not skipping a month because the news looks scary. The system runs regardless of how you feel and what's happening that week and takes all the emotion out of it. I promise you, your returns will thank you later if you can achieve this. And the other half of this is resisting the urge to constantly watch. watch and tinker. So if you're checking your portfolio every single day, you're going to see normal, healthy volatility and interpret it as a signal to do something. Sell a position,

Starting point is 00:18:34 chase whatever's moving, second guess your allocation. And most of that activity does not improve returns. It just adds stress. And often it actively hurts you through bad timing and unnecessary trade costs because you're sitting there trying to time the market and get in and out and think you're an expert now in always reacting to these headlines. So a portfolio built around a handful of diversified positions funded automatically does not need daily supervision and it shouldn't have that. It needs a check-in four or five times a year, not 50 times a week. 50 times a week. I know some people in the Rich Habits Network and I'm sure that listen to this podcast that check their portfolios 50 times a week. And this connects directly back to the credit card

Starting point is 00:19:19 point that we were talking about earlier because the same principle is going to apply. Fewer positions that you actually understand beats a scattered pile of stocks that you bought on a whim, but now you feel obligated to track because you've got $72 invested into it. You don't need 57 different tickers in your portfolio to build wealth. You need maybe a dozen or so that you truly believe in, you fund consistently, and you leave alone to compound over time. Building real wealth was never supposed to require 10 hours a week glued to your computer screen or your X feed or your brokerage account screen. It feels like a second job sometimes and we don't want that. That's not due diligence. That's not a good time. You need to build a system that's less complicated, more streamlined because this is

Starting point is 00:20:05 going to be costing you a lot in stress and bad decisions that are going to be impacting your returns over a long period of time if you don't have this as streamlined as we're trying to encourage you to do right now. 100%, Austin. We've talked about this many times in the Rich Habits Network, but I believe most people could outperform the markets with five to seven ETFs, five to seven individual stocks, and five to seven cryptocurrencies. And even I'd cut that back to three or four cryptocurrencies, set it, manage it,

Starting point is 00:20:36 don't check it 50 times a day, and they would actually crush. So here's how all of this actually applies. Three questions, one for each fix we covered today. Do you know right now without checking your countless credit card statements roughly what you spent last month and what day your paycheck actually lands relative to your bills? And if you're in a household, does your spouse know the numbers like you do? Question number two. If you have businesses, rental properties, or side hustle income, is it running through its own separate account completely from your personal spending? And question number three, is your investing automated on a schedule?

Starting point is 00:21:15 and are you checking your portfolio four times a year versus five, ten, twenty times a day? If the answer to any of those is no, that's not a reason to feel behind. That's just the next thing to fix. And none of these three things take more than an afternoon to get set up and integrated into your new financial life. Yeah, I just want to emphasize those. If you know roughly how much you made last month, how much you spent last month, and if you as a household are on the same page with money, check. have a business, a side hustle, is that spending being commingled with your personal spending? If it is, stop that.

Starting point is 00:21:53 And if you are investing on a schedule into the index funds, ETFs, and some single stocks that we talk about, and you check your portfolio, maybe on a quarterly basis, bi-annual basis, I don't know, instead of 17 times a day, walk through that one by one here. That's your homework as you listen, the three things that rubber just laid out, because it's a lot easier to catch yourself and prevent the harm that doing some of these things will have to your financial life over a five, 10 year period of time than kind of dealing with it after the fact. And if you're feeling pretty good about money, but New Year's resolutions, but now we're in August, September, like, I don't know, guys, I thought I was going to do this,

Starting point is 00:22:33 but now I'm not like, now it's just a good time to have that check in with yourself. This episode's a good reminder. Check in with yourself. Have understanding of where your money's going. Are we as a household on the same page. Am I consistently dollar cost averaging into a simple strategy that aligns with my risk tolerance? Do I cut back on my number of credit cards because it's getting too complex? Like, just check in. You don't have to be perfect, right? Nobody's perfect. But like at the end of the day, just by listening to this podcast and checking in with yourself, you're putting yourself leaps and bounds ahead of your peers because your peers are broke. The average American can't withstand a $500, $700 expense without going into credit card debt. The average American's,

Starting point is 00:23:12 household net worth is negative. You listen to the show. You're trending in the right direction, but just give yourself a little bit of grace, check in, and just understand that your financial life right now needs three main things done right to keep it streamlined. You need to know your cash flow. You need to combine it as a household if you're married. You need to keep business in personal spending separate. And you need to have that simple automated investment. strategy, do the heavy lifting for you and compound for you over a long period of time. Here's the last thing I'll leave you with, Robert. Complexity is what keeps people on the sidelines.

Starting point is 00:23:47 Simplicity is what gets them in the game. We want people in the game. Get your head in the game. Let's go, baby. Come on. Yeah, I agree 100%. And I think one last thing I want to say before we get to the next portion of the show is, you know, we talk about lifestyle creep all the time.

Starting point is 00:24:04 And I feel like this episode is so important. because I feel like it really kind of alludes to financial creep. And that doesn't mean necessarily you're building better financial practices. It just means that you do things over and over again and things get really complicated. And you don't know how to stop it and fix it to get yourself on track. And I see people all the time that'll share with me their portfolios. And this goes for people, even those of you that have maybe a financial advisor you're working with, They'll have like 29 individual stocks, 17 ETFs, every single tiny cryptocurrency in their portfolios,

Starting point is 00:24:41 and they don't even understand what that all does or how it's performing for them. So I think it's so important for everyone watching this episode to really audit all of this and make those three changes so you can get back on track and know exactly where you stand. So Austin, great, great episode. before we jump into our Q&A, though, support from the show comes from VCX, the public ticker for private tech, and for generations American companies have moved the world forward through their ingenuity and determination, and for generations, everyday Americans could be a part of that journey through perhaps the greatest innovation of all, the U.S. stock market.

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Starting point is 00:26:39 All right, Robert, let's now jump to our Q&A section of this episode. As a reminder, if you have a question to ask us, email us at rich habits podcast at gmail.com or DM us on Instagram at rich habits podcast. Our first question comes from Mason on Instagram. Hey, Austin and Robert, I love the podcast and what you all are putting out for free for those willing to seek it. Thank you. I've been binging the podcast to catch up on episodes and I started my listening journey at the very beginning. But I have a question and if it's already been addressed, please just send me the episode so I don't have to bother y'all and can listen to it, but I think it's going to apply to a lot of people. If I'm considering buying a Tesla, is it more financially sound to buy it outright used

Starting point is 00:27:22 or take advantage of their 0.99% financing promotion going on right now. I know you guys have also suggested leases on cars, but again, I'm still a newbie to the show. More specifically, couldn't it be possible that I end up paying less on a new car with that 0.99% interest rate as opposed to an older one, which has already depreciated a bit and would be at an average car notes rate of, I think, 10 or 11%. Obviously, depreciation is a bigger factor when you're buying it new, which is what I would do to qualify for the 0.99% financing promotion, but I wanted to hear your opinions. Thank you so much in advance for taking the time to read and respond. Robert, let's talk through this one together here because, like, we always want to encourage people to be as financially sound and responsible with their money as possible.

Starting point is 00:28:12 And when it comes to taking on debt, we do not like high interest debt. We think there's good debt and there's bad debt. Good debt is debt on assets that produce cash flow and increase in value over time. Bad debt is on depreciating assets that go down in value over time like Tesla's. And so when you think about 10, 11, 12% interest for a used car versus, let's call it 1% interest for a new car, but that new car is going to depreciate like crazy in that two, three, four year period of time when our friend Mason is going to go sell it and buy something new because no one has a car now for more than call it four, five, six years, right?

Starting point is 00:28:51 So it's like, you know, is that better than, you know, because of a low interest rate, saving up and paying cash for a used car. I lean on the used car side of the equation, but just because I feel like a Tesla in the first four years is going to depreciate in value by 30, 40 percent. I mean, you can't pay people to buy these cars right now. They're just, they're going for pennies. It's crazy. Me and you, when it comes to the car thing, we've been on opposing sides for a long time,

Starting point is 00:29:17 but I think we've found the middle ground. And in this instance, you nailed it. Tesla's right now generally depreciate 20 to 30% in year one, 10 to 12% year two, and 8% to 10% year three. So if you add that up, it's 40% or 50% in three years. So I personally, if they're offering a low interest rate lease for three years, two, three years, that's the route I'd go because then you're zero out of pocket with your money on a car that depreciate. And like you stated as well, they are everywhere in the used market, but I would be very careful with some of these older Teslas that you can buy for cheap because again, they have battery issues, they have manufacturing issues and all of that. I personally wouldn't touch one brand new. I wouldn't pay a high interest rate.

Starting point is 00:30:06 If they really want a Tesla and they think it's good for their situation, I would lease it with a little or zero money down out of pocket, rock and roll, give them the keys back in two or three years and get a lot. something else. Now, if the Tesla is not the outcome that is the only outcome and they could go buy a used Toyota or a used Honda or something that they could pay cash for that's four or five years old but has low mileage or medium mileage, I'm totally down with that as well. As long as they're going to keep the car for years and years to come and drive it to the wheels fall off, then I'm totally okay with paying cash for a car, especially if the rates on buying a used car right now as higher as I think they are. Yeah, but the problem when it comes to leasing a Tesla, and I'm looking at on it on the website right here, is you can lease a Tesla for $3.80 a month.

Starting point is 00:30:58 And so if it's $3.80 a month for 12 months, that's $4,600 a year. For three years, that's call it $14,000. So you just paid $14,000. You just paid for the depreciation that they're going to incur by selling it a three-year-old car. Because I'm looking at it here, too, most of these Tesla's lose between 50 and 60% of their original MSRP over five years of ownership. And if the MSRP for, you know, 40 grand or something, and they lose half of that in five years, it's $20,000 of depreciation. And you just paid the dealership $14,000 of their $20,000 of depreciation in three years. So it's like, you're still getting screwed. So in my opinion, like, one, why even look at a Tesla? I understand maybe you want to have a cool Tesla. Like maybe you have a used car budget of 12, 15,

Starting point is 00:31:46 $18, $20,000, just take that $15,000 budget, buy a used Honda, Toyota, I don't know, insert other car here that has solid, you know, safety ratings and is well maintained and aligns with your lifestyle and your commute and things like that. And then someone else can eat the depreciation. I mean, I don't know exactly how old you are. So I don't know how much money you have. If you're a millionaire, just throughout everything we both said and go figure it out for yourself because you can afford to eat. eat the depreciation. But the problem people have here is they put up too much of their money in depreciating assets. And with leases, you know, you're just spending for the depreciation so the dealer, you know, can make that money off the depreciation off of you. And then when it comes to

Starting point is 00:32:32 buying a brand new car, right, Tesla specifically, they depreciate by 50%, even at 1% financing, like you're going to get cooked on the back end if you try to resell the car. And so you're going to be upside down on the, you know, on the note anyway. I just, I don't think there's a world where Tesla is here specifically, you know, makes sense to buy brand new or lease or something unless you just really enjoy spending money and can eat that depreciation because you are wealthy enough to make that decision for yourself. Or if you have a job, I think there is one world where it makes sense. If you have a job that you have to look good and you're going selling real estate or maybe you're a lawyer and you do a lot of house calls, whatever it may be and you drive a lot of miles,

Starting point is 00:33:13 then there is an argument that the lease could make sense. I would just never buy a new car unless you're going to drive it to the wheels fall off because of the depreciation Austin alluded to. Yeah, I agree. It's so hard because today, Robert, what sucks is the average American, they're looking to go buy a car right now. And you can go buy a new car and maybe it's a suburban, right? Or it's something else over here.

Starting point is 00:33:40 And it's $70, $80, $100,000. It's absolutely outrageous. And then you go, okay, let me go buy a used car. And the used car is eight to ten years old. And it's still $30,000 to $40,000. And you're like, what is going on? So I don't blame Mason here for trying to figure out, like, how do I drive a new-ish car for as cheap as possible?

Starting point is 00:34:02 But unfortunately, I think it all comes down to can you eat the depreciation? Does that depreciation materially impact your wealth-building journey? And if the answer that is no, then like make your decision, do what you want to do. But if the answer is yes, and you have too much of your net worth tied into things that go down and value, the investing you're doing over here, because let's think about it for a second. Let's say that, you know, Mason's portfolio is compounding and growing on one side, but they have a depreciating asset on the other that goes down by, you know, $20,000 in the first five years. And their portfolio only goes up by $20,000 in that same period of time. It kind of offsets. And so, That's the critical thinking that we want to encourage people to do here that listen to the show is not just, you know, is my money investing and compounding, yes, but the money that's tied into depreciating assets. And that doesn't go just for cars. That's RVs. That's lawnmowers. That's jet skis.

Starting point is 00:34:59 That's boats. My boat, right? Like, it's a lot of things that go down in value over time. And you just want to make sure you're on the right side of that trade. You're on the right side of that trade. Yeah, I mean, one more thing to look at here, and we see it every day when we talk about lifestyle. creep. You know, the average family, let's say they make $150,000 a year. They net after taxes and everything, $100, $10,000 a year, $8,500 a month. But yet the average car payment in America for U.S.

Starting point is 00:35:24 adults right now is $770. So if you put two of those in the driveway, two cars, that's $1,600, $1,600 a month, plus insurance, gas, and repairs. So you're over $2,000 a month. So you're at 20% to 25% of your net household income to pay for two cars. So it is a very slippery slope because everyone wants a cool car, but at the end of the day, you have to buy within your budget to still allow yourself the ability to save and invest for your future. Could not agree more. Those numbers make my stomach just turn, Robert. You're right. I didn't even think about it like that. 20% plus of that that monthly budget going toward funding, something that goes down in value, just so you can go from point A to point B. Like, there's got to be a better way. So our next question comes from S.C.

Starting point is 00:36:16 on Instagram. SC says, hey guys, I'm curious. The name of the show is rich habits. So what is a rich habit that sounds boring, but you two have seen actually move the needle for most people who implement it? It's a good question. What do you think, Robert? Oh, man, this is a great question. I would say the most boring is getting an actual honest budget, because I'm always sure. shocked at the percentage of people. I'm like, do you budget? And they're like, no. Like, do you have a budget figured out even loosely? No. So I would say the most boring rich habit, and it's a hill that I will live on forever as long as the rich habits podcast and network is around, is getting a budget so you actually know where you stand month to month. It's super easy. It's

Starting point is 00:37:04 really, really boring, but it lets you understand. So if you ever have an emergency and life gets in the way all the time. You're not going immediately to the credit cards because you have a budget and you have that high yield savings account set up so you have your emergency fund. So I would say that would be the most boring thing that most people are going, I make good money. I don't need a budget. And that is why we always say wealthy people forecast and broke people react because they don't have a plan. I like that. When I think boring, I think of something that takes very little, you know, it's not exciting. It has very little, you know, enthusiasm to it. When I think boring, I mean, it's quite literally as boring as like, what do we do that for? Is that even what's going on here?

Starting point is 00:37:50 I was talking to my friend Dylan the other day and he's my age, really cool dude. Shout out Dylan. And he's like, hey, man, I'm ready to start getting into this investing stuff. I'd love to like, what do I do here? And I was walking him through some different ideas and he's like, nah, I don't know if I could commit to putting that much money, you know, on a monthly basis into a Roth IRA or to an investment account, but I could put, you know, a little bit. And I was like, yes, that. The boring thing is figuring out the least amount of money. And Robert and I were just talking about this before the show, the least amount of money that you can pull out of your checking account on a monthly basis without even knowing that it is gone and having that get invested for you automatically. I was telling Robert,

Starting point is 00:38:28 every single week, I'm pretty sure the number for me is $200, $215, right? But I've got two different brokerage accounts that pull, I think it was $150 a week on. this one, 50 bucks a week on that one, and it just goes. I set the presets. It gets invested. I don't think about it. I don't look for it. I don't have to click buttons. It happens. And for me, that's 200 a week. For you, it might be 20 a week. For others, it might be five. For others, it might be 1,000. Like, I don't know. But, like, what's the least amount of money that can come out of your checking account on a weekly or monthly basis where, like, you don't even realize that it's gone, but it's compounding for you and will compound for you for decades and decades and decades

Starting point is 00:39:09 turning into a large sum, a large nest egg. You know, Griffin.com, they've got stock where you shop, acorns, they do the roundups thing. Like these different companies are built upon the money that you didn't even know was invested and it turns into something really cool. And so when I think about a really boring, rich habit, it is finding that $50 a week, $25 a week, making sure that you that it gets automatically invested. You can do this with Public. You can do this, whatever. If you already have a broker,

Starting point is 00:39:37 like go check out the auto-invest feature, right? But like on public.com, you can set up an investment plan where every week it'll take 20 bucks from your checking account, invest it in the S&P 500, and you don't even realize it's there until you fast forward seven years

Starting point is 00:39:51 and you've got $14,000 and you're like, whoa, I didn't do anything. But you did. It was just a boring, rich habit. I love that. And it reminds me of one of my favorite episodes you came up with the concept, you did the research, and everyone was blown away.

Starting point is 00:40:08 And it is the episode, I don't remember the number, but it was when we calculated what every dollar wasted for someone in their early 20s would turn into in retirement if it was instead invested. And for everyone listening, $1 invested in the S&P 500 through VOO, saved and invested in your early 20s, could turn into $77 in retirement for every dollar,

Starting point is 00:40:31 every dollar. So this really makes me think of that moment when we did that episode because it's so important for people to get in the habit of not worrying about what the fake gurus say that if you don't have $10,000, don't even bother starting investing. $100 a month, $50 a month. I don't care what the amount is. Just get invested because the longer timeline you let it compound, the better off you're going to be. And you're going to crack up in 10, 20 years when you're like, Holy moly, that one account that I put $100 a month in, 30 years later is worth $400,000. And it's just really factual. And you should do the math as a test based on what you can invest right now today.

Starting point is 00:41:15 Yeah. I mean, I'll talk to her that a little bit longer. I opened up a $529 account for my nieces and nephews. I think it was in 2003. And I seated it with $3,000. And I put like $150 a month into it. It's like a thing like, oh, yeah, $150 goes there. I don't even think about it.

Starting point is 00:41:31 It's like it's part of the budget. It's part of the system. It's got 15 grand in it right now. Right? Like that's substantial. And it's only been a couple years. And so it's like, imagine you're somebody who just finds that extra $50 a week or that extra $20 or you don't go to Kava like I did last night for dinner and spend $1987.

Starting point is 00:41:51 But you go put that $20 a week into, you know, this investment plan and it compounds. That is the most boring, rich habit that everyone needs to implement, which is just getting invested and letting it go and forgetting about it, not checking it every single day and thinking there's this big strategy around it. It's just letting it compound. All right, Robert, let's wrap up the episode. Final question coming from Trey M. Trey says, hi, Austin and Robert, I'm 21 years old. I have a baby coming in December. Let's go, dude. Congratulations. Trey says, I started a painting business in June of this year. I'm averaging 20,000 in revenue. 50 to 60% of that being profit, and I just hired my first employee because the business is growing so much.

Starting point is 00:42:31 I have $1,000 in my Roth IRA and another $1,000 in a brokerage account. My monthly fixed expenses are $2,000. What is some advice you guys have for how I should allocate my profits to save for the baby and maximize my investment portfolio while growing a small business? Thank you for all you do. I love the show. Robert, and I know I've been talking for a lot here, but I just want to call this out because it's really important here. What is the advice that you guys have for how I should allocate my profits to save for a baby,

Starting point is 00:43:03 maximize investments, and grow a small business? If I've learned anything about being an entrepreneur or an investor or whatever over the last five, six years, it's that when you do three things at once, none of them get done properly, right? So like, maybe talk toward that for a second, but I think you should get laser focused on one thing. And that one thing right now is probably saving for this baby that's going to be around here in a couple months. For me, Austin, I agree 100%. Too many things happening at once. I would be laser focused on how do I take care of this baby being born and making sure we're prepared. So I would do two things.

Starting point is 00:43:39 I would look up Waldo AI and I would open a business account so you can put some money in and gain that because it operates like a high yield savings account. So I would do that first and foremost so you can get that money making money. And I would look at it that you're handling this like it's an emerging. So you want to get three, four, five, six months worth of savings in there of what your total bills are. So if it was six month, $2,000 a month, $12,000 in that account, making that three or four percent, that way you're up and running and you know there's no emergencies that are going to happen during the first months of the baby's life and you are set up so you're not going into credit cards. Now, I don't know how your business is structured.

Starting point is 00:44:24 If you don't have the LLC set up yet, and maybe you're just doing it personally, then I would look at public.com to open a high-yield cash account. Same result as you'd get with Waldo AI, but this would be for personal funds if you're funneling these profits to a personal account or you don't have the LLC setup. That's what I would do. And then as soon as you're up and running and everything is dialed, you're growing and making more money, then I would go back to maxing out the Roth IRA first and foremost because of your age. that's $625 a month or as close to it as you can, and then worry about building up the brokerage account after the fact because you got to get that baby taken care of so you are dialed in for the first year and you're not stressed about money.

Starting point is 00:45:09 I love that. Yeah, man, stack cash. I pray you have a healthy, happy baby and a healthy, happy wife and everything's cool, but sometimes the unexpected happens. And being from a position of strength, which means you've got a lot of cash, right? you got a lot of liquidity. You have the ability to take time off work if you need to. You have the ability to, you know, pay for a specialized visit or something like that, right? Stacking cash having that 10, 12, 15, $20,000. And you're like, oh my gosh, you know, I'm trying to optimize and maximize

Starting point is 00:45:40 my investment portfolio. You'll get there. Don't worry. You're 21. Let's fast forward six months after the baby's born. Three months after the baby's born. Everything's cool. Great. Take the money that that's been sitting over here and go invest it. Everything's cool. But until then, make sure you've got a lot of money. The last place I want to see you in here is something bad happens, Trey, and you are having to take time off work. You're not taking the revenue anymore. You maybe didn't have enough money saved up or something bad happens that way. So just stack cash, baby's born, everyone's happy and healthy. Then we'll move on from a place of strength.

Starting point is 00:46:12 Austin, what a great episode today. I am glad. I feel like we've been tackling some of the more difficult episodes and topics that people struggle with when building financial freedom. and working towards, you know, a really meaningful financial life for themselves and their business and their family. So really appreciate episodes like this. And I think the audience will as well. So just what a great episode. And I'm so glad we did it.

Starting point is 00:46:37 So glad as well. And please do us a favor. Go check out the Rich Habits Network. Over 1,060 something people right now are inside the Rich Habits Network. Why aren't you? The Rich Habits Network is our community for our biggest fans. And if you want more access to Robert and myself, join us because every Tuesday night, we host a two-hour live stream on Zoom.

Starting point is 00:46:59 I think there was 300 people that showed up last Tuesday and hundreds more that watched the replay, right? That's a key part too. I had someone say, hey, I was on the fence about the Rich Habits Network, but I'm busy Tuesday nights or I don't have the autonomy to jump into these live streams. Are they recorded? Yes, everything is recorded. So if you don't have the opportunity to join us live, watch the recording the next day or whatever's

Starting point is 00:47:20 going on later and you're going to get the questions answered. Maybe, you know, send us a DM, say, hey, I got a question for next live stream, you know, talk about it live, whatever, and we will do that for you. So please join the Rich Habits Network, seven-day free trial right now. We're also investing into some incredible pre-IPO companies. Robert, we can talk about this now because the news release just came out, Lambda AI. We invested into Lambda AI around that $4 billion dollar valuation just over a year ago. I think it was May of last year. They're raising now at 12. 3x multiple on our investment and will likely IPO for much more than that here in 2007. We did that in the Rich Habits Network, not just us, 150 other people invested in the Lambda

Starting point is 00:48:01 AI alongside myself and Robert because they were in the Rich Habits Network and they get this deal flow. So if you want to join us, check out the Rich Habits Network, get these pre-IPO deals. We're super proud of everything we've built and we can't wait to have you. Go type in Rich Habits Network on Google. Link in the show notes below. Link on any of our social accounts like Rich Habits Network. You can go find it. It's very, very easy. We can't wait to see you in there. And one more thing I want to add to that because you mentioned the live streams. I had a one-on-one consulting call with someone today that joined our network that was in another network. I'm not going to mention names. And she was shocked that you and I, me and you, Austin, actually do the live streams.

Starting point is 00:48:40 She said the other community sold her this big bag of goods and she went to their live streams within the community and the person she signed up to see would come in and say hi occasionally, but wasn't even on the live streams. Well, guess what? If you're on the fence, Austin and I are in every live stream, start to finish. We don't hand it off to anyone else. It's us. So you get everything, all the good stuff from Austin and I every single Tuesday for two hours.

Starting point is 00:49:09 I want to make sure I told you about that because you mentioned the live stream is so important for people. It's us. We're not handing it off to interns or someone else that's got, you know, like a script to go by. It's us. And I think that's very important. Couldn't agree more. Thanks, everyone. And we'll see you on Thursday for our Q&A episode.

Rich Habits Podcast - 185: Is Your Financial Life Too Complicated?

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