Rich Habits Podcast - 186: What Do Rich People Buy LAST?

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Starting point is 00:01:08 the four things broke people do first and rich people do last. My name's Austin Hankwitz. I'm joined by my co-host Robert Croke. Robert is a seasoned entrepreneur with lifetime revenues of over 300 million, and I'm a 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 business, finance, and mindset. So, Robert, what are we talking about in today's episode? In today's episode, we're flipping the script on how most people think about wealth. Everyone assumes rich people just buy more, bigger houses, nicer cars, more stuff, but that's backwards. The real pattern if you actually study how wealthy people spend is about sequence, not quantity. Broke people try to buy status first, hoping that the

Starting point is 00:01:56 wealth catches up later and rich people buy status last after the wealth is already there, funded by money they don't need for anything else. So today we're walking through four categories where this shows up most clearly, and in every single one, we're going to show you what broke spending looks like first and what rich spending looks like instead. This is going to be fun episode, Robert. So quite literally, we're going to go through four different categories and say, this is what broke people tend to do.

Starting point is 00:02:23 This is what rich people do. And these four categories are sort of the things that rich people buy last, right? So, Robert, kick us off with category number one. Yes, let's start with what everyone sees first because it's the one you drive around in every day, your primary car. And here's what broke spending on a car looks like.

Starting point is 00:02:42 You finance or lease something well above what your income comfortably supports because the car is doing a job that has nothing to do with getting you from point A to point B. It's signaling that you've made it even if you haven't. The average monthly payment on a new car right now as we film this in 2026 is $770 and it's an all-time high in total auto loan debt in this country just surpassed. $1.7 trillion more than student loan debt nationwide. That's not a small number. That's tens of millions of people carrying a car payment around that's eating away at their ability to save or invest. And Austin, another part of this problem that really shocked me when we were doing the research

Starting point is 00:03:25 and preparing for this episode is that 25% of new car buyers right now are using 84-month loans. That's seven years, which we believe is financial. suicide, given the interest rates and expected depreciation on those new cars. And as a reminder, the average new car in America depreciates over 42% in the first five years. That is bonkers. And yeah, I mean, we did some research here. So here's some numbers for you. A new car loses around 20% of its value in just one year. That first year, you drive it off the lot, 20% is gone. And by that year five that you're alluding to, Robert, around half. It's a word. only half of what you originally paid for it. So broke spending on a car isn't just spending money

Starting point is 00:04:12 you don't have, it's quite literally spending money you don't have on an asset that's actively going down in value by every single moment and mile you put on it. You're financing a depreciating asset with debt, which is the worst combination in personal finance. So let's now think about what rich people do, right? Rich people buy nice, fancy cars last. They look pretty boring as a strategy in comparison. You drive something reliable. You drive something that's paid off, often well past the point where you could easily afford something nicer. Because the car itself isn't doing any signaling anymore. When a wealthy person does eventually buy a nicer car, it's usually with cash and it happens years after the net worth grows to such a large.

Starting point is 00:05:01 amount of money that it can absolutely support having something that's going to go down in value. The car is a reward for wealth that already exists. It's not a tool to project wealth that doesn't exist yet. I'll say it one more time. For wealthy people, a car is a reward for the wealth that already exists. It's not a tool to project wealth that doesn't exist yet. It's genuinely one of the last things on the list that a wealthy person's going out and buying. Not because rich people don't like nice cars. I like nice cars, but it's because by the time they buy a nice car, it doesn't move the needle on their finances as someone who isn't in the same situation. They go out, they buy the car, it goes down in value, and it negatively impacts that net worth too much. Robert, I still drive

Starting point is 00:05:47 right now a 2,021 Toyota Forerunner. It is September 2026. I bought this car summer at 2021, so I'm a multi-millionaire driving a 5-year-old Toyota. Like, that's quite literally what I am. And I enjoy it. It's got 50,000 miles on it. It's my dream car. I'm very happy to have it. I love my Toyota forerunner. But before I had this forerunner, Robert, and I think I've shared this store with people in the past, it was a different situation. You know, I had just graduated college in 2018. I just started working downtown Nashville in finance. I was making about $65,000 a year. And I said, you know what? I can afford to buy something flashy, something nicer, something I that I just deserve, right? I didn't deserve it. But so I went out and I bought it. And I think

Starting point is 00:06:26 if you guys are car enthusiasts listening, you might agree with me. I thought it was a pretty cool car. It was a 2000, maybe 16, 17, Lexus, IS 250 F Sport. It looked awesome. It was a really cool car. Like, I really enjoyed it. But the monthly payment was $440 a month. The insurance was $275 a month. And the tires in the car were two different width. So the back tires were wider than the front tires. So I couldn't rotate the tires, you know, as easily. So I was going through tires like crazy. so that was an added expense. Long story short, Robert, what happened and I had this car for 12, 18 months, and I zoomed out and I said, wait a second. All of my money is going toward this car at a 6, 7% interest rate. I'm not maxing out my Roth IRA like I should be because I've got this high car payment. Let me pump the brakes,

Starting point is 00:07:17 pun intended, and switch things up. So I sold the car and then I used that plus savings I had to go buy a 2003 Lexus ES 330 that had literally 80-something thousand miles on it, got very lucky. You bought it from an older individual that bought it new. Back seats when even sat in. It was pretty cool. And I paid like $7,000 cash for it. So it's like it's one of those things that makes you realize. And I drove that car, by the way, until summer of 2021 when I upgraded to this forerunner

Starting point is 00:07:48 and I still drive this forerunner today. But it's one of those lessons, Robert, that's like people make the mistake of having a cool car and trying to project, you know, maybe some wealth that they don't have with their car purchase. And I know, Robert, you got some cool stats to share. too around how much people spend, you know, when it comes to some of these payments and things. But it's just, it's the easiest mistake to make is I can afford a cool new car. And I justified it to myself, Robert, as I was commuting to downtown Nashville every day. I was in my car in that traffic

Starting point is 00:08:15 for at least two hours a day. If I'm going to spend two hours a day, I'm going to enjoy sitting in that car for two hours a day. And that's how I justified it. But then I'm thinking, why? Why not just have a normal decent car, which was this Lexus, you know, ES 350, 2003. It was older, but it was comfy. It was fine. It worked for me. The radio was kind of weird, but whatever. I was wearing my AirPods anyway. But I'd rather have that plus maxing out my Roth IRA and having an emergency fun and coming and living my life from a place of strength versus trying to project wealth on the people that I didn't have. Yeah, I love that story about the Lexus and all of that. And just really rings true to what we're doing here with the rich habits podcast and the rich habits

Starting point is 00:08:59 network because we're trying to help people understand with our 30 year age gap how so many of these financial practices and mindsets just can go from generation to generation if you understand the why of it because so many people don't consider the total ownership cost of the car any more than they do the house that they can't afford and also broke people just always believe that they deserve it, even though they've done nothing to set themselves up financially. And it always brings me back to a really cool story that I don't even know if you know, Austin, 2010, right at the height of Silly Bands, I had always wanted an Aston Martin DB9. We were in New York for the Silly Band show. There was one literally two blocks away that popped up

Starting point is 00:09:44 in my search. I walked over there. I looked at it. I loved it. I test drove it in the middle of winter, and I bought it on the spot. Everyone on my team was like, You are making more money than anyone. Why would you buy a used car? And they didn't understand by making that decision of my dream car and it only being a year old with 2,000 miles. I saved $85,000 in depreciation off the sticker price. So this is a really important part about this episode of getting people to understand to do the math and make sure you're not living beyond your means with your car purchase like you are your house purchase.

Starting point is 00:10:22 Yeah, and I think too it's not just the depreciation, but it's a lot. the fact that like you're buying too much car, right? You mentioned $770 a month is the average new car price right now, or rather the monthly payment, 84 months, seven years, all the depreciation, it just doesn't make any sense. So Robert now, walk us through the second category of things that rich people buy last. Definitely. The second category is the biggest purchase most people will ever make, and it's their house. Broke spending on a house means stretching to the absolute maximum the bank will approve you for because a bigger, nicer house in a better zip code is one of the most visible status signals there is. And a huge number of people are doing exactly this.

Starting point is 00:11:03 Recent data shows that 18 million homeowners in this country are what the industry calls house poor, spending more than 30% of their monthly income on housing costs alone. And nearly half of those households are severely burdened, meaning the housing isn't just tight, it's actively squeezing out everything else. So when housing eats that much of your paycheck, there's nothing left to automate into investments, nothing left for that emergency fund we talk about, and nothing left for people to be able to build wealth over time because the house has become the ceiling of their entire financial life. And that is a huge no-no. So rich spending now, the opposite side of that is spending on a house that is well below what they technically

Starting point is 00:11:49 can qualify for, they keep housing costs as a manageable slice of their income rather than the main event. The upgrade, if it does happen, when it does happen, comes after the income supporting it already exists. Sometimes years after, because there was never any urgency to move once the current house wasn't holding anything back. Now, a lot of wealthy people stay in sort of the starter home longer than they need to, especially after they can afford to leave. because the house was never the goal. The goal was always what the house frees up. The capital, that margin in their budget that keeps compounding somewhere else instead of getting locked into the square footage. Robert, we've talked about this before too. I purchased a home in 2019 for $279,000 and I still

Starting point is 00:12:40 have that house. It's a normal 1,400 square foot town home. The bedroom I'm in right now is one of those bedrooms. I convert it to a podcast studio office, right? But it's like the monthly payment is like $1,500 on this thing. It's the interest rate is 3.3%. And it's not that I can't afford more. I'm, I absolutely can. I make a ton of money. But it's that like, okay, I'll just go buy a house that makes sense for me when I'm ready, when my life supports it, when everything, like when I'm actually don't need to live in such a starter home anymore. And like technically, yeah, I've been in this starter home now for like, you know, six, seven, eight years, whatever. But at the end, of the day, it's not that I need to go impress anyone. It's not that I have to go be or do something

Starting point is 00:13:21 that I'm not. It's just because I've been able to keep my monthly payment so low by not having a mortgage that's $4,000, $5,000, $6,000, which is very normal here in Nashville and Franklin and Brentwood, because you're buying homes that are $800, $900, $1 million plus. I've had a lower monthly mortgage payment, which has allowed me to invest a ton, a ton, a ton of money in my retirement accounts, in the stock market, everything that's meaningful to me. So now, I think I've mentioned I am building a new home and I am, you know, ready to take that next step, but I was able to to make that decision from a place of strength. I've got a ton of money invested. I've got a ton of income now that can support what that payment's going to be. I've been able to save a lot of money

Starting point is 00:14:01 for a nice down payment that's going to be, you know, suitable for what I'm looking for and what I'm trying to achieve. I wasn't rushing into, oh my gosh, I've got to go buy this new home or do this thing or take a move, whatever. Like the mentality you want to have when it comes to housing is live normally, live modestly, live in a place that makes you feel good. But it's not so much about the square footage. It's not so much about the perfect neighborhood. It's the other things that you do that make your house a home. It's the people that live in that home with you. It's the actions you take. It's how you treat that home. It's how you decorate the home. It's how you treat it like a home. You don't have to be or have 4,000, 5,000 square feet to have a home. You can have 2,000 square feet,

Starting point is 00:14:50 3,000 square feet, whatever. Whatever makes sense for you and your family and your situation. And it's the people you spend time with inside that home that make it so special. It's not the size of the home or how many square feet, how many bedrooms, whatever it might be. You're not trying to impress people with your home. You're just trying to live. It's a place that you can put your head at night and keep rain, you know, from off your body when it's raining outside. Yeah, but I also think you really. practice what you preach just like I do. My first home, my first property was a four unit apartment, a fourplex they call it, and I lived in the largest nicest unit and rented the other three units.

Starting point is 00:15:25 I did that for years. And I could have afforded to go out and buy, you know, a really nice single family home to start. But I was always having this fear of, I want to build my wealth right and make sure it lasts for decades and decades because I don't ever want to go broke. And that is what why I think it's really smart for both of us because even today right now, so many people put the card ahead of the horse. Every time they start making more money, they upgrade their lifestyle, which is the cars, the homes, everything else. And they never give themselves a breather in that wealth-building journey to actually set aside enough money to build real wealth for later on. And so, like, if you think about it right now, Austin, even for me in Ohio, I'm not there

Starting point is 00:16:09 very often, but I have a home in Ohio that's very modest. It has a home in Ohio that's very modest. It has a a nice view, it has a nice big yard, but it is fully paid for. It's been paid off for, I think, 16 years, 15 years. It used to be a rental. Now I use it for when I spend time in Ohio. And I could easily upgrade and go get a million dollar home in Ohio, but why? I'm only there two, three, four weeks out of the year. I don't need all of that. So I think that's the key component of this is people need to understand stop living beyond your means and always letting lifestyle creep, rob yourself of the opportunity to build real wealth. I cannot agree more.

Starting point is 00:16:47 A house is awesome and it's definitely needed. You need a place to spend time to sleep, right? Like, you need that. But that should not make up 30, 40, 50% of your take-home pay. You should figure out a situation that aligns with your ability to have it make up 20, 25%, maybe less than that, 15. Like, I don't know, like, makes sense for you there, but not half of your take-home. come pay. We don't want people to be house poor. Wealthy people look at their home, not as this

Starting point is 00:17:15 big old expense they have coming out every single month. They look at this and say, wait, I'm going to live comfortably and modestly until I can't afford to then make that big move sometime else in the future. So, Robert, bring us now into category number three of things that wealthy people buy last. Yeah, this one is my favorite because it's pretty funny how much of a epidemic this is in society. And that is luxury goods. This category really covers everything from designer bags to luxury watches to high-end jewelry. Anything you wear or carry that's built to be noticed. You all know what I'm talking about. And the broke spending here is buying the item specifically because of what it signals.

Starting point is 00:17:58 The logo, the recognizable design, the price tag other people can infer just looking at it. It's a purchase made to be seen often before the income exists to comfortably absorb it. And the thing about these purchases, they're the purest form of spending to look rich than actually being rich. Because unlike a car or a house, there's zero utility for these purchases and you're paying entirely for the signal to others. And I think it is just tragic that people do this. I could tell you stories upon stories of people that I know that have gone broke multiple times. But they always have the Gucci watch and the Louis Vuitton shoes and all this stuff. and they just don't understand wealthy people don't live like this.

Starting point is 00:18:42 Yeah, no, that's a very popular one, especially one we see on the internet all the time. And so as we kind of flip that on its head and think about how rich people approach that, they buy the goods for sure, but it's more a quiet purchase. The purchase gets funded entirely by disposable income, not by debt, right? Money that was never earmarked for investing or saving in the first place, which means it doesn't compete with anything else in their existing financial plan. buying this luxury good becomes a reward rather than a strategy. There's a pattern here that I think think is pretty interesting, Robert, a lot of genuinely wealthy people by fewer of these items than you

Starting point is 00:19:18 would expect. And that's because they could not afford them. Not not that, but because the signal stopped mattering once the wealth was real. You don't need a Rolex to tell people you've made it when your net worth already speaks for itself. I know I've been given some antidotes here, but I give another one. I'm worth millions of dollars, Robert. I don't have a Rolex. The most expensive watch I have is a Tissau that Ireland got me. That was like 300 bucks. And I love it. It's engraved. It's beautiful. It's fun. But it's just like the wealthier I get, the more I realize that like it's goofy. You don't have to project anything to anybody. It's not that like having nice things as bad. I certainly strive to have nice things. But you can tell, like I had a friend and I'm not going to name names. But I had a friend back in like 2022, 2002, 2003. That guy was making 80K a year. He was doing well. He was solid. He was. I call it for his mid to late 20s there. But I remember I saw him out one night and he was wearing a Rolex and it was like a date just or one of these really cool Rolexes. And I was like, whoa. And I was like, dude, how did you? Like I know you don't have money like that. How did you,

Starting point is 00:20:20 what happens? He's like, oh, I got it on like layaway. You know, I got it from this place over at the mall. You know, I got this payment every month, but it's totally worth it. It's going to be awesome. It's a Rolex. All this stuff. And I'm just like, dude, that is corny. What are we doing here? Why are you trying to project something that you're not? Like, I don't know. I just think, I just think it's disingenuous. I think it is so rampant in society because we live in this comparison-based world because of Instagram and TikTok and everything else. And, you know, I could talk about this topic for hours because so many people get it wrong. They think as soon as you get money, you're supposed to go out and buy all of these things and they just have it backwards. I would

Starting point is 00:20:59 rather go to sleep at night knowing that I have millions and millions of dollars put away, making me money while I sleep rather than worrying about having the right bag or the right wallet or the right shoes or the right belt buckle to impress people when I'm out and about. And it just drives me nuts that I can't hammer at home enough to people. We want you to have nice things. I love nice things. I have cool watches. I have cool cars.

Starting point is 00:21:23 I have cool furniture, art, all of the above. But you have to build the financial freedom first. So many people come for me in content when I tell them, don't do this and they're like, well, what's wrong with doing both? It's okay. Buy whatever you want, buy the Rolex, buy the Lambo. I don't care if you already have built your wealth, but you shouldn't be doing it first when you're not financially stable at the point of that purchase. Could not agree more. It's cool to own a Rolex or have luxury goods. And I'm sure my friend would

Starting point is 00:21:53 agree with me that like buying and doing those things from a place of strength is probably better, definitely better than trying to, you know, buy a, a Rolex or a belt or a necklace or something that's like projecting maybe that you are someone you're not or have things maybe than that you really don't. So I don't know. It's just it's one of those things, Robert, where it's more of a self-reflection and more of like a maturity that I think people have to go through. And I have a really close friend named Daniel Isles. He's got a wonderful business. He just posted on his Instagram that he had his first $5 million month with his business, right really really cool guy in that video he was wearing a black shirt black pants cowboy boots

Starting point is 00:22:38 like one ring on his finger and a watch and it all looked completely normal and fine but i guarantee you robert and this is like the thing that once you start like leveling up like i guarantee his shirt was probably pretty expensive his pants or and i saw the watch he had was a richard milly right so like it was definitely like on the more expensive side but it wasn't flashy and i think that's what the most like biggest observation I've made over the years when like wealthy people, when they go out and they buy these luxury goods like Mark Zuckerberg, you know, I know he like wears the same outfit every single day. But he wears these t-shirts at like 300 bucks a piece, but they don't have big Gucci logos on them and Louis Vuitton logo. It's just it's just quiet wealth. It's quiet wealth. And I think the more you have, the more you realize, I don't want to be the loudest guy, the loudest girl or the loudest person in the room here with what with what I'm wearing or what I'm portraying or trying to be. And I don't. I don't want to be that person. I think that that's going to really resonate with our listeners, the more money they build and the more their portfolios compound.

Starting point is 00:23:36 Yeah, wealth is quiet and rich is loud. That saying goes back for as long as time exists. And I think you're spot on there that we're just here to tell people, build wealth first. You can buy all the cool stuff later, but don't do it in reverse. That's it. Bingo. Now, Robert, before we jump to our fourth and final point here, got to give a shout out to public.com, the investing platform for those.

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Starting point is 00:24:42 else's. So go to public.com slash rich habits and transfer your portfolio today. That's public.com slash rich habits. Paid for by public investing, full disclosure, and the podcast description. All right, Robert. So let's now get into the fourth category of things. that rich people buy last. This one drives me nuts, and I feel like we talk about this more times, especially during wedding season, than we probably should every single year.

Starting point is 00:25:08 And it is vacation and experiences. This is the fourth and final category, and this is the one that most people don't think about as a purchase at all because it doesn't leave behind an object. It's a vacation or an experience or a wedding, whatever it may be. And the broke spending here means booking the trip, regardless of, of whether the cash exists to pay for it,

Starting point is 00:25:29 because the trip deserves to happen now. And this is one of the most common forms of consumer debt there is. Recent surveys show that the vast majority of summer travelers use credit cards to cover at least part of their vacation and a meaningful share carry the balance across multiple billing cycles, turning a week away

Starting point is 00:25:47 into months of interest payments. The trip ends, but the bill just keeps on coming, Austin. We gotta get more people out of this habit. If you can't afford to, do it. Tell your friends, I can't go on this trip. I'm just not set up for it. Don't put it on the credit card because it's going to set you back months and even quarters, maybe years, if you go to ham on that trip and do a little crazy trip to Italy or whatever it may be. We want you to take the trip, but don't do it if it's got to go on a credit card. Couldn't agree more,

Starting point is 00:26:14 Robert. Rich people think about vacations and experiences, right? Spending money on travel means taking the trip only when the cash flow supports it without touching investments or going into debt, right, things like that. The vacation gets paid for out of money that was already free to spend. This is not money that is like, ah, well, instead of maxing out my Roth IRA this year, I'm going to go to Italy, right? They, like, rich people, wealthy people say, okay, maybe I don't need to do this one thing every month that's going to cost me $300. Maybe I need to cut back on some of these subscriptions, whatever it might be, right? But it's cutting back from that fund money. It's cutting back from disposable income that was going to get spent on wants. And they're redirecting those wants away from

Starting point is 00:26:55 maybe eating out or this subscription or this concert ticket, whatever, and redirecting it toward a different type of want, which is that vacation that experience the travel, things like that. Not money that is going to be borrowed against future income. To your point, the debt. Now here's the subversive part that surprises a lot of people. Wealthy people, especially in their wealth-building years, travel less than you might expect.

Starting point is 00:27:17 Not because they can't afford it, but because their heads down focused on either their job or their business, their career, whatever, that thing that's eventually going to fund the trips, in the future. The ones with zero financial hangover attached that you were alluding to, Robert, with the months and months and months of interest. It's funny, Robert, like, tell me, genuinely, when's the last time you went on a week-long vacation somewhere? I would say three years ago, three years ago, I do short trips where there are three or four days because then I know it doesn't

Starting point is 00:27:47 impact everyone in my life like you and Christian with the Rich Habits podcast. It doesn't disrupt all the other business meetings and things that I have to do. But definitely I'm not, I love to travel, but I try to make sure that if I'm traveling, there is work attached, not only because then the work pays for the travel, but it also means that I'm not setting myself up to be further and further behind on deadlines that I may have within all of the companies. And that's kind of what I'm trying to get out here with the point, which is like, we all have that one friend that seems like they're going on a cool vacation, a cool trip, or doing something every other month.

Starting point is 00:28:24 I have a friend like that. They went to Banff. They went to Hawaii. They went to Israel. They went to Italy. They went to like all these places all around the world just this summer. And I'm just like, how are you all doing this?

Starting point is 00:28:36 Like, what is going on? Right? So it's like we are exposed to that. But I'm telling you all, I'm telling you right now. There's someone in your life or a family that always seems like they're going on a trip and the Facebook posts look so fun and the kiddos are doing whatever. It's debt.

Starting point is 00:28:48 It's all debt. It's all funded by credit cards or funded by not investing or whatever, but like, unless genuinely like they're Uber wealthy, which like you probably know what they are or not. You know, I saw this video on Instagram. It's just like this person was talking about how they're a teacher, their husband's a firefighter, and they're seeing their teacher friends whose husbands are also probably in the same realm from income, but their teacher friends are gone on these crazy, lavish summer vacations. And they're just like, I know how much you make. How on earth are you affording it? And the answer for everyone listening right now

Starting point is 00:29:18 is that credit card debt Robert is alluding to. So, please take the trip, go on the vacation, do the travel, book it, but do it with money that you were already going to spend on exciting, fun things anyway, that disposable income that we talk about, not from maxing out the Roth IRA or saving for the emergency or whatever it might be, do it with money that you can afford to spend because that is what wealthy people do. 100%. This episode could go on forever and I could tell stories forever of people that had all this proposed wealth and then all of a sudden two years later they're trying to borrow $10,000 off me to make ends meet because they had to have the Hermes belt and all the fancy stuff even though

Starting point is 00:30:01 they weren't maxing out their Roth IRA. They didn't have a half a million million liquid net worth and they're out there willy-nilly with what money they do have to be and seem impressive. And let's get one thing straight. Rich people don't skip the car. They don't skip the house, the watch or the vacation. They just buy them last and that means it doesn't cost them anything to do it and they already have the money because they're not using credit to look cool for people they probably don't even like. So before your next purchase in any of the four categories we talked about, the house, the car, the luxury item, the trip, ask yourself one question. By buying this to look like I've already made it or because I actually have made it? If the honest question is that you're buying it to

Starting point is 00:30:46 protect wealth you don't have yet, that's the signal to pause, to wait, to take a step back. Not forever, just until the purchase is funded by money that was never doing anything else for you. That's the entire difference between broke spending and rich spending. It was never about avoiding buying these things. It's about the order that you buy them in. So Robert, what an awesome episode. I think so too because I hang out with a lot of very wealthy people and they spend completely differently than the people that I know that are broke. And it is shocking to me that the public image is always flip-flopped and people don't get it. So we'll move on from that. But before we jump into our Q&A, support from this show comes from VCX, the public ticker for private tech.

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Starting point is 00:32:03 Until now. Introducing VCX, the public ticker for private tech. VCX by Fundrise gives everyone the opportunity to invest in the next generation of innovation. including the companies leading the AI revolution, space exploration, defense tech, and so much more. So visit getvcx.com for more information. That is getvcx.com. Carefully consider the investment material before investing, including objectives, risk charges, and expenses. This and other information can be found in the fund's prospectus at getvcx.com. This is a paid sponsorship. Robert, our first question comes from Grant on Instagram. As a reminder, if you want to ask us a question,

Starting point is 00:32:41 and DM us on Instagram at Rich Habits Podcast or email us at richhabitspodcast at gmail.com. Grant says, still loving the podcast after all of these years. I recently got Robin Hood Gold for the 3% IRA match and the 3% cashback with a credit card. One of the other benefits is a 3.75% APY on unused cash in my brokerage account. I'm looking at opening a high-yield savings account with my bank for my emergency fund, but it seems like Robin Hood has a higher percent return. turn? Is it a good idea to keep my emergency fund in a Robinhead brokerage account earning 3.75%? I'm not planning on doing any investing besides maxing out my Roth IRA and my 401k match right now due to wanting to

Starting point is 00:33:23 save for a house in the near future. So I'd not be looking to have that money and invest it. It would just be sitting there earning the interest. Looking forward to what you guys think about this. Great question. There are tons of platforms. Robin Hood, Wealthfront, I think Betterment, specifically public as well, that offer this like three and a half. half to 4%, maybe up to 4.1%, depending on like promotions and stuff, interest on your money. Really doesn't matter what platform you use. Again, we like public because we think it's the easiest with their high-yield cash account. What matters is that you're using a platform, right, that's earning three or four percent interest on your uninvested sort of savings, emergency fund here,

Starting point is 00:34:00 things like that. Here's the like caution I want to give you. We're talking about differences of about half a percent between, you know, public or Robin Hood or wealth front or, you know, SoFi, you mentioned your bank here, right? I don't know your banks, but half a percent difference is pretty much what we're talking about here. And over the course of one year, right, that half a percent difference is 50 bucks on $10,000 or about $4 a month of like extra interest you might be earning. Maybe $4 is what moves the needle for you when it comes to saving for your house or whatever your other goals are. But I just think that you should use a platform that resonates most with you. If that's Robin Hood, rock and roll. If it's wealth front, cool. If it's

Starting point is 00:34:40 public like we use, even better. But like, understand that, you know, I think, Robert, people spend too much like brain calories trying to optimize for the 0.25% here, the 0.5% here, which like, good, cool, but like, don't let it pull away from like your other goals and your other investing and things of that nature. Yeah, and the only thing I'll add to this is if you have a local bank, maybe it's a credit union or a regional bank that makes sense for you. Maybe you have a portfolio of real estate loans and mortgages that are going to. through it or you have your car loans there, whatever. Then it might make sense to pick that over a public.com or a Robin Hood, but if it's strictly based on how much money you're going to make

Starting point is 00:35:20 on it from the interest gained from it, I don't think that really matters too much. They're all pretty much the same. So the only reason to pick one versus the other is which one you prefer more or which one gives you additional benefits. So like for me, if I have a bunch of loans with a credit union or a local bank, sure, I'll throw them a bone and put a high-yield savings account, with them because it shows that I'm serious about building the relationship with them. But otherwise, the algorithms don't care. They don't care. You're just one of hundreds and hundreds of thousands of clients.

Starting point is 00:35:51 So do what's best for you so you make sure to automate as much as possible for your wealth building journey. But absolutely make sure you're using a high yield savings account. 100%. I mean, inflation right now is above 3%. So like you're just putting this money in a high yield savings is just keeping up with inflation at this point. So our next question comes from Mike.

Starting point is 00:36:09 this is an email. Mike says, hey, I've been a member of the Rich Habits Network for six months, and I've been listening to your show for a few years. Let's go, Mike. Thanks for being a part of both our community here with the podcast and inside the Rich Habits Network. That's amazing. Mike says I'm 42 years old. I'm single and I have no kids. I work and have a state pension plan, a 457B with the option to do traditional or Roth contributions. I currently have 300,000 in traditional and about 50,000 in Roth. And for the last two years, I've been doing Roth. I make about $215,000 a year with overtime. Overtime pays about 35 to 40% of my total compensation. I plan to retire at 55 years old and my estimated pension will be $160,000 a year. I currently have $700,000 in my

Starting point is 00:36:52 bridge account and will continue to dollar cost average while I'm working. My question is this. Due to the tax implications, while I am working and making way more because of overtime, should I go back to doing a traditional contribution to help with taxes and then convert large chunks into the Roth from the traditional while I'm retired making 160,000 versus the 215 now. Or should I stay the course and just continue contributing to the Roth? Would love to hear your opinion on the pros and cons for my situation. Yeah, I think, you know, 42 years old, you plan to retire 55 years old. That is 13 years into the future. I mean, I understand saying, hey, I make 215 a year right now and technically I'll make 160 in retirement. So I'm being taxed.

Starting point is 00:37:39 right now higher than if I were in retirement. So by making traditional contributions, I can write that off my higher taxes. And then when I am in retirement making 160, so a lower tax bracket, I can convert the traditional to the Roth, be taxed then on that 160 versus the 215 now and arbitrage the difference. You're totally right. That could be the case. And if that's all you're trying to do, I'm here to tell you, the math makes sense. Rock and roll, you can do that. The unknown side of it though is that who knows what the future is going to be are you going to have this pension at 160 in 13 years from now is the tax bracket at 160 going to be the same as 160 is right now or in 13 years is the government going to raise our tax brackets and the way that they tax us

Starting point is 00:38:26 differently like i don't know right if i were you you've already got 300 grand in this traditional 50 000 in the roth maybe there's a world where you just keep doing the roth until it's equivalent to your traditional and flip back and forth however you see fit. Maybe you've split it 50-50 if you'd like. I guess what I'm trying to say here is yes, your math is correct, but I'm not convinced that the future Uncle Sam is going to make sure taxes are lower in the future on 160 than they would be today's 160. Yeah, I like that takeaway. And thanks for breaking that down because I was a little bit fuzzy on what the better solution there is. But I do think keep going on the Roth. The 700,000 in the bridge account right now at 42 years old. Another, you know, 13, 14, 15 years is going to double or

Starting point is 00:39:11 triple anyway. So you're going to have a couple million dollars there. So I think it's a great situation to be in at 42 years old. So congrats. And I really like that breakdown. So our last question comes from Instagram from Gendo. What's up Gendo? Gendo says, hey guys, want to say thank you for the accessibility to financial literacy. Let's go. Absolutely. Gendo says, my fiance got me started listening to your podcast and y'all kickstarted my track to a host. hopefully rich life. I just turned 30. I'm a National Park Service employee making $45,600 a year. I'll get to raise this December, so I'll be making $50,700 a year. In 2025, I maxed my Roth IRA and planned to do so again in 2006. First off, that's awesome. For making 45K and 7,500 of it, I guess 7,000 rather last

Starting point is 00:39:58 year, went to the Roth. That's an accomplishment in and of itself. Holy smokes. Okay, so Gendo says I've got 12,000 in a high-yield savings earning 3%, 10,000 in my Roth IRA, and I have 20,000 in low-interest student loans that I hope to get public service loan forgiveness on in seven years. So here are my two questions. I'm inheriting $60,000 this year. What's the best way for me to handle investing this to go the furthest? My second question is I'm currently putting 10% of my pay into my TSP Roth with a 5% match. Should I only do the 5% match, or is it better to put more into my Roth?

Starting point is 00:40:33 This is more money than I've had in my entire life and I don't want to mess it up. My parents never talked about money with me, so I'm really grateful for your podcast. Gendo, I love this. You're inheriting money. I believe probably because someone passed away, so I'm sorry to hear that that happened to you. But let's make sure we're honoring them the best we can with the $60,000. Robert, you want to kick it off? Yeah, I'd love to.

Starting point is 00:40:53 I would take the $60,000. I would get this traditional, we call it the bridge account, that traditional brokerage account opened up. I would be very, very sure right now you already have your high yield savings account is dialed in at that $12,000. I love that. You've got the Roth IRA up and running. So what I would do, two part here. I would take the $60,000. I would put at least 50 of that in the traditional brokerage account, get it up and running, get it dialed in in the funds we talk about like VOOQQQQ,

Starting point is 00:41:24 those types of low cost funds. That's what I would start. And then also when it comes to the TSPR, I would probably do exactly what you're alluding to. I would lower that 10% down just to the match, get that TSP Roth match, and then I would put the rest of it in your personal Roth to be able to get as close as you can to maxing that out every year. And I think you'll be up and rolling and running.

Starting point is 00:41:50 And the only other thing I want to add, I, too, would keep that $20,000 of student loan debt as long as it is truly low interest, low cost. I would keep rocking and rolling on those payments if you believe there is a program down the road that will give you forgiveness for those loans. And I think you'll be up and running and rock and rolling and just doing a really good job if you follow those tactics. I completely agree. I think that's a great strategy. I'm actually going to want to put maybe all $60,000 into the markets because I just said the math for you here at an 8.5% interest, right, which what you'd earn in the S&P over time adjusted for inflation, rough, rough. you're looking at $60,000 between age 30 and 65. So that 35 year period of time turning to $1.2 million.

Starting point is 00:42:35 So this inheritance will be a $1.2 million nest egg for you at 65 years old if it's invested in the S&P, the NASDAQ, the NASDAQ, the Dow Jones, the international stuff. Like, you're just doing the basics. You're not getting fancy. You're not trading options. You're not doing some startup stuff. Like, you're just hanging out doing the basics here. And I also want to go back to this, uh, race. they're going to get in the month of December going from $45,000 to $50,000. That $5,000 difference, I don't want that to go to lifestyle creep. I don't want that to go to a vacation. I want you to have that, let's call it, you know, $500 extra dollars a month and take that $500, $400, whatever it turns into, and make sure that that's going toward investments. Make sure it's going toward your future. Because again, you're 30 years old. Every dollar invested here at the age of 30

Starting point is 00:43:26 turns into $26 in retirement. So that $500, $400 a month that you're doing, I'll do the math here for you. Every month of $500, let's call it $450. Every month of $450 that you're investing turns into $20,000 added to your nest egg in retirement. One month of investing, this new raise, 20,000 more in retirement.

Starting point is 00:43:47 Just keep that in your mind, Gendo. And the only last thing I want to add to everyone listening and Gendo, Do not tell everyone you're getting this money. I know you want to tell them, hey, I'm crushing it. I'm 30 years old. I've got all this stuff going on. But as soon as you know and let them know that you have this windfall,

Starting point is 00:44:07 guess what? You're going to have so many investment opportunities and so many new best friends. Don't tell them you have it. Get it invested. Turn it into millions of dollars. Live an incredible life without having everyone knocking at your door, asking you to invest in their carwalks, or their food truck or whatever it may be.

Starting point is 00:44:26 So just get it invested and don't tell anyone. Everyone, thanks so much for tuning into this week's episode of the Rich Habits podcast. We are so grateful that 100,000 of you come back every single week and that over almost now, Robert, 1,100 of you have joined us inside the Rich Habits Network. It is just a awesome, awesome, cool place to hang out and we're really, really grateful.

Starting point is 00:44:47 Again, you know, we hosted our two-hour weekly live stream last night. Robert talked about a ton of things, had like 400 people hanging out with us over there on Zoom over inside the Rich Habits Network, asking questions about their personal lives. We're talking about stocks in the market, headlines, and it was just so much fun. So if you want to join us inside the Rich Habits Network to get extra access to Robert and myself, as well as access to pre-IPO companies, I think we talked about this Robert last week, Lambda AI, who just signed a massive $30 billion

Starting point is 00:45:17 deal with Anthropic. We invested into their last round at like $4 billion or something inside the Rich Habits Network. We're doing some cool stuff in there. And if you want to invest alongside of us and join us for these live streams and all the coursework, join the Rich Habits Network. Seven day, free trial, free, nothing out of pocket, poke around, see if it's right for you. And if it is, we'd love to have you stick around and join us for more than seven days. Definitely 100%. The Rich Habits Network is incredibly cool. And it's a no-brainer if you're looking to level up your knowledge in business, finance, mindset, and all of the above, the things that we cover here the most. And, you know, Austin, we have the coolest jobs on earth. We get to come on a

Starting point is 00:45:57 microphone together every week for hours and hours and just talk about how can we help other people not make the age-old financial mistakes that people have been doing wrong for decades and decades. And I couldn't be more happy about doing this now. And in 20 years from now, here in the Rich Habits podcast. Thanks, everyone. And we'll see you on Thursday for a Q&A episode.

Rich Habits Podcast - 186: What Do Rich People Buy LAST?

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