Rich Habits Podcast - 19: Escaping the Poverty Mindset

Episode Date: July 3, 2023

In this episode of the Rich Habits Podcast, Robert Croak & Austin Hankwitz discuss breaking free of the poverty mindset. Specifically, getting & staying out of high-interest consumer debt, building & repairing your credit score, and how to earn (but more importantly) invest your money to build generation wealth. Forming rich habits to one day become financially free are important, but you’ll never stick to them over the long-term unless you’ve made the shift in your mindset that you deserve to be wealthy. You can obtain wealth. No matter your upbringing, your family, or your current situation. If you have a question for next week's episode, be sure to ask it through Instagram DMs! @richhabitspodcast---Be sure to check out Public's new ⁠⁠High Yield Cash Account paying 5.1% APY.⁠⁠ This is higher than anything else on the market and is FDIC insured up to $5M. ---Earn 5.1% APY using a Public HYCA, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Opt-in and share your email, ⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠Learn more about our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠4-module video course!⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Download our FREE Budget Template, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠To learn more about Robert: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://stan.store/RobertJCroak⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠To learn more about Austin: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://stan.store/austinhankwitz⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Contact: [e-mail] ---Hankwitz Group LLC has an existing business relationship with NEOS Investment Management LLC. The opinions expressed are those of the author, and the author owns several NEOS ETFs.

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freaks multiply at a rate that would make a rabbit say yo. Chill. But Laura shopped on Amazon and saved on cleaning spray, countertop wipes, and fly traps. Hey, fruit flies, your baby boom ends here. Save the everyday with Amazon. Hey, everyone. And, welcome back to the Rich Habits podcast, a top 10 business podcast on Spotify. My name is Austin Hankwitz, and I'm joined by my co-host Robert Croke. Robert is a seasoned entrepreneur in his 50s, with more than 200 million in company exits under his belt, and I'm an entrepreneur in my late 20s with a background in finance and economics. Since quitting my full-time job in corporate finance a few years ago, I've built a seven-figure media business and actively advise some of the most

well-known fintech companies around the world. As the show name might suggest, every episode we talk about rich habits as they relate to business, finance, and mindset. However, we try and bring you two unique perspectives, one from an industry veteran, which is Robert and the other myself, someone who's still in the process of building wealth and figuring it all out. So, Robert, what are we going to be talking about in today's episode? In this episode of the Rich Habits podcast, we'll be talking about making the mindset shift out of poverty stricken and into wealth building. Specifically, we're going to share three actionable strategies that are going to help you get and stay out of debt. Build or repair your credit score and most importantly, retire wealthy. I can't emphasize this enough.

Forming rich habits to one day become financially free are important, but you'll never stick to them over the long term unless you've made the shift in your mindset that you deserve to be wealthy. You can obtain wealth. No matter your upbringing, your family, or your current situation, you can definitely do this. I'm so excited about today's episode, not just because of the mindset shift topics we'll be talking about, but also because we'll be talking briefly about both the Supreme Court ruling on student loan forgiveness, as well as the phenomena happening right now on Wall Street with these Bitcoin ETFs. So stay tuned. With that being said, Robert, walk us through the first strategy here. Yes, this is a big one for me right now and obviously very topical

for everyone, and that is getting and staying out of bad debt and what that means based around the recent news cycle. I'm all about leveraging debt to build wealth. Borrowing at 4% so I can earn 10% in the markets is always a good thing. Remember, good debt is great for leveraging and building your wealth. But interest rates are insane right now, so you have to learn the difference between good debt and consumer bad debt. Remember, we always say you can't out invest high interest bad debt, and this is critical. And the average credit card APR right now is 24%. The average used car loan is 12% with the average new car loan being about 7%. So there is no scenario we're holding on to that type of debt with those interest rates is smart right now. Yeah, and that

brings us to the hot topic I want to speak about for a moment. We heard from the Supreme Court on Friday that President Biden's student loan forgiveness was unconstitutional. Therefore, the 23 million borrowers who qualified for forgiveness will no longer be able to count on this money arriving. Now, according to the Department of Education, student loan interest will resume on September 1, and payments will start being due on October 1, so be prepared. Be prepared, right? Please plan for this. Some of you listening right now haven't had to budget for a student loan payment in three years. Find your login passwords, figure out the exact amount, and bake it into your budget, especially if these interest rates are of 6, 7, and 8% for your student loans. And you might want to

consider a sort of debt consolidation loan. I know there's a really cool website that I've personally used in the past called sparofi.com. That's S-P-A-R-R-O-W-F-I-com. It's essentially a really great tool that you can use to search for better interest rates on consolidating and refinancing your student loans. Let's talk about getting out of debt and staying out of debt. To get out of debt, do yourself a favor and research both the Avalanche method and the Snowball method. And then after doing a little bit of research, figure out which debt repayment method makes the most sense for you. Personally, when I was paying off my high interest consumer debt, I used the snowball method, but it is totally up to you. And try adding a spending calendar to your monthly budget.

It's something that really helped me plan as to when my money was going to enter and leave my bank account each month. And you're really just keeping an eye on your money from a mindset perspective. You need to understand that a credit card, personal loan, or 401k loan are not a way to get ahead in your wealth building journey. You need to stop using debt as a crutch and instead build safety nets through habits so you don't have to depend on debt to live. please please please let that sink in and follow that now let's talk about our second strategy specifically your credit score if you're listening right now and i swear to you i did this yesterday and it was a game changer for me i went to a website called annual credit report dot com and downloaded my comprehensive credit report from equifax it took me five minutes to fill out the identity

verification form and it gave me a detailed report of my open accounts broken down buy my credit cards, my mortgages, and everything in between. You can't understand or even begin to fix something you haven't read. Now, once you've downloaded the report and have it maybe printed out or pull up on your phone, it's time to get to work, right? Identify and dispute any inaccurate charges or pay off anything that's not current. You want to hone in on this and understand every open account and make sure everything is completely accurate. As you're going through your wealth building journey, you have to make sure to understand that your credit score is important. It's not the ultimate gauge of where your success is going to go, but it is very important. Finally, let's not

forget the importance of keeping low credit utilization, having a good mix with credit. So you have credit cards, you might have an auto loan, you might have a mortgage, but you want a good mix of credit without having too many credit cards. And the key here is try to have and maintain that utilization below 30% and then also doing some research so you understand the difference between the due date and the statement date because the statement date if you were to pay at that time helps your credit but the due date is the most important to make sure you're never late on your payments because you want to keep your credit score growing and getting higher and better without having any late payments so keep that in mind that is a gem right there robert the difference between the

statement date and the due date. I personally didn't understand that for a while, which was really frustrating because I was like, wait a second, I keep paying my card off, but nothing's being reported. You know, I'm not building my credit. Understanding the difference between the statement date and the due date is super important. Everyone that's listening, this is an important like little pro tip. From a mindset perspective, I want to remind everyone that a credit score is a debt score. Having a great credit score is awesome, but you need to make the mindset shift that you don't need a perfect credit score in order to be wealthy. There are plenty of people who have built generational wealth by investing in boring businesses, index funds, and other great investments, which have nothing to do

with your credit score. Always important. Now, arguably, most importantly, let's round things off with our third strategy of earning more and investing. You deserve to earn your fair market value, and for 90% of you listening right now, I'm willing to bet that you're being underpaid. Now, there are plenty of free resources and tools online that help people learn, one, what their fair market value is, and two, how to ask their boss for it. Personally, I'm a huge fan of show DeWan. He's on LinkedIn and TikTok and Instagram. He's a seasoned career coach turned content creator and his handle is at WorkHap, like Work Happy, WorkHap. So go check him out. He is incredible. For those of you who are actually earning more money, if it's through a side hustle or a raise

or something else, I just really want to emphasize how important it is not to fall victim to lifestyle creep. It's very easy to start spending the additional money you're making versus investing it. If you're able to sort of keep that baseline and more money piles on top of it, you're then able to invest that difference toward a larger goal. It's just a mindset shift you have to make. In my opinion, I believe that pressures and lifestyle creep are one of the biggest hindrances for people's wealth building journeys because they feel they have to keep up with the Joneses, they just keep going. And as they earn more money, they spend more money and the cycle keeps going over decades. And that's why so many people fall short on their retirement dreams.

Now that you're earning more money, let's talk about investing. Austin and I talk about having a well-diversified portfolio all the time. But something I think everyone should be paying more attention to right now is Bitcoin, specifically the ETFs that are being introduced to the market by some of the largest asset management firms like BlackRock and Fidelity. The SEC denied these applications stating the lack of surveillance sharing agreement. But the applications were quickly refiled stating that Coinbase would own that responsibility. So as you know, we've all been talking for a while now about dollar cost averaging into Bitcoin, and I still believe that's a great strategy.

So don't forget, when you're building your retirement portfolio from scratch, There are three key assets that we recommend. Stocks, real estate, and cryptocurrency. Stocks for their reliability, returns and stability, real estate for its cash flow and long-term track record, and crypto for its innovation and technology advancement. What crypto and the underlying blockchain is doing to change the game and banking cross-border payments,

real estate, and so many other industries that have been hindered by last. of innovation. To add some perspective to that sort of stocks, real estate and cryptocurrency portfolio, personally, my net worth is about 50% stocks, about 30% real estate, and 20% cryptocurrency. With that being said, Robert, let's talk about this episode's sponsor. Yes, this episode of the Rich Habits podcast is brought to you by Nios Investments. Neos offers ETFs that aim to offer monthly income while providing core portfolio exposure across equities, fixed income, and cash alternatives like T-bills.

Their ETS may be particularly interesting for folks looking to generate passive income inside of their investment portfolio. They even offer an ETF that provides exposure to the S&P 500 index while aiming to offer high monthly income beyond what investors would receive from their plain exposure to the index. Their funds may serve as a compelling income. focused alternative or complement to many of the investments already in many investor portfolios. If you're looking to add passive income focused ETFs to your portfolio, consider learning more about Nios's ETFs at NiosFunds.com. And as with all investments, investors should carefully

consider their investment objectives, risks, charges, and expenses of Nios exchange traded funds before investing. To obtain a prospectus containing this and other important information, please visit neosfunds.com and please read the prospectus carefully before you invest. Nios ETFs are distributed by Foreside Fund Services LLC. An investment in Nios ETFs involves risk including possible loss of principle. The equity securities purchased by the funds may involve large swings and potential for loss. A fund's income may decline when yields fall. Fixed income securities will decline in value because of an increase in interest rates. And I know we say this all the time, but I really am such a big fan of the SPY-I-E-T-F. Their C-S-H-I-E-T-F is incredible as well.

And thank you all for sitting through the scripted, very compliant, you know, ad read we do for them. But personally, Robert and I are both major fans of their ETFs. We both have a lot of money in them, and we couldn't recommend them enough. So two thumbs up from us. With that being said, Robert, let's jump into the question and answer segment of this episode. Our first question comes from Alex S. Alex asks, what advice would you give a new college graduate who's going to be starting their first full-time job soon? Any suggestions to set myself up for financial freedom in the future? There are three callouts that I quickly want to address. The first one is lifestyle creep. Be mindful of that. You don't need a brand new car now just because you're making $65,000 or $70,000 a

year. Live like a college student for the next two or three years and you will thank yourself. The second callout are roommates, right? You lived with roommates during conference. You still have a few more years inside you where it's perfectly fine and normal to live with roommates, right? At 23, 24, 25, even 26, get you some roommates. It's all good. No one's going to judge you. The last part is start investing into your 401k like as soon as possible. Something I did when I was working for my full-time job and after two years, I already had $22,000 into it. And that has now grown into over $30,000 for just some investing I did from 22 to 24. So that's really, really exciting. That's a great strategy. And my only takeaway is that you have the gift of youth. So keep in mind, I say it every single day. You need to invest early and often because it's not about timing the market. It's about time in the market. So use your age wisely. And you will thank yourself forever later on in life when you've got those millions saved up and you have the lifestyle that you desire. Our next question comes from Manny G. Manny says, as a small business owner, what can I do to minimize tax? owed to the IRS. I'm interested in tax planning strategies because I had to pay over $10,000 in taxes

for 2022. I just want to remind everyone that if you're paying taxes, that means you're making money. So congrats on the profits, Manny. And also want to encourage you, Manny to listen to our episode 18, which was where we did a deep dive into our favorite tax optimization strategies for side hustlers and small business owners. But Robert, you're the tax expert here. I'll let you take this one. Yes, Mani G. Stay up to date on tax laws, deductions, and credits. It may seem obvious, but the IRS.gov website is your friend here. Number two is maximize your deductions, such as marketing expenses, home office expenses, et cetera. Could be your car, could be your cell phone. All of these deductions will help you offset some of your earnings as well. And these are key to understand what deductions

you can benefit from with your small business. Number three, take advantage of depreciation like bonus or Section 179. This is great if you spend a lot of money on equipment and vehicles for your business, and there's a lot you can do here with this strategy. That brings us to our last question coming from Mason v. I am 19 and have a small business detailing boats and installing boat covers. This has led to an abnormal amount of wealth for my age, and almost all of it right now is invested.

My plan has been to go to med school, which would drain these investments and negate all this hard work because I'd use that money to pay for it. What do you think? So I want to hear what you think about Mason's situation and what you think he should specifically do not just with this money,

but maybe even with his career. Mason, V, I love this question and I've been waiting all day to answer it, so let's go. For me, if you're crushing it, you're out of the gate at 19, you've got this side hustle and this business up and running, you're already investing. You're so far ahead of the game of everyone else that's in your age category.

I would find it personally difficult to stop all of that, stop the earnings, stop the building, and stop the investing, and go backwards for 10 years. Because at the end of the day, you have to consider what is my opportunity cost in going to med school now. If you stop earning like you're earning a high earner and investing like you are at 19, you have a 10 year pause, possibly 10 year pause, where you're not going to be adding any money to your investments and you're going to be spending everything you have. So I think you've already spelled it out correctly for yourself. I think you should stay with it, keep investing, keep growing, and be that entrepreneur that

you were born to be and go from there. Mason, from my perspective, and I was super fortunate to graduate with only $15,000 of student loans, which I just paid off, I want to say like last year, and I aggressively paid them down whenever I was working. I mean, most med school students graduate with a quarter million dollars in student loans, right? How is that going to impact your net worth going forward, especially now that you have perhaps all this money right now? So I couldn't agree more with Robert here. I am all for, I think Robert you said, the entrepreneur you were born to be. That is powerful. I love it. And for those listening right now, too, just want to remind you,

this is a 19-year-old who's detailing boats and installing boat covers, right? What's going to, why can't everyone else do those things too? I mean, there are so many different ways in this world to make money. If you're 19, if you're 39, if you're 46, if you're 52, we all, maybe Mason grew up on the water and understands the best way to clean a boat, right? We all have these weird backgrounds and weird quirks that make us entrepreneurs and side hustlers. So just think about what's that weird quirk, the different skill, your specific skill set that makes you a high earner? Because I bet Mason's making a lot of money spraying some windex on a boat hall. Yeah, I love this.

Mason, V, good luck to you. I love this question. And yeah, I look back when I was 23 years old, I really wanted this Mustang convertible. And I was like, how am I going to buy this? My current job, I'm not earning enough. So I got into the vending machine business. And I bought three vending machines that I placed it, three different bars in my neighborhood in the corner. I did a 50-50 split with them. And that is what

paid for me to be able to get that Mustang convertible back then. This was a long time ago. So I love it. There's always a side hustle that works for every person on earth if you need to make more money. But Mason V, I say you go for it instead of waiting 20 years to get on your wealth building journey. Everyone, thank you so much for listening to episode 19 of the Rich Habits podcast where we talk about getting and staying out of bad debt. We talked a little bit about the student loans that are going to be ramping up here pretty soon. So be sure to do your research there and definitely be ready for that. We talked about building and repairing your credit score using annual credit report.com to help with that. And finally talked a little bit about earning more

money and what to do with your money when you earn it as well as what that portfolio might begin to look like for some of you. So really, really excited for you to listen to this episode. And by the way, there was a bunch of you, well over 30 of you, that shot me a DM asking for a copy of Michaela Aloka's Own Your Money book. I sent out the 10 copies I had. So be sure to check your mailboxes for those of you that I replied to over the next call it seven to 10 days. You should get a copy in the mail. And thank all of you for getting us into the top 10 from the bottom of Austin Eyes hearts. We're so proud and so happy.

And we couldn't have done it without you. so thank you so much. And with that being said, we are working behind the scenes on something very, very special that we should be able to introduce around August. So stay tuned and we really think you're going to like it.

Thanks again and have a great start to your week.