Rich Habits Podcast - 27: The 3 Reasons Preventing You From Retiring a Millionaire

Episode Date: August 28, 2023

In this episode of the Rich Habits Podcast, Austin Hankwitz and Robert Croak unpack the three most common reasons we see preventing people from retiring millionaires. Specifically, the lack of retirement goals & planning, carrying high-interest debt for years and years in effort to "preserve" a nest egg, as well as only depending on one source of income. We also share a very special announcement with our podcast listeners! ---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.

Hey everyone, Robert here. Be sure to stick around until the end of this episode. We have something very special we want to share with our podcast listeners exclusively. It's something we've been working on for months now and will provide all of you so much value in your wealth building journey. Stay tuned. Hey, everyone, and welcome back to the Rich Habits podcast, a top five business podcast on Spotify. My name is Austin Hankwitz and I'm joined by my co-host, Robert Kourke. 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 and 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 young and still in the process of building wealth and figuring it all out. Robert, what are we going to be talking about in today's episode? In this episode of the Rich Habits podcast, we're going to break down the three reasons

preventing most people from retiring comfortably. Specifically, we'll talk about the lack of planning, carrying high interest debt over long periods of time, and the lack of multiple income streams. I believe a lot of this is predicated on the mindset of analysis paralysis and the fear of failure when it comes to investing. So many people are fearful of what could happen so they sit idly by without investing any of their money and getting into the markets, and this just does not help anyone when it comes to their wealth building strategies. I couldn't agree more, Robert, especially, you know, we've been seeing a lot of DMs and chatter from our audiences just here in August, as we've seen a little bit of volatility in the stock market, down about four and a half, five percent since the start of the month.

And it just blows my mind because at the end of the day, the stock market does exactly that. It moves up and it moves down, right? No one is getting scared about the volatility to the upside of 5%, but to the downside, the whole world's coming to an end. So I can't wait to hear about these different reasons why people don't retire comfortably. Start us off with number one, Robert. Yes, number one is you don't have retirement goals or even a plan. It's totally an afterthought. I see this every day where people in their 30s, 40s, and sometimes even 60s do not have an executable plan.

They literally just kind of meander around and they say, hey, I've got a 401K. Well, guess what? The 401K is not a retirement plan. It's just one of the vehicles that you may or may not have. in your retirement portfolios, but it is definitely not a plan. So people contribute to their 401k every paycheck, but they have no idea how much they're actually contributing. They have no idea what that amount will be over their lifetime.

And the worst one is they don't know their annual returns or even what the funds are invested in. This is just, it just blows my mind on a daily basis where I'll ask people, what was your return of the last three years in your 401K? What is your 401K mostly invested in? What is your waiting in that? They have no clue. So listeners out there, all of you, please understand, having a 401k is great, but that's not an investment strategy and it's not a retirement strategy.

It's just one piece of the pie. So, Austin, walk us through this a little bit more of your thoughts of where it relates to a 401k, a Roth, a traditional IRA, and give the listeners some more insight. on to what you think is best overall. So I think, you know, this first reason of you don't have a retirement goal or even a retirement plan is overwhelming for a lot of people listening. I see a bunch of people commenting on my videos or during my live stream saying, wait a second, what account is this? What do I buy?

How do I deposit? We have limits and restrictions. And they don't even know where to start. So here is the plan in five simple words. Match beats Roth, beats traditional. Okay. here's what I mean by that. The match you receive from your employer if you're contributing to your 401k is great. You want the free money. Let's get the money in the 401k assuming you have autonomy over it. You know what

it's invested into. It's in the S&P 500. Get up to the match because you want the free money. Next, Roth individual retirement account. That's the next step in the plan. Now you've done up to the match here. It's time to go open up a Roth individual retirement account and max that out every single year. What does max out mean? $6,500 per year or about $550 per month. No, you don't have to max it out every year. You can contribute less than that. That's totally fine and actually encouraged, if that's all you can afford, right? It means you're investing toward retirement, but it's not some sort of restriction or parameter. So that brings us to the last part of this equation, which is that traditional. Think about this as your normal and taxable brokerage account.

You can also think about this as maybe some cryptocurrency, some diversification into collect. or fine art or wine or farmland or any other sort of different diversified investment strategy here. So again, the priority, however, is that match because you're getting that free money. You know where the money is going because you actually took the time to look what's in the account and rebalance. Then you have the Roth IRA. You opened this up on Fidelity. Maybe it was Charles Schwab or even Vanguard.

You are investing most of that, if not all of it, into the S&P 500 and you're investing as much as you can. And then if you have any money left over, you're now diversifying that into your normal, taxable, traditional accounts that you would open up on public.com. And now before we jump to reason number two, though, I want everyone to think about taxes, because at the end of the day, we know taxes are going to rise in the future. So that is why we choose the Roth retirement accounts, Roth 401k, if you have it, Roth IRA, absolutely. When we are investing for retirement, we know the taxes are going to be higher. So let's pay them now and then enjoy that tax-free money and retire. I know that was long-winded, so I'm excited to jump in to reason number two, Robert.

Yes, let's take it away. You carry high interest, a bad debt for years and sometimes decades. This one blows my mind, but we're going to break it down, and hopefully everyone listening will understand that you just can't have this as part of your wealth building strategy. This is the biggest wealth inhibitor I see on a daily basis with people. I was just speaking to someone the other day who had nearly $500,000 invested for retirement, but was still carrying tens of thousands of dollars in bad high interest debt and questioning me if they should pay this off. This is very critical for everyone listening. You can't out invest bad high interest debt. And I know it seems difficult for people in the mindset where they're like,

I have this nest egg, so I'm going to leave the credit card debt go. or the hospital bill debt go or student loan debt go, and it's just not the right way to build wealth. You want to pay off any high interest debt as fast as you possibly can, so then you can become cash flow positive and not still paying minimum payments on that. Because remember, if your credit card debt or bad debt is 20 or 25% interest rate, and you're making 10% in the market, you're still 15% to the bad. And we want to be on the good side of that positive arbitrage of our money.

So this is a critical, critical point in wealth building to get rid of those high interest, what we call bad debts, as soon as possible. So that can be student loans. It could be a car loan, credit card loans. It could be medical bills. It could be taxes. You want to get rid of those first. So then all of your money going into investments, you have positive arbitrage on your money.

This is critical in your wealth building strategy. I think this is probably the most important reason of these three, and here's why, because so many people fall victim to it. Right. So just to put all this in perspective, America has $1 trillion now in credit card debt at a 25% interest rate. We have $1.6 trillion in auto loan debt at a blended 12% interest rate and $17.1 trillion in total house. whole debt. These are all record highs. This is not good. This is not how you build wealth. And now you might say, dang, I don't know. I see my friends going on vacation. They just got the new car. Like, they must be doing good. They're probably not, right? Statistically speaking, they are probably adding to this overall high interest bad debt equation that is keeping Americans poor. We want to get

out of this high interest bad debt. And we want to make sure that we're setting ourselves up for a comfortable retirement down the road. Yes, Austin. Thanks. Thanks. those staggering numbers. That's just crazy to think about. And what everyone listening really needs to let sink in and to really ponder for a few minutes once they're done listening to this podcast is that there's no one there to pick up the pieces for you. They're just, they're just not going to be there. It's really on you to take care of yourself and take care of your family and create these strategies, these rich habits to help you be in a position so you're not in one of those statistics. Because I assure you when things go bad, you're not going to have anyone to pick up the pieces for you.

It's on you. And keep that in mind. Accountability. And I think it takes a lot of people saying I'm sick and tired of being sick and tired. It's time for me to take back control of my life. And hopefully some of that inspiration might come from listening to this podcast and forming those new rich habits for your everyday life. Robert, walk me through reason number three. Okay. This is a good one as well. Maybe not as important as number two, but very important. important for the overall strategy of building wealth, and that is you never executed on having multiple sources of income. 60% of adults live paycheck to paycheck and without multiple streams of income. So it's incredibly hard to build any margin to pay off this bad debt or invest towards the

future. Remember, your side hustle doesn't have to be anything groundbreaking or exciting. It just has to be enough where you can add a few $100 each month to your budget. so you can have that to put away for your investment strategies. That means you might want to consider walking dogs on Wag or Rover, delivering for DoorDash or Uber Eats, or even just driving for Uber on the weekends. There's no excuse to not have multiple sources of income in 2023. There are literally hundreds, if not thousands of side hustles out there that allow you to monetize your free time and many of them are even remote. So everyone listening, please take that to note that there is no excuse and you should really be taking it seriously to have multiple sources of income to help you build towards your retirement and financial freedom. I think one of my favorite side hustles that has become a little bit more popular, especially this summer.

It was made more popular by Gary V, but that's like garage sailing, right? Robert, you talked about the estate sales used to go to for fun. You'd flip a little items here and there. I think we're on a live stream talking about a scarf or a box of scarfs that you found that in a state stale that were worth hundreds, if not thousands of dollars because they were Gucci scarves, right? I think a lot of people get overwhelmed by the idea of, oh my gosh, I have to start an online business and I have to do this or have to buy the equipment or I have to listen, y'all, it is so simple to find a garage sale happening in your neighborhood, in your town,

even biking, walking distance from your house on a Saturday. Show up early. You find a couple cool little things. You check the price of them if you can flip them on eBay or maybe Facebook Marketplace. You pay one or two dollars for it and you flip it into $15 or $20. Maybe that's what I did in college cleaning car headlights. Maybe it's what my girlfriend does for fun, which is walking dogs on Rover or Wag or whichever one she uses. She made $312 last month walking a dog that lives right up the road from us for fun during her lunch breaks. She loves it. It makes her so happy and she's making extra money from it, right? And just to put that in perspective, 300 extra dollars invested per month for 35 years is $1 million in your retirement account after

being adjusted for inflation. That's after the 3.5% assumption for inflation. Just 300 bucks per month in your millionaire in retirement after 35 years, y'all. This is so critical. I love this illustration every time you use it because it just comes back to the fact that so many of the fake gurus, so many of the wannabe people out there that are hiding behind a paywall, want to make becoming wealthy seem super serious and difficult because they want to sell you something really expensive. Well, guess what? If you follow rich habits and you really listen along and take notes and take action, getting to that million, two million, three million dollar net worth is much easier than you think. Couldn't have said it better myself, Robert. With that being said, let's introduce the sponsor

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Again, that's masterworks. dot art forward slash rich habits. All right, Robert, everyone's favorite part of the podcast, the question and answer, and we've got three really, really good questions that go around. Don't forget, if you want to ask us a question, head over to our Instagram at Rich Habits Podcast and shoot us a DM. I personally read every single direct message and I get back to literally everybody. I will get back to you. So shoot us a question. We're going to read it. And if we like it, we'll throw it up on the podcast. Our first question comes from Victor M from Mexico City. Victor says I've been investing $3,000 per month now for a while and I'm excited to keep up the pace.

However, all my money has been going toward the S&P 500. Should I keep this up or maybe divide some of it into QQQ as well? Now, Victor, I like this question because I'm excited that you're not just investing for the future, but you're also thinking about diversifying into what might help you outperform the benchmark which is that S&P 500. Before I answer your question now, I just want to make sure that you're actually investing into the ETF V-O-O and not the ETF SPY. Now the SPY ETF is the S-NP-500, don't get me wrong, but V-O-O is actually an ETF by Vanguard that has a expense ratio that is three times cheaper than SPY. So over the long term, you're actually going to keep more money in your pocket and have

more in retirement. So when we're talking about the S&P 500, we're talking about VO. So here's my perspective, Robert. I say feel free to keep 60, maybe 70% of this invested into the S&P 500 every month and maybe allocate the other 30 or 40% to either VTI, QQQ, or even VGT if you're feeling a little bit more risky. What's your perspective? Yeah, I think that's a great breakdown. I love QQQ and I think everyone needs to make sure they have part of the NASDAQ in their portfolio. Obviously, VTI is great as well. That's a total market fund. So you're really going to be broad, which is going to give you some safety and kind of the bumpy periods. And then VGT, if you want to be a little bit more risky, you can get into VGT and have that tech background. So you're going to have some of that with QQQQQ, but VGT is going to really round it out for you and perform well. So Austin, I think that's a great way for Victor M to round out his portfolio. more and have exposure to more than just the S&P 500. I love it. And Victor M, just a quick call out too. If you're looking for income inside of this portfolio, consider SPYI. Don't forget the I. That ETF will provide you about a 12% distribution yield right now on your investment, which could be

something pretty reasonable, depending on how much money you have in this portfolio. Just a little bit of passive income also helps offset some of that volatility we see in the markets right now. in August, I think we're down about 4% or so. Really good question. Our next question comes from Nina. She asks, what's the best investment account for a child who is not earning income? I like this question because a lot of people you hear online are going to say employ your child, have a little LLC going on, put them on payroll, this, this and that. That might not be viable for a lot of people listening right now. Maybe a lot of people just want to work their normal job, have children, and do the fun stuff. So I think this is a great question and very applicable. Now for me, I'm

going to choose the 529 account right the 529 and not only does the parent have the opportunity to write off the contributions against their taxable income depending on the state they live in but any money that's not used for college can actually be rolled over into the child's Roth IRA upon 18 years of age up to 35,000 dollars I just opened up a 529 account for my newly born nephew he's adorable I put $3,000 into it it'll be worth about $25,000 and 18 years. If I don't put anything more, but if I contribute about another 100 to 150, it'll be worth closer to $60,000 in 18 years, which means my nephew could use $25,000 of that to pay for college. And again, these gains are tax-free. But then they can also use that other

$35,000 and roll it over into their Roth IRA to get a great jump start to their retirement investing. Robert, what's your favorite account? So yeah, you took the best one probably, but a custodial taxable account is a great way to tackle this as well. I love this one because of the flexibility you have as the parent to invest as aggressively or as passively towards your child's future as you'd like. I think what's also really fun about this is that if your child loves certain products like Nike's, for example, you can show them that they can also own Nike stock so they can understand that ownership and be in an investor mindset early on versus just a consumer

mindset. So it really helps them get that mindset shift early in life and that's a great place to be when teaching your children financial education and literacy. Also, as they get older and start earning income, you can then open up a new account for them called a custodial Roth IRA and help them jumpstart their tax-free retirement investing. So that means if they're bagging groceries, babysitting, sweeping a floor, maybe your business or a friend's business, It doesn't matter as long as it's earned income. Then they can really use this custodial Roth IRA, have those earnings be tax-free for life even before they're 18 years old.

What a great question, Nina. Our final question comes from Heinz. Heinz asks, what's the difference between CDs and T-bills? Which one should I be looking at and why? Good question. I feel like we hear all the time. Do I choose the high-guiled savings account? Do I choose the CD?

Do I choose the T bill? One's paying four. One's paying five. One's paying five and a half. What do I choose? So CD stands for a certificate of deposit. Keyword being deposit. You're depositing your money into an account that essentially requires you to keep it in there until a specific date in the future.

This specific date might be several months down the road and is essentially locking up your money for a period of time. If you want to take your money out, with a CD, you have to pay an early withdrawal fee, which is why We actually prefer the T-bills, aka U.S. Treasury bills. These are essentially IOUs from the U.S. government saying, you're lending us X amount of money for six months, and we're going to pay you back what you lent us, plus a predetermined interest rate. And on public.com, you're able to buy and sell your T-bills at any time,

which means you're able to jump in and out of them freely without any sort of lock-up periods, like you might see with a CD. There's also no state or local taxes on your T-Bills, profits with T-bills, which means more money in your pocket when Uncle Sam comes knocking every April. And there's also a link in the show notes below. If you want to go open up one of these T-bill accounts, we couldn't recommend them enough, especially as a good place to park your emergency fund, your savings account. I personally have $50,000 parked in mine, and I'm making 5.5% interest every year on that money, which is incredible, especially when you look around and

say, wait a second, the stock market's trading up and down. I don't want any of that volatility for my savings. Let me park it in something stable. That's going to appreciate slowly but surely over time. Robert, I know you've heard a little bit about the kind of dilemma of the high yield versus the CD versus the T bill. I'd assume you also agree that the T-bills are the best way to go here. Yes, I love it. And we both really appreciate and enjoy working with public.com. I think it's a great platform and the best place to purchase T-bills as well as cryptocurrencies and some of the other investments you would want to make. But I love Treasury bills, especially right now, because I just think it's a great way to hedge your bets a little bit and a really safe way because with no state

and local taxes on the gains, you're truly making the full amount of the 5.5% return. And I just think it's a great and easy product to carry during uncertain time. So I love it. Yeah, and just so well on the same page here too, with a high yield savings account like you might see on wealth front or betterment, those accounts you do have to pay state and local taxes on your gains. So just be aware of that if you have one of those accounts to be setting aside a little bit extra money for when Uncle Sam comes knocking again in April of 2024. So with that being said, everyone, we could not be more excited to have passed Dave Ramsey on the freaking business charts on Spotify because 42,000 of you come back every single week

to listen to what we have to say. We could not be more privileged and excited. We feel warm and fuzzy inside that we have such a lot. growing community and we've been working really hard behind the scenes on something very, very special. Now, what we're talking about here is something that we want to give our podcast listeners a little bit of a sneak peek preview to before we launch it to the public. So as a little token of our appreciation, we want you all to not only get a discount, but also get it one week early. And that is the Rich Habits Podcast Wealth Building Blueprint course. It's a four-module video course. It's

about 45 minutes long and it walks through how to earn extra income, how to pay off your debts, how to build your credit score, how to repair your credit score as well. But more importantly, how to invest for retirement so you can comfortably retire, hopefully a millionaire by the time you're 65. This course is literally the blueprint. I mean, we talk about the ups, the downs, all the things that we've gone through personally and share with you all our biggest learnings, as well as the playbook on how to achieve wealth in retirement. Now here's the deal. Because you are a loyal podcast listener,

if you go to our Rich Habits podcast Instagram account and you send us a DM of your favorite color, blue, green, purple, red, orange, indigo, violet, I don't care. But send us your favorite color. And I'm going to send you back a 20% discount code for the Rich Habits Podcast, wealth building blueprint video course.

That's a mouthful, by the way. We're going to send you discount code to show you how much we appreciate you and just you know here that we're not launching the course for another week, which means you get it one week early because we love our podcast community. Robert, what do you think about that? Do you think that's pretty fair? I think it's great and I believe that it's the best course out there for the money. If you really break it down mathematically, we are charging you $1 a minute for this course. So 50 cents each per minute. And I think it's great value. A lot of the money. you have been asking for us to bring a course out and we were really, really just waiting to we could create the very most valuable course we could on the topics that concern all of you listeners the most. So I'm very proud of it. I'm very proud of the podcast and I can't wait to release the course. And just so we're on the same page here, this course is 45 minutes, therefore it's $45. This isn't a $2,000 fake guru course. This isn't a $699 fake guru course or even a

$100. We are giving you all the blueprint for $2.20 bills essentially. The dinner you had, Saturday night, that's the blueprint here, right? Three months of your Netflix, that's the blueprint. I mean, it's that simple. Everyone, thank you all so very much for sharing the podcast, giving it a like, a review, and all the fun stuff on Spotify, YouTube, Instagram. We see people every Monday morning share the Rich Habits podcast on their Instagram stories. It's the coolest thing we've ever seen. We're super, super grateful. And we also got a lot of really good feedback about last week's episode with George Campbell. A lot of you all want us to have more guests on the podcast.

So we'll start working on that here in the next couple of weeks. Yes, thank you all so much. It was an amazing surprise to wake up and be top five, but just past Dave Ramsey. So it was a lot of work and a lot of fun to get after old Dave and pass him in the charts. So everyone, thank you so much from the bottom of my heart and Austin's heart for supporting us on this journey. Everyone, have a great start to your week and happy Monday.