Rich Habits Podcast - 4: Getting Started in Your 30s & 40s

Episode Date: March 21, 2023

In this episode of the Rich Habits Podcast, Robert Croak and Austin Hankwitz share their best advice for those who might feel like building wealth has passed them by — specifically creating your new budget and holistically evaluating where you're at, making the needed changes to your life to begin implementing your new wealth building habits, and the harsh reality of catching up. Don't forget to share this episode with a friend who could use this advice. ———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 and welcome to the Rich Habits podcast. 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, I've built a seven-figure media business and invested into 26 startups ranging from pre-seed to series C. As the show name might suggest, every episode, we talk about rich habits as they relate to business, finance, and mindset. However, we try to bring you two unique perspectives. One from an industry veteran, Robert, and the other myself, someone who's still in the process of building wealth and figuring it all out. Robert, why don't we jump into things?

What are we going to be talking about today? Well, let's do it. We're going to be walking through the three actions you need to take if you feel like wealth is passing you by, specifically taking the first step to evaluate where you are, making the needed changes to your life to begin investing and have optimization of your investment strategies, and forming the right habits to reach success with your money for retirement. That sounds like a good episode to me, Robert. I'm excited. Yes, yes, yes. Let's get into it. All right, so let's do it. The first thing you mentioned there is specifically taking the first step to evaluate where you are. So for the person

who's in their 30s or 40s right now, that might feel like wealth has sort of pass them by, what is that first step that they need to take to plan going forward? Yeah, that's a great question. So the number one thing, in my opinion, is building a budget, a real budget, not some, you know, halfway done, and just really understanding where you're at and understanding your debt-to-income ratio. Because so many people just don't know where they're at with their finances, so how are they supposed to be able to invest in a way that's meaningful? because at the end of the day, if you have a real budget and you know where you're at and you know what your debt to income ratio is, then you can invest a specific percentage monthly and really accelerate your money and you're investing.

And to me, that is one of the most important things. From my perspective here, something that really helped me create my first budget. And I think we might have talked about this on a previous episode was kind of looking at yourself as a business, right? We know that businesses have to make money to be successful, which means that, you need to track every single dollar that comes into your personal business and every single dollar that leaves the Austin Hankwood's budget business, right? So as someone listening right now, it's super, super important to pull up those bank statements, pull up those credit card statements, pull up even the receipts you might keep if you pay for things in cash, and truly understand,

okay, wait, how much money down to the dollar am I making for my job, my side hustles, everything that is generating me income, even maybe dividends from your investments, who knows, right? Yeah. All the money that comes in and then saying to yourself, okay, I know that I'm starting with this every month. Now I need to figure out all the money that's going out. So actually, what's interesting is you mentioned there's an app, the Mint app. This obviously is not sponsored by them, but what do you like so much about the Mint app? What do you think is so good about that platform that helps people really understand their finances coming in and going out? I just think that overall the app is very intuitive and it's very easy to use. And a lot of times

when I talk with people, do you have a budget clients and business partners and such? And just general people in my DMs, they say no. But I kind of know where I'm at. And that just doesn't really work because what people need to understand when it comes to investing and just really building your wealth, you need to know where you're at every month. It doesn't mean you need to look every single day and look at every single penny, but it means that everything needs to be accounted for. Because at the end of the day, you need to know where you're at on your debt to income ratio and how much can you invest per month to make sure you're building your wealth for the future. Yeah, so you keep saying the word debt to income ratio. So just to kind of bring everyone up to speed here, the debt to income

ratio is exactly what it sounds like, right? So on one side, you've got how much money you're making every single month. It's called $4,000 is how much you're taken home, hits your bank account on a monthly basis, right? Called the after-tax take-home pay. And then on the other side, let's say you've got $400 that's coming out of your monthly take-on pay that goes towards debt. That might be a car payment, student loans, minimum payments on your credit cards, whatever they are, right? But $400 of that $4,000 is coming out. So the debt to income ratio is taking that debt, the $400 and dividing it then into that

income, the $4,000, giving you a 10% ratio, right? So $400 to $4,000 is a 10% debt to income ratio. And back to what Robert was just saying here, if $400,000, of your monthly take-home pay is going to paying debt every single month. That money can't be invested. It can't be saved. It can't be done anything with, right? So now you're just saying, okay, now I have $3,600 to really, like, start with.

What we're really trying to nail down here is that if you're starting with this $3,600, you need to now look at the total equation of that $36 and say, how much of this money as a percentage can I actually begin to use to pay off debt, invest, all that fun stuff. Yeah, and one of the most important things about this kind of. of point that we're making is getting people into rich habits to build their wealth. Because when you just have money sitting and you don't have a budget and it's a Saturday morning, you're like, oh, let's go get lunch. Let's go to the mall. And then you go to the mall and $700

later, that money is gone. And so a lot of this is just really building habits so you know where you're at. And you and I talk about it all the time that if you're going to go spend the $200 on the Nike shoes, put $200 into the Nike stock. So this is all about rich habits because people think that money sitting is just, oh, it's just there, I can spend it. And that's just not how you should be living. Let's get into the tactical habits now that the true steps that people can begin to implement in their lives in their 30s and 40s to help them catch up to really begin building wealth. So walk us through now. What is sort of a savings ratio? What should someone be looking at doing now in their 30s and 40s to begin to kind of catch up and build wealth? To take a line from Dave Ramsey's book,

he says 15% of your net income. And that's a little bit different. I think it should be 15% of your net income after expenses. But that's okay because most people just don't have enough leeway to do a full 15% of the net income. I say for 30s and 40s, you need to up it to 30%. And the reason for that is you have some catching up to do. I get hundreds of people that are in their 40s or 50s a month that say, is it too late? should I just give up? And at the end of the day, you should never give up on your financial

journey because a few good years of proper investing and really getting your money working for you can make a huge difference. And I also tell people all the time to relax because, let's face it, Ray Croc started McDonald's at 52 years old. I mean, so we all know it is possible and very likely with good savings and investing habits to make up for lost time. We've all gone through things. We've all had issues in our 20s or 30s and maybe even 40s or 50s. But at the end of the day, you can't give up on your wealth journey. You have to stay on top of it. And just to sort of add some additional color and really begin to quantify some of these numbers here, right? Let's pretend that 30% is way out of the ballpark for you and you're just trying to figure out what can I do, right?

I pulled up a financial calculator here before the episode. I did some math for you. So if you're 35 years old and you're investing just $300 a month. Now, that is nowhere near this 15 or even 30%, right? But let's just say 300 bucks a month. You do that for from 35 to 65 every month throughout the next 30 years. You're still going to have $610,000 in retirement after inflation. So there is no reason for you to say it's too late for me. I can't afford to pile in.

Listen, $300 a month, if that's getting that money from a side hustle, driving Uber, if it's affiliate marketing, if it's doing something extra. to help you find that extra money in your budget, or if it's maybe not going to the mall, like Roberts here saying, it's better than $700 bucks on a Saturday, right? But $300 a month invested from $35 to $65 is over $600,000 in retirement, including inflation, right? That's already accounting for inflation. So there's a lot to be excited about. There's no reason to be feeling down. There's no reason to feel like you can't do this because, yes, you can't. Yeah, and one of the things to think about, too, in a normal market situation where the S&P 500 is going to return

10, 11%, maybe 9%, that's $60,000 a year that you could be making from this retirement fund that you're putting together. So it's just really all about understanding, investing at any age that you have to invest early, often, and consistently. Like I go back to when I was in my 20s, when all my friends were going to the bars every night and everyone was just partying it up. And I was saving, I think back then when I first started, I opened a fund. just like we talk about. I opened a brokerage account. Back then, it was mass financial something. It was MFS fund. And I put $20 a weekend for five years. And when I was 23 years old, I bought my first fourplex. And it was an amazing feeling because I did it all on my own. I didn't have to ask anybody

for any money. So no matter what age you are, I just think it's important that you have to get your mindset right to think like an investor and not think like a consumer. It's just so important. So yeah, that calculator really helps a lot to magnify what people can do even with $300 a month. And just we're on the same page two, the math was 35 to 65, 300 a month, and that was invested in the S&P 500, right? So the index fund. And just for those listening that are kind of like, well, what exactly is that? Go to your online broker. We Prefer public.com.

There's a link in the show notes here to open the brokerage account through public.com. but that is the ticker V-O-O or SPY. They're both the S&P-500. Yep, we love those. Yes. So let's get into number three. We're talking about, you know, building the budget, talking about tactically investing. What about the person who's like, well, you know what?

I'm kind of good. I'm feeling okay. I'm not too worried about it. Maybe I kind of like my lifestyle right now. What would you say to that person? Yeah, I think a lot of it is if you're, we're talking about 35, 40 years old, 45 years old, is if you've got some time to make up, I think the important thing is to realize, that you don't have to keep up with the Joneses.

I know so many friends of mine that are 42, 47, 38, and they have to have the new BMW every two years. They have to have the new SUV every two years. They have to make sure that they have the $1,200 baby carriage stroller thing. So it really just comes down to if you want to make sure that you have the freedom in retirement and you're running behind where you should be, you have to give up on some things. And you really have to make some hard decisions to give up on a,

experiences, give up on the gadgets. You don't need the newest iPhone every time one comes out. You don't need all the latest, greatest of every gadget for your kitchen and all that. Nobody is going to scorn you because you don't have the latest and greatest of something. I mean, my iPhone is one or two models old. It works perfect. I'm not going to rush out to buy the new ones so I can, you know, be cool for my friend. So I think a lot of it just comes down to realizing you need to accelerate your investing and the way to do that, if you can't increase your income because sometimes it's an income problem and not everyone can just immediately get a side hustle and increase their income, then it's about making hard choices to give up on some things you don't really need.

I'm actually going to ask you a question here that we didn't discuss before the podcast, but I think it could be really interesting to hear answered Robert is what is some things that people perhaps shouldn't give up? So from my perspective, I will absolutely splurge money on something that's going to help me sleep better. I got a new alarm, recently and it has changed my wake up process. It's amazing. It was like 150 bucks. But like that is something that I think is worth it. Are there any things maybe that you think that are worth spending money on? I think anything that has to do with your health and wellness is definitely worth spending money on for sure. And I do a lot. I just feel that it's not really about giving up as much as it is

making sure that the purchases you're making you're actually going to use. A lot of people will go buy an exercise bike and it just becomes a coat rack. A lot of people will go do a lot of different things. And I think it really just comes down to, again, making good decisions based on your current financial situation and your retirement goals. And it doesn't even have to be retirement goals. If someone listening to this podcast is 35 years old and they feel they're behind in their investment journey, they should set a one year goal, a five year goal and a 10 year goal because retirement is 30 years away or 25 years away. Because at the end of the day, then, it's in your mind every time you go and say, I want to go buy this jet ski or I want to get rid of my jet skis that are three years old and get

new ones. Do you really need to? They work fine. You're having a blast. Whatever. I never want to see people give up fun and their lifestyle and the things that are important to them. But I think there's a lot of slow bleeding that happens in people's financial journey, that they buy things that just end up sitting. And I kind of have a rule right now so things just don't go to waste. If I buy something and I don't use it or pick it up for six months, I sell it. Because at the end of the day, you're going to go buy that thing and you go, oh, this is going to be cool, you use it for a few times and then it just sits. That thing might have cost you a thousand dollars and you could sell it in six months for 600 bucks, whereas in two years when you get it

out of the garage, out of the corner of the garage, it might be worth nothing. So I think it's just finding ways to optimize your money. You have to have velocity with your money or you're not keeping up with inflation. I'm actually going to give a shout out to my friend Jack Selby of the Ice Coffeear podcast. I was hanging out with him here in Nashville, Tennessee a couple weeks ago. And we were going shopping. He was looking for a really good winter coat to have for the next several years, right? And it's so funny, he told me, he's like, well, do I really want to get this coat? It's expensive and stuff, but it's obviously going to be good for me. And I was like, yeah, man, just go for it, right? And he's like, well, I have a rule for myself. And I was like,

what's the rule? He's like, well, whenever I buy a new pair of shoes, new pair of jeans, a new coat, something that is like, I will wear it again and again and again. I don't allow myself to have more than four of those things. And I was like, wait, you only have four pairs of shoes? He's like, yeah, because I mean, I can't wear nine different pairs of shoes. I can't wear 12 different coats. I can't wear 15 pairs of jeans. And I was like, that's a really interesting rule. I know, obviously that people need more than four. He's more of a minimalist, so I give him that. But I think that's a really interesting way to look at life is like, do you really need to buy this new thing? And if you do buy it, is it time to perhaps sell the thing that it is replacing?

A lot of people buy when they're bored. That's why when you get in the habit of either auto deduct for your investing or making sure you know at the end of that month, this month I, at 15% or 20%, that's X amount of dollars that I don't have anymore. It's gone. It goes to my investments. then it makes having that money that's right in front of you less obtainable to take. So it really just comes down to people just have to improve their habits. Everyone needs to improve their habits, not give up your lifestyle. I'm not asking you to give up Netflix or give up Starbucks, but to be more cognizant of where you're at on a monthly basis

so you can make sure that every month, month in, month out, year and year out, you are putting money away. And another strong point that I want to bring up on this topic, and I know we're getting a little long-winded in this one, but it's important, is that a lot of people that have a job with a 401K, they literally have their match, they don't even know what the match is, they don't know what the 401K is invested in,

and they think that's investing. That is not invested. That is not being concerned with the velocity of your money and how well it's doing. You have to have your money working as hard for you as you work to get it, and so people need to really be on, top of where they're at in their accounts. What's their 401k doing? So there's just so many different barriers that I think people struggle with of not staying on top of their money and their financial

journey. So just want to bring us back here in recap on the biggest takeaways from this episode. I heard you say, you know, build that first budget, you know, evaluate your spending habits, understand all the money that's coming in, all the money going out, know your debt to income ratio and what you have left to actually spend and invest. Then to begin, if you can, getting up to that 30% of take home pay and start investing aggressively, right? You want to do this for five or six years to really catch up in your 30s and 40s. $300 a month is more than $600,000 in retirement after inflation. And finally, you touched on these experiences and gadgets, right, giving up the crazy experiences, giving up the newest iPhone, giving up the stuff that you

don't exactly need. Don't buy when you're bored. And if you do want to buy something when you're board, buy stock, buy investments. How does that sound, right? Invest early and often and just accelerate that investing process. Is there anything I missed? I mean, something that I noticed last night, I'm actually going to do a video about it. Kind of blew my mind and people might come for me on this, but on my plane flights, I noticed, and especially with men, that on most flights, I bet over 60% of the people when I'm going down the aisle to go to the restroom, I would say over 60% of the people are either playing video games or watching movies on their plane flights. And that just blows me away. We're in a tough economic time right now. There's a lot of changes happening with

migration to crypto and banking issues and all these other things. And I would just assume more people would really want to spend that time because I love plane flights. I write on plane flights. I read on plane flights and I really learn on flights. And I just think that more people would be better served if they use that time when no one in the world is bugging them to maybe get to that book they wanted to read, a financial book, or get to a new side hustle that they could research on. So just maybe that's my final takeaway of accelerating your everything you need to to get yourself set up for financial success. Well, I heard you there say a couple of books. So I think we had a live stream of a week or two ago where someone asked us a couple of our favorite books. What's maybe one

or two your favorite books, Robert, that you would recommend someone reading on their downtime to learn more about investing or entrepreneurship. Think and grow rich to me is a really good book if we're going to do two. And then for people that, let's say, might be in e-commerce or they have a sales business or anything, I would say the wanting. Think and grow rich and the wanting. I love it. I'm going to go buy those books now.

Cool. Good stuff. Everyone, thanks so much for hanging out with us on this episode of the Rich Habits podcast. Be sure to follow us on Apple Podcast. Spotify or wherever you are listening to this podcast, leave a rating, leave a review. Let us know what you want our next episode to be about. Shoot us a DM on Instagram or TikTok. We're both there all the time.

And be sure to check out the show notes below for all information about what we're up to and the different products that we are excited about. Thank you, everyone.