Rich Habits Podcast - 78: How to Prepare for a Recession

Episode Date: August 19, 2024

⭐️ ⁠Click here to join the Rich Habits Network!⁠ There are already 185 loyal listeners who have joined, and we can't wait to have you join us too! :)---In this week's episode of the Rich Habits Podcast, Robert Croak and Austin Hankwitz share their three best tips for preparing for an economic recession. After all of the headline news of economic turmoil, we wanted to make sure everyone listening to our show is completely prepared for whatever might come our way over the coming months. ---⭐️ Skip the waitlist and invest in blue-chip art for the very first time by signing up for Masterworks!⁠https://www.masterworks.art/richhabits⁠Purchase shares in great masterpieces from artists like Pablo Picasso, Banksy, Andy Warhol, and more.See important Masterworks disclosures: ⁠https://www.masterworks.com/cd⁠---⭐️ Check in on what Robert and Austin are investing in using Blossom! Discover new communities and investing topics. ⁠https://www.blossomsocial.ca/⁠---👉 Join over 44,000+ other investors who read the ⁠⁠⁠⁠⁠⁠⁠Rich Habits Newsletter!⁠⁠⁠⁠⁠⁠⁠ We're growing by +150 subscribers every day and can't wait for you to join us :)---⭐ Download our FREE Budgeting Template – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Earn 5.1% on your savings with a High-Yield Cash Account – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Trade stocks, options, music royalties and crypto on Public – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Get a $35 bonus when you start saving & investing with Acorns – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Automatically buy stock where you shop with Grifin – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Protect your family with term life insurance from Suriance – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Use code “Spotify” for 15% off our 4-module video course – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⭐ Optimize your portfolio with Seeking Alpha – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠---👤 Explore everything Austin does – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠👤 Explore everything Robert does – ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠❓ Ask us questions for our Q&A episodes – @richhabitspodcast on Instagram📬 Inquire about working together – [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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your questions always answered, guaranteed. We have a whole section dedicated to answering your questions in real time. I mean, we cannot be more proud of the infrastructure we've built for the rich habits community. So many of you people are always saying, love the podcast, but I want more. I want daily episodes. I want my questions answered. I want some live streams. How do I get more webinars, more this, more that? The Rich Habits Network does exactly that. Right now to join the Rich Habits Network, it costs $77 a month. However, that price will increase to $97 a month starting on September 1st. So if you want to join and get grandfathered in at that low price, you need to do that before September 1st when prices go up. And we've had over 100 people join already. And it's looking like we're going to be at over 200 here

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It'll pop right up and you'll see a really fun intro video by Robert and I. All right, Robert, now that we've shared our fun announcement, what are we going to be talking about in today's episode? In this episode of the Rich Habits podcast, we're going to be sharing with you. how to prepare for a recession. We don't share this episode to scare you, but we certainly want to make sure you're well aware of what's going on in our economy today

and how to prepare yourself for the worst. As you might have seen, there have been countless negative headlines regarding the U.S. consumer. Airbnb lowered their revenue guidance by $170 million as consumers are stretched thin and just aren't traveling as much as the company had originally hoped.

Amazon shared the other week that their customers are spending less and less on their platform as discretionary item demand like computers, electronics, and televisions have fallen off a cliff. According to new Experian data, the average credit card balance in America right now is $6,500. That's the highest it has ever been and is twice as high as it was in 2020. Additionally, the unemployment rate has risen to 4.3% as the number of unemployed people increased by 352,000 people during July. 7.2 million total unemployed.

And as you saw from our newsletter the other week, this recent increase in the unemployment rate triggered the SOM rule, which has 100% accurately predicted every recession since 1980. Now, I know that's a whole lot of scary, and we're not saying we're in a recession or we won't be in one soon, but we want to make sure everyone has the knowledge and resources

to act accordingly. so let's jump into it. I think that's the secret sauce, Robert. We publish these podcast episodes, not to scare people. We want this podcast to be hope, to be the silver lining, to be the shining star in your week. Because we want people to have the resources, the knowledge, the education, everything they need to say, okay, I can only control what I can control.

I can't control the economy. I can't control the presidential election. I can't control, you know, this, that, and the other mortgage rates. I can't control interest rates. but what I can control is how I react and be prepared for those specific things. And so this episode should act as a way for you to get a better understanding of what to expect, as well as how to prepare yourself in case one of these things actually happen, specifically a recession.

Yeah, I totally agree. It's really all about preparation. We always tell everyone to not have knee-jerk reactions. And I think that's one of the important parts of these podcast episodes, is helping people prepare so they're ahead of the curve and they know what's like. likely or potentially to come. And then that way they can make those adjustments. We always talk about active management of your money and not just letting it set it and forget it in a target date fund or some mutual fund. And this is part of that. This is part of that breakdown and that preparation to

help everyone really know where to go and what to do during difficult economic times. So let's get into point number one, lock in on your money. That means making sure you not only have an honest budget, but you've already identified the unnecessary expenses you can cut out in a moment's notice to add some buffer to your savings rate. Additionally, this means understanding and being able to forecast exactly how much money is expected to hit your bank account before the month even begins. September is right around the corner and do you know how much money you're supposed to make during the month? Because I do and you need to make sure you do as well. You always hear me talking about idle money is dead money and you have to have it spoken for.

especially in difficult economic times. Beyond that, you should also have a complete understanding as to when specific bills and subscriptions hit your account. What day of the month does your phone bill hit? What about your utilities? Do you know when they come out of your accounts? And when do you usually do your grocery shopping? If you're someone who's not constantly swiping a credit card,

you need to know how much money you have at specific points during the month to afford the things you want to buy. And if you are a credit card person, i.e. you pay off your, your credit card every single month, you should still understand what's happening to your money behind the scenes on a daily, if not weekly basis. I couldn't have said it better myself, Robert. Being able to forecast exactly how much money is expected to hit your bank account before the month begins is incredibly important. And not just know how much is coming in, but the day you get paid as well as the day other bills are supposed to get paid out. When you do your grocery shopping,

when the utilities are supposed to be paid, when your phone bill is due, when you have to pay for the babysitter or something with your family, right? Being able to know and forecast those specific days and understand where your bank balance will be is incredibly important, especially during times of economic uncertainty. Now, this is also a time that you should consider beefing up your emergency fund. Now remember, your emergency fund should be anywhere between three to six months of spending in size. So if you spend $5,000 per month, you multiply that number by three to six and that's how much cash you should have saved in this account. Now if you're someone who's really trying to prepare for a potential looming recession, then you can multiply it by six, right? Just be

done with it, beef it up a little bit and give yourself a little bit of sigh of relief. So for example, I've got $35,000 in my own emergency fund and I feel pretty great about that. Now remember, the emergency fund should act as insurance. By having this cash sitting in an account for you, it's insuring you against selling your investments during times of uncertainty, likely for a loss, causing you to lose out big on long-term wealth building. You lose your job and you have to now cash out your 401k to pay for your mortgage. That is just a recipe for disaster. The emergency fund ensures against that.

We want to be buying during market turmoil and economic uncertainty as that's where the biggest opportunities lie. But if you have to come up with rent money or mortgage money instead, because you're selling your investments, Sorry, that just doesn't add up. Yeah, I love that breakdown, Austin. And another thing to consider that I see so many people do is during these situations when they're not prepared with their emergency funds, they go back to the old credit card debt. They start racking up the credit cards. They get themselves in trouble. They have a lot of overdraft fees in their checking account.

And that adds up as well. I once did business with a gentleman, and this is going to blow people's mind, that during a tough year, he had 181,000. thousand dollars in overdraft fees through his restaurant's bank accounts so because he was undercapitalized he had that many overdraft fees so don't do that it's so important even on a small level to make sure that you have that emergency fund built up so you don't get in a situation where you have overdraft fees or worse you're running up your credit cards so let's get into talking point number two diversifying your portfolio we talk about bonds we talk about gold and one of the things that i really like and you're really good at, is seeking out the picks and shovels, looking for those opportunities

in the sectors that we see moving forward are going to be strong for us. And I think that's really important for everyone to understand, especially, you know, if we do head into a recession and we get greater recessionary tales moving forward. And you all know how much we love diversification. And during times of economic uncertainty, it's an even better idea. You all heard from Jay Jacobs, the head of thematic and active ETFs at BlackRock. In last week's episode, share with us a flurry of secular growth trends that recession or not will continue to propel spending

and economic activity up and to the right. He also shared with us a ton of ETFs to look further into, including IDU for utilities and IDGT for data centers. Yeah, I think that was an awesome episode. So if you guys not check that one out, you're going to love it. We got a lot of positive feedback on it, specifically with how analytical it was.

And something else worth looking into is the historical price appreciation that gold experiences during rate cuts by the Fed, as the Fed historically cuts rates when there's a recession and recessions tend to cause the price of gold to increase. So keep that in mind. You can add this to your portfolio by purchasing GLD. It's just an ETF that you can get on any brokerage or you can go to Costco and buy some physical gold over there. And finally, and this is what Robert alluded to, public.com just released something that I think

is revolutionary for a lot of. of people's portfolios and that's the corporate bond account paying a 7.3% yield. So you can lock in a 7.3% yield for years to come paid out on a monthly basis because these corporate bonds are paying at such a high rate when compared to the T bills by the Federal Reserve, right? So what happens is companies like Apple or Microsoft or Amazon, they go raise billions of dollars of debt via bonds and they put a 5, 6, 7, 8, 9, 10% interest rate on that bond. And we're the the ones that are buying those bonds from them and receiving those interest rates and those coupon payments. So go check out the link in the show notes below, but I just can't wait to get my hands on this

new awesome product because if you think about a diversified portfolio, Robert and I talk about adding some T bills at that 5.4%. But imagine adding bonds now at 7.3%. It's just, it's pretty cool. So that's a fun product and I'm excited to go check it out for sure. Yeah, I think it was just announced a couple days ago and I'm so excited to get involved there. You guys know we love public. They just put out such great products and I think the timing of this product is fantastic. Lastly and most importantly, you need to understand how a recession might negatively impact your employer's business. If you're working at a technology company, you need to ask yourself, are people going to still buy and use our products if their spending power is stretched thin?

While if you're working at a hospital as a nurse or something else, you can probably breathe a sigh of relief. What's important to know here is what a recession might do to your job. If you're in the marketing department, you might be in trouble as marketing dollars are the first dollars cut when recessions take place. While if you're in the sales department, you might be in a better position and have more job security. I mean, I can't say this enough. If you are working at a startup company or a company that, you know, isn't publicly traded or might not have that much funding or, you know, Whatever might happen here, you need to be prepared. Polish up the resume, you know, start getting yourself out there a little bit more on LinkedIn.

I'm not saying you're going to lose your job, but what's really important to know is that it could be on the table as cuts begin to come down to the bottom line. It's also important to look at your company's career site so you know if you're working somewhere that's hiring more and more people or if your company's looking to make cuts and save money anywhere they can. So if you go to the career website and it's full of a bunch of open positions, that's a good thing. If it has no open positions and you guys aren't hiring, that might not be a good thing, right? You guys all might be stretched then. So by understanding how your employer might be impacted by a recession, you're going to be positioning yourself for success if we do see said recession. Now, additionally, if you're a small business owner, you need to be doing this type of analysis for yourself, period. If you're selling a high ticket service to homeowners, for example, and it's paid for by the homeowners themselves, if that's a refrigerator or you guys do kitchen remodels or you're selling something for the back.

yard landscaping or whatever's going on, maybe you're a pool salesman, right? Are you going to be in business when those same people that are having trouble paying for their groceries can't buy a high ticket item from you, right? They have to go into high interest debt. So that's what I'm trying to make sure you guys all understand here is like, do you work for a company who sells directly to U.S. consumers? If so, is that specific item that your company sells to consumers? Is it a discretionary item where it's like, yeah, throw this on the credit card or I'll take out a loan for it? Or is this an item that everyone's always buying groceries, different types of insurances, health care, things like that. And actually, Robert, a fun example to even think about here was

the used car or just car market over the last, call it four years. We saw everyone have a bunch of cash in their bank accounts from the stimulus checks, low interest rates, the stock market was ripping in 2020 and 2021. So car prices were inflated because that's the first thing people go out and spend their money on. But then once the opposite happened, a little bit of austerity in 2022 and 2023. Interest rates rose, unemployment rose, things like that are negatively impacting the American consumer right now. Use car prices are crashing. People aren't selling cars at all because those are high ticket items. So if you're a used car salesman, you've probably already experienced this or any car salesperson, you've probably already experienced this with your business. But I just want

people to understand that like if you're selling a high ticket item to US consumers, like they have to go into debt to buy it, you need to have a game plan. Yeah. And I think the important moral of the story here is like we talk about in a lot of episodes is getting ahead of the curve, understanding what's to come, what's potentially to come, and looking at your situation and doing a complete overhaul, what do I need to change? Am I in good shape? Do I have the emergency savings saved up?

And then understanding your job and or your own business to make sure that you're bulletproof during these tough times because even if you look at like restaurant owners right now, they're getting pummeled because food costs are so high. And then you look at some other people where they're getting pummeled because insurance costs are so high. So it's all about preparation and getting ahead of it just so you don't find yourself in a bad economic situation during a downturn in the markets. Couldn't have said it better myself, Robert. I just want to make sure everyone knows that we're not over here trying to spread some hebie-gib bad news, scariness.

What we want to do is make sure you're prepared, right? We want to make sure that you get locked in on your money. You understand what you're spending. You understand what you're making. you understand when some of these bills hit your account every single month. We want to make sure you're diversified, right? Once you've built your base, it's important to diversify, especially now that public has, you know, shared this new corporate bond account that's paying 7.3%. Like, that's an awesome thing to add to the portfolio. Call it 5, 10, maybe 15% waiting depending on how much fixed income

you like. Picks and shovels are always a great idea. Robert, you know, we talked about this with Jay Jacob, but I want to reiterate how important it is to be investing in a companies that are experiencing secular growth trends, right? Apple, Amazon, Google, meta, Microsoft, they're all spending hundreds of billions of dollars a year developing AI infrastructure. Who do you think they're giving that money to? And what companies are now going to receive that money as profits? And how do I invest in those companies, right? The picks and the shovels that we talked about here. And finally, Robert, just like what you said, how important it is to understand how a recession might negatively impact the company you're working for, which means you might lose your job. Now, Robert, we

We talk a little bit about diversification with the bonds and the gold and the picks and shovels and these secular growth trends, but we're not talking enough about Masterworks because New Deloitte data has found that nearly 58% of wealth managers' clients consider their art collections as part of their overall estate planning strategy. And UBS released a report that nearly 40% of ultra-high net worth collectors are allocating 30% of their wealth to artwork. Well, I guess it's a good thing that we're partner with Masterworks then, isn't it? We're not saying that any of you need to allocate 30% of your wealth to art investing, of course, but we love, love, love diversification on this show. And Masterworks has over 950,000 users and nearly $1 billion in assets under management for a reason, because diversification into art makes a lot of sense for a lot of people.

Including Robert and myself. We're both investors and Masterworks, and I've personally been on the platform since I think it was 2019. So I'm going on five years now, Robert. Now, since inception, they've had 23 exits, each of them individually delivering a profit to their investors, and not counting works still in holding. They've distributed over $55 million total back in investor proceeds, which is incredible. It is. Masterworks gives you a chance to invest in shares of multimillion dollar paintings by artists like Banksy, Bosquiat, and more.

And in honor of the relationship they have with rich habits, They let our subscribers skip the wait list by going to masterworks. Dot art front slash rich habits. That's masterworks. Dot art front slash rich habits, which is also shown in the show notes of this episode. As with any investment, past performance is not indicative of future returns.

Investing involves risk. Important regulation aid disclosures can be found at masterworks.com front slash CD. Again, guys, we only share opportunities and sponsors and things like that on the show that Robert and I believe in. Again, I have been a user of masterwork since 2019. I remember seeing it as an advertisement on Morning Brew's newsletter back when I was working in corporate America and I thought it was the coolest thing. Artwork is great. It's a great way to diversify your portfolio, especially when we experience crazy volatility like we did just the other week. Now, Robert, I'm pleased to announce that our first question in the Q&A section of this episode is coming

from the Rich Habits Network. If you post a question in the Rich Habits Network, we're either going to answer it inside the network on this platform or bring it up and answer it on the episode. That is guaranteed we will always do that. So Matthew W is our first question. He was one of our early members of the Rich Habits Network. So we're very excited to answer Matthew's question. Matthew says, Hey everyone, I'm keen to hear your thoughts on a few topics, but I'll start with this one. I'm 53 years old. My income has definitely taken a hit since the pandemic. So my ability to continually invest into the stock market has taken a hit as well. My wife and I did hold stocks. and investments, but we sold them all and we bought an investment property in Kansas City instead.

We bought it in July of 2022, and it's been a very painful experience while we've tried to stabilize the property, which we think we're finally close to doing. Now, the property has appreciated about $100,000 since, and we have just over $300,000 in equity. Now, here's the deal. My question is, should I sell the investment property and invest the $300,000 of equity into cryptocurrency, specifically Bitcoin? Or should I just continue to hold the property? for a long time. We also own two other investment properties, and we're really excited about real estate investing as a whole. Robert, I'll take a stab at this one. I think it's pretty kind of cut and dry, Matthew. I mean, let's pretend you sell the property. If you sell the property

and you take $300,000 and you invest that all into Bitcoin, will you be breaking our rule of Bitcoin allocation? We always talk about how people should have Bitcoin in their portfolios. That's great. We all have Bitcoin. Robert and I love Bitcoin, and we think it's a great way to diversify your portfolio. Bitcoin Sharp ratio is very interesting. They have a very interesting beta, right? It's very cool of an asset class. However, we only think people should have between 5 and 15% of their total net invested capital into Bitcoin. And that's because Bitcoin is also a volatile asset. We've seen Bitcoin move down 70% in a couple months, as well as up 300% in a couple months. It's a very volatile asset. So by having 5 to 15% of your net worth inside of Bitcoin, we think that

is an awesome allocation. Something else that's interesting, too, is you mentioned you have two other investment properties. I have no idea how much you have in those properties, how stable their rents are or anything else like that. So if you did want to sell this property because it's been a nightmare and you're up in the green by $100,000 on it, I wouldn't be mad at it because you still have two other properties. Robert, what's your take on this situation? Yeah, I think you nailed it. For me, it's always important. I love the sound of $300,000 being invested into cryptocurrency, but that would only makes sense if you had $3 million in net invested capital because we want to keep you around that 10% in cryptocurrency, maybe 15%, depending on your risk analysis and how you feel about it. So for me,

it's a little difficult. I would rather make sure you had your base, which we don't know what that is. You could have millions of dollars. But look at it from this perspective. The easy thing for you to do is take what you have right now from an invested capital across all of your different assets and then go, okay, I'm going to take up to 15% of this 300k is going to go towards the crypto portfolio. That's where you want to be. We don't want to see you only have $300,000 plus whatever you have in the 401k and just go all in on cryptocurrency. It could work out, but it might not also work out.

So we always want to keep within these parameters that we build out and we believe are optimal for people's wealth building strategies. And that's what I would do. Figure out what that 10 or 15% of the 300k is. and do that. And I think it's a great idea to start with Bitcoin, Ethereum, and XRP. Great question. Our next question comes from Taylor Kay. Taylor says, hey guys, I love to listen to the show. I'm 35 years old, and I really wish that this show was around in my early 20s when I was just starting to learn about this stuff. As mentioned, I'm 35, and I work in sales, which means it's hard for me

to know what my monthly checks will be each month because I am just straight commission. Some months, I make a lot of money. Other months, I make no money, but I average between 150 and $200,000 a year. I have three kids and my wife is a stay-at-home mom and she plans to be for the foreseeable future. I currently have $150,000 in my 401k and I start a brokerage account on public.com that is worth $20,000 that has the ETFs that you've talked about. I have about $30,000 in cash and I have no debt outside of my mortgage. We owe $330,000 on our house and most homes in our neighborhood are going for $750,000. I do have access to a HELOC with borrowing capacity up to $150,000, but I just have that as a safety net. Now here's my question.

When is it a good time to take money out of my brokerage account, specifically the profits, and use them to pay for vacations or maybe adding a pool to the house? I feel like I've been investing pretty well, but I also want to enjoy my money while I'm still young. What you guys take on this? Robert, I'll let you go first. Well, Taylor, you've done a good job getting yourself here. My take on this is pretty standard. So many people from the ages of 35 to 45, they stay on the roller coaster.

So what does that mean? It means that they start making good money. Maybe they're in six figures. Maybe they're making $75, $80,000. Things are going well. But what they do is they save, save, save, save, save, save. Then they buy a big ticket item. Save, save, save, save, buy a big ticket item.

So they never get off the roller coaster of lifestyle creep. So I think it's important to understand you're right there at 35 years old. You're doing well for yourself. I'm excited for you. You've really laid the groundwork. So I think you need to figure out how can I live the life I want to lead, but also have some delayed gratification so you can get and keep building up your portfolios. Because the problem is, if you buy the pool this year, which I'm not saying you shouldn't,

get the pool. But then in 18 months, you go, well, we're going to get that boat. We want to start jet skiing or going boating or whatever it is. And then two years later, you're like, you know what, I want to upgrade to the BMW. If this continues throughout your 30s, 40s and 50s, then one day you wake up and you just don't have the retirement you need for yourself and your family. So it's very important to understand you need to be making progress along the way towards your financial goals for retirement while not letting lifestyle creep beat you in the game. So that's my take on it. Yeah, Taylor, I definitely agree with Robert.

And I think you've done a great job. $150,000 at 35 is a great place to be. I think a general rule is this, right? If you're investing, and we've shared this in the Rich Habits Network as part of our coursework, If you're investing about 15% of your monthly take-home pay, anything above that, go for it, right? If you have an extra $700 a month that is not allocated for, save it up for 10 months. You now have $7,000. Go buy that jet ski.

Go upgrade the kitchen. Go get the new grill. Go on that fun vacation, whatever it might be. And something else that's really fun and exciting that I do, maybe not that exciting, but I think that's exciting, is whenever I invest $100,000 into the stock market, no matter how long that takes me to accomplish, I then allocate, I give myself permission to spend up to $10,000 of whatever else money I have around that's going to come in over the coming months and allocate that to something fun. That might be a vacation. That might be a jet ski. It was a jet ski actually in the month of May for my birthday.

That's what I did. I spent $8,500 on a jet ski. And what I'm trying to say here is like if you can set some milestones and give yourself a reward that you deserve because you've achieved this awesome milestone for you, it might be $25,000, $75,000. invested in the markets. And then you can say, sure, now I can spend $5,000 of next month or two months or three months of, you know, invested capital that was going to go to my, you know, $20,000 public account here. And I'm going to use that instead as a way to really enjoy with the kids and the family during the summertime. Or I'm going to use that as a way to go on that fun ski trip the wife and I have been thinking about. It's totally fine to spend money. We want people to enjoy their money.

But we don't want them to, you know, Robert's point, to make that mistake of like thinking they're making progress with money because the progress they're making is materialistic and it's not investment focused. The real progress comes when your net worth goes up and when your passive income goes up and when your portfolio brokerage accounts go up. It doesn't come with things. You can upgrade the car, which is great, but that's a depreciating asset. You can upgrade to a boat, that's great, but that's a depreciating asset. You can, you know, all these are the different things. So I just want to make sure we're on the same page about that. Yeah, I think it's a great lesson for everyone to learn that We definitely want you to have fun.

We want you to ball outrageous and have a blast because you're doing well. But you have to make sure that there is that balance there between growth towards retirement so you're financially free and having fun. And most people don't do that. Most people that I talk to and that I see and that come to me for help and advice, they are in the situation of living beyond their means and they don't have anything put away for retirement. And we just don't let that happen here in the Rich Habits Network or

podcast. We are here to give you guys the guidance. I'm in my late 50s. Austin's almost 30 years old. We have 30 years of experience and age gap between us. And it's just really great to be able to share those stories with all of you to help give you that guidance you need to get to the place you dream of in your financial life. I love that answer, Robert. And now before we jump into our last question from Scott, I want to remind everyone that if you're an investor like Robert and I, you can see what Robert and I are investing into on the Blossom app because Blossom allows us to share our investments with you guys. For example, Robert, I see your portfolio here on Blossom. You're up about a one and a half percent today. Let's go, baby. Blossom is a social investing app built around transparency. Simply

sign up for a free account, connect your existing online brokerage account like Fidelity, Robin Hood, Vanguard, or Charles Schwab, and get started. Unlike anonymous platforms like Reddit and Twitter, Blossom users link their existing brokerage accounts to the app so that all of their holdings and portfolios are shared within the feed and verified by actual data leading to richer discussions and decisions. It's never been easier to join a community of like-minded investors focused on building long-term wealth together. For example, when I signed up for the app the other week, I chose to follow the dividends, passive income, and options communities for my feed, so people that talk about that stuff show up on my feed.

They also offer a one-stop shop dashboard for tracking all of your investments, including a dividend tracker, a dividend forecaster, sector breakdowns, and much more. And remember, Blossom is not an online broker. It is a platform. You're not investing into stocks on Blossom. They're simply a social app network for investors that want to connect with other investors. And did we mention they currently have 120,000 active users across both Canada and the U.S. So go sign up for Blossom using the link in the description of the show notes. and we'll see you over there. So our final question comes from Scott. Scott actually asked this question

in the Rich Habits Network as well. So Scott, we are pleased to answer your question here on the show. Thanks so much for supporting us. Scott says, My wife and I are in our early 50s. We owe $150,000 on our home at a 2.7% interest rate.

We have $30,000 in an emergency fund, $480,000 in our 401ks, $250,000 in our IRAs, $10,000 in a taxable brokerage account, spread across a couple single stocks and $1,500 in crypto. I'm always hearing, though, that we should be adding bonds to our portfolio. What are you guys' thoughts on this?

So, Scott, what you're probably hearing is people whispering in your ear, Hey, Scott, you're getting older. You know, you guys are in your 50s. It's time to move away from the wealth building phase and into the wealth preservation phase of your journey. And that might be true, right? It might be a good idea to add some bonds to your portfolio. However, you're in your early 50s.

So let's say you're 52 years old. I have a hunch that you're going to be around in 20 years. at 72 years old, maybe even in 30 years at 82 years old. And so what I want to encourage you to do, Scott, is not make a knee-jerk reaction to allocate 30, 40, 50, 60% of your portfolio into fixed income bonds paying four, five, six, or seven percent, likely a little bit lower than that at this age, because you have 20, 25, 30 years of an investing time horizon in front of you. So you might be thinking about making this switch into bonds as to maybe hedge against volatility or whatever your friends or whoever's telling you to do this might be suggesting or kind of using as a reason.

When in actuality, you're just like Robert and I. We know that we're going to be investing for the next 10, 15, 20, 25 years. And over a 10, 15, 20 year period, the S&P 500 has always been higher than than it is today. I guarantee you the S&P will be higher in 10, 15, 20 years than it is right now. That's just American capitalism at work. So if you want to stay. They invested in the markets like us, probably a good idea. If you want to allocate some of your portfolio to bonds, maybe public.com 7.3% corporate bonds, be my guest. I just wouldn't go all in on fixed income because you're kind of young for that.

Yeah, I agree totally, Scott. Early 50s, let's assume early 50s to you is 52 or 53 years old. If you put 10 years on the calendar and we have $700,000 to work with right now, and we were to look that we could get that $700,000 to $2 million. So you have to then kind of reverse engineer the math in this situation and go, okay, is $2 million enough in retirement? So $2 million if you were to use the 4% rule is around $6,600 a month you'd be able to live off of.

So you have to look at that and say, what am I spending now for my lifestyle? And is $6,600 a month in 10 years going to be enough based on what future money is going to be worth, you know, with inflation and cost of living increases? So I think what Austin is saying, and I agree totally. with is don't take your foot off the gas just yet. I think bonds are fine. You can have a small portion of it in bonds, but I don't think it's the age yet for you to fully take your foot off the gas because you're not where you need to be financially, I'm assuming for retirement. So if you're looking to get to that $1.5, $2.2 million, $2 million range in retirement, I would keep your foot on

the gas for a few more years. Add in some bonds like Austin talked about through public.com. And I think you'll be all set. Everyone, thank you so much for tuning in to this week's episode of The Rich Habits Podcast. If we have a recession, if we don't have a recession, Robert and I are still going to be publishing podcast episodes. So I hope you're not sick of us just yet. And don't forget, definitely check out the Rich Habits Network before prices increase on September 1st. We've actually added four people since we started recording this episode, which is really, really exciting. We can't wait for this to be a thriving community of hundreds, if not thousands of people.

It's going to be so much fun. Austin, I love that take. and I'm going to rally around that for a second. And that is so many people, when the markets are good, they are hyped about financial literacy and learning more. And then when markets are down or bad, they stop the learning because they feel like, oh, the markets are in the toilet.

There's nothing we can do right now. We're not making money. In my opinion, I think it should be the exact opposite. You should always be learning. You should always have your finger on the pulse in the markets because it's all about maximizing gains when the markets are really good and minimizing losses when markets are bad. So keep that in mind. You should always be learning and always be upping your literacy around building wealth. And

that's what we're here for. Thanks, everyone. And have a great start to your week.