123: How Rich People Buy Back Their Time

0:28The Burlington Coat Event is back. do differently? Would we go to bed at a consistent time or take steps to reduce interruptions to our sleep? With the all-new Sleep Score, Apple Watch measures your bedtime consistency, interruptions, and sleep duration. Then, every morning it combines these factors into an easy-to-understand score from 1 to 100, so you'll know how to take the quality of your sleep from good to excellent. Introducing the new Sleep Score on Apple Watch, iPhone 11 or later required. Hey everyone, and welcome back to the Rich Habits Podcast, a top 10 business podcast on Spotify brought to you by Public.com.

1:05Today's episode explains how rich people buy back their time. My name is Austin Hankwitz, and I'm joined by my co-host Robert Croak. Robert is a seasoned entrepreneur with lifetime revenues of over 300 million, and I'm a multimillionaire in my late 20s with a background in finance and economics. As the show name might suggest, every episode, We talk about rich habits as they relate to business, finance, and mindset. So, Robert, what are we going to be talking about in today's episode? In this week's episode of the Rich Habits Podcast, we're going to share with you the four ways rich people accomplish buying back their time, giving them the freedom to choose how they spend it.

1:41By the end of this episode, you'll have a clear roadmap that will allow you to integrate these strategies into your own daily life, helping you inch closer to a stress-free lifestyle leading into retirement. inch closer to a stress-free lifestyle leading into retirement. I like the sound of that. That sounds cool to me. Now, we'll have to remember, money isn't the goal. It's the tool people use to buy back their time. We can't take money with us when we're gone. So using it as effectively as possible to optimize our lives while we're still alive, aka spending time doing things we actually enjoy doing, is the goal.

2:16That's the end game. Full stop. So strategy number one that rich people use to buy back their time is understanding the hourly return on investment on their time. Here's what I mean. We all know that working an hourly job pays a specific amount of money and working a salary job, you can kind of compute and figure out, okay, how many hours a week am I working, right? What's my hourly wage? But what's the hourly wage you pay yourself? Do you believe that running errands or grocery shopping on the weekends, or maybe the time you spend cutting your lawn or how much time it takes you to clean your house, do you think that is time well spent?

2:50If you're ever going to be able to buy back your time, you first need to understand what your time is actually worth. We've all heard this like funny analogy where if Elon Musk dropped a$100 bill on the ground, it wouldn't be worth his time to pick it up. Whereas if I saw$100 on the ground, I am jumping for it. And the reason why it's not worth his time is because he makes so much more money making these important decisions for Tesla or SpaceX or Neuralink or XAI or whatever these billionaires do with their time. And speaking of Elon Musk, he's definitely going to be benefiting from our third strategy.

3:20So be sure to stick around and listen to that one. But it's really important to understand that if you're ever going to buy back your time, you need to understand what it's worth. Yeah, and I want to give an example here. So if you spend five hours of your time and you generate$500 in extra income, it's clear that your time would be worth$100 per hour. So if you're able to hire out any of the daily repetitive tasks you're doing for 50 % or less of your hourly ROI, that's when you have to make the change because it makes sense to buy back your time. Unfortunately, I've not yet mastered this myself because I sometimes enjoy the slow mornings, cutting my lawn, or going to Home Depot to get supplies for one of the real estate projects.

4:04So for me, I'm not the best example here, but I'm definitely improving year over year to get better at it. But I just want everyone to understand the importance of at least understanding the ROI of your time so you can make those necessary changes. And also realize I don't have to be perfect at it at this point because I am in a little bit different position in my life where I'm working towards happiness and peace versus growing my wealth. And honestly, the most important takeaway from understanding the hourly ROI of your time is creating a life where you have systems and processes in place that reduce friction and headaches.

4:42You guys hear me talk about it all the time. I don't like friction. I hire accordingly and have the processes to make sure that everything goes smoother within all of my organizations. The less friction there is, the more I can get done in a day, but the better I can be at it. I love that equation you use, right? 50 % if it costs 50 % or less, that's when it begins to make sense to go higher, figure out that repetitive task. For me, it's cleaning my house. I've got house cleaners that come every single week. They're amazing. Shout out Sylvia. But I pay them 140 bucks and they're cleaning my house.

5:17It takes about maybe two hours. And in my opinion, I'm like, wait a second. Oh my gosh, for$140, I can save what would be three or four hours of my time on a Saturday where I could go be doing other things or making money or building my business, whatever. So figure out for you, what is that repetitive task that either you don't like to do, it's not worth your time, but understand what is the ROI on your actual time so you can go spend it doing something else. I don't know that people really do this consideration in this math of what is the actual time value of every hour of their life. And I'm not saying you can't go have fun and waste time and sometimes lay around, but it's understanding the math so you can hire out and get rid of some of those mundane tasks because you might want to do it just so you can golf or go boating more.

6:04A great example of this that a lot of wealthy people, including myself, is I don't grocery shop. I hire that out. I get it delivered. I get it brought out. And yes, it costs a little more. But at the end of the day, it's all about that time. I had this argument with my mother 35 years ago at the restaurant because she would drive to the bakery to buy 10 loaves of bread for the restaurant. I'd be like, mother, for an extra$4, we can get that bread delivered. And she didn't understand that. So I'm very cognizant of why and how I spend my time. And grocery shopping is one of them that I don't do.

6:40But there are many others where I try to make things simpler. So that leads us into strategy number two. buying expertise from people who've already mastered their craft and made the mistakes. And no, we're not talking about the fake gurus or promise you millions of dollars from trading Forex or meme coins. We're talking about getting true mentorship from industry veterans and accomplished thought leaders who have decades of experience doing the things you're trying to learn and succeed at. The goal here is to buy speed and everyone needs to understand this because why learn from your own mistakes when you can learn from someone else's.

7:18For example, there have been plenty of times in my life and career where I was mentored by someone who better understood the numbers in real estate more than I did early on. So therefore helping me avoid all of the pitfalls, losing valuable time and money in my first deal. But now on the flip side, I now get the opportunity to mentor hundreds of thousands of people through my content. And even recently we published a PDF download, walking people through 36 real estate hacks that I have learned over the last 20, 25 years of doing real estate deals. And I've also mentored countless small business people and people that are getting and building their own brands in the consumer products world because of my success and experience with Silly Bands.

8:02What I think is really important for people to understand about this specific strategy of buying back your time is you're not just buying the knowledge of what to do, right? You're not just buying the expertise and things of that nature, but you're buying the knowledge of what not to do, right? Avoiding those mistakes, making sure that you are not doing something that royally screws up whatever process or, you know, goal you're trying to accomplish. So a recent example in my life here was I just bought a boat. Really excited. I've been saving up for about a year now to go buy this boat. And it's my first boat.

8:37So but I know or don't know about owning a boat. And so what I did was I reached out to several friends and mentors that have a better understanding of the do's and don'ts when it comes to owning a boat, ensuring that when I finally bought this boat, I made the right decisions along the way. I knew exactly the type of boat, the type of engine, the types of different maintenance things to look out for to ensure that I'm not losing a ton of money on the back end because I didn't understand what I was getting myself into. So I just think it's cool for people to remember too that buying expertise is not just knowledge of how to do something better, but it's knowledge of what to avoid along the way.

9:10And this can be, you know, a personal trainer is a wonderful example of buying expertise. They're telling you, you know, what to do to build muscle, but also what not to do so you don't hurt yourself when you're working out or get overexhausted, things of that nature. So the expertise is one of my favorite strategies. What not to do is equally as important, if not more important, as what to do. So such a great takeaway. Austin, bring us to our next point. So strategy number three that rich people use to buy back their time is making money while they sleep. This one is super simple and also very straightforward.

9:45Rich people, for the last several years and decades, have planted seeds, allowing them to now make what we call mailbox money. They get cash deposited straight into their checking accounts or their brokerage accounts because of investment decisions they made in the past. But don't feel bad if you haven't made any of these investment decisions yet. we're going to give you three easy investment decisions you can make right now to start earning your own mailbox money, with the first one being to open and use a high-yield savings account for your savings. Now, we prefer the high-yield cash account paying 4.1 % APY by public.com.

10:20So that means if you have an emergency fund of$10 ,000,$15 ,000,$20 ,000, and it's earning pennies per year in a checking account or some other account, you need to move that over into an account that's going to pay you actual interest. I earned$169.12 last month on my savings because of my high yield cash account on public.com. And that's just for having my money sitting in the right type of account. I didn't do anything fancy. Now, number two, monthly income through NEOs funds. These are ETFs traded on the stock market. You can use any brokerage you want to buy them. Of course, Public Works, but Schwab and Robinhood and Vanguard, whatever, just go find them.

10:57They track the index funds we love while paying 12 to 15 % yield per year on your money. I've got about $55 ,000 of my own money invested into these right now. My goal is to get it to$100 ,000 by the end of the year. And once I achieve that goal, I'll start making$1 ,650 per month in mailbox money paid right to me just for investing my money correctly. And finally, number three is real estate. We like Fundrise as a way for anyone to start investing into this asset class with as little as$10. Their flagship fund is what we recommend and are invested into, and we're both in the green this year. They pay investors out on a quarterly basis, similar to stocks, but you're, of course, investing into a diversified asset class.

11:43Remember, mailbox money comes in many forms. It can be business ownership, crypto, portfolio income, like what Elon Musk does, only getting paid in stocks and not cash to run his companies. The key here is to start investing early and often, stay consistent, and as we always say, be diversified so you can start earning money while you sleep. And I just want to emphasize, portfolio income isn't just the cash paid to you, but it's the value of your portfolio going up over time as well. So I'm up, I don't know how many tens of thousands of dollars this year in my own portfolio, but like that's money that hasn't hit my bank account, but it is my net worth going up over time, right?

12:23Let's get into our fourth and final strategy, the art of saying no. The word no is a complete sentence. So the sooner you learn that, the better off you'll be. Rich people say no to opportunities and experiences all the time because they've realized it pulls them away from their end game goals and they like to stay focused. This could be a business goal, a health-related goal, a relational goal. It doesn't matter what you're trying to accomplish. Saying no to distractions will help you get there faster. The biggest takeaway from saying no is not falling victim to the shiny ball syndrome. For decades, I've watched intelligent, talented people struggle financially because they've not learned how to say no, and they lack execution on their goals because they bounce from project to project and continually waste their time and many times lose money because they can't stay focused on the winners and really see them through and they bounce around way too much.

13:20I really like how we kicked off this strategy. The word no is a complete sentence. It is. No, I don't want to go do that. No, that doesn't help me. No, I don't want to do those things, right? That's the easiest way, really anyone can begin to buy back their time. But a lesson that I've learned in my business and in my relationships, and maybe not so much in my health because I don't work out as much as I should, but a lesson I've learned over the last half decade in the things that I do is the word compounding and how important compounding can be. So instead of seeing a little bit of success with something new and then getting expired to take that and go start something else and then, oh my gosh, it worked.

13:57Let's go do another thing. Let's go start that new thing. Find the thing that works for you that you enjoy doing over a long period of time and just get 1 % better at it every single day. And instead of taking all that time and inspiration and excitement to go start something new, go double down on what's already working in your business, in your relationships, in your health, whatever you're trying to accomplish, whatever the theme is of that thing, consistently get better every single day about it. Compounding effects will take hold after the first one, two, three years and they can be glorious.

14:29So in summary, rich people buy back their time in four distinct ways by understanding the ROI on their hours, by buying expertise from people who've already done what they're trying to accomplish, by making money while they sleep, by owning equity and growing businesses and real estate, and by saying no to distractions. I really enjoyed putting this episode together because I think it's a really good blend of mindset to help people get on track, but then also strategy so people can really go, hey, wait a minute, do I need to make changes here? I need to better understand what my time value proposition is and really put themselves in a better position to be able to say no much more often.

15:11So before we jump into our Q &A section of this episode, let's take a moment to hear from our sponsor, Masterworks. Get this, Robert. Half of financial advisors are now allocating to alternative investments in strategies to manage their portfolio risk. And over two thirds of millennials are investing in alternatives. That's over 67 % of millennials have their money invested into things that aren't stocks and bonds. Now, two of the big reasons that these advisors are diversifying with alternatives is to reduce exposure to public markets and find alternative sources of returns. Now, of course, with alternative assets, there's a ton of different options out there.

15:48We actually just talked about Fundrise and real estate, But one of them that we are also invested in is fine artwork, the valuable paintings by iconic artists like Picasso, Warhol, and Banksy. I'm not an art expert, but that's kind of the point. We've both been using Masterworks as an investing platform to diversify our portfolios into this asset class for five years now, and it's become so easy. You don't even need an art history degree to do it. That's right. Both of us invest with Masterworks, the sponsor of today's episode. and we've even interviewed their founder and CEO, Scott Lynn, on the show.

16:23So make sure you check out that episode. With Masterworks, you don't need to spend millions of dollars to invest in multi-million dollar art. They've offered investments in almost 500 works to date with over$1.2 billion in invested capital. They've also exited 23 works so far with investors realizing annualized net returns including 17.6%, 17.8%, and 21.5 % on those works held longer than one year, excluding unsold works. So join over 1 million Masterworks users at masterworks.art front slash rich habits, which is also in the show notes of this episode. As with any investment, past performance is not indicative of future returns.

17:05Investing involves risk. Sale returns are not inclusive of unsold works and important regulation aid disclosures can be found at masterworks.com front slash CD. So as a reminder, if you have a question to ask us, head it over to Instagram and DM us at rich habits podcast, or send us an email at rich habits podcast at gmail.com. We get thousands of questions every single week and we try and answer them on the show. So our first question actually comes from Instagram from Anna E. Anna says, hi, I'm interested in learning more about house hacking and in researching my area, I live in Los Angeles, I found a duplex for$1.3 million.

17:43The owner, however, is requesting an IRS 1031 exchange. How would that affect the purchase? Could I still use the Fannie Mae 5 % down mortgage? Thanks in advance. So Robert, I'll kick this one off. The first thing I want to explain is house hacking. House hacking, if you're new around here, simply means that you are living in a duplex, triplex, or quadplex, and you're renting out the other units. That just means that you literally go out and buy this multifamily property, you live in one of the units, and you rent out the other units, and you use the rent to pay for the mortgage. Normally, house hacking can either completely pay for your monthly mortgage or really bring down what you owe to a couple hundred bucks, which is much better than a couple thousand like I'm sure rent can be in Los Angeles.

18:27Now, we always talk about the Fannie Mae 5 % down mortgage. It's essentially the easiest way for people to go buy a multifamily property. I believe the terms are it has to be owner-occupied, which means you have to live in it as well. You can borrow up to$1.3 million and you can put down a 5 % down payment and you get the mortgage, assuming you have the right credit score and debt-to-income ratio, stuff like that. So Robert, why don't you dive into the specifics as it relates to the 1031 exchange, maybe talking about first what that means, and then two, does it impact her process of getting this multifamily?

19:00The 1031 exchange is not going to affect you at all getting the Fannie Mae mortgage. One does not have anything to do with the other. And the 1031 exchange, what it essentially means, if someone wants to sell a property, buy a like-kind property, it could be of greater value or lesser value within 180 days, then they don't have to pay the capital gains tax on the sale. That is essentially what the 1031 exchange is. So in this instance, it will not affect you at all. It doesn't affect the purchase price. As long as you qualify with credit score, I think the Fannie Mae right now, you have to have a 630 credit score or higher, and you have the 5 % down payment.

19:41You have the job verification. You will be good to go. And it is one of my favorite mortgage tools out there because it allows you so much flexibility. And for years, Austin and I have been talking about, we believe when someone is buying their first property, that house hacking is the best way to go because you're not burying yourself in debt and you're building equity. You have some tax benefits and it just makes your life better because when you are ready to settle down and buy the dream home, you've already got these other two, three, four doors that are going to make you income and build you equity for the future.

20:19That's a great answer. Now let's move on to our second question. Also on Instagram from AJF. AJ says, hey guys, I love the show. I got a question for the Thursday Q &A. I've outgrown my current home of about 1 ,800 square feet and I definitely want to upsize for my growing family. The thing is, I have an amazing interest rate right now locked in on my current mortgage that I bought in 2017 and I have$150 ,000 of equity. I'm debating whether I should sell the home and use that equity as a down payment toward my next one or maybe I keep this property and I use it as a rental. Do you know, however, of any other creative strategies to recommend to upsize while making the most of my current equity and low mortgage rate?

21:00My current rate is 2.8%. And I know I'm not going to get anything close to that nowadays. Thanks in advance. Robert, you want to kick this one off? I would love to. I think you're in a great position. I personally wouldn't sell it with a rate like that. But the things you have to ask yourself are, is the property cash flowing? if you keep it as a rental? Will you have positive cash flow every month? If the answer is yes, you just have to consider what that is. And then also you have to look at what is the capital appreciation year over year for that property. So let's say that the cash flow is 4 % and the capital appreciation is 4%, giving you a total return of 8 % year over year.

21:38I like it. Anything that's above a seven, I think is a great investment for you because some areas start to grow more and more, which then increases your cash on cash return. So in my opinion, I would hold off selling it, turn it into the rental, keep that awesome mortgage, even though you have equity in it, because that way you can really enjoy the benefits of the situation you've created with this property. So Robert, I've done a little bit of math behind the scenes here. So when AJ bought this house in 2017, the median single family home was worth about$312 ,000. So I'm assuming he's just a normal person.

22:151 ,800 square feet sounds like about 300K to me back then, which means his monthly payment when you have principal and interest and some property taxes is about$1 ,300. Now the question is, can AJ rent out this residence for significantly more than that, so much more that to your point, it cash flows in a meaningful way? Also to that point, will it also appreciate over a longer period of time, which I would imagine it will considering it's already appreciated by that 150 ,000 of equity. So here's what I would do, AJ. If you need to upsize the house, the last thing I would wanna do is get rid of this because this could be a cashflow machine for you for the rest of your life, 500, 750,$1 ,000 a month, depending on what you can rent it for, which is a lot of money over a long period of time, especially if that money is then invested correctly into the markets.

23:03So in my opinion, I would figure out a way to save for a reasonable down payment on your next mortgage, but more importantly, know that whatever that monthly payment is, isn't more than about 30 to 35 % of your take-home pay, right? That's the back of the envelope math you wanna be working toward because once it becomes 35, 45, 50 % of your take-home pay, now you're turning house broke and we don't wanna do that. I don't care how bad you want a new house, you're gonna stick around with the one you got, especially if your mortgage is 1 ,400 bucks or less. So I would say for a good down payment, maybe that takes two, three, four years, but at the end of the day, you're not sacrificing what could be a wonderful cash flow machine for the next several decades.

23:43I couldn't agree more. And the only thing I would say in that window of three to four years that you mentioned is really be aggressive. Find a way to get that down payment as quickly as you can. So for your growing family, you can get something that you really enjoy. But I just think you're in a great situation, AJ. I wouldn't sell it either. I love the takeaway from Austin. Keep it. Find a way to get a side hustle, save more money, change your budget a little bit so you can really set yourself up for the bigger home while not sacrificing what seems to be a really good investment. Now, before we jump into our last question from Rebecca, I want to take a moment to hear from public.com.

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24:58So if you're finally listening and investing towards your Roth IRA this year, do it on public and earn 1 % match on all contributions. Paid for by public investing and full disclosures in the podcast description. So our final question comes from Rebecca J on Instagram. Rebecca says, there's been many comments that I've seen recently about potential tax benefits from using an LLC versus just paying myself as a W-2. Could you explain exactly how to go about that? And is this only for passive income LLCs? So Robert, I love this question from Rebecca. Yeah, LLCs are super important. I'll let you kick things off with explaining what is an LLC, why people open them, some ways they can save on taxes, and then I will come in at the end and explain how I'm doing my own LLC to save as much as I possibly can.

25:46So probably one of the best pieces of advice I ever received was 20 some years ago from a lawyer when I was asking why the LLCs and the revocable trust and all of these things were so important. And she said to me, because you want as much layering as you can from your assets to anyone that wants to take them. And I know that sounds harsh, but it can be as simple as someone falls on your property and sues you and comes after your personal assets. That is why LLCs are so important. Limited liability corporation. By having that layering, it gives you protection from prying eyes, from people trying to come after your personal assets, and gives you that layering that's necessary to grow your wealth and really build that insulation to keep you out of trouble and out of harm's way.