136: The Easiest $678K You’ll Ever Make

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0:42Because Marshalls believes everyone deserves access to the good stuff. Visit a Marshalls store near you or shop online at marshalls.com. Hey, everyone, and welcome back to the Rich Habits Podcast, a top 10 business podcast on Spotify, brought to you by public.com. By the end of this episode, you'll know exactly how subscriptions are secretly draining your wealth and how to audit your recurring charges so that you can turbocharge your retirement investing. My name is Austin Hankwitz and I'm joined by my co-host Robert Krogh. Robert is a seasoned entrepreneur with lifetime revenues of over 300 million and I'm a multi-millionaire in my late 20s with a background in finance and economics.

1:24As 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 episode of the Rich Habits podcast, we're diving deep into something that's costing our listeners hundreds, maybe even thousands of dollars every single year without them even realizing it. And that is subscriptions. The average American has five to six paid subscriptions that they aren't even aware of. That's where your retirement savings are leaking out$9.99 at a time. And that is not by accident.

2:01These companies have spent millions figuring out exactly how to hack our brains. So today we're pulling back the curtain on their playbook. Why$9.99 feels so much cheaper than$10. The psychological reason you keep your gym membership that you haven't used since January. And then, of course, our three-step subscription audit that we think a lot of you are going to benefit from by the end of this episode. Yes, you'll be able to identify and cut the fat from your monthly expenses. We're taking real money and putting it back in your pocket. Some of our community members have found$200,$300, and even$500 per month that they didn't even know they were spending.

2:42And before you shrug off a couple hundred bucks a month in extra subscriptions, think about this. $200 a month, if it was invested over 20 years, would turn into over$200K in your retirement account. $300 a month turns into$292K, and$400 a month turns into$390K in retirement. These are real numbers. These are the facts. But before we walk through our three-step subscription audit, we think it's really important for all of you to understand the data behind these subscriptions. You're essentially playing some crazy psychological game with these trillion dollar companies. So Austin, walk us through it.

3:24Break it down. This is crazy. It's the real data. And I can't wait to get into it. Yeah. So the data tells us that the subscription economy has grown by 435 % over the past decade. And we're not just talking Netflix and Spotify. Everything is a subscription right now. Your Microsoft Office, your meditation app, and even car features. I don't know if you guys saw this, but I remember back in the day, BMW tried to charge a subscription for heated seats. Yeah, they make it really easy for you to upgrade and add all of these crazy costs. But here's where it gets psychological. Companies know that once you sign up for a subscription, you're five times less likely to cancel it than you are to return a one-time purchase.

4:07They're banking on what is called psychological ownership. So once benefiting from a subscription becomes part of your routine, like your Spotify or your Netflix, your brain treats losing it via unsubscribing like an actual loss. So for me, that one would be my PokerGo subscription that I haven't logged into for over two years. And I just haven't made the time to cancel it myself at$9.99 a month. So don't do that. Well, this is called the endowment effect, right? And it's very well known in behavioral economics. The moment you sign up for that subscription, your brain starts to think that that service is yours.

4:45And so by canceling it, it feels like you're giving something up. Like it really feels inside of your stomach like, oh, my gosh, like I don't have access to this anymore. And sometimes you maybe only use it a couple of times. It's really interesting, the overlap between psychology and money. Yeah, I mean, these companies are billion, multi-billion dollar organizations that spend tens of millions of dollars figuring out the best way to convert you. into a customer. So let's talk about that pricing psychology. Austin, why do you think everything ends in 99 cents? Well, it's called charm pricing.

5:20Robert and I have done a little bit of homework here and it's been around since the 1880s. But here's what's crazy. It worked back then and it still works today. MIT and the University of Chicago ran studies showing that items priced at$39 actually sold better than items that were priced at$34. More expensive and it sold even better. Our brains process that first digit so quickly that the$9.99 gets categorized as nine something when it's actually just$10, right? So we see this at gas stations all the time. And with subscriptions, they definitely take this to the next level. They figured out that$9.99 per month sounds like nothing, but that's$120 a year.

6:04Stack 10 of those subscriptions together, which you probably have, and you're looking at a whopping$1 ,200 a year. So if you instead invested in the S &P 500 with just average returns, that would be worth$97 ,000 over the course of a 20-year period of time. Contrary to what some financial influencers say, little leaks do actually sink ships. So here's something that probably won't surprise you. 42 % of consumers have forgotten about at least one subscription that they no longer use, but they're still paying for. That gym membership from New Year's 2023, still hitting your card. That language learning app that you use for two weeks, still charging you.

6:48And the list goes on and on and on. Dang, man. 42 % have forgotten about at least one. I mean, geez, I guarantee both of us, I forgot something. But companies, they call this breakage, right? Back to the psychological terms here. Just like gift cards that never get used, they're counting on you to forget about them. Some business models are literally built on the assumption that 40 to 60 % of their subscribers are not going to use the service. I think Planet Fitness was recently like sued or something about this for not only making it really hard for people to unsubscribe, but their entire business model is like, yeah, this many people didn't show up this month.

7:23How great is that? Stop forgetting. Let's save ourselves a few hundred dollars a month by implementing our three-step subscription audit. Time to bring out that notepad and start taking notes. So step one is the discovery phase. You're gonna pull up the last three months of your bank and credit card statements, not just one month, three months, because some subscriptions bill quarterly or annually, and you need to catch all of them. Now go make yourself a spreadsheet with four columns on it. Maybe you wanna just get a piece of paper and do this, but write down the service's name, so Spotify, Netflix, things like that.

7:56the monthly cost, the last time you use the subscription, and then a value rating between one to 10. And be honest with that value rating. If you haven't used it in the last 30 days, the value of it's probably not a 10. So the pro tip about this one is to check your email for receipts. Search for those keywords like subscription, renewal, monthly, auto pay, things like that. You will be shocked what you end up finding, especially if it's on a PayPal or maybe you're paying through a cash app or something like that. Like these subscriptions, they're hiding places. So go find them. And to Robert's point, this is going to help you unlock hundreds of thousands of dollars in retirement if you're able to invest this correctly.

8:36And step number two is ruthless evaluation. So we use what we call the dollar per use calculation. So take that monthly cost and divide it by how many times you actually used it last month. So that$15 gym membership sounds cheap until you realize you only used it twice. That's$7.50 per use. So you could have just paid that one day pass, probably save yourself some money. And this is for people that are actually still using the gym membership. Not all of you that are watching that haven't used it in months. And these are the little leaks that are going to get you over time. So now here's our rule.

9:13If you haven't used it in 60 days, it goes into the cancel immediately pile. No exceptions. But what if I would have used it later? You won't. And if you do, you can always sign up again, probably with a customer discount code that's going to save you money anyway. So for the subscriptions you keep and do use, ask yourself this. Could I share this with someone? Netflix, Spotify, family, even some software subscriptions allow multiple users. Split that cost and boom, instant 50 % savings. I know people that do this with their YouTube TV subscriptions and it works wonders. So you definitely want to start integrating this step as well.

9:54Which by the way, when did YouTube TV become over a thousand dollars a year? That is just, that's bonkers. Let's now rock and roll to step three of our three-step subscription audit, which is the optimization strategy. We're talking all things optimization here. So for the subscriptions you are keeping, we're going to negotiate a little bit. We're going to call them up and we're going to say the four magic words. I'm thinking about canceling. This works very well for your credit card annual fees. I've not done this, but I know friends who have actually called American Express and they got their annual fee waived for whatever it was and definitely do that.

10:27It also works for insurance and Wi-Fi and cable companies, even cell phone bills. 70 % of the time, they're going to offer you a discount to stay because they know their customer acquisition cost is way higher than keeping you even here at a discount. Now, it might not work for Netflix because they're a trillion dollar company, but it could work with that$200 a month gym subscription that you don't really use that often. For example, maybe you call your cable internet provider and you get a$20 off per month promo because you use the four magic words. That's$240 that you can save on an annualized basis for your cable internet that you were going to have to pay for anyway, right?

11:07That$240 is very important, especially if it gets invested. That's the whole thing. I guess the last optimization tip here, Robert, is look out for those annual payment options, right? Because most services offer a 10 % to 20 % discount if you pay on an annualized basis. But make sure you're only doing this for services that you know you're going to use for a whole year. Your Netflix, sure. I mean, I've been a Netflix subscriber for a long time now. If they gave me a 10 % or 15 % discount, count me in. The mindfulness app that you downloaded on your phone and they're offering you a 20 % discount for the yearly.

11:40No, you're not going to use that. Don't trick yourself. Yeah, I love that breakdown, Austin. And it's just so important because so many of these influencers out there talk about getting rid of that$10 a day of coffee or staying home and, you know, not having that$14 avocado toast isn't going to help your financial situation. And it's just wrong. The math doesn't math. So I love this episode. Because it really just shows how small changes in your financial plans can make such huge differences down the road. And that's why we always talk about compound interest, investing early and often, and all those things.

12:18And I think that's a great highlight in this episode. I mean, think about it like this. $240 just by negotiating a bill. Now you've got another maybe three or four subscriptions. Or maybe you split your YouTube TV subscriptions to$500 a year. We're talking about what could turn into hundreds, if not thousands of dollars a month, that now you invest that over the next 5, 10, 15, 20 years. We're talking about hundreds of thousands of dollars. Speaking of investing, it's very important that everyone understands this reality. Investing toward your financial future is the only way you will ever be able to retire, period.

12:54So if you want to stop trading time for money in your 9 to 5 or your hourly job, you need a nest egg that's growing for you over time. And the easiest way anyone can begin investing towards their future is on public.com. They make it incredibly simple to build a multi-asset portfolio, including ETF stocks, bonds, crypto options, and more. They also offer access to industry-leading yields of up to 4.1 % APY for your emergency fund. And for a limited time, you can earn a 1 % match on all IRA deposits, IRA transfers, and 401k rollovers. That's$1 ,000 of free money for every$100 ,000 you roll over into their platform, which means that old 401k that's making a couple percentage points you got hanging out at your old employer.

13:40Roll that over, go get your 1 % match, and get your bag. Yes, fund your account in five minutes or less. Head to public.com forward slash rich habits to claim your 1 % match today. Paid for by public investing. Full disclosure in the podcast description. So let's put all of this in perspective with real numbers. The average American spends$273 per month on subscriptions. But when surveyed, they think they only spend around$79 per month. The gap is$194 per month. That's$2 ,328 per year you don't even realize you're spending. So the$194 a month, if you invested that into the S &P 500, the NASDAQ, these index funds and ETFs we talk about averaged 12 % returns over a 30-year period of time, which by the way, the S &P's averaged 11.88 % since inception.

14:36So these are real assumptions here. You would have over$678 ,000, hence the title of our episode. Let me say it again. The 194 a month that you are canceling your subscriptions, you're being smart here, you're just auditing what you are spending on a monthly basis, that 194 invested for 30 years at 12 % is$678 ,000. That is the real cost of subscription creep. Not just the monthly charges, but the hundreds of thousands in compound interest that you are going to be missing out on by just keeping that poker go, Robert, subscription around. I know, I know. And here's what kills me, though. People will drive across town to save 10 cents per gallon on gas, but they won't spend the 30 minutes that it takes to audit their subscriptions that could help them save hundreds of dollars per month.

15:35It's because subscriptions feel small and manageable, but death by a thousand cuts is still death. So listen, guys, look, we're not anti-subscription. If Netflix brings you joy, keep it. Spotify keeps the Rich Habits podcast rolling, keep it. That's worth every single penny, but be intentional. Every dollar you save on subscriptions you don't use is a dollar you can invest in your future. Also, it's just good practice to know where your money is going every single month. So if you're squandering away hundreds of dollars a month on subscriptions you don't use, where else might you be experiencing leakage?

16:12100%, right? The company is spending millions, if not tens of millions on this psychological research to keep you subscribed or counting on your inaction. But that's not a thing here at the Rich Habits Podcast. It's take notes and take action. These companies are betting you're not going to take the hour, that all it's going to take is an hour to audit your subscriptions using our three-step subscription audit that we just laid out for you in this episode. So go prove them wrong. Your future wealth depends on it. small action turns into big, big outcomes, specifically$678 ,000 of an outcome. I love when we break these simple things down and really enlighten people to understand that these little leaks do sink ships and dreams.

16:55So I love this episode. And remember everyone that's listening, building wealth isn't just about making money. It's about keeping more of the money you make for yourself. And there's no easier place to start than with the subscriptions, silently draining your bank accounts every single month. Wealth isn't built just in the stock market or real estate. It can also be built in the boring daily decisions that you make, like canceling those subscriptions that you forgot about and don't use. Those decisions compound over time into real wealth, especially when you invest the money that you save. I'm worried some people here are going to listen to this episode and be like, cool, I'm now$194 richer a month.

17:36What do I do with it? Here's a quick playbook. Go open up a Roth individual retirement account on any broker you want. We prefer public because we think they're the easiest way to start investing. We love their UI. We love their support team. It's great. Then deposit the 194 into your Roth IRA via cash. Once the cash is in there, invest the 194 into VOO and QQQ. You can go 50-50 on it if you want. You can go more VOO, more QQQ. It doesn't matter. But these are the 500 largest, most profitable companies in the United States through the Vanguard S &P 500 VOO, and then also the 100 largest listed companies on the NASDAQ exchange via Invesco's QQQ.

18:19So actionable insights here, right? You are taking this money that you're saving. You are putting it in your Roth IRA. You're investing it now over 30 years, right? You're doing this every single month that you're saving this money, 194, 194. Maybe you round it up to$200. How about that? Maybe you find another$200. Now it's$400. Now you're really rich. It all starts with small steps, Robert. Just taking the small steps, finding the margin in your budget, and then using that to not go, oh, I now can afford a new pair of shoes this month. Or, oh, we're going to go eat out for$200. It's going to be great.

18:50No, you are using this money to build wealth. Yeah, it just all comes down to making your money work as hard for you as you work to get it. You've heard us say that thousands of times over the past few years, and it really is so critical. And it's just, I want to hammer home this one point another time before we go to the next portion of the show. And that is understanding that small investments consistently can build wealth. So don't listen to the fake gurus and the people that tell you you have to have$50 ,000 or$20 ,000 to even get started because they're wrong and they just don't know what they're talking about.

19:26and they don't understand consistency and compounding. So I hope this helps a whole bunch of you get it together, do the audit and start building wealth consistently. 100%. Now, before we jump to our Q &A section of this episode, got to give a major shout out to Blossom Social because they're hosting a couple interesting events around the United States and Canada. Our awesome partners over at Blossom Social are hosting their third annual investor social tour where hundreds of DIY investors across North America meet up in person for an evening of food, drinks, networking, education, and fun. And they'll be hitting seven cities this year, including LA, Vancouver, Calgary, Chicago, Montreal, Toronto hosted at the Rogers Center for you baseball fans.

20:16Yes, where the Blue Jays play. And New York hosted at the NASDAQ Center in Times Square. So it's going to be a blast. You guys know how much we love Blossom as an online social network. They're all about connecting investors online. Well, now's your chance to see what the community is all about in real life. They've even hooked our listeners up with a 15 % off coupon code. So just go check out the link in the show notes below or go to blossomsocial.com slash 2025 investor tour and use rich habits, 15, all capitalized rich habits, 15. It's one word at checkout to get 15 % off. All right, Robert, let's now jump to our first question coming from KW.

20:59KW hits us up on Instagram, which as a reminder, if you have a question for us, DM us on Instagram at richhabitspodcast or email us at richhabitspodcast at gmail.com. KW says, hi, Austin and Robert. This is KW, and I've been listening to you guys for the last year or so, and I love your ideas. My wife and I are at a point where we're confused on what to do next. After listening to you all, I feel as if we could do a lot more for building for our retirement, but I want y 'all's take. We are in our early 50s. My wife works for a company making about$60 ,000 a year and contributes 15 % to her 401k.

21:32Her account currently is valued at$420 ,000. I am self-employed, profiting about$100 ,000 a year, and I contribute$16 ,000 a year to my SEP IRA through a brokerage firm, which right now is valued at$225 ,000. We have a paid off house, which is valued at$850 ,000. We have no other debt. We have$115 ,000 at a 4.5 % interest rate in a CD and$140 ,000 in a high yield savings account. Can you please give us some ideas as to where we can disperse our money so that we can make it work harder for us? Thank you for all you do. K-W. Robert, I feel like this question's right up your alley. Yeah, I love you guys are in a great situation.

22:10I feel you're too heavy in cash and too risk off. So my first glaring change that I would make is either when the CD matures, I would get that money working maybe in some crypto, some precious metals in more of the funds that we talk about like VOO, AIQ, QQQ, some of that. But also I feel like you're really heavy in your high yield savings account as well, because with 140 ,000 sitting there making three, 4%, I think that's two risk off also. So I would look to getting a traditional brokerage account moving if you don't have one. Get some of this money out of the high-yield savings account. Get that down to maybe three, four months of your monthly bills for your emergency fund, and everything else gets working in the market.

22:59Because being in your early 50s, if you really accelerate your growth with this$200 ,000,$300 ,000,$400 ,000 on top of the SEP and the 401k, you're going to see magical returns in the coming years. And you guys have another 15 good years of investing before you're fully retired. So that's what I would do first and foremost. Get a little more risk on, get some money into crypto, get some money into maybe some precious metals, these ETFs and index funds we talk about, because you don't want to be sitting on the sidelines so heavy in cash through the high yield savings and the CD. I love that breakdown, Robert.

23:38Let's give them some like, here are the real numbers, right? You've got$860 ,000 at your disposal to invest. $420 ,000 plus$225 ,000 plus the$115 ,000 that's sitting in the CD plus$100 ,000 of the$140 ,000 in your high-yield savings. If you want to keep$40 ,000, be my guest. You guys are rich. You're fine. Go put$40 ,000 in your savings account. I'm cool with that. Now we're talking about$860 ,000. The stock market doubles on average every seven years. That's that 8, 9, 10, 12 % that we see in the S &P 500 and the NASDAQ. If you guys are in your early 50s, you're 52 years old, maybe 53. Let's say you've got seven years until you're 60 and then another seven, you're 67.

24:18That's two more doubles of$860 ,000. That's three and a half million dollars by the time you're in your mid to late 60s ready to truly retire. I mean, you guys, if you wanted to, you probably could retire early depending on how much money you want to live off of, especially with a paid off house. So I love where you're at. I love that you guys have built such a wonderful nest egg for yourselves. Now it's time to move away from the conservative type of investing and just collecting a little bit of interest to getting aggressive. Think precious metals, think the S &P 500, the NASDAQ, the MOAT, VTI, VGT, VUG, AIQ, right?

24:55All these index funds and ETFs that we talk about here on the show that, I mean, just gold is up 40 % this year. Like imagine if you just put your money in gold. So all I'm saying here is there's a lot of great ways to invest this money. If you want to put a little bit more into the SEP IRA, that's cool. Make sure your wife's 401k is invested correctly and not sitting in some silly target date funds. But beyond that, go open up a brokerage account on public and just deposit a couple hundred thousand dollars between your high yield savings and the CD and all the other fun money you guys make and you're going to be just fine.

25:25I love it. Yeah. There's just so much they can do to get better diversified, a little more risk on and produce so much more money for retirement in the next 10 to 15 years. So our next question comes from Ogie. Ogie says, Hey Austin and Robert, I love your podcast. I've been a fan of your videos on TikTok before you even started the podcast. Let's freaking go, man. That's awesome. Ogie says, my question's all about my parents and investing. No matter how much I encourage them to put money in the stock market, they always say it's too risky. They are war refugees and have experienced losing everything in a blink of an eye.

25:58So I understand their fear. Right now they're both 60 years old. They have no mortgage, no debt, no car payment. They've saved over$100 ,000 in an emergency fund. And on top of that, they have two 401ks with more than$100 ,000 in each. And my mom has another 401k with$50 ,000. What is the best way to help them get invested in safer assets so their money can still grow, but feel secure? Should I encourage them to roll over their 401ks into a public account that offers a 1 % match and then allocate more into treasuries and bonds? Or is there a smarter, safer way for they'd be positioned in at this stage of their life.