15: How to Build a Crypto Portfolio From Scratch, the Debt Ceiling, Revocable Trusts, and 401(k) Loans

0:00Hey, everyone, and welcome back to the Rich Habits Podcast. My name is Austin Hankwitz, and as always, I'm joined by my co-host, Robert Croak. Robert is a seasoned entrepreneur in his 50s with more than$200 million in company exits under his belt. And I'm an entrepreneur in my late 20s with a background in finance and economics. Since quitting my full-time job in corporate finance a few years ago, I built a seven-figure media business and actively advised some of the most well-known fintechs around the world. As the show name might suggest, every episode we talk about rich habits as they relate to business, finance, and mindset.

0:38However, we try and bring you two unique perspectives. One from an industry veteran, which is Robert, and the other myself, someone who's young and still in the process of building wealth and figuring it all out. So, Robert, are you ready to jump into things? What are we going to be talking about in today's episode? Yes. In this episode, we'll be talking about how the debt ceiling being raised affects you, how to build a crypto portfolio from scratch, as well as our updated thoughts on artificial intelligence after the insane momentum of NVIDIA. If you want to ask us a question, be sure to follow at Rich Habits podcast on Instagram and shoot us a DM and let us know what's on your mind.

1:18We are here to answer your questions. We are here. We're really excited. We've got three awesome questions teed up for you guys. So be sure to stay tuned to the very end of the episode where we have our Q &A session. So with that being said, let's just quickly breeze through what happened this weekend with the debt ceiling. So Robert, what's the debt ceiling? Why is it important? Why is it in headlines right now? Give me the play by play. What the debt ceiling means is it's what Congress allows the federal government to spend yearly. And with that said, the debt ceiling had to be raised in order for us to prevent a default.

1:53And so it's very critical that the debt ceiling did get raised. And it got put in a really good spot, actually, because they curbed what the government can spend, but they did raise it so there was no default. So to touch on that a little bit, there will be a lot less spending. And that's going to be a little bit sketchy for the market because the government's been giving away so much money for the past few years and printing so much money with all these programs because of COVID. And so it's going to be interesting to see what happens with the economy, Social Security and everything else without all of this excess money to print and give away.

2:35I would probably argue that nothing's going to happen to Social Security. I think that's the golden egg that no Democrat or Republican wants to touch. But with that being said, we're going to quickly talk about how the Fiscal Responsibility Act of 2023, aka raising of the debt ceiling, this is the bill that was passed, impacts you. So there's two types of people that will be impacted mainly here. The first one are student loan borrowers. So if you're a student loan borrower, as you might remember, student loan repayments have been on pause since COVID as a way to kind of keep more money in the pockets of Americans during these uncertain economic times.

3:13COVID was crazy. We needed our liquid cash. So they paused student loan repayments so people had more money to have in their budget every single month. However, this bill now reaffirms Biden's plans of payment resuming in August. So I don't know if you guys remember this, but Biden has said, yep, payments are going to come back in August, blah, blah, blah. But, you know, we heard a little bit of weird stuff about the forgiveness and being blocked and this and that. Now this is in writing. It's a bill now. They will resume in August. There's no more like, well, maybe, maybe not. I'm going to go back and move.

3:45No, no, no. This is law now. So if you have student loans, be prepared to begin paying them back in August. Yeah, that's a great point, Austin. And I'm glad you covered it because a lot of people are just not prepared for these payments to start back up again. And something that I want to be very clear about, I get asked all the time, should I pay off my student loans early? And I generally tell people, no, you shouldn't, because we're hopeful that government's going to create more programs to help people with massive student loan debt. But since that hasn't occurred and there are payments resuming in August, a few very important things on this point that I want to make sure everyone understands.

4:25If you're late, you default and you stop making these payments because you're not prepared financially to start making them again. They can come after your paychecks. They can come after your tax returns. So just keep in mind, you have to be ready in August to make these monthly payments and start them up again because you will get yourself in trouble if you don't and you default. So this is a great point that everyone needs to understand. And just wanna make sure everyone's on the same page. Robert's talking about federally guaranteed student loans. So if you were like me where I got my student loans through a local credit union, they're not gonna do anything.

5:02That'll just hurt your credit score and you're gonna be a bad person for not paying off your debt, right? But for the federally guaranteed student loans, which is the vast majority of people, be prepared. So the second people now, group of folks that get impacted by this bill being passed, the Fiscal Responsibility Act of 2023, are food stamp recipients. So some adults without dependent children will be subject to tougher work requirements if they want to qualify for SNAP or EBT. These type of requirements usually stop after the age of 49, but now they're going to gradually extend them up to the age of 54 by 2025.

5:39So if you are that or if you know someone who might be impacted by that, make sure that they are aware of this to do some research, to look into it and do everything they can to continue to qualify and receive the great benefits that are afforded to them through this awesome program. Yeah, and this is another one that's really interesting because it's really building up to what's going to happen when the Fed now is introduced in July. And if it rolls out in its full regalia, it'll be interesting to see how that affects food stamp recipients and the SNAP programs, because, you know, that is going to be one of the things that's going to lead up to the government introducing a base pay model for all citizens.

6:24And I think That's something that we have to look forward to in the next three to five years where we will just not have the food stamp and the SNAP programs anymore. And every person in America is just going to have this base pay, this minimum wage that the government's going to provide. And that's going to really change the game of how all of this works. And I think the FedNow program opens the doors to that being introduced in the next few years. So it's a very interesting tactic and something that people need to be aware of. Wait, are you saying that universal basic income is coming in like three to five years?

7:01Yeah, I just think with where we're headed with artificial intelligence. I read something recently. I don't fact I'd have to fact check, but I think it was Goldman Sachs that there'd be 84 million jobs lost in the next five years due to artificial intelligence. So I could see universal basic income definitely being needed sooner than later. Some people think it might be 10 or 20, 30 years out, but my guess would be five to seven years maximum. We're going to need to initiate it because there's just going to be too much of a breakdown between the haves and the have nots. OK, that's a take. That's a hot take.

7:38I'm going to replay this in five years and we'll see what's up. Hey, that's OK. Well, speaking now of universal basic income and FedNow and payment systems and all this fun stuff, let's now talk about the root and the meat and potatoes of this episode, how to build a crypto portfolio from scratch. Now that we know everything that happened over the weekend, let's talk about what really matters, investing, building wealth, making new rich habits. So, Robert, why don't you walk us through, one, what is cryptocurrency? Why should someone invest in cryptocurrency? What's the point of it all? For someone who really has no idea, maybe they've heard a little bit here and there, like why would they want to take their hard-earned cash and invest it into a internet coin?

8:22Yes, thank you for that lead in. And of course, I always believe that all adults, anyone investing should have a portion of their portfolio in cryptocurrency. I know Uncle Bill around the corner and John, someone's cousin, said it's a scam because they bought high and sold low. But at the end of the day, cryptocurrency, the coins and the underlying blockchain is just it's here to stay. All the biggest companies, all the biggest hedge funds, all the biggest countries and banks are all getting behind cryptocurrency in the blockchain and is just disrupting so many archaic industries. That is just a foregone conclusion that cryptocurrency is here to stay.

9:04Now, just like the Internet and the dot-com boom, yes, 80 % of the cryptos that you see today are going to be gone in three to five years. But the ones that are building real actionable projects with use cases that are getting these huge contracts with governments and countries and banks, they're here to stay. And there's just going to be so much wealth change over the next few years because of it. If you look at starting out, for those of you that haven't delved into crypto just yet, I would say start out by getting an account open. I would say start out with either a public.com or a Coinbase account.

9:41These are super easy to open up. Great platforms. We love them. We use them. And it's just a really good way for you to get started in cryptocurrency. And then from there and starting your portfolio, let's say it's your first investment in crypto. I would say start with the blue chips like Bitcoin and Ethereum. These two have the best use cases. They've been around forever and there's just so much money and everything behind them that these are really good ones to start with. But one of the key takeaways that I'd like to discuss in this beginning phase of building your portfolio in crypto is to really keep an eye on the ISO 22 coins.

10:21And what that means is right now, the federal government is switching from the SWIFT payment system that we have used for years and years over to the ISO 22 payment system. That migration is happening right now. And some of the key coins, there's five key coins in the ISO 22 pact. And these are the layers of the blockchain that support the ISO 22 system. And those five coins, I think, are something everyone should keep their eye on for the next few years and be dollar cost averaging in. And those coins are XRP, QNT, which is quant, XLM, HBAR, and IOTA, I-O-T-A. Five coins, read up on them. I think it's a mistake for anyone that does not have those five coins in their portfolio.

11:12So I think it's just really important that everyone has a portion of their overall portfolio, their investable income in cryptocurrency. It could be 5%, it could be 3%, it could be 10%, whatever you feel comfortable with. but I just think it is a mistake if you do not have some of your investable money in the crypto space. That's the very fundamental side. Let's get more tactical as it relates to someone now building that portfolio. Here's what I would do, right? Starting from scratch, let's rewind back to me building my portfolio from scratch for the first time. I'm downloading Coinbase Pro because on Coinbase Pro, I believe there, I think it's the transaction fees are like a third of what they are on normal Coinbase.

11:56So that's a pro tip. Download Coinbase Pro. I would then begin, I'd fund my account. So whenever you think about funding your account, what you should be thinking about is when you get your paycheck from your employer, just as you begin investing into a 401k or some sort of ETF or building an actual investment portfolio somewhere else, carve out however much money that might be for you every month, 10, 50, a hundred,$200, and put that now into this new Coinbase Pro account. So you would fund that account. And then with that money, you begin to say, okay, as a percentage of, let's call it$100 now that I invest every single two weeks, every time I get my paycheck toward cryptocurrency, how much of that money do I want to be in Bitcoin?

12:35Is it 20%, 30%, 40 %? How much do I want to be in Ethereum or these ISO 22 tokens or these AI tokens? Personally, I like Chainlink a lot. So how much do I want in these? It could be a good idea to perhaps get out a piece of paper, draw a circle like a pie, and then begin to kind of divvy up the pie into the percentages so you can begin to understand, okay, if I have$100 every two weeks, I'll have$28 into Bitcoin,$14 into Ethereum,$6 here, $8 here, whatever that might look like. And you can put that on, I believe, like an auto invest, sort of an auto repeat kind of function inside of Coinbase Pro.

13:12I think public.com does it as well. And just rinse and repeat. Same strategy every two weeks. I buy this much of this, this much of this. dollar cost average. We all know cryptocurrency is going up and down. It's going left and right. It's going in circles. But generally speaking, if you rewind, you can see it goes up and to the right. It's got its cycles, its boom and bust and its bubbles. We get that. But Bitcoin's been here for a while. Ethereum has been here for a while. And we can say the same about a lot of other great projects, a ton that Robert has highlighted here. So whenever you think about also now investing in a cryptocurrency for the first time, I want you to be thinking about it as a percentage of your net worth.

13:49Robert alluded to that. He said five, is it three, is it 15? Personally, I'm around the 15 % range, but that's because I'm young. I'm aggressive investor. I want to build wealth. Fingers crossed. The coins I chose are great. But I want to be more aggressive with my crypto investments. But for you maybe that's listening right now, that could be 8 % of your net worth or 2 % or whatever that looks like. So think about your investable assets and what kind of a percentage of that do you want? Now you have the playbook. It's very simple. You just put it on auto, repeat auto invest and just ride the wave.

14:23I know you're going to feel, oh my gosh, euphoric. I'm up 40 % today or this week, or, oh my gosh, I'm down 32 % this week. Oh my, what do I do now? What's going on? Just ride the wave, have some fun, do a lot of research and don't forget, we're just two guys on the internet. So this is not financial advice. Yeah, that's a great excerpt, Austin. You nailed that. And just one thing that I would like to reiterate is always remember, guys, it's time in the market, not timing the market. So many people think that they're going to wait till it comes down and they're going to time the market. And guess what?

14:55The best and brightest in the world can't time the market. That's why we always preach to you guys to dollar cost average and be in the market and be consistent. It's just so important. Absolutely. Now, with that being said, let's round off our third point here of artificial intelligence. We saw NVIDIA raise their revenue guidance for Q2 from like$7 billion up to like$11 billion now,$4 billion, I believe, that just came out of nowhere with the demand for their processors and their chips. Robert, you've been a big guy now on artificial intelligence for, I'd say, several months. You've been very vocal about NVIDIA and other AI stocks.

15:35So I just want to quickly highlight and give you the opportunity here to remind our listeners, one, why they should care about artificial intelligence, and two, a couple investment ideas in the space if they've not yet invested. I just think it's so important that everyone in their daily lives and in their businesses are learning artificial intelligence, the chat GPTs of the world, but just research. You could literally Google what are the best artificial intelligence platforms to use and figure out how this artificial intelligence craze can benefit your daily life, your business, and your productivity.

16:10It's something that is here to stay. It is taking the world by storm, as you might think and say. And so I just think everyone needs to make it part of their daily thought process and their learning habits. That's what we're here for, rich habits. What can artificial intelligence do for you, your companies, and your workflow? And so there's just so many opportunities in it as a job or creating a new company, but also for investing in the space. I've been very vocal about it because, you know, I try to be an early adopter on everything like crypto and AI and all these other things. And it's just has led me to a lot of great investments over the past few decades.

16:51And that's why I preach about it a lot. You know, several people that are financial educators like Austin and I, you know, reached out and kind of called me out about it, you know, NVIDIA and AMD and Microsoft. And I was just like, look, you can say whatever you want to say about PE ratios or what the charts say or what economic conditions are. But at the end of the day, I just think that artificial intelligence is so strong right now and the growth is there. And that's why I'm focusing a lot on those investment strategies. And a few of the ones I like are really simple. AIQ, I think everyone should take a look at.

17:31LRNZ, I think, is another great one. And then as far as individual stocks across the board, we love NVIDIA, AMD, Microsoft, Broadcom, and Google. These are all big, big players in the artificial intelligence boom. And so I think it's just something everyone needs to have on their watch list and be dollar cost averaging in. 100%. I couldn't have said it better myself. And just want to reiterate there, AIQ, great ETF. There's a ton of good names. LRNZ is more of a deep learning ETF, but it's definitely up the same alley as AI. And then also in the NVIDIA, the AMD, the Microsoft, Broadcom, and Google that you mentioned.

18:11Awesome. Cool. Well, with that being said, Robert, I think we should introduce this episode's sponsor. Yes. This episode of the Rich Habits podcast is brought to you by Neos Investments. Neos offers ETFs that aim to offer monthly income while providing core portfolio exposure across equities, fixed income, and cash alternatives like T-bills. Their ETFs may be particularly interesting for folks to generate passive income inside of their investment portfolio. They even offer an ETF that provides exposure to the S &P 500 index while aiming to offer high monthly income behind what investors would receive from plain exposure to the index.

18:55Their funds may serve as a compelling income-focused alternative or complement to many of the investments already in many investor portfolios. So if you're looking to add passive income-focused ETFs to your portfolio, consider learning more about NEOS's ETFs at neosfunds.com. And as with all investments, investors should carefully consider their investment objective, risks, charges, and expenses of NEOS's exchange-traded funds before investing. To obtain a prospectus containing this and other important information, please visit neosfunds.com. Please read the prospectus carefully before you invest.

19:32NEOS ETFs are distributed by Foresight Fund Services LLC. An investment in NEOS ETFs involves risk, including possible loss of principal. The equity securities purchased by the funds may involve large price swings and potential for loss. A fund's income may decline when yields fall. Fixed income securities will decline in value because of an increase in interest rates. major shout out to neos funds we love their etfs spyi is my favorite it has replaced jeppy inside of my portfolio for all you income focused investors jepi is jp morgan's covered call strategy etf i like spyi much more and you should definitely go check out cshi if you're looking for a cash alternative that i think now pays more than six percent which is awesome so with that being said, let's jump into this episode's question and answer session.

20:26Don't forget, shoot us a DM on Instagram. Let us know your thoughts, your questions. We're here to answer them. So our first question comes from Curry M. Curry asks, how do you feel about leveraging your money through a 401k loan? I'll be paying myself the interest on the loan and then can take the money to reinvest it somewhere else. Robert, I saw you put the thumbs down. Give me your thoughts. Yeah, I just think this is a huge no-no. It's never a good idea to be taking money and loans out from your 401k or your retirement savings. And I don't know the current interest rates right now, but I believe they're about 2 % over prime.

21:02So you're just really, it's just a big no-no. And any financial advisor educator is going to tell you that. I think there's just better ways to find money to progress your investing strategy. So for me, that's a big thumbs down. I totally agree. I'm never advocating for anyone to borrow against their future to do whatever with now, reinvest it somewhere else. What if that investment goes south and I have to pay back this loan? Like it just does not make sense. If you need the money and you wanna be investing or doing something actually productive with it, like paying off high interest debt, for example, just go get a personal loan or a debt consolidation loan, right?

21:40There's a lot of alternatives to borrowing from your own 401k. So two thumbs down from me. I'm not going to tell anyone that's a good idea. Our next question is really interesting to me, Robert, because I think it will resonate with a couple things that you've done in your past here. So Maggie L asks, I own multiple investment properties. I have several investment portfolios and I'm starting to angel invest. I'm thinking about setting up a trust to secure all of my assets inside of. What are your thoughts here? And do you have any recommendations for companies that could help? Maggie L, good for you.

22:16Love it. And yes, you should have a trust. Here's the structure. You're going to take every property in an individual LLC. And then those LLCs that own each property and each investment are going to be owned by a holding company. That holding company is going to fully own all of the shares, all of the equity in each LLC. Then above the holding company, you're going to have a revocable trust, not irrevocable, revocable trust at the top. So the revocable trust owns 100 % of the holding company and the holding company owns 100 % of every LLC and you are the beneficiary. Because remember, you always want to control everything and own nothing.

23:01So Maggie, you're definitely on the right track. Add in that revocable trust on top of the holding company that owns all of your LLCs and you will be bulletproof and in a great place structurally. So I heard you make a point to call out revocable and not irrevocable. What's the difference there? Why does that matter? Just it's a better overall structure for this type of setup when you're dealing with businesses and real estate and various assets. There's just a lot of long-term, not only tax, but protective mechanisms in the revocable trust. Great question, Maggie. That's amazing. Yeah. Major shout out to Maggie.

23:41She's making some money moves. She's been listening to the Rich Habits podcast. She's there. She's there for sure. Our next question comes from Grace G. Grace asks, should I be building my portfolio while I save for my emergency fund? I'm also trying to pay off high interest debt. What should I be focused on? Grace, such a good question. And Robert and I need to get this tattooed on our faces for how much we say it. You cannot out-invest high interest debt. So no, you should not be building a portfolio while also paying off debt, while also building an emergency fund, while also, while also, while also.

24:15Take a deep breath and focus on one thing. For me, what I would focus on, that's cute, Robert, the little, I like that. And by the way, y 'all need to watch us on Spotify. This is all a video podcast and you can see all of our funny facial expressions and all the thumbs up and thumbs down that we're doing. So watch the episodes on Spotify. Anyway, here's what I would do. I would focus on one thing at a time. Right now, that big focus for you should be paying off that high interest debt. Now, if that high interest debt is a credit card or multiple credit cards, perhaps consider getting a debt consolidation loan and pulling all those credit cards together and paying off that with a lower interest rate.

24:54That would be maybe a good idea. But you want to get rid of this high interest debt. You don't want that hanging over your shoulder. The interest is going to eat you alive. And once you've paid all that off and now you have what is called good debt, think your mortgage, perhaps your student loans if they're favorable, perhaps your car if it's pretty favorable. But I'm talking about no credit card debt. Then take a step back and say, okay, three to six months of expenses in my emergency fund, park that inside of public.com's treasuries so you're earning 5.4 % on that money. So your emergency fund is going to grow while you put money into it, which is a really good idea.

25:29And then finally, once you've got your bases covered, there's no high interest debt, and you've got your emergency fund figured out, that's when I want you to say, all right, I'm going to start investing and building a portfolio. Think about this, right? You can't out invest high interest debt. So if you're also trying to invest while you have this debt hanging around you. You're going to be making 10 % in the market, but the debt's going to be taking 26 % of the balance. And that's a net negative of 16%. So you want to get rid of that. There's no reason to have that. Only after you've done that, start investing.