154: Our Biggest Financial Red Flags & Green Flags

18:27Robert Croak:All right, Robert, let's score ourselves every green flag plus one, every red flag minus one. Ask yourself, how did I score? If you're in the negative, bad news bears. You're headed for financial trouble this year and beyond. Let's fix that. If you're at zero, okay, you're treading water a little bit. If you're positive, chances are you're going to start building wealth. And if you hit all three of those green flags with no red flags, you are virtually guaranteed to grow wealth in 2026 and beyond.

18:54Austin Hankwitz:But here's the key. Focusing on fixing red flags before adding green ones is like having a boat with holes. Doesn't matter how fast you row, you're still going to sink. Plug the leaks first, then you can accelerate. Tracking your net worth while spending hundreds every month on unnecessary emergencies is not going to move the needle for you.

19:13Robert Croak:That's so funny to think about. Oh, I'm just going to track me going down and having bad habits, right? Come on, let's figure that one out. If we think about it here, let's get positive. 2026, it can be your wealthiest year ever, or it could just be another year of treading water. The difference is not gonna be the economy, the stock market, your income, the whatever. It's those daily habits, those green flags, or the red flags that are gonna help you trend in the right direction. You don't need to be perfect. I love what Robert said. Imperfect action beats perfect procrastination. Make it exist, then make it perfect, right?

19:49Robert Croak:Just start doing something. 2026, just start doing something. You don't need to fix everything today. You just need to start. Pick up a red flag and say, I'm gonna get rid of this this month of February. I'm getting out of it. We're not doing this red flag anymore. Those small changes that are constantly applied over a long period of time create extraordinary results. And don't forget, be patient with yourself. Give yourself grace along the way. This is my favorite advice to give people because a lot of people are like, oh my gosh, I thought I could do this. and fast forward eight months, I've made no progress.

20:21Robert Croak:I don't know what's going on. Give yourself grace. You've had a rough eight months or maybe you had a rough 2025, like new year, new me, rock and roll. Every single person has the opportunity to change their lives in 2026. The wealthy aren't doing anything you can't do. They're just doing the boring, simple things that work over and over while everyone else is looking for shortcuts that don't exist. We are big believers. If on a long enough time horizon, you keep doing the green flags, you will be extraordinarily wealthy.

20:51Austin Hankwitz:So, so good. So the takeaway for me is even if you stumble a little bit, even if you skip a few weeks, even if something happens that sets you back, the goal here is to get you on the right track. And even with setbacks, you stay consistent and you keep moving forward because you have to get out of this red flag, green flag situation and get on the right track.

21:13Robert Croak:All right, Robert. So we've got the Q &A section here of our show. As a quick reminder, if you have a question to ask us, you want to be on the podcast, you can email us at richhabitspodcast at gmail.com. Or you can send us a DM on Instagram at richhabitspodcast. We've got three awesome questions. I think all of them are coming from Instagram. Our Instagram DMs are just absolutely flooded with your questions, which we love. We're so grateful that so many of you have so many questions to ask us. But Robert, before we jump into that, on paper, the markets are looking pretty healthy. The indices are near all-time highs.

21:46Robert Croak:But when you zoom out, a few warning signs are starting to stack up a little bit.

21:50Austin Hankwitz:Yeah, starting with concentration. A handful of stocks made up roughly 40 % of the S &P 500 by the end of 2025. Then you've got returns hinging on AI spending, continuing without interruption. If that slows, a lot of investors' portfolios might be more exposed to these specific risks than people realize.

22:10Robert Croak:Bonds, they've been a conventionally stable investment, but they're becoming less helpful for true diversification, I would argue. Starting to move in the same direction as stocks, which is the opposite you'd want to happen if you were looking for a hedge in your portfolio. Not to mention the U.S. dollar dropped around 10 % against major currencies last year.

22:29Austin Hankwitz:And even the usual safe places are starting to feel crowded. Gold's at all-time highs. Real estate is still very rate sensitive. So the question becomes, if you want more diversification, what else is there?

22:41Robert Croak:So for us, we started looking and seeing what the ultra high net worth investors have done for generations. The answer there is scarce, globally priced assets that aren't completely tied to the stock market's performance, specifically blue chip artwork.

22:58Austin Hankwitz:We've personally been invested with Masterworks for years. you can fractually invest in museum-quality artwork, the kind that used to be reserved for billionaires and institutions only, featuring artists like Basquiat, Banksy, and Picasso. Like any market, it carries its own risks, but most importantly, it's a global asset class with low correlation and attractive appreciation since 1995, according to Masterworks data. Masterworks handles sourcing, storage, insurance, and eventual sales.

23:27Robert Croak:And since 2019, investors on the platform have allocated over a billion dollars across hundreds of works. And across 26 sales to date, they've delivered annualized net returns like 14.6, 17.6, and 17.8 % while moving independently to popular markets.

23:45Austin Hankwitz:So if you're feeling cornered by currency or concentration risk right now, this is one of the few genuinely different opportunities we've found. and you can get priority access by going to masterworks.art slash rich habits. That's masterworks.art slash rich habits.

24:01Robert Croak:As always, investing involves risk and past performance does not guarantee future results. See important regulation aid disclosures at masterworks.com forward slash CD. Robert, I just logged into my Masterworks account and I am pretty impressed. I haven't honestly, I don't check a lot of my alternative investment asset It counts like on a weekly or monthly basis, more quarterly and annual, because these things aren't as liquid as you would think. But I just logged in. I'm looking at my Masterworks account. I've got two investments. I've got Dark Milk, which is a Basquiat painting. And I've got Mississippi, which is another Basquiat painting.

24:38Robert Croak:My Mississippi investment is up 62.2%. And my dark milk investment is up 45.3%. And that is from March of 2022. So you can figure out there, I guess, the annualized returns, benchmark them against the S &P or whatever you want there. But that's the whole point of this, right? Is like having things that go up in value that aren't correlated to the stock market, right? So like that's, I think that's important. But yeah, again, I use Masterworks, love to just share my own experience there. If you're someone who wants to get started with a little bit of diversification in your own portfolio. We hope that this quick breakdown of what Masterworks does was helpful.

25:16Robert Croak:And again, we were only talking about things that Robert and I use ourselves, right? I've been with Masterworks for five, six years now. I firmly believe in diversification and blue chip artwork. And that's just, we're really grateful to support the show as well.

25:28Austin Hankwitz:Yeah, I appreciate it, Austin, because you turned me on to Masterworks. I wasn't an investor until about three years ago, so I appreciate that as well. My investments have done very well over time. So it's just really all about diversification. And we love Masterworks to allow us to be able to do this. And you can do the same.

25:45Robert Croak:So our first question comes from our Instagram DMs. Again, Rich Habits Podcast on Instagram. This question is from Kiko. Kiko says, I love the podcast and would really appreciate your advice. My husband took over a profitable plant nursery two years ago. The land is fully paid off and he's grown the business steadily. But we're not quite sure what the next stage looks like or who could best guide that growth for us. Most of the business's value is in the land. The business also has about$500 ,000 of cash and he hopes to buy more land in the next couple years. He also holds a long-term state lease with 15 years left that he's considering selling.

26:27Robert Croak:Similar leases have recently gone for around$1 million. With all that in mind, do you guys have any advice as to who we should lean on as our trusted source of information? Should we talk to a CPA accountant, a financial advisor, or maybe industry veterans to get some insight as to where we should take this business? Robert, I'll let you kick this one off.

26:48Austin Hankwitz:Yeah, I love this question, and I think you nailed it as far as I would speak to industry veterans. Pay them a fee if they consult. Find someone regionally that knows the land and knows the area and knows that specific style of business. Pay them the money. Spend an hour, two hours with them and say, here's where we're at. Lay it all out for them and get their advice on this. I think that is your quickest route to learning what your next steps are. I can help you along the way. I think a CPA could help you as well. I don't know if a financial advisor would give you as much insight as you desire to be able to figure out what's next because it looks like you guys are doing pretty well and you just want to keep growing.

27:27Austin Hankwitz:So you need somebody that really knows this specific niche of business so you can get the most value out of them. That's what I would do.

27:35Robert Croak:I like that advice. The advice I'd give you is every business is the same at its core. You have revenue, you have operating expenses, and you have operating profit, right? Operating income. Then of that operating income, you pay taxes and you're on to the next year, right? Every business essentially is the same. You can make more money in two ways. One, grow revenue or two, cut expenses, right? If you are at a million dollars a year right now and you have half a million dollars of operating expenses, that means your revenue minus those operating expenses equals that 50 % margin on that million.

28:09Robert Croak:So you have half a million dollars. So if you grow that revenue to$1.2 million and your operating expenses don't grow as quickly as your revenue grew, so maybe from$1 million to$1.2 million, but your operating expenses grew from$500 ,000 to$600 ,000, so you grew revenue by$200 ,000 while your expenses only grew by$100 ,000, that$100 ,000 difference goes to your bottom line. So you made more money. So again, you make money as a business owner in two ways, growing revenue faster than you grow your expenses or cutting your expenses dramatically. So maybe instead of 500 ,000 of operating expenses, you cut it down to 400 ,000 while keeping the same amount of revenue.

28:47Robert Croak:You made just as much money as you did if you grew your revenue in that next example I gave. So I would just really encourage you to think about and make sure you 100%, which it sounds like you do, understand the fundamentals of running a business, understand what it means to delegate, understand what it means to hire, where you can make more money, if it's different services, different plants, different whatever. Like that to me is more of an industry expert type vibe. But even before you do that, like you have to understand the core fundamentals of operating a business, especially if this is something that you want to sell and hand off to someone else, or maybe have some sort of a succession plan for your own family.

29:24Robert Croak:Like this business, if it's going to live beyond you, it has to be a flywheel effect that you can just give to someone else and they give you a lump sum of money for it. And the last piece of advice for you, Kiko, is to ensure that you're not forgetting your own retirement investing. A lot of entrepreneurs, they'll say, oh, I own my own business. I don't have a 401k. No, I don't work for a corporation. I don't get access to these retirement accounts. Absolutely you do. Make sure you've got that Roth IRA set up and you're investing every single year. Make sure you have your solo 401k or SEP IRA set up and you're investing every single year.

29:59Robert Croak:This is how you turned a, oh my gosh, this business is taking so much from me. I can't operate this to, wait a second, I have$400 ,000 in this retirement account now. How awesome is this? And you can do something called a mega backdoor Roth solo 401k and turbocharge your retirement investing if that's something you're interested in as well. just you know google that one and check that one out but long story short there's a ton of different ways to invest toward retirement do not forget that as an option as a business owner now our next question comes from christian h christian says hey austin and robert i hope this message finds you well as i'm sure you guys receive multiple questions every day well christian we receive like thousands a week so congrats you're lucky go buy a lottery ticket my name is christian i'm 18 years old and i'm a freshman in college i currently work as a retailer making $12 an hour and I work about three days a week.

30:51Robert Croak:On top of that, I door dash when I'm not working and I make an extra$100 a week. I have$15 ,849 in a 401k,$812 in a Roth IRA,$1 ,303 in a brokerage account. All of them are in the S &P 500. I live with my parents. Me and my dad share a car because I don't have a car. Although I feel like I'm making the right financial decisions, I still feel behind and would like to hear your thoughts on what I'm doing and if I should change anything. Thank you in advance. Robert?

31:23Austin Hankwitz:Christian, Christian, Christian. You are absolutely crushing it, knocking the cover off the ball. You are doing all the right things. Never, ever, ever in this instance think you're behind. I know 40-year-olds, a lot of them, 50-year-olds that have negative net worths and you have all the right things happening. I am so proud of you and you have to give yourself a little bit of grace here and just keep doing what you're doing. Keep multiplying your income. Keep investing like you're investing because you're absolutely crushing it. And if you can keep living with your parents a little longer and get more and more money put away, I would do that.

32:02Austin Hankwitz:And I really love the fact that you're sharing a car right now as long as it doesn't hinder you from making money. because if it does, then I would go out and find a used car that you could buy, get some payments on it. Maybe your father would co-sign for you if you need it to get a really cheap payment so you can get up and running and make more money. But if it's not hindering your income earning, then I would say keep doing exactly what you're doing because you are so far ahead of most people at 18 years old.

32:30Robert Croak:I couldn't agree more. There are so many people out there that are not even at your situation in their 40s. You are doing the right thing. So here's my advice. It feels like you're not doing the right thing because you go on Instagram and you see your friends that are in college or that old teammate who is on the football team with you that's now 20 years old, so two years older than you, and they've got their own apartment and they're working some job. Or you compare yourself to others. Comparison, especially at your age, is the thief of joy. You are running your own race. You're in your own lane.

33:01Robert Croak:And that just goes for everybody, right? Not just 18 year olds. But it is really easy to get down on yourself when you're in your teens and early 20s, because you look around and you see these influencers or these business moguls or these fake gurus even that are buying Lamborghinis at 26 years old. And you're like, oh my gosh, or 19 years old. And you're like, why aren't I? What's going on with me? I need to do like, it's the worst. I fell for it. Everyone falls for it. Don't fall for it. The quicker you realize that you are running your own race and that nothing in this world matters, but your happiness on a daily basis and the goals you've set for yourself over the next two, four, six, eight, 10 years time.

33:41Robert Croak:That's all that matters, man.

33:43Austin Hankwitz:Definitely 100%. Christian, keep doing what you're doing. Don't fall victim to comparison. And we'll see you when you're a multimillionaire in a few years.

33:51Robert Croak:Our last question comes from Amanda on Instagram. Amanda says, I've been listening to your podcast for a few months now, and I truly enjoy your perspectives and the friendly tone of your podcast. So first, thank you both for all you do. Amanda says, your podcast has inspired me to open up a Roth IRA, so I've been researching various ETFs. By researching ETFs, I've ended up with two questions. My first question is, VOO has a fee of 0.03 % and I've made it a habit now of checking the fees on every ETF I look into. Sometimes I hear you guys recommend ETFs like QQQ or even SPYI but when I look them up their fees are much higher than VOO's 0.3%.

34:35Robert Croak:Can you please explain why some ETFs with higher fees might still be worth it? is an unrealistic to expect to find more ETFs with a 0.03 % fee? And then her final question is, can you explain how to read a prospectus? And yeah, no problem at all. Robert, let's talk about this first question. I kind of like the ending of it. So I'm going to start there. Is it unrealistic to expect to find more ETFs with a 0.03 % fee? Yes, that is unrealistic. Yes. Most ETFs are 0.1 to point maybe two or three percent depending on if they're thematic, if they just track an index, if they're actively managed, if they're passively managed, right?

35:15Robert Croak:All these different things go into the pricing of an ETF. With VOO, it's a passively managed index fund tracking ETF, right? So like literally all they do is they passively track the S &P 500. There's no decision making, there's no hiring of analysts. There's no trading that takes place on a daily monthly basis. Like it's very easy for Vanguard to passively track the S &P, which is why it is so cheap to do so. Let's put the other extreme now on the table, SPYI. SPYI is the NEOS S &P 500 high income ETF. That is an actively managed ETF that trades, I would imagine, on a weekly, if not monthly basis.

36:00Robert Croak:They're doing and using a data-driven strategy to buy and sell option contracts and then ensure that you get paid a percentage with these distributions, a lot of research. I mean, they've got tons of employees that are doing this with them. That's a whole operation. And that operation, they've got more expenses, I'd argue, than just a passively managed index fund. So when now is it worth it to invest in those when you can compare their performance to their competitors, right? So here's a really great example. SPYI is the NEOS S &P 500 high income covered call ETF. JEPI, JEPI, is the JP Morgan equivalent of that.

36:44Robert Croak:These ETFs are claiming to do the exact same thing, Deliver monthly income and track the S &P 500, right? They are both trying to do the same thing. JEPI's total performance in 2025 was 8%. SPYI's total performance in 2025 was 16.5%, twice as high of a total return as JEPI was. JEPI has a lower expense ratio than SPYI. Despite that lower expense ratio, they dramatically underperformed the markets. And so what I'm trying to say here is just because something has a lower expense ratio than something else doesn't mean it's better or, you know, than that other thing. You have to look at total performance.

37:32Austin Hankwitz:I think that's a great breakdown, Austin. And the only thing I'm going to add is because people ask all the time, why do we choose VOO versus SPY? And for me, it's about expense ratio. It is important, but it shouldn't be the only thing you're considering. unless you're investing millions and millions of dollars. But in this reference, VOO has a much lower expense ratio than SPY. So it leaves more money in the investor's pocket. And that's why we choose that, because we want to guide you as best as we can through the process. But when it comes to overall expense ratios, I wouldn't be as concerned with it as much as I would be concerned with performance over a long period of time to make sure you're choosing really good products.

38:12Austin Hankwitz:That's why for any of you that have been listening for a long time, Austin and I generally talk about the same ETFs and funds over and over every year because we own them and we believe they are the best strategy for all of you to have diversification, but also long-term growth.

38:28Robert Croak:You're totally right, Robert. When you compare the funds we talk about all the time, SPYI, which is the NEO's high income S &P 500 covered call ETF, 18 % return in 2023, 19 % return in 2024, and 16.5 % in 2025. You now compare that to funds with lower expense ratios. It doesn't matter if the expense ratio is materially lower if you're underperforming the benchmarks, right? Again, Jeppy, 9 % in 2023, 12 % in 2024, and 8 % in 2025. Like, I don't care if the expense ratio is zero. That's terrible performance relative to its peers. And as a prudent, educated investor, you're doing this research yourself, Shout out to Amanda for looking at these expense ratios and trying to figure out how this comes together.

39:19Robert Croak:Now, I'll quickly answer your question on how to read a prospectus. At the end of the day, what matters most is understanding the investment objective of that prospectus when looking at these ETFs. That's very important. Another thing, of course, is to understand the fees and then also look for tax stuff. Not all ETFs that create income are creating that income tax efficiently. Jepi, for example, uses equity-linked notes. SPYI uses Section 1256 contracts. Other companies use swaps and other derivatives. It's all very convoluted, which is why we just try and steer you guys in the best direction because we've done the research.

39:56Robert Croak:You just got to trust us on this one.

39:57Austin Hankwitz:What a great episode. Tactical mindset, getting everyone on the right track. So please take notes and take action after this episode and share it with a friend. We all have family members and friends that have red flags, green flags, and all of the above. So just share the episode because everyone needs a little help and a little guidance as we get into 2026.

40:19Robert Croak:And if you've got just five seconds, please consider leaving us a five-star review, voting in the poll below here on Spotify, leaving a comment on Spotify or wherever you're listening to this episode. And we are so, so grateful.

41:03Robert Croak:We'll see you next time. Learn more and get a quote at usaa.com slash bundle. Restrictions apply. Thought sweet green was just salads? Think again. There's a new way to do sweet green. Wrapped and ready. These handheld wraps pack bold flavor and 40 plus grams of protein into something hearty, satisfying, and built for life on the go. From craveable sauces to satisfying textures. They're designed to keep you going without slowing you down. So put that fork down. Try the new wraps today in app or at order.sweetgreen.com. Available at participating locations only.