168: Our Personal Seven Streams of Income

19:36Robert Croak:Yeah. So I personally am not actively being a landlord, like I know you've done very well in the past, but I do have real estate exposure through platforms like Fundrise, InvestFunder, for a lot of people that are in their 20s and 30s who want a more practical entry point into real estate and sort of getting that capital appreciation with those properties and getting some cash flow. Fundrise, InvestFunder are awesome where you don't have to come up with a$20 ,000 down payment. You can start with as little as a couple hundred bucks, a couple thousand dollars, whatever really fits into your own portfolio there.

20:07Austin Hankwitz:Yeah. That said, I think that owning physical real estate, actually being a landlord or owning commercial property is one of the most powerful wealth building tools that exist, especially when you factor in leverage. Now, I'm not saying you should start out like this. Like he said, Fundrise, VestFunder, these lower entry point ways to invest in bigger projects is a great way to start. But think about the math here. When you buy a$500 ,000 property with$100 ,000 down in a mortgage and that property appreciates the$600 ,000, you didn't make 20 % on your money. You made 100 % on your$100 ,000 investment because of that leverage.

20:46Austin Hankwitz:And no other asset class lets you use that kind of leverage so affordably. And remember, mortgage rates are challenging right now, but real estate is a long-term game. So I don't think that should dissuade you from getting into real estate anytime soon.

21:01Robert Croak:So if you're listening, you're like, hey, how do I get this stream of income with real estate? Maybe you're not ready to buy a physical property with$100 ,000,$200 ,000 down payment. That's fine. You can go on to your broker, public Robinhood Schwab Fidelity, type in VNQ. That is a real estate investment trust. It's a publicly traded equity on the stock market offered by Vanguard that allows you to track all of these sort of real estate investments that are also listed on the stock market. So the ETF for that is VNQ. You also have, again, platforms like Fundrise, VestFunder, things like that to get exposure to real estate over time.

21:38Robert Croak:If you are ready and the numbers do make sense in your market, house hacking is one of the easiest ways that you can start getting into real estate without having to get way in over your head as a landlord. I know a lot of millionaires that got their start in real estate with house hacking, including Robert.

21:55Austin Hankwitz:Yeah, my first property was a four unit. I lived in one unit for many years. I had three units rented at almost all times. And it was a great jumpstart to get me into real estate without having to come out of pocket so much and have that dream house right out of the gate. That's the key here. You don't need to start in real estate with your dream house. You should be looking at it as a long term investment. and how can I get a lower cost of living while still getting all the benefits of real estate? And that leads us into stream number seven. This is the last stream of all that we've mentioned and this is royalty and licensing income.

22:32Austin Hankwitz:And this is one that most people don't think applies to them but I actually think it's more accessible now more than ever before. And this one is special to me because licensing is literally a big part of how I made my fortune years ago. When Silly Bands took off, I wasn't manufacturing every single unit myself. I was licensing the brand out, licensing the designs and earning royalties of every unit sold. We were doing band-aids and video games and all these other things using licensing through Silly Bands. And that was the ultimate leverage play because you create something once, that brand, that design, that product, or that piece of content, and you earn money every single time someone else uses it or sells it.

23:17Austin Hankwitz:So think, I've earned millions of dollars in licensing and royalty income over my career through all of these ways.

23:24Robert Croak:And for me personally, the stream shows up a couple different ways, but the concept is still the same. So when I sold the rate of return newsletter to Grit Capital, I retained certain rights and still co-authored the newsletter today. So I earn ongoing income from the content that gets published regardless. And another no-brainer licensing sort of royalty stuff is the Rich Habits podcast. It generates royalty-like income. When we record an episode once, it generates ad revenue on Spotify and YouTube across different platforms, things like that. And we get paid indefinitely for that against the back catalog.

24:00Robert Croak:Episodes that were recorded two years ago, people still listen to them and they still generate revenue today. So, I mean, that's the whole play when it comes to licensing and royalties. You create it once and it just goes off into the sunset.

24:14Austin Hankwitz:Yeah, that one to many theory is why it's so important to be building your personal brand and your business brand and all of this because it puts you in the game and in that situation. And here's why I believe it's more accessible than ever. In 2026, anyone can create a digital intellectual property that generates royalty like income. You can write an ebook and sell it on Amazon and earn royalties on every sale forever. Create an online course on Udemy or Skillshare. Royalties every time someone enrolls. Build a newsletter with a paid tier. There's recurring revenue there from content you created.

24:51Austin Hankwitz:Create templates, presets, spreadsheets, apps. All of these are digital products that you build once and sell repeatedly or allow affiliate marketers to drive traffic to that product every single day. and the barrier to entry for creating something that earns you money while you sleep is lower than ever. So get out there, see what works with your skillset, what your niche is, what your hobbies are. I mean, everything goes out there right now in this royalty income sector.

25:20Robert Croak:Totally agree, Robert. The lesson here is to think about how you can create something once that generates income more than once, even if it's really small. I mean, for example, I know people who are making a ton of money by selling eight, 12,$14 notion templates, grocery list templates that they get traffic from Instagram reels or TikTok and people go buy their notion templates. They made that grocery template one time and then now they're selling it 19 times. There are so many different ways to do this. You can also think about it like TikTok shop. I mean, Robert, think about it like this. I'm sure there are people who affiliate silly bands and they make one video in let's call it August of 2025, mid-summer about how fun and cool silly bands are on their wrist, sell a bunch of silly bands, get affiliate revenue for it.

26:11Robert Croak:And the algorithm picks that video back up months later, years later, even because it's relevant again, it's summertime again. And it just, it continues to generate money kind of like royalties without you trading time for money and putting in the hours every single time. Go look into The Stan Store, S-T-A-N-S-T-O-R-E. They make it really, really easy for anyone to build and sell coursework if that's what you're into. But whatever your hobbies or niches are, that's where you need to focus. And go create a royalty-like income for yourself.

26:44Austin Hankwitz:Yeah, that reminds me. We have affiliates for Silly Bands right now through TikTok that are making$20 ,000,$30 ,000,$40 ,000 a year by just making cool videos about why they love Silly Bands and how fun it is to collect them. So that's a great call out because it's recurring revenue. And like you said, the algorithm picks those videos back up, makes them run again, and they make more and more money in perpetuity. So there you have it, everyone. The seven streams of income broken down personally from two multimillionaires who are living it every single day. So let's recap this quickly, though, so we remember everything.

27:20Austin Hankwitz:Stream one, earned income. Your salary, your consulting fees, the foundation of everything. Stream two, business income, the profits from the businesses you own or that you have equity in. And stream three is interest income, your cash working for you in high yield accounts and bonds that we talk about every single episode.

27:42Robert Croak:Stream number four is that dividend income. You're getting paid just to own stocks. Stream number five, capital gains, the wealth you build by buying low and selling high over a long period of time. And stream six, that rental real estate income, one of the oldest and most reliable wealth builders for millionaires. And finally, stream number seven, royalty and licensing income, which is building something once that pays you repeatedly. So here's what I want everyone to take away from this episode, Robert. You don't build all seven streams of income overnight. I turned 30 in a couple of weeks, but I remember being 23 years old and having one stream of income, my earned income.

28:23Robert Croak:I started adding streams of income one by one over the following years, and each new stream made the next one easier to build because I had more capital, more knowledge, more compounding. The goal is to have progress over a long period of time of achieving all seven different streams of income, not to get it done in the first or second year of starting.

28:45Austin Hankwitz:I love that, and I'll add this for my 40 years of experience. The first three streams are the hardest to build, bar none. But once you have earned income, business income, and investment income working together, streams four through seven start to happen and it seems almost naturally and automatically. The money you earn funds the businesses, the businesses generate profits, the profits get invested, the investments pay the dividends and appreciate, and eventually you're earning income in your sleep. And that's the compounding effect of multiple streams of income over your lifetime.

29:19Robert Croak:What a fun episode. I love talking about stuff because I love talking about the things that are like personal to us, because I think we've made a lot. We've lost a lot. We've learned a lot along the way. And that's what the show is all about is being as radically transparent as we possibly can about our wins, our losses, the lessons learned along the way and sharing them with you. So you also don't have to make the mistakes we did, or you can learn about the things that we learned, but faster. I just love this episode and I'm so grateful for this podcast.

29:46Austin Hankwitz:Yeah, I really do too. This was great because I like being vulnerable because too much information out there is all about rainbows and unicorns. And I love sharing my losses because there's no reason for anyone that follows the Rich Habits podcast and watches these episodes that's in the community should ever have to make the mistakes I made. I've already made all the mistakes. Learn from me, learn from Austin, and let's rock and roll.

30:11Robert Croak:So let's now jump to the Q &A section of our episode. As a reminder, you can ask us a question on Instagram at richhabitspodcast. Just send us a DM of your question and we'll add it to the queue. Or you can email us at richhabitspodcast at gmail.com. So our first question is coming from KR. KR says, hey guys, I'm a big fan of the show. Thank you for giving us all access to building wealth. I'm currently optimizing my tax loss harvesting strategy across my portfolio to offset my W-2 income. I have a taxable brokerage account. I utilize a Wealthfront taxable brokerage account running a direct indexing strategy.

30:51Robert Croak:This algorithm aggressively harvests tax losses at the individual stock level. I also have tax advantage accounts. I am automatically contributing to things like a 403B, HSA, IRAs, things like that. So here's my question. Can you tell us more about wash sales. Does the IRS look through the funds in my workplace retirement accounts? And would this setup trigger a wash sale violation if Wealthfront harvests a loss on an individual stock that is concurrently held inside my Fidelity automated fund purchases? What types of stocks, ETFs, and mutual funds are just not okay to invest in because of this?

31:32Robert Croak:Great question, NKR, let's dig in. So the first thing you talked about here was direct indexing and using that as a way to tax loss harvest across your portfolio to offset my W-2 income. A couple things to call out. It's really hard to offset earned W-2 income with capital losses. They are sort of put into different buckets in the eyes of the IRS. Earned W-2 income is money you earn by trading time for money, right? Like, hey, salary, nine to five job, hourly, whatever going on, right? So that's money you're earning W-2. Where capital losses, which come from tax loss harvesting in your direct indexing portfolio, capital losses are kind of bucketed on the other side.

32:15Robert Croak:Because think about it, Robert, let's say someone had$100 ,000 of earned income, and then they had a capital loss of$100 ,000. Oh, I don't know. I don't pay anyone any taxes now, right? The IRS is smarter than that. So what they've done is they've maxed out and capped the amount of capital losses that can offset your W-2 income at$3 ,000 per year. So if you have, let's call it$9 ,000 of capital losses with this tax loss harvesting strategy you're doing, you can only use$3 ,000 of those losses to offset$3 ,000 of your W-2 income. The losses can carry forward. So you can offset another$3 ,000 next year and another$3 ,000 the year after that to completely utilize that$9 ,000 total, but you can only do$3 ,000 a year at a time.

33:03Robert Croak:Another way that people are trying to lower their W-2 taxable income here, you mentioned the HSA. That's a great strategy. You mentioned having an IRA. Yeah, if you want to use that, you mentioned pre-tax contributions to retirement accounts. All those things can offset taxable W-2 income. So I want to just clear the air there on that first. But you specifically asked about the wash sale rule. So what is that? A wash sale occurs when you sell a security, like a stock or an ETF, at a loss and buy a substantially identical security within 30 days before or after the sale, which is a 61-day window there.

33:40Robert Croak:When someone triggers this rule, the IRS completely disallows the loss for current year tax purposes and adds it to the cost basis of the replacement shares. According to the revenue ruling 2008-5, in 2008, the IRS clarified that wash sales apply across all account types, including IRAs. So if you sell a stock at a loss in your direct indexing account with Wealthfront and you repurchase it in your IRA within that 30-day period of time, the loss is permanently disallowed. And unlike a standard wash sale, you don't even get the basis step up because IRAs don't track investment basis the same way as a taxable brokerage account would.

34:25Robert Croak:So yes, the IRS absolutely can look through all of your retirement accounts. The rule applies across all accounts you and your spouse both own. Think 401ks, 403bs, IRAs, HSAs, all that fun stuff. So good question. Glad you're thinking about this. And I hope this helps.

34:42Austin Hankwitz:Yeah, I don't have anything to add to that. That was very thorough, but it really just makes me think about how so many people are always concerned about beating the tax man. If you have proper strategies and you set yourself up like you're trying to do here, you don't have to worry about paying taxes because the tax code is there to help and help people grow. So really good coverage, Austin, on this because that was a very deep breakdown of the situation.

35:08Robert Croak:So our next question comes from an anonymous listener. They said, I'm 32. I have$250 ,000 in investments between my 401k, my Roth IRA, and my bridge account. I also have a rental property that is cashflow neutral, but it's building equity. The woman I plan on proposing to has$30 ,000 in savings and$90 ,000 in her student debt. I've been giving her advice from your podcast, and she's currently building her emergency fund and maxing out her Roth IRA. But for the next 10 years or so, she will contribute a large portion of her monthly income to pay down that student loan debt while I'm just maxing out my 401k and my Roth IRA and building wealth.

35:44Robert Croak:I don't plan on divorce, but it takes two to tango. While Austin says the US stock market tends to go up into the right, so does the divorce rate. And with the majority of those divorces initiated by women, I'm not rich, but should I consider a prenuptial agreement to protect the interest I will generate in my retirement accounts over the next decades? Are prenups a rich habit? What a good question. Robert, you want to start?

36:06Austin Hankwitz:Yeah, I feel like this is my situation almost identically. And yes, prenups are a rich habit because as you can see, you already have your financial situation in place. You're doing really well. You're setting yourself up for the future. Meanwhile, she has all of this debt that you're agreeing to sort of take on. So I definitely think, number one, you need to have the hard conversation before you put the ring on the finger and say, hey, you've got all this debt. I want to make sure we're aligned financially for the future of what we're doing here. And I do think it makes sense for me as I'm building my wealth to have a prenuptial agreement.

36:44Austin Hankwitz:I want to make sure that's okay with you. It's not because of a lack of love or trust. It's just the facts that I need to do to protect myself over time. So I definitely think it is a rich habit. I went through it. I ended up divorced. I am one of those people that is in that 50 percentile. She initiated the divorce. So yes, if I didn't have that prenuptial agreement and everything in place, things would have been a lot different for me financially. So I always tell everyone, if it's true love, another agreement along with the marriage license isn't going to matter. And it protects everything you've built prior to that person entering into your life.

37:20Robert Croak:So I largely agree, but I have a different reason why. To our anonymous listener and everyone else listening right now, you already have a prenuptial agreement. It's with the state that you live in. I live in the state of Tennessee. If I were to get a divorce, the state, well, I'm not married yet, technically, but like the state has a very clear way that they go about things. Every state has it. So there's already a prenuptial agreement in place right now. So you either write it yourself and you agree as to what's going to happen if we have a divorce that then, you know, people follow as this is a written and signed agreement and this is what's going to happen.

37:56Robert Croak:or you just let the government figure it out. Personally, I'm not a fan of letting the government figure stuff out with my money, right? So I do not yet have a prenuptial agreement in place, but how I've thought about approaching it is from the place of, and maybe actually Robert, before I share how I think I'll approach a prenup with my fiance, you said you had a prenup with your ex-wife. What was in the prenup and how did you think through building it from scratch?

38:24Austin Hankwitz:Yeah, it basically was in different states have different rules. And I'm not a lawyer, so just make sure you check your state. But like Louisiana, for instance, where I lived is a no fault state. So when you enter in, and I think that's the correct terminology, when you enter into an agreement of marriage, then no matter what the documents say in a prenup, I believe they separate and split the information and the money and the equities. whereas in Ohio, if your personal net worth goes down during the marriage, then you take what you came with and the other person takes what they came with. But if it goes up, then it is a split from there on up.

39:03Austin Hankwitz:The difference for me that's a little bit harder for most people to take into place is I had more of an age gap in my marriage. We had a 20-year age difference. So for that, I had been building in my career a lot longer and had a tremendous amount of assets and money already. So that makes it a little more difficult where the prenup is more important because you want to make sure someone's not getting into a relationship with malice in mind where they stay with you for two, three, four years, get the divorce, they're all of a sudden rich off of your 30 years of hard work. So for me, I was pretty lenient in my prenup because I was truly in love, but I did still have it in place because I had already worked 25 years of my career prior to getting married.

39:46Austin Hankwitz:And I wanted to make sure to protect those assets.

39:48Robert Croak:And the thing too, when it comes to prenups to consider is it's not so much that you are putting your spouse at fault, but it's your spouse's family sometimes, right? Like love my spouse's family, but I don't know if I got a divorce or, you know, something in the future and there was a$10 million pot to figure out, people get crazy when there's millions and millions of dollars at play, right? And so like, if you've got everything figured out ahead of time, I feel like that just kind of nips that in the bud. I also want to consider too, yeah, you mentioned divorce, but sometimes it's not divorce.

40:25Robert Croak:Sometimes it's death. And I'm in business with Robert. I'm in business with Christian. I'm in business with a lot of people. If I were to die, my fiance is now in business with Robert, in business with Christian, in business with a lot of people. That's weird. I don't want that to happen. I don't want that to, like, that's just weird, right? So having a prenup in place also should write out and talk about what happens if Austin dies in a tragic car accident. How is Austin's business equity interests liquidated? And how is Ireland, my fiance compensated and like all these other different things, right?

40:57Robert Croak:So like, that's how I've approached a prenup is not just thinking like, oh, if we get a divorce, I'm going to make sure that I get my money out of this more in the sense of two. It's like, yeah, if we get married, I want to make sure I walk away with what I brought to the situation, whatever wealth we build while we're married. Cool. We can split that. But having sort of a very level head. And again, I'm not a, I've never had this done before. So I am talking about just straight out of my, off the dome here. Generally no experience. Robert's gone through it. I haven't, but this is just how I'm thinking about it in real time as someone who's not gone through a divorce, as someone who doesn't have tens of millions of dollars and just like is trying to still figure this out over time.

41:32Robert Croak:That's my raw perspective here. So good question. Are prenups rich habits? I think it depends on the situation, but they very much can be. So now before we jump to our final question, got to give a shout out to Neos Investments. Neos offers ETFs that seek high levels of monthly income with a keen focus on tax efficiency while providing core portfolio exposure across equities, fixed income, and real estate, as well as cryptocurrency and cash alternatives like treasury bills. Their ETFs may be interesting for investors looking to generate that tax-efficient monthly income inside of their investment portfolios, something we just talked about on this episode.

42:07Robert Croak:Their funds may serve as a compelling income-focused alternative or complement to many investors already in those same portfolios.

42:15Austin Hankwitz:So if you're looking to add passive income-focused ETFs to your portfolio, consider learning more about NEOS ETFs at neosfunds.com. And as with all investments, investors should carefully consider their investment objectives, risks, charges, and expenses of NEOS 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. An investment in NEOS ETFs involves risk and includes possible loss of principal. There is no guarantee that NEOS ETFs will make monthly distributions and the amounts may fluctuate month to month.

42:54Austin Hankwitz:Cryptocurrency is relatively new and the market has its own specific risks. NEOS ETFs are distributed by Foresight Fund Services, LLC.

43:02Robert Croak:All right, Robert, our final question is coming from Jason. Jason says, Hey guys, my name is Jason and I've got a question I'd like your opinion on. I'm 21. I'm a junior in college pursuing a bachelor's degree in business administration. I work part-time earning about 26 ,000 per year after taxes. I currently have $27 ,000 in taxable brokerage account, 14 ,500 in a Roth IRA and 4 ,000 in an emergency fund. My car is paid off. I live with my parents, so I do not rent or have other significant monthly expenses. I maintain a detailed budget to track my spending and keep it low. My employer offers a defined benefit plan that vests after five years.

43:41Robert Croak:I've worked there for about one year, so I could see myself staying there after I graduate. Once I exceed 1 ,000 hours per year, which will happen in the next few months, I will be required to contribute 9 % of each paycheck to this defined benefit plan. I also have the option to increase my contribution up to 19%. I plan to max out my Roth IRA this year as I still need to contribute$6 ,000. If I increase my contribution to the defined benefit plan, I'm concerned that I may not have enough income to fully fund my Roth IRA. More than half of my income goes toward college expenses, although I do not have college student loans.

44:18Robert Croak:My question is, once I cross that 1 ,000-hour mark, should I increase my contribution to the defined benefit plan or keep it at 9 % to ensure that I can max out my Roth IRA? Thank you both for your time. I really appreciate your guidance. Super simple. Make sure you max out the Roth IRA, like full stop. If you are maxing out your Roth IRA at 21 years old, you will have millions and millions and millions and millions of dollars in retirement. And it's your money. No one can take that from you. That is your individual retirement account. And if you die, talking about prenups, your beneficiary will get that IRA.

44:54Robert Croak:Might not be the same case for a defined benefit plan.

44:56Austin Hankwitz:Yeah, I think that's a great breakdown. And the only thing I'll add is just to keep in mind with these defined benefit plans. You're very young. And if you were to switch jobs and not fully vest in that defined benefit plan, you could potentially lose some of that later on because it's not a portable vehicle for you to just take the money with you. So keep that in mind. And you also don't have any investment control like you do with the Roth IRA because it is fully handled of what's invested and how it's invested by the employer. So that's the only two things I would add. Defined benefit plans can be good, but you need to make sure it's something that you're going to be there long enough to fully vet that plan and be able to have control over your future with that money to be able to get it all.

45:41Robert Croak:Yeah. So once you work those thousand hours, 9%, sure. If that's what you got to do, you got to do it. Go up to the 9%. You're building wealth. That's great. You're investing. Cool. But then also do not put more into it after that 9%. Everything else, Roth IRA.

45:56Austin Hankwitz:You all know we talk about the Roth IRA day in and day out. I think it's one of the best wealth building tools everyone should have. So from the time 18 and up, get the Roth IRA up and running. Try to max it out every single year and keep it simple. Think about VOO, QQQ, VTI, maybe AIQ, depending on if you want a little bit of international risk in AI. But just keep it simple. Get the Roth IRA maxed out as much as you can, if not every single year, because that is one of the easiest ways to set yourself up for financial freedom.

46:31Robert Croak:Everybody, thanks so much for tuning in to this week's episode of the Rich Habits podcast. We got personal again. we broke down our personal seven different streams of income that we've built throughout our lives here, hoping that you all got to learn from the lessons that we've learned along the way, because we've definitely made some mistakes, but really proud of what we've accomplished. As always, if you're not yet subscribed to the Rich Habits podcast on Spotify, on YouTube, or Apple Podcasts, maybe your friend sent you this, please consider hitting that subscribe button. We've got a quarter million of you subscribed to us across platforms, and we could not be more grateful.

47:05Robert Croak:If you listen to the show a lot and you've not yet left us a five-star review, please consider doing so. It definitely, definitely helps. With that being said, we'll see you on Thursday for our Q &A episode.

47:33Thank you.