184: Do These Wealth Building Habits Actually Matter?

0:01This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+. This episode is brought to you by Facebook. So you were scrolling on Marketplace, and there it was, the bike you'd been searching for.

0:35You sent a message, and it turned out the seller was super chatty, kind of funny, and an avid cyclist. The next thing you know, you're in a cycling crew. Well, a community cycling group. The thing about Facebook, you might find more than what you're looking for. From a browse to a bike ride, this summer, find more on Facebook. 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're going to know the specific habits that actually move your net worth. Not the vague stuff like budget better or spend less, but the real repeatable behaviors that separate people who build lasting generational wealth from people who just earn a good paycheck.

1:21And I promise there's a difference. My name is Austin Hankwitz. I'm joined by my co-host, Robert Croak. Robert is a seasoned entrepreneur with lifetime revenues of over 300 million. And I'm a multimillionaire in my early 30s with a background in finance and economics. As the show name might suggest, every episode, we talk about rich habits as they relate to business, finance, and mindset. So Robert, what are we specifically talking about in today's episode. In today's episode of the Rich Habits Podcast, we're talking about the habits that actually matter when it comes to building wealth. And I wanted to be clear about something up front.

1:55This isn't a list of tips. Tips don't build wealth, habits do. And the difference between someone with a strong net worth and someone treading water almost never comes down to income. It comes down to what they repeatedly do month after month, year after year without having to Think about it. And here's the uncomfortable truth. Most people know what they're supposed to do. Everyone knows they should invest. Everyone knows that they should track their spending. But knowing isn't the problem. The problem is that knowledge doesn't compound. Behaviors do. So today we're walking through four habits in order that build upon each other.

2:31You get these four habits right and you're consistent with it. The rest of the personal finance picture takes care of itself. So Robert, walk us through habit number one. Habit number one is automate and start early while you're at it. The first habit is automation and underneath it is a piece of math almost nobody respects until it's too late. Start early and invest often. Time is one variable in investing you can never buy back. And automation is what actually makes often happen without relying on willpower. So here's why starting early matters so much. The S &P 500 has averaged roughly a 10 % annual return over the long term for decades.

3:11That means, generally speaking, your money doubles every seven years if it's compounding and you just leave it alone. So somebody who starts investing at 25 versus somebody who starts at 35 years old isn't just 10 years further ahead. They've had an entire extra doubling cycle. And that decade of, oh, I'll start once I make more money isn't a 10-year delay. It can be the difference between one extra compounding cycle happening or not happening at all. And that early money ends up doing the heaviest lifting of your entire portfolio's lifetime growth. We always say in the Rich Habits Network, parked money is dead money.

3:49And this really illustrates that. Yeah, no, this is also something we talk about a lot on the show, right? The earlier dollar invested is worth much more than the later dollar, even if it's the same amount of money getting invested, which is exactly why automating your investments matter so much. It's the mechanism that makes early and often actually happen. Willpower is an unreliable system. It fluctuates with your mood, your stress levels, or whatever's going on in your life that week. If your investing habit depends on you manually deciding to move money every single month, you might skip a month because you just don't feel like it.

4:25Then you skip two months and now your whole system is falling apart. Systems execute regardless of how you feel, and that's why it's important to have some automation in your investing systems. 100 % automation also works on a psychological level. The money moves before you ever get the chance to talk yourself out of it, before it ever hits your checking account and starts looking like spendable cash. Because once money is sitting in your checking account, your brain treats it as available to spend. But if it's automatically diverted into a brokerage or retirement account the same day you get paid, you never form the habit of treating it as yours to spend in the first place.

5:05That's why pay yourself first isn't just a cliche. It's a sequencing rule that is so, so important. So automate the contribution to happen on payday, before your bills, before your discretionary spending, before anything else touches that money and whatever's left, that is what you build your lifestyle around. Robert, the lesson here is super simple. Don't wait until conditions feel perfect to start. We had a whole episode about that. I think it was the biggest trap in finance was the name of that episode, right? I'll start when. So don't wait for those conditions and don't rely just on discipline alone to keep you investing and staying the course.

5:43Start now with whatever you can, automate it immediately, and then treat often, right? Investing early and often as the standard, not the exception. 100 % Austin. I just believe that the most important part about this section here is people understanding money has to have velocity. And if it's sitting in your account and the weekend comes, you're going to spend it. That's human nature because you think it's available. And I think automation is so, so critical here. So move on to the next one. Yeah, this second habit, Robert, I think is my favorite of the episode. Tracking your net worth, not just your income.

6:21So when you track your net worth, it could be a shocking number to you. But a recent survey found that two thirds of Americans don't currently track their net worth or even know their net worth at all. And that statistic alone is telling me that either they don't know how to do it or they don't care to do it. Now, despite that, they know their salary, right? They know their paycheck down to the dollar. Oh yeah, every two weeks I get this much money exactly. Or every Friday I get paid this. Or, you know, my salary is this plus benefits. And they track that. They know exactly what they make, but they have no idea what they're actually worth.

6:55What they own minus what they owe. And income is not the same thing as wealth. You can have a very high income, but a very low net worth if you're spending scales in proportion to your income. rising over time as well. You can have a modest income and a very strong net worth if your habits and your spending is really dialed in and you're living below your means. Net worth is the only number that actually tells you whether you're getting richer or you're just getting paid. So Robert, help me understand from your perspective, why do you think that net worth tracking gets skipped so often, even by people that are high earners making$150 ,000,$250 ,000, $350 ,000 a year, doctors and lawyers, like why do you think they just focus or maybe they skip or they don't start doing that just yet?

7:42I think a lot of it is fear. They know they're making a lot of money, but they know they're spending a lot of money and they don't want to know the result. It's probably the same reason people skip going to the doctor when they don't feel well. They're afraid of what the answer looks like. And so I think it's because net worth can really feel uncomfortable to look at, especially early on when a lot of it might be flat or like you alluded to, people have a negative net worth. I see it all the time where someone's making$150 ,000,$200 ,000 a year, but their debts are so high, they have a negative net worth, and they think that they're crushing it because they have a BMW in the driveway and a nice house.

8:17But I think it comes back to that discomfort is exactly why it matters. Because you always say this, Austin, and I love this quote, what gets measured gets managed. And that's why we have to get rid of that fear, because if you're not tracking your net worth, you have no real feedback loop to know where you actually are. And you don't know if your habits from the last 12 months actually moved the needle, or if you've just busied yourself with spending decisions that felt responsible, but didn't change your financial position at all, moving you forward towards the goals. So the fix here doesn't need to be complicated.

8:55Pick a cadence. Monthly is usually the sweet spot, frequent enough to catch trends infrequent enough that you're not obsessing over daily market noise and total up your assets minus your liabilities. That's it. Investment accounts, cash, home equity. If you own your property minus any debts, that's how you get that number. Do that every month, same day, each time and watch the trend line year after year. That single number tracked consistently becomes the report card for every financial habit on that list. And it is what you should be doing every single month, every single year. Yeah. I just want to emphasize this again, right?

9:32Like tracking your net worth, not just your income. I know a lot of you listening right now know, oh, I make X amount of dollars every two weeks, or my salary is this, or I make this much per hour, like whatever you are, whatever, what's going on with your income, like, you know, your income really, really well, but do you know your net worth? Do you know what your net worth is now versus at the beginning of this year? Maybe what it was at the beginning of last year, right? Like I was telling Robert when we were writing this episode and figuring out how we were going to portray these habits to you all, I found my net worth tracker from 2021.

10:05And I was going through it. And I was like, whoa, I can't believe I was tracking this stuff. What gets measured gets managed. Wealthy people forecast, broke people react. And so be someone that does not just obsess over their income, but is putting that income to work in such a way where your net worth is inching higher time over time, call it month, quarters, years especially, right? Understand what direction you're trending in as a human being from a wealth building perspective. 100%. Robert, let's now jump to our third habit, which is what to do the moment unexpected money shows up. And that is reinvesting these big windfalls instead of spending them like they're just free money, right?

10:48Think bonus, tax refund, maybe a commission payout at work. Maybe you came into an inheritance or some sort of liquidity event at your business, right? Like anything that's outside your normal paycheck. Here's why windfalls carry so much leverage over a long period of time. If you think about it, your regular paycheck already has lifestyle built around it. You've budgeted for it. You expect the money. Most of it's already spoken for, but a windfall is different because it's money you were not relying on to live your current life, which means it's the purest form of surplus capital that you'll ever get your hands on.

11:25And that surplus capital, if used correctly, can go straight into your investments, start compounding for you like all the other money in your portfolio, and you're off to the races. So now, Robert, I know I asked you before, I want to ask you again, why do you think people make the mistake of, and I know you've got a personal anecdote I want you to share on this, but it's like, why do you think when people get this, you know, windfall of 20, 30, 50, a hundred thousand dollars, they blow it. Yeah. I think it's because they look at it as free money and they don't look at it as the lifeline that it really is to get them to the next level of their financial dreams.

12:01And I see it all the time. And I think the biggest common mistake is mentally categorizing this windfall money differently than real money and treating it like house money you can spend loosely on things you normally wouldn't buy. And I think that's where the whole thing where people, they get into this lifestyle creep method and they go, oh, I've got, I have this 50 ,000 coming up next month. I know what I'm going to do. I'm going to get the boat. I'm going to remodel the backyard or whatever they're going to do. And they don't realize that at that point in their lives, they're probably treading water.

12:34We see these stats all the time that in the U S you know, over 60 % of US households making over$100 ,000 a year are still living paycheck to paycheck. And if they understand the importance of this one step of using that money to invest for their future and letting it compound, rather than just blowing it and going back to normal, it changes everything for them and their family for decades to come. So I think a windfall should get the same treatment as any other capital decision. Actually more disciplined because there's no automatic system pulling it into that investment account the way your paycheck would be set up to be.

13:11And you have to make an active decision. And that decision point is where most people leak the value of the entire windfall because they go blow it on something because they felt it was free money and didn't take it seriously as a way to get to the next level financially. So the habit to build here is simple. Before you spend a single dollar on a windfall on anything discretionary, decide what percentage is going straight into investments. Some people do all of it, and some do a portion and let themselves enjoy a small piece of it. But the number needs to be decided in advance, ideally before the money arrives.

13:47I think this is the key here, so you're not making that decision emotionally at the moment this money hits your account. I know what you're thinking. Man, we can't have any fun around these rich habits, guys, but I promise you, we're okay if you spoil yourselves a little bit. We're just pointing out what the math does for you, where you can let these windfalls compound because they don't have competing claims on them. So figure it out before you get the money. Figure out the percentage you're going to play with and the percentage it's going to invest it. And then protect the rest by getting it invested as soon as it hits your account.

14:20It brings me to a story that is very real to me. This is many, many decades ago. My girlfriend at the time, I think I was 19 and she was 18 years old. She got hit by a motorcycle. She got a settlement of$40 ,000. She's like, what should I do with it? I'm like, that is a ton of money, especially back then. I took her to Tim Croak, my cousin who runs Croak Capital. He sat her down and said, look, put this into your Roth IRA. Get yourself set up. You'll have hundreds and hundreds of thousands of dollars from this$40 ,000 at retirement. And she really wanted to buy this Chrysler convertible. She went ahead and bought the convertible.

14:56Didn't listen to Tim and I. Obviously, that car went to zero in a few years like most cars do. She never saved the money, never got started. And then as of what I've heard recently is she's not in a great financial situation. So the windfall is just a lifeline for anyone listening. If you get it, I know you want to spend it, but please don't. Because if you let that money compound for years and decades, you'll thank us later. Yeah, I think the windfall is an important one because it comes in all different shapes. forms and sizes, right? Like I've got friends that get big bonuses, 20, 30, 50, a hundred thousand dollar bonuses at the end of the year.

15:35I also have friends that get big tax refunds. I've got other friends that earn sales commission. I've got other friends that are realtors and they earn, you know, commission when they do some realty stuff. Like windfalls come in all different shapes and sizes and you need to be prepared for when you do get a windfall to have a plan with it. Like maybe you spend a portion of it and you invest another portion, like maybe you invest all of it, like regardless, just have a plan because the wealthiest people I know, whenever they get a windfall, that money is already allocated to some sort of investment, some sort of savings account, some sort of endeavor, some sort of new thing that they're working on or doing where it's going to compound in their favor versus, oh, I got a windfall.

16:18I'm going to go buy a boat. I got a windfall. I'm going to go upgrade the lawnmower, you know, like whatever. Right. So it's like, Just make sure you're being strategic when you get these windfalls because they're pretty common. Now, Robert, before we jump to our final habit here, need to give a shout out to public.com, the investing platform for those who take investing as seriously as we do here on the Rich Habits podcast. On public, you can build a multi-asset portfolio of stocks, bonds, options, cryptocurrency, and now generated assets, which allow you to turn any idea into an investable index using artificial intelligence.

16:52And it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20 % year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one-of-a-kind index, and even lets you backtest it against the S &P 500, all with just a few clicks. Generated assets can be thought of as ETFs, but with infinite possibilities. They are completely customizable. They're based on your thesis, not someone else's. And they're easy to build. So go to public.com, transfer your portfolio, and make sure you use public.com slash rich habits, because maybe you find the surprise in your portfolio when you transfer, Robert.

17:32You never know. Paid for by public investing. Full disclosure in the podcast description. And shout out to public. They just came out with these AI agents that are now off the wait list. So AI agents, we had Yannick on the podcast a while ago. AI agents are completely open to the public now. And they've got a catalog of agents. So you can see what other AI agent, trader, investor, bot things that other people on the platform are using. So like, go check out Public. They've got a ton of cool tools and resources. But if you open an account, please go to public.com slash rich habits and let them know that we sent you.

18:05All right, Robert. So let's now wrap up this episode with our final habit, which I think I know I talked about the net worth versus the income side, like being really important. But like this one is a goaded habit. And I don't think people spend enough time thinking about it. So I really hope that people take this episode and can really like self reflect and think, am I doing this habit? And that is protecting your time to keep learning. And it's one to skip easily because you're like, oh, not that urgent, automated, I can learn later, whatever, there's no numbers to track. Like, I get that. But financial knowledge compounds exactly the same way that money does.

18:42And the people who keep learning make dramatically better decisions with their money every single time they're faced with a fork in the road. What to invest in, when to take on debt, when to walk away from a deal, how to read the market cycles. The problem is most people's financial education stops the day they left school. That was high school or college, if it even started at school at all, because most financial education isn't even being taught places. Right. So like all that stops the moment you leave because no one keeps educating themselves. But despite you not educating yourself anymore, theoretically, the tools, the tax code, the products available, they all keep changing and morphing and doing new things.

19:22So like not only are things changing, but you're just like not even putting in the time and energy and focus to learn the new things that are changing. So someone who hasn't updated their financial knowledge in 10 years is making decisions on a 10 year old roadmap that is just not reality anymore. Yeah, I read the stat that over 45 percent of U.S. adults over 35 years old don't read even one book a year. So I agree with this totally. They just stop learning because they're not forced to learn and it's on them. So they're spending their time watching sports and doom scrolling and they're not updating that financial roadmap.

20:01And that's why the Rich Habits podcast and Rich Habits Network is so important to keep you guys up to date of what works now to help you build wealth, not maybe something you learned 15 years ago. So I think this habit just gets deprioritized because it doesn't have that immediate visible payoff. If you automate a contribution, you can literally watch the account balance change, but an hour spent reading about how a Roth conversion works or how a covered call strategy behaves in a down market doesn't show up as a number anywhere. And it's theoretical until you take that action. It shows up later as a better decision you make down the road that you wouldn't have known to make otherwise.

20:42So that delayed payoff makes it easy to deprioritize in the moment, even though over a decade, it might be the highest leverage habit on this entire list. Yeah, no, I like that, Robert. And the fix here is simple, right? It's treating financial literacy like a scheduled habit, not like something that you'll get to eventually. And you listen to the Rich Habits podcast. You're putting in some work. We appreciate that. We're not trying to downplay that. But blocking out that actual time, even if it's just like an hour a week to listen to our show, about an hour a week for these Monday episodes, maybe read, follow the markets.

21:15Maybe you join the Rich Habits Network and you join us for a two hour weekly live stream. Like I know for a lot of people that is their time to learn about the markets, learn about strategies, see what everyone else is doing. So just like finding that time and then making it real and being dedicated to it. It doesn't have to be complicated. just read a few finance newsletters, listens to our podcasts, follow people who explain concepts clearly and concisely like Robert and myself. The goal is to not be a professional Wall Street analyst. The goal is to keep your financial literacy moving in the same direction as your money, which is up and to the right.

21:54Yeah. So here's how to actually apply this. Ask yourself these three questions, one for each habit we covered today. Is my investing automated or does it depend on me remembering every month? And if I haven't started yet, what's actually stopping me from starting this week instead of waiting? Do I actually know my net worth right now off the top of my head within the last 30 or 60 days? And then the last time I got unexpected money, did I decide in advance what percentage would go to investments? Or did I blow it like most people? and when was the last time I spent real dedicated time learning something new about how money works and how it affects my personal development for my net worth?

22:38And if you can't answer one of those questions confidently, it's not a reason to feel behind. It's just the next habit that you need to start working to build out because wealth isn't built in a single decision. It's built in the boring, repetitive handful of habits that are done consistently over a long period of time. If you start early, you automate the processes, you measure it, you protect your windfalls, you keep learning, right? Like none of this stuff is complicated. It all just is kind of systematic. You just got to stay with it over a long period of time and it's going to compound in your favor.

23:12Yeah, definitely. This whole episode reminds me of one of the quotes you kind of put together based on something I said. And I think it goes like investing to build wealth should not be like an action sport. it should be watching paint dry and then having ice cream when it's over. And I think it's just such a fun anecdote to so many people think investing has to be either difficult or they have to get too fancy to build wealth. And I've learned over 40 years of investing that the best investments I've made have been the boring, consistent ones because they just always grow and go up over to the right for me year after year and decade after decade.

23:52So I love this episode. Could not agree more, Robert. Now, before we jump to our Q &A section of this episode, got to give a shout out to Neos Investments. And we actually had them on the show pretty recently after their announcement of their partnership with Goldman Sachs. 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, real estate, cryptocurrency, and cash alternatives like T-bills. Their ETFs may be especially interesting for investors looking to generate tax-efficient monthly income inside of their investment portfolios.

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