185: Is Your Financial Life Too Complicated?

0:00Hey, 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 exactly why your financial life feels overwhelming and three specific things that you can do right now to fix it this month and make everything simple again. My name is Austin Hankwitz and I'm joined by my co-host Robert Croak. Robert is a seasoned entrepreneur with lifetime revenues 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 single episode, we talk about rich habits as they relate to business, finance, and mindset.

0:39So Robert, what are we talking about in today's episode? In today's episode of the Rich Habits podcast, we're asking a question a lot of you already know the answer to, even if you haven't said it out loud. And that question is, is your financial life too complicated? And here's how you know it is. You've got money spread across six or seven different accounts, and you couldn't tell someone your total balance without pulling up on your phone and adding it all up together. You've got credit cards you opened for a sign-up bonus three years ago that you still carry a balance on, and you're not totally sure what the interest rate is.

1:13And you and your spouse have separate accounts, separate goals, and honestly, separate financial lives running in the same household. If you've got a business, a side hustle, or rental properties, your personal and business expenses are tangled together in a way that makes you wince every time you think about tax season. And your investment portfolio isn't a portfolio. It's a graveyard of stocks you bought on a whim because somebody at the barbershop or somebody online was talking about, and half of them which you forgot you actually own. None of that is a character flaw. It's just complexity that is built up over time.

1:50one small decision at a time until one day you look up and the whole system feels too tangled to even start untangling. And that's where we're at today. Yeah, Robert, when your financial system feels this overwhelming, the natural response is to just do nothing. You sit on the sidelines, you observe, and you're just kind of drifting through life. You don't actually open any statements. You don't try and consolidate your cards. You don't set up your investment account. You just sit and drift. Being overwhelmed doesn't just feel bad, but it can become very expensive because the fix requires action.

2:27And complexity is the biggest reason people stay frozen and do not take action. You know who you are right now. You're listening. You might have had a job at a 401k two years ago that you've yet to roll over into your Roth IRA. or maybe a card to Robert's point that you opened up six months ago for some bonus points that has got a couple subscriptions on it, but you're not really sure what's going on over there, right? You're very complex. Everything is spread out and tangled. So today we're going to give you the three ways to fix it. So Robert, let's get into strategy number one. Absolutely. In my opinion, little leaks do sink ships and we're going to unwind how to help you guys get back on track and simplify everything.

3:10So our first strategy today is know your money and combine it as a household. The first fix is the foundation everything else sits on. You have to actually know how much you're making, when it hits your account, how much you're spending, and where it's all going. This sounds basic and that's exactly why most people skip it. Most people can tell you their salary. Very few people can tell you without adding everything together manually across all their cards and statements, what they spent last month or what day of the month their bills actually clear versus when their paycheck hits. It's shocking to me, but it is so, so prevalent.

3:48And the gap between income timing and spending timing is where a huge amount of financial stress lives. It's not usually that people don't make enough. It's that they don't know the shape of their own cash flow. So they're constantly reacting instead of planning. So critical here. You get surprised by a bill you forgot was coming. You overdraft two days before payday. None of that is an income problem. It's a visibility problem and it's completely fixable once you actually sit down and map it out. What comes in on what day, what goes out on what day, that's it. And I just want to emphasize this before we go to the second point.

4:28You should have a money calendar, you should see what day does this subscription hit? What day does this expense hit? What day do I buy the groceries? What day does my paycheck come? And understand and predict how much money you're going to spend that week, how much money you're going to spend that month before the week or the month even starts. And know down to the day when those things happen. Once you have visibility like that, you feel as if building wealth and investing and saving is just like this automatic thing because you completely understand where the money is going to come from before any of the transactions even take place.

5:07So we're now, Robert, talking about these transactions. Let's talk about the credit cards for a second because a lot of people, including myself, I'm guilty of this one sometimes, a lot of people have this problem. They're carrying five, six, seven different credit cards. They got one for the airline miles, one for the cashback, one for the store that they signed up for at a checkout for a discount, one maybe that their bank pushed on them because they were getting swindled at the time. Each card has its own due date, reward structure, login to some different app or website, and the mental overhead of tracking seven different due dates and seven different categories and seven different logins is why you feel like your financial picture is in a mess.

5:49You don't need five, six, seven credit cards. You need maybe two or three that you actually understand and enjoy using. One for maybe everyday spending that earns you something meaningful. One maybe for a specific category like restaurants or groceries or travel or you know whatever that is. One for maybe that third thing that might apply to you but the rest of them should get paid off and frozen. Forget about maybe don't close them because if you close them it kind of impacts that credit score but just be mindful about the cards you use. Fewer moving parts means fewer things mess up and fewer things get missed.

6:27Yeah, I think of so many stories. I used to know a guy, we were friends back in the day. He seemed very successful and had all these businesses and rental properties and a multi million dollar home. And then one time his wife shared with me that they had$86 ,000 of overdraft fees in one year because they didn't do the things we're talking about. $86 ,000 wasted because they didn't prepare and have all of this structured. So that blew my mind and it just popped up for me, but let's get into the third piece and that is combining finances. So if you're married and you're still running two completely separate financial lives, sharing a mortgage, but not a spreadsheet, you don't actually have a household financial picture.

7:10You have two individual ones sitting next to each other. And that makes it almost impossible to build towards these shared goals we're hoping to achieve with this podcast because neither person can see the entire financial picture. So this doesn't mean every single dollar has to be joint. Plenty of couples keep some individual accounts for personal spending, but there needs to be this combined view for everything. A shared understanding of total income, total expenses, total savings rate, total net worth. If one person is the one who handles the finances and the other one has no idea what the numbers actually are, that's not a combined household.

7:49That's one person carrying the entire cognitive load alone. And that's a setup that will eventually break down because we all know the number one cause of divorce is money fights and money problems. So the fix here is simple to state. Even if it takes an afternoon to actually execute, sit down, map out your income and expense timing so you know where your real cash flow is. Cut your credit cards down to two or three that you actually use and understand. And if you're a household, get on the same page with one shared view of the numbers. I promise you this is really, really important. And that's it.

8:26That's the entire fix. And it's the one that makes everything else in this episode much, much easier to achieve. And getting on the same page with your money, with your spouse, might be hard. So here's how to approach it. You have a joint checking account. Our paychecks get deposited into this joint checking account. We have a household budget that we agree on before the month even starts. Hey, you know, we're filming this right now, Robert, August 26, September. Let's figure out what we're going to spend. What's coming in? What's going out, right? Let's get on the same page with money. We're married, right?

8:59We share a bed together. Let's share a spreadsheet together too. And then once that money's deposited and it's earned, you're rocking and rolling. Expenses are paid as they're incurred, just like what you budgeted. And the saving, investing, and everything like that always happens because it was outlined in that monthly budget. Austin, we might have some miscellaneous expenses. Sure, figure that out. Not that deep. What is important is that you guys are on the same page with the money that's coming in, what's going out, what's getting invested, and you're trending in the right direction together toward a very wealthy retirement.

9:33One person isn't doing all the numbers and doing it over here, while the other person is just la-di-da. I don't know anything. I'm just living my life, right? Like you have to be on the same page. Visibility is important. And the best marriages are ones that have open communication about money. And before we get into strategy number two, I want to linger for a second. If you're not married yet, but you're in a serious relationship, Maybe you're engaged and you're going to get married in a year or two. These conversations all need to happen anyway. Don't wait until you get married to figure out if you're both on the same page financially for the future, because especially if you're in your younger years like Austin and Ireland are, you need to have this all figured out in advance because you don't want that money stress five years down the road, 10 years down the road.

10:21After it's too late, you're already married and you're not on the same page. So I wanted to linger there for a second. Before we get into strategy number two, which is separate your personal and business financial matters, this one is absolutely critical as you're building your wealth and building your assets. So this second fix is all about keeping personal money personal and business money for the business. And if you don't have a business, a rental property or a side hustle, you can think of this one as a preview for what to do when you do, because almost everybody eventually crosses into this territory of entrepreneurship and asset ownership.

11:00But here's the problem. The moment you have any kind of business activity, you now have to have two separate financial pictures and they need to stay separate. And a shocking number of people run both pictures through the same personal finance account and the same personal credit card. And that is a no-no that ends today. They buy business supplies on their personal card or they deposit client payments into their personal checking account. And then just kind of mentally keep track of what's the business money in their head and what's the personal money in their head. And that system works fine right up until tax season.

11:35And then it becomes a nightmare because now you and your accountant have to go back through 12 months of transactions to try and reconstruct what actually happens with a business expense or was it or wasn't a personal expense. And that is just really rough to do after the fact. Yeah, please don't do this. Please separate business and personal. And the fix is structural, which means you don't fix this by trying harder to remember what you spend something on. You fix it by actually creating accounts, separate things, and that separation happens automatically because you're using different cards, different bank accounts, different structures, things like that.

12:12If you have any business or any rental activity, that activity needs its own checking account, ideally its own credit card. Every dollar of revenue goes into that account. Every business expense comes out of that account. If you have multiple properties or multiple businesses and ventures, each one arguably deserves its own account as well, its own LLC, its own EIN, or at minimum, its own clean ledger so you can look at each one of them individually and know how well they're performing without untangling it from everything else. And again, this matters more than just like convenience when you and your accountant are going through taxes.

12:46It matters for actually knowing whether your business or your rental property is profitable. If the money is all mixed together with your personal spending, you don't have any idea as to what your real margin is. It's all kind of commingled together there. So that clean separation is the only way to get an honest answer to the question of, is my side hustle, my business, my rental property actually making money? Or am I just kind of subsidizing it all with my normal spending? Yeah, I see this every single day where people think they're up and running and they're doing a good job. They just bought their first rental property and their personal name.

13:21Then they just opened their first LLC, but they use their home address and their personal cell number. and all of this extends to the legal and structural side of this too. So if you set up an LLC or an S Corp for liability protection, that protection actually depends on how you treat it and if you treat it like a separate entity. If you're commingling funds using the business account to pay personal bills or vice versa, you can undermine the legal separation that the entity was supposed to give you in the first place. Proper operating structures, real separation, clean books, that's what actually protects you.

13:57And it's what makes tax season something you can get through in an afternoon instead of dreading it for sometimes weeks on end. But it also protects you from any outside, you know, legal matters or lawsuits or anything else. So just please make sure you take the structure as seriously as everything else in this episode, because as a business owner like myself, I always want to make sure I have that liability protection and it starts with your structure. Now before we jump to our third point, I want 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, real estate, cryptocurrency, and cash alternatives like T-bills.

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15:25To 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 funds does involve risk, including possible loss of principal. And there is no guarantee the NEOS ETFs will make monthly distributions, and the amounts may fluctuate from month to month. Cryptocurrency is relatively new and the market has its own specific risks. And Nios ETFs are distributed by Foresight Fund Services, LLC. Robert, speaking of investing, let's now jump to our third strategy to streamline your financial picture here, which is simple, boring investing, beating the complicated checking my portfolio every single day strategy.

16:09Unfortunately, I think a lot of you guys try and implement. So let's talk about this. Let's talk about the investment portfolio, because this is where complexity does the most damage while you feel productive. A lot of people equate active investing, active management of their portfolio with being a good investor. And we want you to have active management in your portfolio, but checking the price every single day, holding dozens of individual stocks that you don't even know what they do, constantly trading in and out of positions. That feels good, maybe, but that's not a good thing for the vast majority of people.

16:43It is just complexity dressed up as a dozen hours a week of effort that usually costs you more than it actually earns. So the fix is this. Dollar cost average into your investments with automatic deposits and check your portfolio once a quarter, four times a year. That's the whole strategy. DCA into fundamentally sound index funds and ETFs that we talk about here and inside the Rich Habits Network. and then check your portfolio once every three months, close your eyes and let the wealth building become inevitable. I wish everyone watching this episode would just ooza and be able to follow those instructions you just laid out because we know for a fact there's so many people that knee-jerk react to every single headline, every single tweet they see, every little detail, checking their account balances 25, 30 times a day and it's just crazy.

17:40So here's the deal. Set up an automatic transfer from your checking account into your brokerage account on a schedule and let that money buy into your positions automatically without you having to make a decision every single time. That's dollar cost averaging with auto deposits, and it removes the two things that hurt most investors, emotion and inconsistency. You're not trying to time the market. You're not skipping a month because the news looks scary. The system runs regardless of how you feel and what's happening that week and takes all the emotion out of it. I promise you, your returns will thank you later if you can achieve this.

18:19And the other half of this is resisting the urge to constantly watch and tinker. So if you're checking your portfolio every single day, you're going to see normal, healthy volatility and interpret it as a signal to do something, sell a position, chase whatever's moving, second guess your allocation. And most of that activity does not improve returns. It just adds stress and often it actively hurts you through bad timing and unnecessary trade costs because you're sitting there trying to time the market and get in and out and think you're an expert now and always reacting to these headlines. So a portfolio built around a handful of diversified positions funded automatically does not need daily supervision, and it shouldn't have that.

19:06It needs a check-in four or five times a year, not 50 times a week. 50 times a week. I know some people in the Rich Habits Network, and I'm sure they listen to this podcast that check their portfolios 50 times a week. And this connects directly back to the credit card point that we were talking about earlier because the same principle is going to apply. Fewer positions that you actually understand beats a scattered pile of stocks that you bought on a whim, but now you feel obligated to track because you've got$72 invested into it. You don't need 57 different tickers in your portfolio to build wealth.

19:38You need maybe a dozen or so that you truly believe in, you fund consistently, and you leave alone to compound over time. Building real wealth was never supposed to require 10 hours a week glued to your computer screen or your X feed or your brokerage account screen. It feels like a second job sometimes, and we don't want that. That's not due diligence. That's not a good time. You need to build a system that's less complicated, more streamlined, because it's going to be costing you a lot in stress and bad decisions that are going to be impacting your returns over a long period of time. if you don't have this as streamlined as we're trying to encourage you to do right now.

20:16100 % Austin. We've talked about this many times in the Rich Habits Network, but I believe most people could outperform the markets with five to seven ETFs, five to seven individual stocks, and five to seven cryptocurrencies. And even I'd cut that back to three or four cryptocurrencies. Set it, manage it, don't check it 50 times a day, and they would actually crush. So here's how all of this actually applies. Three questions, one for each fix we covered today. Do you know right now, without checking your countless credit card statements, roughly what you spent last month and what day your paycheck actually lands relative to your bills?

20:57And if you're in a household, does your spouse know the numbers like you do? Question number two, if you have businesses, rental properties, or side hustle income, is it running through its own separate account completely from your personal spending? And question number three, is your investing automated on a schedule? And are you checking your portfolio four times a year versus five, 10, 20 times a day? If the answer to any of those is no, that's not a reason to feel behind. That's just the next thing to fix. And none of these three things take more than an afternoon to get set up and integrated into your new financial life.

21:35Yeah, I just want to emphasize those. If you know roughly how much you made last month, how much you spent last month, and if you as a household are on the same page with money, check. If you have a business, a side hustle, is that spending being commingled with your personal spending? If it is, stop that. And if you are investing on a schedule into the index funds, ETFs, and some single stocks that we talk about, and you check your portfolio, maybe on a quarterly basis, biannual basis, I don't know, instead of 17 times a day, walk through that one by one here. That's your homework as you listen.

22:10The three things that Robert just laid out, because it's a lot easier to catch yourself and prevent the harm that doing some of these things will have to your financial life over a five, 10 year period of time than kind of dealing with it after the fact. And if you're feeling pretty good about money, but New Year's resolutions, but now we're in August, September, like, I don't know, guys, I thought I was going to do this, but now I'm not like, now's just a good time to have that check in with yourself. This episode is a good reminder, check in with yourself, have understanding of where your money's going.

22:41Are we as a household on the same page? Am I consistently dollar cost averaging into a simple strategy that aligns with my risk tolerance? Do I cut back on my number of credit cards because it's getting too complex? Just check in. You don't have to be perfect. Nobody's perfect. But at the end of the day, just by listening to this podcast and checking in with yourself, you're putting yourself leaps and bounds ahead of your peers because your peers are broke. The average American can't withstand a$500,$700 expense without going into credit card debt. The average American's household net worth is negative.

23:15right like you listen to the show you're trending in the right direction but just give yourself a little bit of grace check in and just understand that your financial life right now needs three main things done right to keep it streamlined you need to know your cash flow you need to combine it as a household if you're married you need to keep business and personal spending separate and you need to have that simple automated investing strategy do the heavy lifting for you and compound for you over a long period of time here's the last thing i'll leave you with Robert. Complexity is what keeps people on the sidelines.

23:47Simplicity is what gets them in the game. We want people in the game. Get your head in the game. Let's go, baby. Come on. Yeah, I agree 100%. And I think one last thing I want to say before we get to the next portion of the show is, you know, we talk about lifestyle creep all the time. And I feel like this episode is so important because I feel like it really kind of alludes to financial creep. And that doesn't mean necessarily you're building better financial practices. It just means that you do things over and over again and things get really complicated and you don't know how to stop it and fix it to get yourself on track.

24:23And I see people all the time that'll share with me their portfolios. And this goes for people, even those of you that have maybe a financial advisor you're working with, they'll have like 29 individual stocks, 17 ETFs, every single tiny cryptocurrency in their portfolios and they don't even understand what that all does or how it's performing for them. So I think it's so important for everyone watching this episode to really audit all of this and make those three changes so you can get back on track and know exactly where you stand. So Austin, great, great episode. Before we jump into our Q &A though, support from the show comes from VCX, the public ticker for private tech.

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