20: Catching Up Financially in Your 40s & 50s

0:00BJ's Wholesale Club makes holiday hosting so easy, we called in the ultimate host to talk about it. Mrs. Claus here. You think Santa has it tough delivering all over the world? Try cooking for hundreds of elves. Good thing BJ's offers low prices on all the menu must-haves, plus free same-day delivery on your first order of$100 or more. No more squeezing in trips to the store. The only squeezing here is the big guy into a suit after dinner. For terms, visit BJ's.com slash holiday and get the same great prices online as in-club. This is a real good story about Bronx and his dad, Ryan. real United Airlines customers.

0:35We were returning home and one of the flight attendants asked Bronx if he wanted to see the flight deck and meet Captain Andrew. I got to sit in the driver's seat. I grew up in an aviation family and seeing Bronx kind of reminded me of myself when I was that age. That's Andrew, a real United pilot. These small interactions can shape a kid's future. It felt like I was the captain. Allowing my son to see the flight deck will stick with us forever. That's how good leads the way. Hey everyone and welcome to the Rich Habits Podcast. a top 10 business podcast on Spotify. My name is Austin Hankwitz and I'm joined by my co-host Robert Croak.

1:10Robert is a seasoned entrepreneur in his 50s with more than 200 million in company exits under his belt and I'm an entrepreneur in my late 20s with a background in finance and economics. Since quitting my full-time job in corporate finance a few years ago, I've built a seven-figure media business and actively advise some of the most well-known fintech companies around the world. As the show name might suggest, every episode we talk about rich habits as they relate to business, finance, and mindset. However, we try and bring you two unique perspectives, one from an industry veteran, which is Robert, and the other myself, someone who's young and still in the process of building wealth and figuring it all out.

1:50So Robert, what are we going to be talking about in today's episode? In this episode of the Rich Habits podcast, we will be talking about being in your 30s, 40s, or 50s and feeling left behind in your wealth building journey. And specifically, our three best tips to help you get unstuck and back on track, moving towards your attainable financial goals. Very important here. I think that last part, the attainable financial goals is most important, right? We're in our 40s and 50s. We're trying to make it to that home stretch of something called retirements. And we're trying to make some money along the way.

2:24So I'm excited to jump into this episode. So Robert, walk us through the first strategy on how we can begin moving toward these attainable financial goals. Yes, I love this. And this episode is really important to me just because so many people reach out to me on a weekly or a monthly basis saying I'm in my late 30s, I'm in my 40s, I'm in my 50s and wealth has passed me by and it's too late. Well, guess what, everyone? It's not too late. Remember, Ray Kroc started McDonald's at 52 years old. One of the key takeaways here is you either have an income problem or you have a spending problem. So either way, you have to buckle down and get a budget in place.

3:00Please take notes on this. Very important. So many people out there don't have a budget and just don't really know where they're at in their financial situation. There is a free budget spreadsheet in the show notes you can have sent straight to your email. Getting your budget and debt to income in line will help you start investing 20 % of your net household income to get you back on track. This is very important. We want to get you to that 20 % amount. What is that debt to income ratio and why is it important for someone to get really figured out in order for them to begin hitting these financial goals?

3:34It's really all about understanding really where you are. To keep it simple, so many people that don't have a budget and don't know what their debt to income ratio is, we want to be at that 30 % mark if we can be to be optimal. It's all about understanding where you are so you know how much you can invest monthly. Because at the end of the day, the most important thing in investing is consistency. Remember, it's not about timing the market. It's about time in the market. It's so critical. and what I see with so many people that I speak to on a weekly monthly basis is they don't know their budget they don't know their monthly expenses they have no idea what their debt to income ratio is so guess what happens they have all this money sitting in a savings account and they go oh I'm bored on a Saturday let's go to this farmer's market let's go to this estate sale let's go to Target or the mall and they start spending their money because they don't have a place for it so what we want to do is make sure everyone understands having a budget, knowing their debt to income ratio to get to that 20%.

4:36And that 20 % might be 600 a month, a thousand a month, 2000 a month, but that money is then earmarked and part of your investment strategy to build your wealth. And sometimes it's not just a debt to income ratio problem, but it could be an income problem itself. So we'll talk a little bit about that in a second, but before we do that, I want to clarify what this debt to income ratio really means. Let's say that you're bringing home$5 ,000 per month in after-tax income that gets deposited to your checking account. And let's say 2 ,500 of that comes out every single month to service debt. If that's your mortgage, your credit cards, your student loans, whatever it might be, that's 50 % of your take-home.

5:15So you have a 50 % debt to income ratio and above that 30 % threshold that Robert just talked about. The goal is to bring that down or increase your income so that you can comfortably set aside 20 % of that income to be investing. Yeah, I love that. And a great takeaway and thanks for clarifying the debt to income ratio part because it is so important and remarkable to me a large percentage of people that just don't understand the budgeting and understanding the debt to income ratio and how important that is in their future and current wealth building strategies. So let's go to number two. You have to get rid of any bad high interest debt.

5:51Think credit cards, hospital bills, or personal loans. Remember you can't out invest bad debt. Look at a consolidation loan, zero interest credit card to help you get back on track. And the pro tip here is if you have equity in your home, you could really look at a HELOC loan as an alternative to help you clear out that bad debt quicker. So let's talk about for a moment why it's so important to get rid of this high interest bad debt. We know historically speaking, the stock market does 8, 10, maybe 12 % per year. Let's say on the high end, 12 % every year going for. You can invest the money at 12%, but if you have this high interest debt at 24, 26, 28 % on these credit cards, you're not building wealth.

6:32You're not moving in the right direction by any means. More money is coming out the other end with these high interest credit cards and hospital bills and personal loans. So by getting those paid off as quickly as possible, you will be moving in the right direction. Now, Robert, you mentioned a HELOC. Now, before you think about jumping to that, I want to encourage you to think about the downside risk. If you don't pay off the HELOC, you will lose your house, right? That is a thing. So be careful with this consideration. But if you are drowning in debt, high interest debt, this could be a pretty decent solution.

6:59You can't out invest bad high interest debt. So let's do the simple math. If I have equity in my house and I can pull that equity out at six or seven or 8 % and pay off my bad debt at 24 or 26%, that gets me cash flow positive and I'm arbitraging the difference between borrowing at six, seven or eight percent and paying off those 24 percent credit cards. So it's a huge upswing and a great way to help people get back to cash flow positive because it's so important you can't out invest that bad debt. So even if in the market you're making 10 or 12 percent, you're still 14 percent to the bad or 10 % to the bad by not getting rid of that bad debt first.

7:44And that's why I think the HELOC is a good strategy. Obviously, you can do zero interest credit cards. You can look at consolidation loans. But right now, pulling equity out of your home is a pretty simple way to do this and get you cash flow positive. Robert, what's our third strategy here? Yeah, the third strategy is to get your Roth IRA opened and start maxing it out. It's never too late to enjoy the benefits of a Roth IRA. so many people that I talk to day in and day out just aren't excited. They just don't know enough about the Roth IRA to understand the importance and what the benefits are.

8:21And we really have to push that initiative. So everyone, in my opinion, and I think Austin's as well, is that a Roth IRA should probably be the number one first step in your investment journey the day you turn 18. And what I like to see is everyone get that Roth IRA opened in your individual brokerage account. You can do it on almost any of the online platforms and then really look at start investing into VOO, QQQ, VGT. If you want to get a little more aggressive, one of the index funds that I really like is AIQ, very heavy in artificial intelligence. but maxing out that Roth at$6 ,500 a year is just a great strategy to get you stable and get you that base before you start going off in these investment tangents.

9:11And it's just so important that everyone understands this so you get off on the right track, whether you're 18, 28, 38, or 48, you have to have that Roth and really pay attention to maxing it out because of the tax benefits long-term. Now I have two pro tips to add to that. The first one is for those of you who are in your 50s, don't forget about catch-up provisions. So if you want and if you can afford it, you can actually contribute an additional$1 ,000 to your Roth IRA to sort of catch up a little bit because we're talking about catching up financially here. Now you have a little bit more money to help you get across the finish line.

9:49Now for you small business owners like myself, what you can be thinking about as well is the mega backdoor Roth Solo 401k. Now, I know it sounds like a mouthful. It's a lot of information. You definitely should consult with a financial advisor, accountant, someone like that to walk you through it. That's certainly what I do. I use ocho.com to help me with that. Through this, if you're a small business owner, you can actually contribute$66 ,000 per year toward your retirement, which is way more than the 6 ,500 that the Roth IRA traditionally allows you to max out at. Yeah, I love that. That is amazing and such a great takeaway and kind of that pro tip that we like to offer because it just gives people more bite-sized options to really do what we are here to do.

10:35And that is to help all of you that are listening, maximize your gains and optimize your wealth building strategies. It's so important. So we're going to move on to the sponsor of the show. We all love the scripted parts, but we have to put them in. This episode of the Rich Habits podcast is brought to you by NEOS Investments. NEOS offers ETFs that aim to offer monthly income while providing core portfolio exposure across equities. That's a tough one to say. Fixed income and cash alternatives like T-bills. Their ETFs may be particularly interesting for folks looking to generate passive income inside of their investment portfolio.

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11:52To obtain a prospectus containing this and other important information, please visit neosfunds.com. Please read the prospectus carefully before you invest. NEOS ETFs are distributed by Foresight Fund Services, LLC. An investment in NEOS ETFs involves risk, including possible loss of principal. The equity securities purchased by the funds may involve large price swings and potential for loss. A fund's income may decline when yields fall. Fixed income securities will decline in value because of an increase in interest rates. I know, I know the scripted part. Everyone hates it. I wish we could just easily tell you all how excited we are about NEOS funds because we are.

12:31I love SPYI and CSHI. They're my two favorite ETFs from an income-focused perspective. So if you are looking for that passive income in your portfolio, definitely go to neospunds.com and check out both of those. Robert and I talked about them ad nauseum last night on our TikTok Live, which, by the way, watch our TikTok Lives on Thursday nights. We put a lot of work into those. We have some fun, don't we, Robert? Yes, definitely love it. OK, let's get into the question portion of the show. We love this. You guys love this. And we have some really good ones this week. Take it away, Austin. So our first question comes from Dana D.

13:05Dana asks, I'd love to get your thoughts on where to prioritize investing through an HSA or some other health or flex savings account. Robert, what's your perspective on an HSA? Yeah, I think Dana presented a really good question. It's not talked about very often. My take on it is that HSAs and flex savings accounts are great for people to begin saving for future health-related expenses and could be a great strategy if you're building a family. but you should only think about it as a small portion of your investable income going towards these platforms. It's not exactly a wealth building strategy.

13:41It's more of a self-created insurance strategy in case of any health catastrophes. So keep that in mind, Dana. I think you should do a small portion of it, especially if you're building a family and you want to look out for the hubby and the kids and all of that, but don't look at it as an overall wealth building strategy, but more of an insurance policy that you control. Next question comes from Cynthia G. Now, Cynthia says, I owe$80 ,000 on my mortgage. It was originally$270 ,000 in 2008. I have enough money in stocks now to pay it off, but my interest rate is only 3.25%, so I'm a little hesitant.

14:19I listen to each episode with my daughters who are 13 and nine. We love them. Shout out to your daughters. Thank you so much for listening to our episodes. We are thrilled. So, Robert, what do you think she should do? Should she pay off the mortgage? Cynthia G., don't you dare touch that mortgage. At 3.25%, you are in a beautiful, beautiful place. Don't make extra payments. Don't pay it off. Remember, we always want to arbitrage our money. If we can borrow money cheaper than what we can make with our money, we never pay that debt off. This is called good debt. So Cynthia G, please listen. Put that money that you're thinking about using to pay off the mortgage, put it into the markets, get it into VOO, get it into QQQ, max out your Roth IRA and make sure you understand that that arbitrage, let's say the market's doing 8%, 10%, but your mortgage is 3.25%.

15:17You're making all that extra money that goes into your pocket instead of paying off that low interest mortgage. The S &P 500 is up 15 % this year. The NASDAQ composite is up 30 % this year. That's a lot of money for$80 ,000. I mean, that is tens of thousands of dollars in profit that Cynthia G could be leaving on the table if she'd then taken this money out and paid off her mortgage. So I'm always in the boat of leave the low, low, low interest mortgages. I personally have one. It's 3.3%. I have no intentions of paying it off. I'm gonna leave it there. I'm gonna let it do its thing. It's all good.

15:51As long as I can take that money and invest it into better opportunities. And like what Robert said, have that sort of arbitrage mentality. You have to maximize your gains on your money. And if you were to pay that mortgage off at 3.25%, you are leaving potentially hundreds of thousands of dollars on the table in opportunity cost over the next 10, 20, 30 years as you're working towards retirement. So keep that in mind. I'm going to take this one away. And Austin, this is right up your alley. Rafael A. said, is it smart to invest in ETFs in my Roth IRA? If not ETFs, then what? Love this question.

16:29And Austin, I'm ready for you to knock this one out of the park. So let's think about this for a second. Is it smart to invest into a diversified basket of stocks? Abso-freaking-lutely it is, right? Two thumbs up. You absolutely want your Roth IRA, aka your retirement account, to be diversified across incredible companies. Now, the best way to achieve that, we just alluded to it right now. We talked about VOO, right? The S &P 500. It's up 15 % year to date. And then we also talked about the NASDAQ composite, QQQ. That's up 30 % year to date. Those are both ETFs. So yes, it's very smart to invest your money in your Roth IRA into ETFs because over the long term, It's a great way to stay diversified as well as have that capital appreciation that you're looking for with a retirement account.

17:16Now, on top of that, if you want to dabble in the dark arts of single stock investing, be my guest, have some fun. But I do, though, want to make sure I'm very clear about this. These are index fund ETFs, not very speculative solar panel ETFs or AI ETFs. Sure, you can have some fun with that, but I wouldn't suggest putting your retirement money into those. That was a great response, Austin. Okay, so we had so many questions this week. We are going to add a bonus question. So I hope you guys will bear with us. Take it away, Austin. I'm excited about this one. So our bonus question comes from May M.

17:51And May asks, is it a good time to invest into precious metals? If so, where do I invest in them through an online broker? This is a great question, May. And right up my alley. I love precious metals. I think everyone should use it as a hedge against uncertain times. I love me some silver and gold. There's a nice little stack of silver right there. Don't look at precious metals per se for the return you're going to get on it because gold has ultimately not performed that well from a growth perspective and a profit perspective. But look at it as a hedge against uncertain times. The dollar crashes, the sky is falling, whatever it may be.

18:29I think precious metals now and in the future will always be a good hedge to have a portion of your investable portfolio invested in. And just to add a little bit more color on top of that, when you're looking for how to invest in them through an online broker, there's a bunch of ETFs. There is the SLV iShares, Silver Trust ETF. And there's also GLD, which is a gold shares ETF. So if you don't wanna buy the physical stuff, you can invest in it on your online broker account. Love it, love it. Well, Austin, take us away. We are so excited about this episode and tell them what's coming up next. As you know, we've been trending up on Spotify and Apple Podcasts and all these really awesome platforms and we're super, super excited.

19:13We now have over 15 ,000 people that come back every Monday morning to listen to what we have to say. And I really want to challenge those same people to share this podcast with someone that they think should also be coming back on Monday mornings to learn about rich habits as they relate to business, finance, and mindset. If it's your cousin, if it's a coworker or someone you work out with at the gym, I want you to share this podcast with someone you believe can form and benefit from these rich habits. I want to personally thank all of you from the bottom of my heart for all the amazing support.

19:47Please make sure to give us a rave review. We would love to have that support to really help us keep climbing the charts. We are currently a top 10 podcast on Spotify, and we would love to be top five, and you can help us do that. And finally, if you have any questions for us to answer, look us up on Instagram at richhabitspodcast, where we also post our favorite clips from the podcast. We share those nearly every single day now. Go to that account, give us a follow, and ask us a question. We get about 10 to 15 questions a week, so sometimes it's hard for us to narrow them down. But if you keep asking them, I will definitely get to it.

20:23Thanks, everyone, and see you next week.