28: Mindset Shift — Consumer to Wealth

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0:36I just give my stylist my size, style, and budget preferences. I order boxes when I want and how I want. No subscription required. And he sends just for me pieces, plus outfit recommendations and styling tips. I keep what works and send back the rest. It's so easy. Make style easy. Get started today at stitchfix.com slash Spotify. That's stitchfix.com slash Spotify. Hey everyone, and welcome back to the Rich Habits Podcast. a top five business podcast on Spotify. My name is Austin Hankwitz and I'm joined by my co-host Robert Croak. Robert 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.

1:19Since 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 still young and in the process of building wealth and figuring it all out. So Robert, what are we going to be talking about in today's episode? In today's episode of the Rich Habits Podcast, we'll be talking about the importance of making the mindset shipped away from consume, consume, consume, to begin as an investor and building generational wealth.

2:04I see this all too much every day when I'm speaking to people in my DMs or my private calls or my communities, where this lack mindset has just been built up for generations, decades sometimes, where people just don't think wealth, owning businesses, and being a really sophisticated investor is in the cards for them. And this is really important for everyone to get out of their mindset and really understand that building wealth is much easier than they think it is. And they just have to lose those lack mentality mindsets and just really start to focus on the information at hand, watching our podcast, and learning that this can be for everyone if you know where to look.

2:48The title of this episode is Mindset Shift, Consumer to Wealth. So Robert, I want to hear the first practice that you think about here as it relates to helping people make that mindset shift away from consume to now building wealth. This is 100 % one of my favorite topics, and I'm so glad we're covering this because so many people suffer from this, the overall perspective of the lack mindset when it comes to building wealth. So for me, number one is buying stocks and companies you love and not just buying their products. This is so critical. Every single day, Americans shop at places like Target, Walmart, Costco, buying their Campbell's soup, buying their Tide Pods, swiping their credit cards and their MasterCards at the checkout line before they load all of these products into their Ford, Toyotas, and Hondas.

3:40Every day we interact with these publicly traded companies and many times we don't even know it. When we're at one of our favorite stores and we see it's absolutely packed full of customers, we need to begin thinking like an investor and not just the consumer. So what I do when I'm sometimes even in the checkout, I'll look up the stock to see if this store is publicly traded and then I'll put it on my watch list to begin researching. at times I've even invested while still at the store. I remember vividly three, four years ago, of course I knew about Ulta Beauty, but I'd never been in a store.

4:15We went in that day, it was like a Tuesday or Wednesday, and the store was packed. And this was not a mall store. It was a standalone store at a strip plaza, and it was packed. While in the store, I looked up the stock and I was like, how did this not come on my radar sooner, especially with the industries that I'm in. And I was really blown away by the performance and the growth of Ulta Beauty at that time. So I bought the stock before ever leaving the store. So it's always just important for the listeners out there to understand that just you want to buy what you know and buy what you see, but also always be researching because if you walk into a store or a restaurant or whatever consumer product it might be, and it's packed and you see that frequency of customers, you really want to be investigating the stock as well.

5:06So you always want to keep your eye open for new investment opportunities. And before we move on to the next topic, I just want to remind everyone too, and Robert, you alluded to it there for a second, but this doesn't always have to be sort of product focused. This can also be restaurants, right? There are a ton of restaurants that are publicly traded, Taco Bell, McDonald's, Wendy's, all these places we eat from are also publicly traded. So don't just think about like, oh, I bought an Apple iPhone, so I need to go buy their stock. Or, oh, I'm buying my Nike shoes, so I need to go buy Nike stock.

5:37Where are you eating? Think about that as well. That was an awesome call out, Robert. I love that rule to live by, especially for new beginners in the stock market trying to figure out, well, what do I buy? Just look at the receipts, right? Look at your habits. Look around and say, what do I own? Now, what's the second way that these people can begin to make a mindset shift. Yeah, so I love that first one. And for number two, it's really my challenge for the listeners out there is every time you want to buy the product like the Nike shoes or the Apple iPhone, or you're at Target four days a week, you must also want to buy the equivalent amount in stock in the company of the product or where the product was sold.

6:16This is a great practice to really get your mindset thinking like an investor and not just a consumer. This is huge. Please, all of you, really make a conscious effort to remember this point because so many people along their journey just think that investing is this big, scary thing and it really isn't and should be part of your daily and weekly habits. So this is very important. I know there are hundreds, if not thousands of you listening right now who are going to buy those dang pumpkin spice lattes at Starbucks this week at$7 a piece. Well, I'll tell you what, you should download the public app in the show notes.

6:55And every time you buy one of those pumpkin spice lattes, invest the same amount of money in Starbucks stock. Now, here's why this is so important, Robert, right? The people listening right now have been drinking Starbucks for the last 10 years, during which they've probably spent a few thousand dollars on their coffee or their snacks. If they also took a few thousand dollars, one seven dollar latte at a time and invested that into their stock, they would have tripled their investment. No, seriously, the average Starbucks customer literally goes every day. But even if we only lower that down to 300 days per year with an average of seven dollars, that's twenty one hundred dollars per year spent at Starbucks.

7:38And I'm not saying they should give up their coffee, but just think about the returns they'd have if they had invested that same$2 ,100 into Starbucks stock. Remember the challenge where whatever you're spending with that brand, you're spending in their stock as well. If they would have done that, the company's stock prices tripled in the last decade. So that$2 ,100 would probably be more like$6 ,300,$6 ,500, maybe more depending on where the overall stock ends up. So it's just very important for everyone to understand you can't just always act like a consumer. You also have to think like an investor.

8:19So for me, I'm always, I love Nike, so I'm buying the shoes, but I'm also buying the stock and dollar costs averaging in every single month. And I think this is just one of the best ways to transfer that mindset and really get you on track in your wealth building journey. Okay, Austin, take us on to number three. I know this one is right in your wheelhouse. You are the master at analysis. So let's take this one away. When we think now about making that mindset shift away from consume, consume, consume to now build wealth, generational wealth, you have to automate your investing, right? So every single listener out there needs to not only know exactly how much is entering and exiting their checking account on a weekly and monthly basis, but also exactly how much of that is going toward investments.

9:09The easiest way and kind of fun way to do this, Robert, is to think of yourself as a business, right? The business of Robert Croke. But, you know, think like how much revenue is the business of Robert Croke generating? How much in expenses is the business of Robert Croke spending on a monthly basis? And how much is the business setting aside for investing? You need to be investing 15 to 20 % of your monthly take-home pay. And for 99 % of you listening there, automating that process right out of the gate is how you'll actually be able to get it done. You get paid, boom. The money is invested and it's not even up for debate if you can spend that money that month on the new this or the new that.

9:47It's already invested. It's already allocated, gone, it's out the door, and it's building wealth for you. There's actually a really cool feature in the public app called Investment Plans that helps you create sort of this automation. For example, you tell it the two or three index funds you want in the investment plan, how much you want to invest into those, and then how often, and it automates the entire process for you. It all starts with a budget and understanding your debt to income ratio. Once you've done that, you have a better understanding of your overall financial picture. You need to understand your overall financial picture, how much is coming in, how much is going out, what is going out, and where that's going toward.

10:25Am I spending money? Am I investing the money? What I'm doing with my money? And once you've done that, I'm telling you, It all gets so much easier. You get in the habit, you get in the processes, and it just is so habitual. And by building these rich habits is how the everyday American is going to be able to build generational wealth. That was an amazing takeaway on this subject. And I want to reiterate just one line of this, and that is getting your budget in line, understanding your debt to income ratio, and then really knowing what you can actually earmark month to month for your automated investing.

11:01I cannot stress this enough how important this is. Probably over 90 % of the people that I talk to in DMs, private calls, private community don't have these facts figured out in their wealth building journey. And it's just catastrophic for the long term. If you don't have these automated, yes, there might be changes from time to time, but the closer you can to automating and knowing where you're at month to month, the better off you'll be in the long term. Incredible, Robert. Absolutely incredible. Well, with that being said, Robert, let's introduce this episode's sponsor to our listeners. Yes, this episode of the Rich Habits podcast is brought to you by Neos Investments.

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13:04A fund's income may decline when yields fall, and fixed income securities will decline in value because of an increase in interest rates. And as always, we are super grateful that you all stick around for that minute, minute and a half scripted read of Neos. We are very, very fortunate that they are so willing to sponsor this podcast. At the end of the day, we believe in their ETFs very much, right? I hold SPYI and CSHI. Both of these ETFs are producing income from me inside of my investment portfolio. Robert has the same. We love their ETFs and we think they have a place in nearly every person's long-term portfolio.

13:42Now let's kick off everyone's favorite section of the episode, the question and answer. We've got three awesome questions from Ian, Juan, and Tosh. I can't wait to dive into these starting with Ian W's question. Ian asks, what are your favorite websites or platforms to use to begin investing into REITs and artwork? I'm really trying to diversify my portfolio. I think to answer that question, the first thing we need to do is define what the question is asking, what are REITs, right? And what is artwork? Well, I think we know what artwork is, right? But what are REITs? That might be a little bit more confusing.

14:15So just so we're on the same page here, REIT, R-E-I-T is an acronym that stands for Real Estate Investment Trust. Now, what a real estate investment trust is, it's essentially a big pool of money where people very, very much smarter than myself take this big pool of money and invest it into real estate with the very simple objective of generating cash flow. So by investing into a REIT like this, you're essentially a shareholder of a large operation of landlords. And sometimes those tenants, right? You're a landlord, you have tenants. Sometimes those tenants might be data centers. It might be cell phone towers.

14:51Other times it might be Dollar General, Costco, or Walmart. There are tons of different types of REITs. I know Robert really likes his public storage REITs, like the ones that you walk in and you have those storage units. There are different types of REITs. they're all over the place. Now, for me personally, I like two REITs that are publicly traded on the stock market right now. One is called Realty Income Corporation, ticker symbol O, and the other is called VICI Properties, ticker symbol VICI. Now, to Ian's point though, he asked the website or platform. Of course, we recommend Fundrise.com.

15:22I've been using Fundrise now for, I think, four years. It's been a while. And what's really cool about Fundrise is they take all the workout, right? All you have to do is deposit funds and they take care of the rest. Now, they do have a Fundrise Pro sort of$10 per month subscription if you want more autonomy. So if you really want to invest in the Midwest or you really want to invest in like, you know, Florida or like a very specific smaller geographical area, they allow you that autonomy, but that is part of their Fundrise Pro subscription. And now to answer the second part of the question, we like Masterworks for investing into artwork and here's why.

15:57Masterworks has never had a piece of art that has declined in value where they lost money for their investors. I think they just had their 16th exit, aka 16 times in a row now. They've purchased artwork where investors like myself, Robert, and others listening were able to also purchase a sliver of equity in that artwork, and then they sold it at auction for more than they bought it for, right? Overall, Masterworks has done an incredible job of giving us, the everyday investor, an opportunity to invest into pieces of art that are worth 10, 20, 30, 40 million dollars. And as we know, art isn't very much correlated to the stock market.

16:36So by having that diversification in our portfolios, we're able to sort of offset the ebbs and flows and the volatility of the stock market. Austin, that was a great takeaway. We both love Fundrise. I've had great success with them as well. And I do like Masterworks. I've always been an investor in artwork. And what I love about Masterworks is it allows the everyday investor to be able to buy a piece of that blue chip art that would otherwise be out of their price range. That's why Masterworks is such a great platform. But I also like other types of diversified asset classes, gold and silver, crypto, collectibles.

17:14So there's really a ton of ways to diversify your portfolio. So I really think, Ian, just keep reading, keep learning, watching our podcast, and we will continue to deliver those nuggets to you of how to diversify your portfolio the best way you can. Now, our next question comes from Juan L. Juan says, I'm 29 years old, and right now I'm an entrepreneur running a landscaping business. However, I have a bachelor's degree in agriculture sciences and an advanced degree in leadership and management. I'm now also getting a qualification and personal training. However, I'm a bit lost on my career path.

17:51Should I take on more education and try and break into agricultural technologies? Do I do the fitness stuff or do I just continue building my landscape business? Now, Robert, you have way more experience in building businesses, career paths, and everything in between. I want to hear your perspective on this. I would say I want to start with, wow, Juan, this is a mouthful and it just screams analysis paralysis. Staying in school for a few more years is not going to get you where you want to go because you have so many different directions. And I'm all about when people are younger to try a lot of things and fail.

18:28But it seems like you're putting off trying things and you just keep layering on more and more education and certifications. And I think that is just a shiny ball syndrome problem. So in my opinion, at 29 years old, what I would do, and this is what most millionaires do. You hear it every day that most millionaires have seven sources of income, but you're doing it backwards. You're trying to have seven sources of income all at once, and that's not how it works. Generally, you want to start out with one source of income. You master that source of income. It can be 1099. It can be a small business.

19:03It can be your W-2 income. Then from there, when you get your base built up, your investment base, then you go to diversification. So you get that side hustle, maybe the vending business, maybe a pressure washing business, landscaping, whatever it is. Then you start adding on those other investment vehicles. You don't do it all at once in the beginning because you want to start in a place of security and a foundation that you can build off of like your landscaping business. So what I would do first and foremost, get that landscaping business fully scaled, fully dialed, then maybe bring in a managing partner.

19:43Give them a small piece of equity, maybe 10%. Give them a little bit of a bump. Let them take over the day-to-day operations. So then you can focus on income generating stream number two. That's how I would build it. That's the course I would take. I feel like right now you're having analysis paralysis, but also you're all over the place with the shiny ball syndrome. We need to narrow that focus, get you in a place to build the first income stream properly and scale it, then go to number two. That's what I would do. And I think another important call out here is I would really encourage you not to go into debt for further, further, further education, right?

20:23I think Robert and I were just talking before the podcast about a woman that he knows he's friends with, and she's in her, I think, 50s or something like that. And she has$280 ,000 in student loans and she's in her 50s because she got all these advanced degrees thinking she was gonna make all this money and she never really stuck with it, never really liked it. And so the last thing I want you to do here, Juan, is to go into 50, 100,$150 ,000 more in student loan debt so you can get an advanced degree for something that you might not even like. So I love Robert's answer here, right? You are already doing the landscaping business.

20:57seems like it's going well for you. Let's build that out. Let's dial that in. Let's make that a million a year business. If you can bring in some partners, employees, everything to grow that once that's automated and built, then say, okay, wait a second. I've got this figured out. My base is there. Do I want to now maybe flirt with the idea of being a personal trainer? Do I maybe now want to flirt with the idea of this agricultural technologies career? That's I think the way to do it. So really good answer, Robert. Thank you so much. Yeah. You don't want to be in a situation where you're 20, 25 years into your career and you're a jack of all trades, master of none, you really want to hone in on one or two things that you're really great at.

21:35And then a lot of the other investments and revenue streams can be from partnerships and proper investing strategies. Now, our last question here comes from Tosh. She says, hi there, I love the podcast. Thanks, Tosh. We love that you listen to the podcast. I need some advice on paying off my debt. I'm 36 years old. I have about$15 ,000 in my 401k with a portfolio in bonds, stocks, and the S &P 500. Should I cash out all of my 401k and then use that money to pay off some of my$25 ,000 in high interest debt? No, absolutely not. You should not cash out your 401k to do anything, right? You never want to borrow from your future, aka cashing out your retirement, to pay for the now.

22:20I totally understand that you've got$25 ,000 in high interest debt. And we always say you can't out-invest high interest debt. So I see now where your brain would say, wait a second. So if I can't out-invest this, I should cash this out and then I should go pay off the debt. That would be true if it was not in a retirement account, right? If you had maybe 15K in a cryptocurrency and you're maybe 15K in a brokerage account with some single stocks. And I would probably say, yeah, cash that out. Let's get rid of this crazy high interest debt. Let's get you on your wealth building journey. But because it's in your 401k, what's going to happen here is you're getting taxed twice.

22:52If you cash out your 401k early, you're going to get hit twice with taxes. One on that early penalty tax, right? That's like 10 or 15%. And that second one is the earned income tax implications that you're going to have to deal with, right? So you're going to kiss away 35 to 40 percent of that$15 ,000 overnight. It's just going to be gone. So now you're looking at what, But$8 ,000 to$9 ,000 to pay toward this$25 ,000 and you have no retirement, that's no fun. What you should do is you should strap down, get on that budget, figure out how to earn extra income and pay everything you can now toward this high interest debt.

23:28Get it paid off, wipe it away and keep your money in retirement. Great job breaking that down, Austin. And just a couple of things I'd like to add. Bonds, not sure why you need them at such a young age. I think you should be more invested into the stock market index funds, ETFs, like we discuss. And then secondly, it just really comes back to you don't want to have all of these penalties taking the money out of the retirement to pay off this high interest debt. I think you just really need to look inside, find a way to either earn more income or reduce your expenses and get that high interest debt paid off as soon as possible.

24:05You could even look at going out and getting a zero interest credit card that maybe gives you a year, 18 months. That would give you some time to figure out how to pay off the debt while it's still at zero interest and not hurting you further. So I think there's some things you can do here to fix this without suffering the penalties of the removal from your retirement account. Okay, so we just finished my favorite portion of the podcast. And I just want to remind everyone listening now during the month of September, we're launching the Rich Habits Podcast Wealth Building Blueprint video course.

24:40However, our podcast listeners are getting the course weeks earlier than the public just because we love you all so much. So Austin, take it away and break it down for them. So over the last week now, we've received hundreds of direct messages on Instagram from our podcast listeners sharing their favorite colors, blue, violet, indigo, green, red, pink. It's been all over the place. But by sharing with us their favorite colors, this has allowed them to receive a 20 % off discount code to purchase the course, bringing the total to only$36. That's$36 for four video modules of Robert and myself walking you all through how to build extra streams of income, how to pay down your debts, how to repair and build your credit score, as well as our step-by-step blueprint of how to invest and build your retirement.

25:32Every single person listening right now will find value in this course if you're a novice or if you're an expert like ourselves. If you want to purchase the course for a discount, send us a DM on Instagram at richhabitspodcast with your favorite color and we'll send you the discount code. Remember, this course isn't available to the public yet and will not be available for probably two or three more weeks. So the only way you'll be able to get it early right now is by sending us a direct message of your favorite color to the richhabitspodcast Instagram account. That's it for the Rich Habits podcast.