35: Building Generational Wealth in Your 20s & 30s

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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 three 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 in the process of building wealth and figuring it all out. 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 sharing our three best tips to building wealth in your 20s and 30s.

1:58Assuming you're young, hungry, and ready to go to work, these three tips could drastically change the trajectory of your financial future. If you're 40 or older, you're more than welcome to try these three strategies. However, these tips are most successful for people who are very tech savvy, have the opportunity to work countless hours per week, and are very hungry for success. And just to remind everyone, right, not only are we going to be sharing with you all the specific strategies, but we're also going to be providing the additional resources in the show notes below that will hopefully get you started, keep you inspired, and help you stay on track.

2:34That's what the Rich Habits podcast is all about. We don't just give you the sauce, but we also give you the specific platforms, the websites, everything you need to actually execute on these strategies and ideas. So Robert, kick us off with number one. Number one is buying those boring small businesses. We all hear about it. Boomers are retiring at record numbers. So all of these small businesses, many of these boomers do not have succession plans for these small businesses. And what does that mean for you? It means opportunity, opportunity, opportunity. So many tens of thousands of businesses are going unsold right now every single year because boomers are retiring and they don't have a plan in place to sell these businesses.

3:16So we are here to tell you that we think this is one of the top three best opportunities in the market right now to create wealth is owning those already built, already cash flowing businesses. But you're going to go in, you're going to find one that's suitable for you. You're going to implement modern technologies, think sales tactics, proper marketing, really good web and SEO strategies, automation. You're going to use all the modern tools we have at our disposal, and you're going to really increase the profitability and revenues of those businesses and really build those businesses up. And what I like about this from someone who already has a portfolio of small businesses, as you're building and building and building, you can also be looking at exits.

4:01Maybe you buy a business that's doing$1 million a year with maybe a 10 or 12 % margin. You build it to 3, 4 million, maybe with a 20 or 30 % margin. Then you could exit that business alone and really sell it for a large multiple. So this is one of my favorite strategies of how to build wealth faster than maybe some of the other sectors out there because the market is ripe with opportunities right now. And just to give a clear example of what I think a modern technology or new strategy could be after you buy one of these boring businesses, as you all know, I live in Nashville, Tennessee. I was getting my car washed at some random car wash around town, and they said if I give them my phone number, they will give me a free car wash.

4:47So I'm like, okay, here's my phone number. Now let me get my free premium car wash. Two days later, I get a text message from the car wash saying, hey, here's a quick discounted offer if you want to get your car washed in the month of November or December, right? It wasn't that same month. So it was like I had to remind myself I need to go back to that car wash in the future to get this discount, which I did, right? And now I use that car wash every single time that I want to get my car detailed and washed and vacuumed, right? So by implementing this new advertising, marketing, drip campaign strategy, not only did they make a future customer out of me that comes back every single time, but they also know how to get in touch with me if they want to send me special deals and offers.

5:27Imagine by doing that to tens of thousands of people on an annualized basis for one car wash. like to Robert's point, think about just how big you can scale this potential 500 ,000 or a million dollars in revenue car wash to two, three, four million. And as you're able to do that, potentially increase those margins along the way. Now, if you want to see an extremely well articulated example about how Graham Weaver, one of the most successful private equity investors out there has done this for himself to scale to$15 billion in business equity, there's going to be an interview linked below in the show notes.

6:00He walks through if someone had a challenge of like go from$0 to$1 million, like go earn your first million dollars. He walks through how he would go buy a car wash, how he would scale it into dozens around the country. And he gives a little bit of an antidote of what he personally did at 25 years old by buying label printing companies, right? So he built a track record of himself doing that. I think he bought four or five and really scaled them before he went out and raised a small fund from investors. And then it sort of snowballed that into what it is today, this$15 billion sort of empire. But it sounds daunting.

6:30It sounds scary. It sounds like, oh my gosh, what do I do, right? Think about owner's financing. Think about what Robert just talked about as it relates to scaling and advertising and improving margins and efficiency and work your ass off once you own that, right? If you have a car wash, you want to be the best car wash in the world. If you have a laundromat, you want to be the best laundromat in the world. If you have insert small business idea here, make it the best one in the world that every single person that in your town wants to come to and be a customer. Totally. There are tens of thousands of small businesses out there right now that you drive by every single day, many of which might be for sale now or will be for sale at some point if the owners do not have a succession plan in place.

7:09So always keep that in mind that there are so many ways to build wealth. And we believe by integrating new modern technologies into already cash-blowing businesses, this is one of the best tactics to use. Buying a small business, scaling it using efficient technology that, of course, the 20-year-olds and the 30-year-olds listening right now are already aware of is step one. What's the second great way, Robert? Let's go into my favorite topic, cryptocurrency. And before anyone comes for me, I'm going to keep it in here. We're going to always be talking about cryptocurrency because I think everyone should have a piece of their investable capital in cryptocurrency.

7:48It is the most disruptive technology. It is changing the world right before our eyes. Every single day we see a news story talking about PayPal, Amazon, Microsoft, Meta, everyone is integrating the blockchain and the associated cryptocurrencies into their business models. And it just is the way of the future. Blockchain is disrupting all of the markets that we work in every single day, whether it's real estate, shipping, cross-border payments, it doesn't matter. So I want everyone that's listening to please understand, And follow along, do your research and really get into crypto. Not saying you have to go all in.

8:29I'm just saying have a portion of your investable assets in cryptocurrency because I think it is one of the best asset classes for the next 10 years. And it's very critical that you understand it and know where to invest in it like Bitcoin or Ethereum or Chainlink. Everyone has seen the news with BlackRock, Fidelity, ARK Investments, all looking to get their Bitcoin ETFs, their spot ETFs approved in the coming months. And this alone is going to be game changing for the cryptocurrency markets. So I just want everyone to be aware of it. Keep it on your radar and make sure your dollar cost averaging in, at least in the big boys, the blue chips of the industry.

9:12because I think it's going to be one of the greatest wealth transfer opportunities of the next five to 10 years. I couldn't agree more, right? And I think unfortunately, a lot of people in their 20s and 30s might discover a website that, like CoinMarketCap, for example, it's got a list of the top 200 cryptocurrencies by market cap on there. And they'll go find one that's up 40 % in the last week or whatever and get really excited about it and say, oh my gosh, I found my get rich quick scheme. I'm jumping in all on this and they go all in and then it goes kaput. and they're like, oh my gosh, I just lost my money.

9:43We're not saying that. We are not saying to go all in on some random cryptocurrency that your Uncle Bill found on the internet and is telling you to buy. What we are saying is we believe it's a freaking crime that people don't have Bitcoin in their portfolios, right? Everyone should have five to 15 % of their net worth invested into those big boys. Bitcoin and Ethereum, I really like Chainlink. Robert mentioned it. It's one of my favorites, so I have a portion of my portfolio into Chainlink as well. But don't overcomplicate it. Buy some Bitcoin, buy some Ethereum, and forget about it. Dollar cost average into this asset class like you would any other asset class, if that is stocks, ETFs, or other collectibles.

10:21So you're not buying into one point. It might be the top or the bottom. You want to definitely dollar cost average to smooth out that volatility because we all know cryptocurrency has volatility. And just stay invested. Because something people might not know right now is that, and maybe you do, but cryptocurrency has a boom and bust cycle, right? It gets really hyped up. the prices go all the way up and then it's euphoria and then it crashes back down. I would argue right now we're pretty much in the bottom half of that. I don't think we've started that euphoria phase by any stretch of the imagination.

10:51And I think it could start in the next 12, 18, 24, maybe 36 months at the latest. But I'd imagine over the next 24 months, cryptocurrency is going to really see a big push in the right direction. And personally, right, we can only talk from experience. Personally, as a 27 year old, I am investing into this asset class and I plan to profit from it over the next two to three years. Yeah. And just to really kind of cap off this section, I just think it behooves everyone to do your own research. Get in there, start reading, start following along, understand it better, and realize that it's in that kind of too big to fail place.

11:28Are there going to be cryptocurrencies that go to zero? Absolutely. But are the big, big, you know, we call them blue chip cryptos going to thrive? Absolutely. You don't get companies like BlackRock and Fidelity and ARK and major banks and countries behind these types of projects if they don't believe in it for the long term. Because instead of like us, where they're putting in a couple thousand, they're putting in hundreds of millions and even billions of dollars into these technologies. And they're not going to be wrong. These people move markets. And in this instance, you really can follow the money and thrive.

12:05So as a way to make money and a lot of it, it's just really important to understand this sector, get in, get involved and really learn where it fits you the best. What part of this big, beautiful machine do you fit in the best to make out and carve out your future? I couldn't have said it better myself, Robert. Now, our final strategy and or tip to building some insane wealth in your 20s and 30s is artificial intelligence. We hear it in the headlines. Everyone's kind of over it, right? Oh my gosh, I thought that was just a fad. What's going on? Why are you guys still talking about it? Listen, this one is so important.

12:42If you're able to understand this and scale this, you'll be able to generate hundreds of thousands of dollars in profit. For example, I follow a guy named Joe on TikTok who's in his 20s that has figured out that there was demand for fitness courses and meal plans within a specific niche on Pinterest. I'll link his profile out in the description below. And essentially what he does on TikTok is document his journey of like, hey everyone, I have this idea, I think it was like last November, of using ChatGPT for creating these digital products and I'm going to go sell it and figure it out, come along for the ride, right?

13:15It's like a documentation sort of TikTok account. Now by using ChatGPT and other AI products, he's created digital courses that dive deep onto fitness exercises, as well as specific meal plans. He markets these courses on Pinterest using their native Pinterest ads platform. And after costs and taxes, he has profited$361 ,000 in 2023 alone. Think about that. 20 something year old who figured out how to use AI to build a product and then leveraged an existing advertising platform through Pinterest to sell the product. Now he has 361 ,000 extra dollars in his bank account, right? Now, no offense to Joe, Joe's a really smart guy, but he's not special.

13:53You can absolutely do this too. Maybe it's fitness and meal plans, or maybe it's candle making, maybe it's scheduling, maybe it's productivity hacking, or gaming, or pickleball, or whatever else, right? There are so many specific niches that people are searching for to learn more about. So maybe identify them using Google Trends. It's super simple to see what people are searching for on a weekly, monthly, or even daily basis on that platform and build a digital product using artificial intelligence around it and then sell it on Pinterest. I'll tell you, I have a different take from that, but this is a really good story and a good way to really encapsulate what AI is.

14:28So many people, like you said, are tired of talking about it and they think that AI is here and, you know, big deal. We know what ChatGPT is, but guess what? We're just scratching the surface. In my opinion, one of the biggest things, if I were in my early 20s right now, I would go all in on AI. I would become an expert on how to build the best tech stacks for entrepreneurs and small business owners using AI. And then what I would do is I would create using AI a DM strategy to DM all of these people like myself and like you and say, hey, do you need help with your tech stack for all of your growing businesses?

15:10Would you like to allow us a few minutes to give you a demonstration? that I would demonstrate these services of how you can make my day more organized, more streamlined, and my businesses more profitable. And that right there would be a service-based business that could make you millions. Because let me tell you, with as fast as all of technology is moving, artificial intelligence is here to stay, and it's gonna be improving month after month, year after year. And most business owners and entrepreneurs and influencers are not gonna be able to keep up with that. So that alone is one business model that I wish I had time to start, but someone young and hungry could do that with very little money and a lot of time and research and really crush the game and services because AI is so important.

15:58like right now for me every single day. I use ClickUp. I use Otter AI. You hear me talk about Taylor Brands. When you're building like your brand guide and your logos for a new brand, Taylor Brands has incredible AI, better than most that I've seen. But then also you can look at Adobe MidJourney. Let's say you want to create photorealistic art or fine art that you want to be able to sell prints on Etsy for, you could use MidJourney for that. There are just endless business models you can create all based around this technology and really crush it in the coming years. I'm so excited about AI in this sector, especially for those of you that are looking for kind of like that cheat code to wealth and really moving forward and making a lot of money quicker to streamline your wealth building journey.

16:50Just to piggyback on that real quick, Robert, I feel like as you were just mentioning this, I had an epiphany. Super simple. Thinking back to what I did when I was in college and graduated college to make some extra money, I built websites for dog grooming companies. I had a cookie cutter website. It was super simple. One, imagine doing that now with AI. So simple to build a website with AI. Find a niche. If it's a dog groomer, if it's a barbershop, how many barbershops are in anyone's town listening right now? Dozens? Hundreds? There are so many customers for you out there. Keeping with this barbershop example, how can you build out an artificial intelligence enhanced tech stack so the solopreneur barber who's renting out a booth at ABC building company is able to take on more clients, communicate better with his clients, process payment, reminders?

17:36There are so many different opportunities ahead of you. You just have to realize, okay, these are the cool products that artificial intelligence does. How can I work backwards into helping other people achieve and solve these problems with knowledge that they don't know? But I do know because I spent the time, energy, and focus in my 20s and 30s and whoever else is listening right now to actually learn these and build and sell around them. God, I love this. It gives me goosebumps because I just think of these thousands of businesses in every small town that have a website that's five years old with no updates.

18:08So they have no SEO. They don't have any kind of performance based technologies in their website that's creating lead gens or it's email automation or any of it. and you could create a services-based business just around using the AI tools we discussed and absolutely crush it in your own region or nationally with these types of services. That's why I just love the idea of people that have the energy and the time going all in on AI and building something really great and meaningful and creating wealth in the meantime. I couldn't have said it better myself, Robert. Artificial intelligence is here to stay.

18:45Now, with that being said, let's introduce this episode's sponsor. This episode of the Rich Habits podcast is brought to you by Nios Investments. Nios currently offers three unique exchange-traded funds, SPYI, BNDI, and CSHI. All three aim to offer their investors monthly passive income with tax efficiency in mind. Their management teams are pioneers in the option-based ETF space with decades of combined experience creating and managing ETFs that pursue income as the outcome. And during uncertain economic times, NEOs ETFs can also be thought of as a way to turn market volatility into opportunity.

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20:32Just one remind everyone, we are major fans of these ETFs. SPYI is a massive holding in my personal portfolio, and we both invest into SPYI and CSHI. Haven't yet dabbled in BNDI, but we'll see. Everyone, definitely go check out Nios' ETFs. We give them two thumbs up. Now, with that being said, let's jump into everyone's favorite segment of the episode, our question and answer. Our first question comes from Jenis B. Jenis says, I'm in the service industry as a bartender. I'm not offered a 401k or health insurance or anything like that. How do I best save for retirement? What are my options? Really good question.

21:06And I'll give you two right off the bat. So if you don't have a 401k, this doesn't just go for like bartenders. This goes for anyone out there. Not like even if you have a 401k, you can do this, right? Open up the Roth individual retirement account, right? The IRA stands for individual retirement account. You as an individual are afforded the opportunity to invest toward your retirement in a tax advantaged manner. And you can do this by opening up a Roth individual retirement account. Okay. How do we do that? You can go to Google and type in Roth IRA and you'll be presented with a ton of different options.

21:38If it's Vanguard, Betterment, Wealthfront, Fidelity, I mean, the list goes on and on. Personally, if I were you, I would go to a Betterment or a Wealthfront, which is a robo-advisor. And essentially what they do is they're for the people who want to be completely hands-off. They don't want to learn this stuff. They don't want to take the time. They just want to deposit the money and have it get invested on their behalf. If you want to be more hands-on, you're more than welcome to go to Vanguard or Fidelity and maybe even Charles Schwab and open up an account through them. And when you open up the Roth IRA through them, you have to not just deposit the money from your checking account, but once deposited, you then have to buy the specific securities or ETFs rather to invest in, right?

22:17VOO, VTI, VGT, QQQ, stuff like that. So that's what you should do, full stop. And you can do that even if you have a 401k, right? It's the individual retirement account. It's called that for a reason. And I'm going to add a couple more to this, Genis B, coming from someone that's been in the restaurant and bar industry for a very long time. It is unfortunate that you don't get offered health insurance or 401k, but that's okay because we have other solutions for you to make sure you build wealth and protect yourself financially. So the other items I would look at is look at treasury bills. You can go to public.com.

22:51There's a link in the show notes. And I would look at buying the treasury bills and putting some money into that monthly. Right now, treasury bills are paying out about five and a half percent. And so it's a really nice gain and it's very safe for your money. And you also don't pay taxes locally or state on your gains with treasury bills. And I would also look at having a high yield savings account. Wealthfront is a great one that Austin mentioned, because what I think would be good for you having this high yield savings account is maybe look at putting a portion of your income in there so you can get your own individual health insurance policy.

23:27Shop around, find one that suits you well. Without knowing your age, I still believe it would be important for you to earmark some of your funds for health insurance because I think it would be a great way to protect yourself since you did mention it and find a policy that suits your budget. 100%. And open enrollment is right around the corner. It's something I'm personally going to be participating in for the coming year. So definitely earmark, you know, maybe two, three,$400 a month for that health insurance and make sure that that is a line item in your budget. Also totally agree with Robert here.

24:00You should have several thousand dollars saved in a T-bill or some sort of high yield savings account, not just for emergencies, but health emergencies, especially if the policy you choose has a high out-of-pocket deductible. Couldn't have said it better myself. So our next question comes from Donna G. Donna says, you always say how good it is to have an IRA, but I want my children to liquidate their IRAs and take that money to go buy a house now since they're 30 years old. What do you think about this strategy? Good question, Donna G. I think that that is not a very good idea because your children will only be able to keep 70 cents on the dollar for every dollar they take out, assuming a 20 % effective tax rate and a 10 % penalty, right?

24:41So that's 30 % of the whole amount that they're taking out goes straight to the government for taxes and penalties. Not a good idea. So instead of liquidating their retirement, something I say a lot, right? Don't borrow from your future to do something today. To buy this house, maybe they should just consider a side hustle to generate more income that they can then park into a high-yield savings account or a T-bill that's going to help them grow that savings faster. Maybe if they are sort of on track for a four or five, six-year kind of trajectory to save up for that down payment, maybe it's even a good idea to put that in the markets, right?