66: The Financial Playbook for Recent Graduates

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0:40I 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 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. Robert is a seasoned entrepreneur in his 50s with more than 300 million in lifetime revenues under his belt and I'm an entrepreneur in my late 20s with a background in finance and economics.

1:21Since 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, this is going to be a fun episode. What are we going to be talking about?

1:51Yeah. In this episode of the Rich Habits podcast, we're going to be sharing the financial playbook for all of you recent high school and college graduates out there. I know there's a ton of you listening right now that know someone, whether it's your neighbor, your cousin, your niece, your nephew, or even your own children that just graduated from high school or college and have no idea what to do with their career and their finances. And we're going to cover all of that today. So send them this episode because we're going to teach them how to retire a multimillionaire, how to increase their net worth during their defining decade, as well as offer some career advice, no matter what line of work they look to be in and what career path they take.

2:33Robert, this episode is going to be everything I wish I knew at 18 and 22 years old. It's going to be a game changer for a lot of you. And by the way, happy Memorial Day to everyone as well. We want to sincerely thank all of our veterans for their service and their sacrifice. We would not be here as a country without you. Also, summer is officially here. I hope you guys have your summer plans figured out or you're out by the barbecue. Maybe you're by a pool right now listening to the show. Don't forget to come back every week during the summer because we're not taking any days off. There's no summer vacation here for the Rich Habits podcast.

3:06Now, Robert, I'm pumped because now that I'm six years out of college, I have so much to share about going from a negative net worth at 22 to a net worth millionaire now at 28. So let's jump into the show. Yeah, number one, you're a recent graduate heading into your defining decade. And what does that mean? Congrats, you've graduated high school or college and you're entering your defining decade. The reason why we call it the defining decade is because the decisions you make in your 20s are going to have lasting effects throughout the rest of your life, financially, career-wise, relationally, and everything in between.

3:44No one fresh out of high school or college knows what they want to do for the rest of their life, nor should you. And if someone tells you that you should know, don't listen to them. Listen to your gut and just do your thing. Trust me. Everyone thinks they've got it figured out at 16, 18, 19, 20. You don't. Our lives go in seasons and you should not beat yourself up for trying to figure it out by the time you're 21. We want to see you have a plan, but trust me, you're going to want to let your life kind of open up to you and really kind of display and figure it out as you go. And we're going to give you the playbook of how to do it right.

4:20And speaking of defining decade, Robert, highly recommend everyone who is in their 20s to read the book, The Defining Decade, Why Your 20s Matter and How to Make the Most of Them Now by Dr. Meg J. So go check that out. But to Robert's point, you don't need to know what you want to do for the rest of your life to set yourself up for financial freedom. You just need to know what not to do. So now let's get into this playbook, Robert. Your defining decade in our humble opinions can be broken out into two separate categories, what to do and what not to do. Financially speaking, let's start with a few action items you should do immediately, no matter your situation.

5:00Action item number one, open a Roth IRA on Fidelity, Charles Schwab, M1 Finance, or wherever you want. You literally go to Google and you type in open Roth IRA. IRA stands for individual retirement account. It might say that instead, but that's the same thing. Open the account and deposit money into it. This can be$20,$50,$100. It doesn't matter. You're young. You might not have that much and that's okay. But what matters is that you're actually depositing money into the account and you're investing the money that you deposited into the S &P 500, aka the letters VOO in the search bar. If you're unfamiliar, the S &P 500 is financial jargon talk for the 500 largest, most profitable companies that operate in the United States.

5:50Their stocks tend to go up about 10 to 12 % per year, which means your investments will as well. So by investing$100 per month into this fund from, let's call it 22 to 67, 100 bucks a month. That's it. You're going to retire with$2.3 million of tax-free money waiting for you to enjoy in retirement. Congrats. You're now a multimillionaire and that's only from$100 a month. Imagine if you made it 200, 300, 400, right? We're going to get into that and the fun stuff there. But that is the first action item anyone listening right now can take to ensure financial freedom in retirement. The second action item, Robert, is to build your base as quickly as possible, which means having$50 ,000 to$100 ,000 invested into the stock market.

6:35Now, before you throw up in your mouth a little bit because you're just thinking about, oh my God, how am I going to get$100 ,000? That's insane. Just hear us out, right? We're not saying that you have to have$100 ,000 in cash and that's on top of the Roth IRA money or any other money you already have. We want you to have between$50 ,000 to$100 ,000 invested total across everything as soon as possible. And if you're looking for a time frame on this before 30 years old, so before your 30th birthday is a really good sort of time horizon you can give yourself, call it eight years or so, right? And here's how you're going to do it.

7:10You're young and you have all the time in the world. So don't waste it by going out and partying every weekend with fake friends because you're not going to be friends with these people in five years, 10 years anyway. Don't waste your money on them now. Instead, learn the side hustles or go get a side job that's going to allow you to earn an extra few hundred bucks or maybe even an extra thousand dollars a month to start building your base with. This is a long-term game. We're talking five, seven, eight years here, right? But what we always say is the number one key to success with building your base is by investing early and often, Robert.

7:44I love this breakdown, Austin, and it really just covers everything that we talk about on a regular basis and getting the people to understand, stay away from FOMO, implement delayed gratification, and really understand that the earlier you set yourself up and let compound interest do its job through this basket of ETFs and doing this Roth IRA, the better off you're going to be in the long run because so many people do it the opposite. They sit there and they spend beyond their means. They live beyond their means all through their twenties and thirties. They wake up and they're 40, 43 years old and they're like, oh shit, I don't have anything saved towards retirement.

8:24Then they're playing catch up. So I love this strategy. And speaking of ETFs, let's take a moment to talk about some of the funds we personally like a lot. 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 portfolio exposure across equities, fixed income, and cash alternatives like T-bills. Their ETFs may be interesting for folks looking to generate passive income inside their investment portfolio. They even offer ETFs that provide exposure to the S &P 500 index or the NASDAQ 100 index, while aiming to offer high monthly income beyond what investors would receive from plain exposure to the index.

9:08Their funds may serve as a compelling income-focused alternative or complement to many investments already in many investor portfolios. So if you're listening and you're a recent graduate looking to add passive income-focused ETFs to your portfolio, consider learning more about NEOS's ETFs at neosfunds.com. And as with all investments, investors should carefully consider their investment objectives, risks, charges, and expenses of NEOS exchange-traded funds before investing. To obtain a prospectus containing this and other important information, please visit neosfunds.com. please read the prospectus carefully before you invest.

9:43NEOs ETFs are distributed by Foreside 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, and fixed income securities will decline in value because of an increase in interest rates. You know, Robert, we talk about NEOs funds all the time, and I just talked about VOO, right? The ETF people need to be buying to track the performance of the S &P 500. But maybe if you're someone who wants a little bit more passive income inside of your portfolio, like Robert and I prefer, SPYI could be a cool compliment or alternative to that.

10:24It's totally up to you. We love Nios Investments. We love their ETFs and we are super proud that they are sponsors of the show. So let's now flip the switch. Things not to do during your defining decade. This is the critical, critical points we want to make for everyone listening. And remember, this is for graduates. So share it with a cousin, share it with a niece, share it with a son or a daughter, because this is going to be so important to help them figure it out along the way. So here we go. Number one, do not go into high interest credit card debt. Let me say it again. Do not go into high interest credit card debt.

11:00This is a crutch a lot of my personal friends use to supplement their lifestyles. I see it every single day. I personally know people in their 30s, 20s, who have eight, 12, even$20 ,000 of credit card debt, constantly holding them back from building wealth. You know, and you look at it at first, these people really never had the intention of going into credit card debt, but fell victim to it after getting the FOMO from living in a cool town like Nashville or Miami, or even here in St. Petersburg. And this debt is bad and will continue to ruin you financially if you're not ahead of it and staying on top of it.

11:37Now, remember, we don't think credit cards are bad. We're not saying that. Credit card debt is bad and carrying a balance is worse. If you manage your credit properly, it can be a great wealth building tool, but most people don't do that. That is why you need to look at the snowball method or some of these other methods to make sure to get it paid off as soon as possible. Number two, don't fall victim to the decades old American dream myth that owning a single family home is a great investment. We're not saying don't buy real estate. We're saying though that in your 20s, you should house hack.

12:10We talk about this all the time. There's a mortgage out there called the Fannie Mae 5 % mortgage where you can buy up to four doors, $1.3 million to buy a duplex, a quadplex or a triplex. Very, very simple here. In the main perspective, we want you to understand is that for your first property, we don't think it should be a single family home because you're tying up too much of your money, that down payment and the closing costs and too much of your credit. So in our opinion, you'd be better off to find a duplex in your hometown priced between three and 500K maybe, something that you can afford.

12:47Put down that 5%, it might be 20K and get that up and running. Then you can live in one unit, you rent out the other unit so they're paying part of your mortgage, if not all of your mortgage. And this will really set you up because not only are they paying down the mortgage for you, but you get the tax benefits and the capital appreciation, which is incredible. And this single move can put you so far ahead of your peer group in the early stages and really build your wealth early on. So this is what we believe is a great strategy for those just starting out in real estate. And you know, Robert, a lot of people listen to Dave Ramsey and what he has to say about going out and making sure your first home, you go buy it out, You put as much down as possible, then you spend$200 ,000,$300 ,000,$400 ,000,$600 ,000 of your hard-earned money over the next decade paying it off, tying up all of that money inside of this single-family home, which isn't producing any income for you.

13:42We're instead telling you to go a different route, something where you can still live, but also a way that's going to produce income for you, not only while you live in it, but this could even be thought of, Robert, as a stepping stone to building out a larger real estate portfolio throughout your life. I mean, in your 20s, if you go out, for example, I have a friend named John Erringman. He's also a content creator, Johnny Finance. He lives in Cincinnati, Ohio, Robert. And I think when he was 24 or 25 years old, he bought a duplex. It was about a quarter million dollars. He lived in one half.

14:13He did it with low interest rates during COVID and he rented out the other half. Well, now, you know, he's gotten married. He wants to upgrade his lifestyle a little bit. He's making a little bit more money. And so he has completely moved out of that first duplex. He now has two units, right? Both sides of the duplex that are paying him money covers more than the mortgage. You've seen the capital appreciation, to your point, the tax write-offs, all the cool stuff that comes with that. And now he's ready to start upgrading his lifestyle a little bit and go into that next duplex or single family home now that he has something that's working for him with his money and paying him every single month.

14:43So that's the kind of mindset shift we want people to make. It's like you can either put all this money into a single family home and live there, which is cool, or you can still live somewhere and have that same place pay you. We want to always be thinking about ways to make money with our money and putting our money to work. Yeah, that's a great analogy. And my issue is that Dave Ramsey's math just ain't math. We use that term all the time and it just isn't because we always talk about velocity of your money. And if I can make over here 10, 11, 12, 15 % with my money and over here, I can get a mortgage for five or 6%, even right now, 7%, I'm still going to have the positive arbitrage over here.

15:20So for me, I am never paying down a low interest mortgage. And for so many people that bought homes during COVID for the two, three, 4 % mortgage, that's even worse advice. Because if you're sitting on a three or 4 % mortgage, which we may never see those rates again, and you can go over here in the VOOs that we talk about in the SPYIs and the QQQs, if you can go over there and make 10, 12, 15%, all of that positive arbitrage is going to you and not someone else. because what most people don't understand, sounds cool to say you own a home, sounds cool to say you have all the equity in the home, but guess what?

15:56You can't do anything with that equity, so it's an opportunity cost that's just sitting there doing nothing. Now, is it accumulating? Sure, that is true, but if you take that same opportunity cost with that money and get it working in the markets, you're gonna be so much further along in your financial journey. That's why we always say when you're first getting started, please house hack first because it gets you into real estate without tying yourself up and really locking you down and not being able to make moves. So that's why we like house hacking first. And there are so many duplexes, triplexes, even a quadplex if you want to go that big, but start with the duplex.

16:35There's so many out there, again, that are between this$300 ,000 and$500 ,000 range. You go put$20 ,000,$25 ,000 down in a couple of years when you can afford that, or maybe even in your late 20s, who knows what your plan is. But that's going to be a step stepping stone for you to now build out a real estate portfolio that's going to be paying you for the rest of your life. The rest of your life, Robert. All right, Robert, let's move on to point number two, the middle stage. You're finally starting to hit stride in your career, no matter what line of work you're in. You got the job you're happy with, or maybe you even started the company that you've been dreaming of for years.

17:09Now it's go time. So starting with some financial action items related to your career that you can do right now. The first one is everyone should be contributing to their 401k up to the match so they can receive the free money that comes with the match, right? We always say up to the match no matter what it's invested into because that's free money. The contribution will come out of your paycheck before you even see it, making it sort of like this forced savings account that will pay you dividends in the future. When I was 22, 23, 24 years old working my nine to five job, I was like, man, I really don't want to contribute to my 401k.

17:46This is like an extra 300 bucks a month, but I guess I should do it, right? I guess I should. And when I finally left that job, Robert, I had 20 grand, dude. I had 20 grand in there in just like two and a half years. It was insane. So I think that's an awesome financial action item everyone can do right now in their career. The second financial action item everyone can do right now as well is not to make the mistake of having too much money withheld from your paychecks every pay cycle. Let me say that again. Don't make the mistake of having too much money withheld for taxes during your pay cycle.

18:19You do not want a massive tax refund in April. You don't want that. People make this mistake all the time because they think they're doing something right by having the government pay them back a bunch of money at the end of the year. No, that's not the case. The government is holding on to this extra tax money that you earned throughout the year and they're not paying you a dime in interest to hold on to it. We want that money in our pockets, working for us, invested. We want that to be used toward building our base. Now that I've shared a couple of my favorite financial action items as it relates to people's careers, Robert, I want you to share some highlights regarding hiring and firing people as you've run businesses with hundreds of employees throughout your long career.

19:03I would say first and foremost, the most important thing for everyone listening and everyone you share this episode with is to understand one thing. You have to remember that your boss might be acting like your friend, giving you all the high fives in the beginning. Everything is going great, but that can turn on a dime and you can find yourself unemployed overnight. If the economy turns bad or the company has financial issues, who knows? So it's always so important for you to keep your eye on the prize and the prize is you. You see it all the time where people talk about every six months, put yourself out there, see what you can do internally to see if you can move up in the company, put offers out there externally and see if you can find other better opportunities.

19:47because we always hear the story and we see the memes about it, that if you, something happened to you, your company would replace you in 48 hours and move on from your job. So it's so, so important for you to always understand and know your worth and always be accelerating your job, whether that's increasing your skillsets, keeping up to date in your skillsets. Something that's been going around a lot lately is AI is not going to take your job. The person that's better at AI then you is going to take your job. And this really illustrates what it means to stay on top of your skill sets. Because if you do, and you can fill those positions within your company or a new company, because you're ahead of the curve, when it comes to skill sets, you're always going to have upward momentum in your salary and in your compensation packages.

20:37This is so, so critical. Too many people stay loyal to companies that are not loyal to them. And I don't want you to fall victim of it because of the fact is the upside is just not going to be there for you long term unless you're with a startup that's going to give you a piece of the company because at the end of the day, they would fire you or replace you in a second for a better offer and you need to be looking the same way. I completely agree with this advice, Robert, 100%. To play devil's advocate, a piece of advice I got from one of my old bosses when I worked at this multi-billion dollar healthcare company.

21:12He was about 10 years older than me. So he was kind of where I wanted to be in 10 years. And the advice he gave me was to find someone at your job, if it's a boss, a mentor, whatever, and ride their coattails. What he said was, for example, his mentor was about 15 to 20 years older than him. He was a decision maker, right? He was a hotshot and he was rocking and rolling. And so he said, let me work as much as I can around this guy. So if he jumps to a new job, he's going to see me as invaluable and ask me to come with him. And that's exactly what happened. So he was this analyst for one of these C-suite decision makers, I think it was at Humana.

21:48And then the guy at Humana became the CEO of the company I worked for and pulled the analyst with him and then gave him a VP role right off the bat. And so he was sort of riding this guy's coattails from one job to another. And I totally agree, your job, these companies, they're ruthless. If they got to do layoffs, if they got to do budget cuts, you're on the chopping block, time to go. I can give you all some stories about that, especially with my girlfriend. But I do highly want to encourage people to find that version of themselves that they want to be in that 10 or 15 year period. And if it's with a boss in or out of your department, a mentor, maybe they don't even work at your company, but kind of put yourself around them a little bit more.

22:27And if they do job hop to another company, let them know, hey, I'd love to come work with you at this new opportunity. Now, speaking of that, Robert, the second thing I want to mention And two, just to really lay in your point here, company is going to get rid of you so quick, you can even blink. I mean, my girlfriend was working for a company back in 2022, and she was rocking and rolling, five-star performance reviews, everything was going great. And then she randomly got called in on a Thursday, right? Whatever it was. And the CEO and the head of HR were there. And he just said, sorry, we got to lay you off.

22:56We're doing budget cuts. You and the whole other marketing team are gone. We don't have money for you anymore. Thanks so much for your time. See you later. Bye. Here's three weeks or four weeks of severance. Good luck. And this was after you're doing great. We can't wait to promote you. We love you. You're awesome. It's like, sorry, see you later. Bye, right? So just want to really nail in this point here to your kind of perspective here, Robert, is that you should always be sharpening your skill sets, keep your resume up to date. And this sort of second point, you know, really leans into that, which is networking, right?

23:23Networking is not just a meme we hear in college and high school and after, right? I can say with certainty that my business has grown tremendously over the last two or three years because of networking. Now, when you're employed and you're working out at a company, networking might mean attending maybe some mentorship programs or different workshops around town. For me, for example, I worked at a healthcare company. So there was sort of this mentorship program called Leadership Healthcare. We'd meet every other week. We'd all go get coffee and lunch. I get to network with people there. It was an awesome opportunity.

23:55I met a lot of friends. Maybe that is even taking some competitors out to lunch. You want to be friendly here. This isn't like business. Networking is being personable and just making new friends that also happen to work in the same field or industry as you. So when I was working at my corporate job, I was always meeting people for lunch, for coffee, you know, beers after work, whatever it was, not just to learn about, again, their job, but about them as a person. And here's what I would do. This is the hack. Make an Excel spreadsheet with a couple columns. The first one should be the person's name.

24:24The second one should be where they work. The third one should be where you guys met for drinks or breakfast or whatever it was. And the fourth one should be something interesting that they were working on that you can follow up about in let's call it three or six months when you want to reopen that door for a conversation, right? Oh, you know, last time we talked, you were working on this project about ABCXYZ. How'd that go, by the way? Did you able, you know, were you able to hit that deadline or do whatever you wanted? Wow, Austin, thanks so much for remembering. Yeah, dude, I was able to do that.