110: The Spending Trap: Escape the Psychology of Broke

Summary

Rich Habits Podcast Episode 110: The Spending Trap: Escape the Psychology of Broke

Hosts: Austin Hankwitz and Robert Croak
Release Date: March 24, 2025
Podcast Description: The Rich Habits Podcast is a financial literacy resource dedicated to helping listeners regain control over their finances by adopting new, effective habits. Hosted by seasoned entrepreneur Robert Croak and young entrepreneur Austin Hankwitz, the podcast delves into the financial behaviors of the wealthy, sharing personal experiences, mistakes, and strategic blueprints for financial success.

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Introduction

In Episode 110, titled "The Spending Trap: Escape the Psychology of Broke," hosts Austin Hankwitz and Robert Croak explore the deep-seated psychological factors that contribute to overspending and under-saving. They aim to provide listeners with actionable strategies to break free from financial habits that hinder long-term wealth accumulation.

Notable Quote:

"Rich is loud and wealth is quiet."
— Robert Croak [04:44]

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1. Spending as Part of Identity (04:59 – 11:11)

Key Discussion Points:

• Identity and Consumption: Both hosts discuss how individuals often equate spending money with defining their personal identity. This mindset leads people to purchase items and experiences not just for utility but to signal their status and align with an aspirational self.

• Personal Anecdotes: Robert shares his past experience of possessing luxury items like Rolexes and Porsche cars in his early twenties, which he now views as unnecessary for true wealth. Similarly, Austin recounts his own journey from equating spending with identity to shifting focus towards saving and investing.

Actionable Strategies:

• Redefine Richness: Instead of associating wealth with material possessions, redefine being rich as being a lifelong learner, having strong relationships, or pursuing meaningful hobbies.

Notable Quote:

"Build the life that's authentic to you, not what you think others think it should be."
— Robert Croak [10:30]

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2. The Allure of Instant Gratification (12:00 – 17:10)

Key Discussion Points:

• Dopamine and Spending: The hosts delve into how instant gratification from purchases, backed by neuroscience studies (e.g., a 2023 MIT study), can lead to impulsive spending that undermines long-term financial goals.

• Behavioral Traps: They highlight common scenarios like ordering takeout instead of cooking, impulsively buying trending items on platforms like TikTok Shop, and the ease of digital payments that facilitate overspending.

Actionable Strategies:

• 48-Hour Rule: Implement a waiting period before making significant purchases. Write down desired items and revisit the decision after two days to assess genuine need versus impulse.

• Automate Savings: Set up automatic transfers to savings or investment accounts to prioritize long-term financial goals over immediate desires.

Notable Quote:

"Children do what feels good in the moment. Adults devise a plan and stick to it."
— Austin Hankwitz [13:18]

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3. Social Pressure and FOMO (17:10 – 25:00)

Key Discussion Points:

• Impact of Social Networks: Social pressure and the fear of missing out (FOMO) drive many to engage in overspending to keep up with peers, attend events, or conform to societal expectations.

• Cycle of Spending Seasons: The hosts describe the recurring financial strain caused by seasonal events like weddings and holidays, leading to continuous debt accumulation and hindered savings.

Actionable Strategies:

• No Spend Days: Introduce designated days where no discretionary spending occurs. For instance, Austin shares his “No Spend Sunday” where he engages in free or low-cost activities, proving that enjoyment doesn't require significant expenditure.

• Selective Participation: Encourage listeners to prioritize events and expenditures that align with their financial goals, even if it means declining invitations or finding alternative ways to participate.

Notable Quote:

"Spending $2,000 on a vacation is not what I had planned for the summer. You should feel comfortable saying no."
— Austin Hankwitz [20:03]

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Challenges and Practical Exercises

Hosts proposed three key challenges to help listeners overcome overspending:

1. Rethink Richness:

   • Challenge: Define what being rich means beyond material possessions. Identify aspects such as continuous learning, strong relationships, or personal growth.

2. Implement the 48-Hour Rule:

   • Challenge: For any desired purchase, write it down and revisit the decision after 48 hours. If the desire persists, plan how to afford it without disrupting the budget.

3. Adopt No Spend Days:

   • Challenge: Dedicate specific days (e.g., No Spend Sunday) to limit spending to essentials, fostering creativity and contentment without monetary reliance.

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Q&A Highlights

1. Understanding "Systems in Place" (29:15 – 31:59)

• Listener’s Question: What does having "systems in place" mean in personal finance?

• Hosts’ Explanation:

  • Budgeting: Utilize budgeting tools to track income and expenses transparently.
  • Debt Management: Understand and manage the debt-to-income ratio.
  • Automated Investments: Set up automatic transfers to investment accounts to ensure consistent savings without manual intervention.

Notable Quote:

"Wealth is inevitable if you follow the plan."
— Austin Hankwitz [30:46]

2. Career Advice for a Recent Graduate (32:08 – 36:48)

• Listener’s Question: Guidance for a 20-year-old with a business management degree unsure about career paths in a small town.

• Hosts’ Recommendations:

  • Move to Opportunities-Rich Areas: Relocate to bigger cities where opportunities are abundant.
  • Consider Management Trainee Programs: Programs like Aldi’s store manager trainee can fast-track career growth with competitive salaries.
  • Focus on Building Savings: Prioritize saving the first $20,000 by taking on side jobs or additional work.

Notable Quote:

"At 20 years old, your number one goal is to get your first $20,000."
— Robert Croak [36:48]

3. IRA Rollover and Investment Strategy (39:12 – 44:51)

• Listener’s Question: Advice on managing a traditional IRA invested in a Target Date Fund after leaving a 401(k) position.

• Hosts’ Advice:

  • Consider Rolling Over to a Roth IRA: Although it involves paying taxes now, it can be beneficial in the long run.
  • Diversify Investments: Move away from Target Date Funds to ETFs and index funds for better long-term growth.
  • Consult a Tax Professional: Ensure tax obligations are manageable when converting accounts.

Notable Quote:

"It's better to pay your taxes now, where you know where it's at, take the hit now and move on to the future."
— Robert Croak [41:30]

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Conclusion

Episode 110 of the Rich Habits Podcast provides a comprehensive exploration of the psychological barriers to financial success, particularly focusing on overspending habits rooted in identity, instant gratification, and social pressures. Through personal anecdotes, empirical evidence, and practical strategies, Austin Hankwitz and Robert Croak equip listeners with the tools necessary to break free from the spending trap and build sustainable wealth.

Final Encouragement:

"Take notes, take action, and share with a friend if they're suffering from any of these issues."
— Robert Croak [25:27]

Listeners are invited to engage further by participating in challenges, joining the Rich Habits Network, and contributing their own tips and experiences to foster a community of financial growth and support.

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Note: This summary intentionally skips advertisement segments and sponsor messages to focus solely on the episode's core content, as per the provided instructions.

Transcript

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[Austin Hankwitz]

Hey everyone and welcome back to the Rich Habits Podcast brought to you by Public.com, a top 10 business podcast on Spotify. My name is Austin Hankwitz and I'm joined by my co host Robert Krok. Robert is a seasoned entrepreneur in his 50s with lifetime revenues of over $300 million, 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. Now, 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. All right, Robert, what are we going to be talking about in today's episode?

[Robert Krok]

In this week's episode of the Rich Habits Podcast, we're going to demystify the psychology of spending, specifically overspending under saving and letting lifestyle creep ruin your chances of retiring with dignity. There's much more to this episode than lifestyle creep, especially as we lean into the mindset side of the equation.

[Austin Hankwitz]

Robert, I feel like when I first got started in my career there was a lot of overspending that took place, and we'll get into some of those examples here pretty soon. But throughout the episode, we're going to challenge you on every single one of these things. We're going to give you some actionable things, advice, ideas, things that you can do in your day to day life that's going to help you rewatch, wire your brain to stop overspending and also learn some strategies and techniques that'll help you dial in your budget and take a little step back from the fear of missing out or FOMO as people say.

[Robert Krok]

I believe that mindset is one of the greatest problems people face when trying to figure out their personal finances. So I believe this episode will resonate really well with our audience just because we break it down in a way. I believe that'll help people over overcome these hurdles in a meaningful way and help them get on the right track. So let's dig in.

[Austin Hankwitz]

Before we dig in Robert, we have to remind everyone April 3rd in Toronto, Canada at 4pm we will be speaking at the Grit Money Summit alongside Sahil Bloom, Cody Sanchez, Chris Camillo and a ton of other incredible people like the managing partners at Neos Funds, Katie Stockton, some like CNBC talking heads. Like some really cool people are going to be there and it's completely free. So if you're in the Toronto, Canada area, there's going to be a link in the show notes notes below to get your tickets. Again, they're free and if you are not in the area and you still want to watch the live stream, it is free to tune in as well. There's going to be a link as well in the show notes to register for that. Get the reminder. Watch it. It's going to be streamed on YouTube so you shouldn't have any problems with it. Super, super simple stuff. It's going to be a blast. Robert we'll talk investing 2025 stock market outlook, entrepreneurship, the rise of the DIY investor and 10x ideas for the next 10 years. That's going to be my favorite one for sure. And by the way, again Robert and I will both be there in person. So if meet us if you want to hang out with us, there's like a cocktail hour afterward. We get some drinks. It'll be cool. Meet us there. It's completely free and we can't wait to meet you guys.

[Robert Krok]

The panel is incredible. So many who's who of people in personal finance and business and so I'm super excited to take part in this and just really share everything we can. All of our best stuff and knowledge of where the markets are now, where they're going, what are our big ideas moving forward. So it's going to be a blast. I'm excited to do it with you and share the stage with so many other great speakers. Let's jump into Point number one. The first reason why people find themselves overspending and under saving is because they think about spending money as part of their identity. People spend to signal who they are or who they want to be. Studies like those from the Journal of Consumer Research show folks often buy to align with with an aspirational self, even if it tanks their finances. And I can't wait to dig into this point.

[Austin Hankwitz]

I completely agree with this one. Right. Why are people overspending? Because they look at spending money as part of their personal identity. I am the person that can afford the lattes, or I am the person that can go on vacation twice a year. I am the person that can buy the new shoes, eat out, go do these different things because that's who I am. That's my identity. I identify with that type of rich. Right? That's what rich means to me. And I think that's a mistake. It's not the way that we should be looking at ourselves when it comes to defining what rich is. So do you have any, maybe personal stories or examples as to how? I'm sure in the past, you know, you've been doing this for a while, you probably overcame this hurdle of spending money as an identity.

[Robert Krok]

Yeah, I did. And I definitely was that person. I took it one step higher. I was the person that felt that even at 21 and 22, that I had to have the Rolexes, I had to have the fancy cars, and I had all of it at 23 years old. I had a brand new SUV, I had a Porsche, I had two or three Rolexes. And now in retrospect, even though they were at that time assets, I thought I definitely learned, and I talk about it every day now, and I challenge people every day now, that I don't believe you should own any of that stuff or spend money on any of it until you at least have $250,000 saved and invested. And so many people believe they need these expensive items to show what their identity is. And I don't think that should be the case. So for me, how I overcame it was realizing that I needed to save more money and invest more. And for me, I'm very happy with the result because I think it was around 23 or 24 years old is when I really made the switch. And I started really basing my identity around my investing knowledge. And it was such a great pivot for me from a mindset perspective, because then it was kind of like a party trick. People like, oh, what are you up to? Oh, I'm investing In this, oh, I'm renovating this duplex. And it was really all about that, rather than talking about things, realizing the problem, fixing the problem, and overcoming it through mindset shifts that we're covering today.

[Austin Hankwitz]

I completely agree. Having that weird tendency of spending money as part of your identity, or I am the person that does this, can afford these things. I understand how important it is to manifest. And, you know, I know Robert, for example, for you, you bought one of these, like, Porsche keychains. So, you know, you want to have a new Porsche one day and call it six months later, you got it. Because the keychain remind. I understand manifesting, but there's a difference between vision boards and manifesting and like spending money you don't have and overspending and under saving, under investing. And so that's the big key shift we're trying to really implement here is like, remind people you should have more to your identity than just what you're buy. It took me, I want to say, three years, two or three years out of college to make this shift. I remember because I graduated college, I was like, listen, guys, I got this new job. I'm making 60 grand. I'm moving to Nashville. Get me the Lexus. I want some suits, I want some Brooks Brothers. I want to have all these cool things, like, I'm going to be that cool person. And it was my identity to spend and have a big car payment. It felt like my identity was to go eat out and do these things. And it felt good in the moment. But I found myself looking back, wow, I didn't max out my Roth IRA last year. What was wrong with me? Why didn't I do that? You know, I carried credit card debt. That's not normal. Why did I do that? And so, like, reflecting upon those things and being able to say, that's not the type of person I want to be. I want to be more humble. I want to have more ambition toward things that will grow my net worth over a long period of time versus impress people. I don't care about that. Don't even think about me.

[Robert Krok]

To begin with, rich is loud and wealth is quiet. And I remember when I was 22 years old and I was a car salesman, it was right when there was special financing, like 2.9% financing. And I had the first bay by the door, the busiest door of the dealership. And I was the kind of guy, I was always bouncing off walls, just like you see me today. And I was the kind of guy I would wait on anyone. I never Ever cared what they look like, what they were dressed like. And I remember vividly to this day, this farmer looking guy in overhauls and a T shirt with no sleeves gets out of this truck. He walks up to the door and everyone's scattered. I was like, what's up, man? Come on in, let's talk. So we talked for like 10 minutes. He goes, I want to buy a new Corvette. And everyone was kind of chuckling. I could see him in the distance. I'm like, let's go take a look. We go outside, we walk around, we do our thing. He had a bag of cash and he literally was like, that's the one I want. Came in. I didn't judge him. He bought it, paid cash for it, said, I'll be back to pick up my truck, drove it out of there, the happiest person ever. And it always stuck with me because people judge so much based on what you drive, how you dress. And I'm not saying anyone here listening needs to go out and buy Walmart clothes or go to Goodwill. I'm not saying that. But I am saying that this is so important for people to understand, not to make these depreciating assets and these big time purchases of luxury clothes or luxury cars or whatever it may be as part of their identity. I think it's so important to understand that. So here's the challenge. If you're someone who's struggling with overspending because it's part of your personal identity, it's time to rethink what it means to be rich. Are you rich because you're a constant learner and you're trying to always learn new things? Are you rich because you have a strong friend, group and support system in your life? What we're trying to get at here is being rich doesn't always mean you're spending your money and buying things for validation. It should mean building your life, the life you desire and not what you perceive society thinks your life should be. This is one of the biggest things that I've overcome to be able to do what I've done in my career and become what I am today. And I think it's so important. Build the life that's authentic to you, not what you think others think it should be. Because at the end of the day, I promise you, they're all broke, living beyond their means. And you need to do what is best for you.

[Austin Hankwitz]

Build the life you desire, not what you perceive society thinks your life should be. Boom. Mic drop. Okay, so before we jump into our second point quick 15 second reminder. We are running a seven day free trial right now inside the Rich Habits Network. So you can hang out with us completely for free for an entire week, join our weekly live streams, watch 8 hours of video coursework, or even send us a message, a dm, Ask a question. It's completely free. You can cancel it if you hate it. No hard feelings. There's a link in the show notes below to join the Rich Habits Network. Now let's think about the second one here, which is people that are chasing instant gratification. Maybe they're not spending money on the lattes because they think it's their identity. Maybe they've kind of figured some other stuff out with that, but they're still chasing that instant gratification. Dopamine hits from buying stuff, even if you don't need the stuff, are very real. Neuroscience backs this up. I think it was a 2023 from MIT that showed the brain lights up more from a purchase than from saving or investing. But after that high begins to fade, you might now be looking at yourself like, wow, did I really just go into debt for this? Or man, I feel regret even buying this in the first place. Here's something I say all the time. Children do what feels good in the moment. Adults devise a plan and stick to it. I've probably said this phrase a hundred times now on the show, and I know a portion of you probably still aren't executing upon that phrase in your daily lives. You see the shoes on sale at HOKA or on running and you go buy them even though they're not in your monthly budget. And let's be real, you're only running once a week anyway. Or maybe you immediately buy whatever the video on TikTok is trying to sell you. With the TikTok shop, you're scrolling your feed, the person's got a phone charger or a wallet or a foot massager and you're just like, I need to buy it. And it's so easy to hit the Apple Pay little face ID and it's at your house two days later. I get that. But at the end of the day, having a definition and a clear line and a strategy around what I want to buy and putting parameters around that versus that instant gratification of buying or spending money is super, super important when it comes to building wealth over a long period of time.

[Robert Krok]

I love this. The other way to look at it too is instant gratification comes from two other things, boredom and laziness. A lot of times that's why Amazon and all these websites make it so easy for you to click the buy it now button because they want you to do it in this instant moment. And so I talk about it all the time. That eating out randomly because you didn't go to the grocery store or ordering Uber eats and paying all the absorbent fees because you didn't plan ahead to cook. All of these things also fall into this category that really can diminish your financial being by not allowing you to follow a budget. You need to forecast. You need to understand where your money is supposed to go so you don't fall victim to this trap.

[Austin Hankwitz]

And Robert, you mentioned like the eating out and the laziness or the boredom and things like that. I just want to make sure we're all on the same page about what spending an extra $400 a month on Uber Eats or Grubhub or DoorDash or even just like delivery or you know, eating out on a Tuesday because you don't want to cook or whatever that is. 400amonth is all we're saying here. 400 invested in the S&P 500 from 35 to 65. So that 30 year period of time, $400 a month, that's all we're talking about. $1.1 million. $1.1 million. So when people are like, oh, I don't have the money to invest, I can't afford it. We don't have a retirement savings. We don't do these things. Yeah you do. You're just eating it. You're eating your retirement. Every time you swipe the doordash or open up Uber eats or go out and do the happy hours, like that's your retirement and you're eating it. And so I want people to understand that only $400 a month is what we're talking about here. That's the difference between over a 30 year period, becoming a millionaire or not.

[Robert Krok]

Yeah, this is such a great illustration because it's not just food. People nickel and dime themselves. You mentioned TikTok shops. I think that is one of the greatest drainers of bank accounts right now. Because people see all of these things are like, oh, that's so cute. Click. Oh, I love that. Click. Oh, here's that supplement I saw again. It's so viral. Click. Most of this stuff doesn't go to use. Most of it doesn't help your health or your wellness or any of that. And yet it's just a big drain on your bank accounts. Rather than making the effort to be Consistent. And I don't care what people spend if they were putting away 15 or 20% of their monthly income first and then spend the rest. But most people don't have it dialed in. We talk about automating your spending and automating your investing every month. So for me, it's all about if you're putting away 15 or 20% a month, then go ahead and order the Uber Eats. But if you're not, you should never be doing that.

[Austin Hankwitz]

So here's the challenge that Robert and I want to share with you when it comes to overcoming this instant gratification spending habit, right? This overspending habit of instant gratification. I need this. It feels good. I'm spending hundreds of dollars a month on TikTok shop or Amazon, right? The 48 hour rule. I have a page on my notes app in my iPhone that I write down a list of all the really big important purchases I want to make. So instead of impulse buying them, I write down Austin wants to buy a couch for $3,000. And I write it down in the notes app. And then if I find myself coming back to that 48 hours later and I still want to buy it, right? Two nights of sleep have taken place by this point. I slept on it twice and I still want it. Then I'll further explore how to afford it, how to buy it where it fits in the budget. But if I'm like, man, I want that foot massager on TikTok, and then I'll write it down in my notes app, then I forget about it. I never really wanted the foot massager anyway, right? It was just a FOMO, right? An instant gratification thing on TikTok. And so that's what we're trying to help you guys understand is instant gratification is real. We get that. But by implementing something like the 48 hour rule, hopefully you can cut back a little bit on that instant overspending, allowing you to save and invest more over time.

[Robert Krok]

A hack that I use all the time, and I don't know how many people that are listening know this, probably most, but I'm going to share it anyway, is if you have a high ticket item you're going to buy online, integrate the 48 hour rule. But when you think you're going to buy it, put it in your shopping cart. Because so many big websites out there that sell these high ticket items, if you put it in your cart and you abandon the cart, they will email you almost immediately. Within 24 or 48 hours, a discount code to get you back. And that will save you some money on this high ticket item, if you don't already do that. Okay, so let's go to our last point of overspending, and that is social pressure and FOMO fear of missing out. This point is so impactful to your wealth building journey. I see far too many people kick the can down the road over and over again because of the social pressure they deal with on having to drive a certain car, live in a certain neighborhood, eat at certain restaurants, because it's the cool factor. Even though you know you don't have the budget for those 200 dinners two times a week, all of this really comes into really damaging your ability to put aside the money. You guys hear me joke about it all the time. When you're in your neighborhood and you see lines and lines of the Mercedes and the new Jeeps and the BMWs, don't worry about that, worry about you. Because at the end of the day, you need to make sure you and your family are set up for financial freedom. Later on, many of you hear me talk about the cycle of the season. So I want to touch on that for a minute. And what I mean by the cycle of the season is this. We're in springtime right now. Wedding season is upon us. So right now you're thinking about, you got to go to this wedding, this wedding, and this wedding this summer, and you're already thinking about, how am I going to pay for it? Because you have to either drive there, fly there, you got to get hotels, Airbnbs going out, all of that is very expensive. And what do you do? You swipe the credit card. Then when after wedding season is over, you've got a couple months, you start paying down the credit card, you think you're getting back on track, and then boom, it's holiday season. So all of a sudden you start racking up the credit card for the holiday. And then you got to spend months paying that off. And this cycle repeats over and over every year and there is never a break from the cycle. So this is why it's so important to get rid of the fomo, get rid of the social pressure. Sometimes you just have to tell people, it's not in my budget to come to your wedding. I would love to be there, but I cannot do it. I am sorry. Write them a nice letter, send them a small gift. And just like the holidays, don't overspend on the holidays. Make a list and budget for the holidays. Because so many people just randomly go shopping, See all Kinds of cute things that they want to buy for the nephews and the cousins and the sisters and the brothers. That's all great. But if you don't budget for it, you're going to find yourself constantly in the cycle of the seasons and not be able to get out of it, especially if you're putting the debt on credit cards.

[Austin Hankwitz]

And I think the FOMO aspect is more of, like, a personal thing, where the social pressure is, like, an outside thing. If you have good friends, the social pressure, they will understand. Right? So, for example, I don't want to name names, but there's a guy in my friend group who does not make nearly as much as everyone else. And he's a really good friend. He's a homie. Love this guy. But I've noticed this year because we've talked about, you know, he's got some credit card debt, he's trying to pay off his car. He's trying to do these money moves and be smart with his money. I've noticed. Now we said, hey, man, we're gonna go get some drinks for St. Patrick's Day. We're all gonna go to Broadway, have a good time. You want to come? He's like, no, guys, I can't afford it. But y'all have fun. Let me know how it goes. Wishing you all the best. And I respect that. I respect that. And so, like, that's what we're trying to help you guys understand is, like, the social pressure of going out for the happy hour. And let's go on this vacation or this trip or this wedding or everyone's gonna go do this thing. I have to go with them. We're planning a beach trip right now for the summer, and a couple people like, hey, guys, can't afford it. I'm trying to save some money. This is not in my budget. Spending $2,000 on a vacation is not what I had planned for the summer. Y'all have fun, though. Wishing you all the best. And I always hope to be that friend that's, like, good for you. Whatever I can do to help, like, let me know. Happy to review your budget or whatever. Like, no shame in your game. And I think the FOMO thing, though, is what people probably struggle the most with, right? Because they're like, oh, my friends are out. They're doing this. I need to go join them. And then you swipe the first credit card, and it's like, oh, my gosh, there's $50. And then another hundred later, and it's just like, what did I Do having a plan to deal with the fomo, surrounding yourself with friends that understand that they might be putting some social pressure on you, but being cogn to know that they don't mean any, like, harm with that, right? They're not trying to put pressure on you. Just know that you've got that invite, I think is really important. So, really, like, for me, the big piece of advice I can share here is, like, if you have the friends that actually care about you, they'll understand saying, no, I can't make it to the wedding, I can't make it to the trip, I can't make it to the brunch, whatever, and you should feel comfortable in that. And then also, too, if you do get fomo, maybe that's like some emotional exercise you got to go through. Maybe there's therapy involved. Maybe there's something, I don't know, like, you have to begin to tackle that, though, head on. Because if you have FOMO for the rest of your life with all these different things, you'll never get ahead with your money, right? You'll keep kicking the can down the road, down the road, down the road. Now, Robert, here's my challenge I have for these people. And this is kind of embarrassing to admit, but it's honestly really fun. My girlfriend and I, we do something called these no spend days, right? So it might sound weird, but once you realize how easy it is to not spend money, it's actually really fun. So we do something called no spend Sunday, like, once a month. Which means on Sunday, we'll wake up and say, cool, what breakfast can we make here at the house with groceries we already have? And then we'll say, cool, let's grab some ollipops or some poppies and we'll go, you know, pack some lunch and go for a little picnic or something outside, or walk around a lake or a state park, or, you know, maybe go to a farmer's market to observe. Or maybe, here's one time we went to Costco on a Sunday and just tried all the different samples, right? So we didn't pay anything to go there or do anything. But it's like, we got out of the house, we had some fun. We did these no spend Sundays, and they work. And so, like, showing yourself that you can go out, meet people, do things and have fun without spending hundreds or even thousands of dollars like you would on a vacation just, like, proves to you that, like, you can be alone with your thoughts and the people. And, like, money's not something that has to be transacted upon every moment to make you happy. Right? You don't have that. That our first point, which was like, you don't have that identity with spending money.

[Robert Krok]

I love this. And it really brings me back to, I think I did a tick tock a few years ago about this where I was trying to show people how much fun you can have with outdoors for free. Because someone was saying, man, you're always walking, you're always hiking, you're always doing this, you're always doing that. I'm like, yeah, rather than buying a motorcycle, get good bicycles. Rather than buying a boat, go out and get paddle boards, they're awesome. Or kayaks. There's so many ways you can build a healthy lifestyle that doesn't involve spending a lot of money. I walk a lot. Elizabeth and I play tennis a lot. We do a lot of these things that are so much fun and so good for us, but they're not expensive. And I think that's a critical part about your point that I really enjoy. Because again, it gets back to people spend money when they're bored, find ways to exercise, have fun and get out of the house without spending a bunch of money. Because that is the key to really building and setting yourself up for financial freedom later on. Because let's face it, there will never be a day in most people's lives that they don't yearn to buy something. Trust me, there's always a car, there's always a watch, there's always a boat, there's always a house, there's always something I want to buy. But I forecast. I don't have knee jerk reactions, I don't have impulse buys. I plan. And that's what everyone else needs to do as well.

[Austin Hankwitz]

And I think beyond that. And just to put a bow on this too, there are so many free documentaries on YouTube you can watch. There are so many cool videos on the Internet that are free or games you can play. Like, there's free activities are everywhere. You just have to look for them. And if you're someone that like falls victim to the FOMO and the social pressure, like, let's go do this, let's go do that. Practicing austerity, practicing once a month. Just saying, I'm not going to spend any money today. I'm going to entertain myself with a book or apps on my iPhone or whatever else you're doing, your shoulders are going to kind of come back a little bit more. You're going to walk different. Knowing that you can do things in your life that doesn't involve spending money and not having that identity to spending the money.

[Robert Krok]

Every little bit helps. And if someone tells you, oh, putting away $200 a month or 400amonth isn't going to make or break you financially, they're absolutely dead wrong and they don't know what they're talking about. Every little bit helps. And that's why this episode is so critical. So make sure everyone understands, take notes, take action, and share with a friend if they're suffering from any of these issues.

[Austin Hankwitz]

The first challenge we gave you was to rethink what it means to be rich, right? Do not identify with spending money. How else can you identify with being rich? Is it you're a lifelong learner? Are you a athlete? Are you, you know, someone who has cool hobbies? Do you have a good friend group and support system? Like, what can you do to help yourself now? Identify as something else that you can correlate to rich, that is not. I spend money every day because that's who I am. And the next Challenge was the 48 hour rule, right? If you like it, instead of buying it instantly, right? Move away from the instant gratification. Have a plan and execute the plan. Write down the thing you want to buy. You come back to it two days later, 48 hours later, and you still want it. Then figure out how to pay for it. That's totally cool. But make sure you're not falling victim to the TikTok shop videos. We know you're watching them, and, man, I bought too much stuff over there. But the last challenge here are these no spend days. Figure out how to implement a no spend Sunday or maybe a no spend Saturday. I know something big that people love trying to do is no spend January. They start the year off as frugal as they can, hoping to keep that momentum going. If you want to be an extremist and you want to do a no spend month, be my guest. Let me know how it goes. That just essentially means, like, you're not buying anything. That's, like, discretionary, I'd imagine. But yeah, figure out that stuff. If it works for you, that's great. Just know that the social pressure, the fomo, you got to figure out how to deal with that or you'll never get ahead with your money.

[Robert Krok]

I agree. I love this episode. And it's just. It's the little things that compound over time that help people. And so many people don't figure out the little things and they don't take the time to set themselves up. Automate, get their spending in order so they can retire with dignity. That is our goal here. Help everyone figure out where their pain points are, how to get ahead, and how to really fix their situation. So this is a great episode to illustrate that.

[Austin Hankwitz]

So before we jump into our Q and A section of the show, let's take a moment to hear from this episode sponsor public.com if you're serious about investing, you need to know about public.com on public you can invest in everything. Stocks, options, bonds, crypto. They even offer some of the highest yields in the industry, like their bond account that pays 6% or higher right now and remains locked even if the Fed continues to cut interest rates. If you are an investor and you're not using Public, what are you doing? Public is the platform to use. They are our favorite favorite online broker and they offer every single thing to investors. What also sets Public apart is how they give you the tools and resources to make informed investment decisions. What that means is they have an AI tool called Alpha that tells you why an asset is moving. Hey, this stock is up. Here's why your portfolio is down today. Here is why. It uses AI to figure out why the markets are up or down. And it tells you every day, week, month, what's going on with your money and why it's moving. Super important.

[Robert Krok]

Yes. And Public is a FINRA registered SIPC insured U S based company with a customer support team that actually cares. So the bottom line is your investments deserve a platform that takes them as seriously as you do. Fund your account in five minutes or less at public.com rich habits and get up to $10,000 when you transfer your old portfolio. That's public.comfront/rich Habits paid for by Public Investing. Full disclosures in the podcast Description so.

[Austin Hankwitz]

Our first question is from Instagram dms@rich habits Podcast on Instagram from Liz Liz says on episode 109 you all mentioned having systems in place. Place. I've heard this term often and not just from your podcast, but I don't really understand what it means. Can you explain it to me as if I was 5 years old?

[Robert Krok]

Robert I love this question, Liz, and we've just discussed most of it in this episode, but I'm going to break it down. What we mean by systems in place are having a budget. We have a free budgeting tool in the podcast Show Notes. You can go get it for free, upload your budget and do an honest budget so you know exactly where you're at every month and stick to it. So that's number one Number two, once the budget's in place, is understanding your debt to income ratio so you can calculate how much money per month you can put away for investing. So that is a really important second step. We want people at least to be putting away 10%, we'd love to see 15 or 20%. So you're putting it away for the future and investing it. And number three is automating those investments, whether you do it through public.com or wherever you would do it, is automating it. So you're not leaving it to chance. Because if you leave it to chance, you're going to forget months at a time, you're not going to have that automation. And we want to make sure you are investing every single month and you have this dollar cost averaging strategy that is implemented into your daily life because then that way you will have the systems, you will be consistent and you'll be able to retire comfortably.

[Austin Hankwitz]

My way to think about it is even like an extension of this sentence, having systems in place that make wealth building inevitable. So like doing things day to day that make your wealth go up like clockwork, it just happens, it has to happen, mathematically speaking. And so Robert's point. Yeah, by knowing how much you're making every month, how much you're spending every month, and automating your investing, if it's with public or wherever else, will allow you to build wealth and you will be wealthy inevitably. It's just like you have the processes, the simple systems in place that make wealth building happen. It's not leaving it up. The chance of, oh man, I had this big emergency or oh, I have to go on this vacation, I can't invest this month, or oh, this is happening, so I don't have the money to set aside to pay off my credit cards or, you know, none of that. We want you to have a system in place with your money. If it's budgeting, if it's investing, if it's earning, if it's your whatever it might be to make sure that you are building wealth automatically. And there's an episode, it's called episode 102. I think it's called Automating youg Money or Building Automations with your Money, something like that. Where Robert and I give you the step by step playbook on how to build these systems for yourself.

[Robert Krok]

I love it. Yes, it's all about automation and consistency. Everything else is there. And like Austin says, wealth is inevitable if you follow the plan.

[Austin Hankwitz]

So our next question comes from Hunter. Hunter says I'm 20 years old. I'm working full time to get my wife through nursing school and myself through an online business school. We both have about a year and a half left until we graduate. We both live in a very small town where I don't feel like there's much opportunity to progress and have the life we desire. We have talked about moving to a bigger city in order to have more opportunities. But one issue I have is that business is a vast field and I don't know where to start with my career. So I don't know what I would do once I moved to this bigger town. So what advice would you give someone like me who's right out of college with a business management degree in order to perhaps find a job, be successful, make good money, and to set his family up for a good lifestyle? Thanks in advance, Robert. You want to start this one?

[Robert Krok]

This is one of my favorite questions. So yes, for me, and I grew up in East Toledo, Ohio. It was cold five months out of the year, snow five months out of the year, very little opportunity. It was a very downtrodden, kind of broken down area. And what I tell everyone now when they ask me, what would you do different? I would move. So in this instance, I was talking 18 to 21 years old. Move, move where there's money, move where there's power, move where there's growth, and move where there's opportunity. Because the closer the proximity you have to power and money, the easier it is for you to possess it. Because when you're in an area like a small town, there might not be much opportunity for you. And it's not just about making money. It's about learning and growing and improving on your skill sets, especially in the business world. Because you're right, it is vast. Who knows what you're going to end up doing in 10, 15 or 20 years. But if you move now, before you get too many roots growing in the small town, you might find yourself in a much better situation because business owners always lack talent. So if you're somebody that's driven, somebody that's going to work hard, somebody that's tenacious in a big market where there's lots of opportunities, I think you'll thrive that much more. And for the wife going through nursing school, that's going to open the door for bigger hospitals, bigger medical centers, and more money for her as well. So that's what I would do.

[Austin Hankwitz]

I totally agree. I grew up in a super small town called Kingsport, Tennessee. There was not much there besides working at a chemical factory called Eastman or being a doctor, obviously wasn't a doctor, and I don't work at a chemical factory, so I moved to Nashville. So much more opportunity. That's a really, really great piece of advice. Go somewhere where there is opportunity that you can afford. Right? Do not put yourself in a situation to go live in a New York City where a high cost of living or something. But maybe there's somewhere like in Georgia or South Carolina or North Carolina, somewhere in the Southeast that's a lot more affordable, but is definitely a bigger town than where you are right now. I don't really know where you guys live. Unfortunately, I didn't mention that. But tactically speaking, and this is something a couple of my friends who were in your exact situation did with their business management degrees. The Aldi store manager trainee. It's a manager trainee position. It's like 30 to 35 weeks long of like this sort of program where they teach you how to be a store manager at Aldi. And then once you pass their program, you like, become a store manager at aldi making between 65 and $85,000 a year. Come on, dude, 21 years old is what you'll be making. 65 to 85. That's exactly what I was doing. Graduated college, making 62 and a half. 65, whatever it was. That is a really great place to be. Now, of course you can go move up, you can go do the different things. Maybe you become a district manager, whatever. But the biggest piece of advice I could give anyone who's like, just trying to start their career and they have a very general degree and they're not sure what to do. There are companies like Aldi, like Walmart, like Buc EE's, like Chipotle. There's some really good companies out there that they start you low, but within 1, 2, 3, 4 years, you're making six figures. And if you stick with it, it you have the whole district to your name. And the reason why they do that is because people don't like to stick with it. But if you can stick with it, like I know Buc EE's for example. I'm sure you guys have heard, like the gas station Buc EE's. Buc EE's pays their store managers over a hundred thousand dollars a year. A hundred grand to manage a gas station. Right? Like, that's what we're trying to help you guys figure out if you're in this. Like, hey, I'm a recent grad. I don't really know what to do. Get in on one of These like, you know, Walmart store reps or Aldi store reps or whatever, put in your hours, which you know, you're 21, 22, 23, you got some time. Put in the reps, sacrifice the weekends, do what you got to do early on. So then you fast forward four years, you're making 90 to 120,000 at 25, like that is what I would do if I were in your shoes.

[Robert Krok]

And at 20 years old, for any of you that are younger, maybe you're 20, 18, 25, 26, your number one goal at that age is to get your first 20,000 bucks. Get it. I don't care if you have to work weekends, side jobs, side hustles, whatever it is, get $20,000, get it into your brokerage account, get it invested, and then keep going. That is your goal. You should be laser focused on finding a way to get your first money set aside. So then that way you at least have your start to building your base. It is so critical, and that is number one mission critical. What to do.

[Austin Hankwitz]

I could not agree more. And the second most important thing to do is completely stay out of debt. Forget about the credit card debt, forget about the high interest loans, forget about HELOCs, forget about car debt. Like, don't even touch it. If I man, that, that's if I give myself some advice, it's like, dude, forget about all that stuff. Just go invest and build wealth. And I'm looking on Indeed's website. Management trainee. Yearly salary in Tennessee at Aldi, $101,000.

[Robert Krok]

Amazing.

[Austin Hankwitz]

Come on, man.

[Robert Krok]

Amazing.

[Austin Hankwitz]

So before we jump to our last question from Kendall here, let's take a moment to hear from this episode sponsor Masterworks. Robert, I just saw a Bank of America survey. They surveyed all these wealthy individuals and it said by next year, ultra high net worth individuals could be devoting up to 11% of their portfolios to find art and collectibles. Art has historically been an asset class celebrated for its lack of correlation to other popular assets for the last three decades. Like the stock market, we're seeing some volatility right now, but the sector looks to rebound from its 2025 highs with Sotheby's just having their first big auction of 2025, and it nearly topped the very highest end of their internal estimates. Not to mention the co founder of global private equity firm Blackstone has quietly been buying up some impressive artwork for himself. Now, we always preach how important it is to have diversification because we too have our own money invested in artwork. I've Been using Masterworks now for over five years. And Robert, we had a really good question in the Rich Habits network on a live stream last night, which was, hey, should I put 1, 2, 3% of my net worth into artwork? Knowing how uncorrelated it is, the answer is, yeah, for sure. I mean, you see these ultra high net worth people putting in up to 11% of their net worths. So finding that, call it low to mid single digit, that works for you is how I would approach it myself.

[Robert Krok]

And that's right, because both of us invest with Masterworks, the sponsor of today's episode. And we've even interviewed the founder and CEO Scott Lynn on the show. And since then, they've crossed over a billion dollars in capital raised featuring artwork offerings that typically range from a half a million to $20 million. Although with Masterworks, you don't need to spend millions or even be an art expert. And that is why we love it, because the everyday person looking for diversification can invest with Masterworks. Masterworks has offered investments in over 450 works and exited 23 works, with investors realizing annualized net returns including 17.6%, 17.8% and 21.5% on those works that were held longer than one year. Join over 1 million Masterworks users at Masterworks Art front slash Rich Habits, which is also in the show notes of the episode. As with any investment, past performance is not indicative of future returns. Investing involves risk. Sale returns are not inclusive of unsold works. Important Reg A disclosures can be [e-mail].

[Austin Hankwitz]

CD and again, Robert, 1, 2, 3, 4. 5% of your net worth. Toss it in some artwork. Let it go up slowly over time. It's what I've done. It's a great strategy and it helps me sleep better at night knowing that my portfolio isn't going up, down, left and right in circles every single day. We've seen now in 2025, definitely. So our last question comes from Kendall. Kendall says, hey, Austin and Robert. I'm a big fan of the show and I recommend it to all of my friends. I have a question for you guys. I left my job as a hairstylist at a salon where I had a 401k. I'm now an independent contractor running my own small business. But I did a direct transfer of my 401k into a Vanguard traditional IRA. But the issue is that it's invested into a Target Date Fund and I can no longer buy more shares of that Target Date Fund. So should I sell the Target Date Fund and instead invest the money into the ETFs and index funds that you guys talk about. It also has $46,000 into it. Should I roll over the traditional IRA and convert it to a Roth IRA and pay taxes on it? I'm really not too sure what to do here, Robert, you want to kick this one off?

[Robert Krok]

Sure, I think. And you know where I stand on this. I don't like kicking the tax man down the road just because we don't know what the federal government's going to do with our taxes in 5, 10, or 20 years. So for me, I think it's a great time to cash it in, get out of the Target Date Fund, get that money into the Roth IRA, get into that basket of index funds and ETFs we talk about. Because at the end of the day, it's better to pay your taxes now, where you know where it's at, Take the hit now and move on to the future, especially because you want this money performing better. Traditionally, Target Date funds are not really meant to grow wealth. They're meant to not lose your money and keep your money stable. So they underperform the markets dramatically in most cycles. So that's why we don't like to see people, especially younger people, having a Target date fund for 20, 30, 40 years, because it's just not going to perform as well as some of the other vehicles we talk about.

[Austin Hankwitz]

Yeah, I think one of my favorite kind of just like, investing ideologies is. And if you look at a Target Date Fund right now, it's probably outperforming the S and P year to date, because these Target Date funds have, like, the international, they have the bonds, they have the T bills. They've got the craziest, diversified, worldwide mix of financial products you could believe in, because they want you to preserve your wealth. And you're like, oh, well, you guys are crazy. My Target Date Fund is outperforming the S and P this year momentarily. And so I'm like, okay, joke's on us. I guess so in the short term. But like, let's look about the last two years. Your target date fund went up 10% over the last two years. My S&P 500 went up 50%. Right. 25 and then 28. So it's like, which one would you rather have? Or you want to be invested for a Black Swan event, or would you rather be invested for, you know, just a normal business market cycle, which is up until the. Right. Over a long period of time. That's how I'M invested. I've got 90% of my Roth IRA in the S&P 500 and a couple other things here and there. But I believe over a long period of time buying and dollar cost averaging into the US indices and index funds like the S&P 500, the Nasdaq, Dow Jones, all that fun stuff that we talk about is a wonderful way to invest and build wealth over a long period of time. Convert the traditional into the Roth. That's cool. Just make sure that you talk to a tax professional that can help you figure out what you'll owe in taxes. Back of the envelope math is telling me about $7,000 and what I mean by that is do not take $7,000 out of this account. Go have $7,000 saved up for this tax bill. Right? You don't want to cash out your retirement to go pay the taxes. That's not a smart idea. So just figure out what that number is. Make sure you are doing it in a way that you can afford. Maybe you don't do it all at once in one year. Maybe you do 10,000 a year for the next couple of years and allows you to kind of have a more manageable tax bill. But love this question Kendall and thank you so much for listening to the show.

[Robert Krok]

Thank you all each and every week for following along, sharing the podcast, joining the Rich Habits Network, and just really supporting us in this journey to help as many people as we can around the world understand that personal finance is personal. Help them with their business growth, help them with their mindset issues. All of this is so important to us to help you and bring as much value as we can. And we appreciate you following along and giving us those five star reviews and sharing with a friend.

[Austin Hankwitz]

And do us a favor, if you have your own overspending, psychology tips or tricks, comment them below on Spotify. We're going to call them out on our next episode. We're going to check out what you guys suggest. We love in the comments. Y'all sent us 180 comments on an episode the other week. It was really, really cool. So yeah, leave us a comment on Spotify. We always get back to them. We love reading your comments and participating in the polls and liking and sharing and all that fun stuff as well. So thank you guys so much for listening to the show and have a great start to your week.