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- [00:01]
Austin Hankwitz
You're the owner of a small business, which means you're also the tech guy and HR and personal assistant and head honcho and intern. You could use another pair of hands like the experts you'll find at Verizon Small Business Days, April 21st through 27th. Get a FREE tech check, special deals and more. Call 1-800-483-4428 or visit verizon.comsmallbusiness to book your appointment. Verizon Business out here, there's no one.
- [00:32]
Robert Kroke
Way of doing things, no unwritten rules, and no shortage of adventure. Because out here, the only requirement is having fun. Bank of America invites kids 6 to 18 to golf with us for a limited time. Sign them up for a free one year membership, giving them access to discounted Tetons at thousands of courses. Learn more@bankofamerica.com golf with us what would you like the power to do? Bank of America restrictions apply cpfa.com golf with us for complete details Copyright 2025 bank of America Corporation hey everyone and.
- [01:01]
Austin Hankwitz
Welco back to the Rich Habits podcast, a top 10 business podcast on Spotify brought to you by public.com my name is Austin Hankwitz and I'm joined by my co host Robert Kroke. Robert is a seasoned entrepreneur in his late 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. 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. So Robert, I'm excited for this episode, but let's tell the audience what are we going to be talking about today?
- [01:54]
Guest Speaker
We're going to share with you the blueprint of using credit cards wisely and demystifying the stigma that credit cards are the gateway drug to bad debt. We've been hearing about this for decades from Uncle Dave, so today we're going to break it down. Of course, credit cards, if used improperly, can be a financial disaster waiting to happen. However, if you understand the inner workings of the specific terms, the dates and the strategies that we'll be talking about in this episode, you'll be able to unlock those Free airline tickets, all inclusive resorts, and countless perks given you by leveraging the points and miles earned through everyday spending.
- [02:35]
Austin Hankwitz
Robert, I think this episode is going to be a wonderful opportunity for us, who, again, we do not claim to be credit card experts. There are credit card experts out there that are going to tell you how to use your 100,000 points to go do a ten thousand dollar, you know, all inclusive resort. Something that's not what this episode's about, but instead we want to be able to walk you through how we understand credit cards and how you can begin to become a credit card person and take advantage advantage of those points and those perks that come with these cards. Right. So just to like lay the groundwork here, the first thing everyone needs to understand when it comes to credit cards is that you are borrowing money from a bank. This is not free money. They are not your friends and they make money defined as interest, which is something we'll talk about more later when you don't pay off your credit card balance in full every month. We'll explain a little bit later about what all those terms and definitions mean, but we just want to make sure we're on the same page about this. Do not go into credit card debt. Do not open credit cards to spend money. You don't have to try and accrue reward points in miles because you think it's going to make you rich. You get rich by investing early and often and consistently and over a long period of time. I've yet to meet someone who's like, yep, I made my millions by getting my credit card points right. These are simply perks. We want to make sure you have the strategies and everything to be able to take advantage of these things. But understand to only spend money you would have already be spending with a debit card or cash. That's the money you're spending on these cards. You're not going into debt to try and get these perks.
- [04:13]
Guest Speaker
Wow, this is exciting. I'm really glad we're breaking this down because I feel like so many people have credit all wrong, especially how to use credit cards correctly. Something I want to share is that approximately 60% of U.S. adults currently carry a credit card balance for at least a year. This is not what we want anyone to be doing and definitely the wrong way about it. And that's why I'm excited to break down all the terms, all the strategies with hopefully nudging some of you in the right direction so you truly understand what to do and how to do it correctly. If you're carrying credit card balances right now. Pay it off. And don't fool yourself into thinking you're a credit card person. You should just skip this episode. Don't even watch it, because you're not going to pay attention and you're not going to learn anything. No, I'm just kidding. Definitely stick around. But just so, so important this episode is for many of you, including myself. I am not an expert. I just know the importance of understanding all of these terms so you can keep your credit score up without going into debt. So let's get into it.
- [05:23]
Austin Hankwitz
And it took me a long time, Robert, to understand these terms and strategies. So I want to kick this episode off with some of the most important terms to help you optimize your credit card ownership in throughout your life, starting with statement date. So the statement date is the date normally at the end of a month when the credit card issuer closes your billing cycle and generates your statement. Now, your statement summarizes your transactions, your fees, and the balance that you accrued during that billing cycle. So it's showing like all the times that you swiped your card at the grocery store, the restaurant, or, you know, the streaming service charges, whatever it might be, what you spent. Right. So the amount of money that you spent during those times and what the total amount of money you now owe to the bank. And this balance is what gets reported to the credit bureaus, impacting your credit utilization. I know that was probably overwhelming. We'll talk through all those little terms and details in a little bit. But what you need to understand most is that the statement date happens at the end of the billing cycle. And it's what's going to tell you how much money you spent during a period of time. Again, the billing cycle. Right. The period of time is about 28 to 31 days, depending on the month. And you can again think about this as, like, the parameters of time around all the transactions that took place. So, for example, what transactions took place between March 1 and March 31. Right. That would be a billing cycle. And then, for example, April 2 would be the statement date where your credit card issuer says, hey, here's all the money you spent during the billing cycle, and this is your statement, and you get it on this date. That's how you should think about it. Right. And now what you should be doing is checking your statement regularly so you can track your spending and spot errors. You're always saying, oh, it's not going to happen to me. No one's going to steal my identity I'll never have an error. I thought so too, until I saw an $860 Publix transaction on my credit card. I found it early. I was able to get it reversed. I got a new credit card number, things like that. But things do happen. So looking at your statement every month on that statement date, to understand what you spent, where you spent, what happened, the prior billing cycle is really, really important.
- [07:38]
Guest Speaker
And it's really important for all of our listeners because they might know some of what happens with credit cards and how it works, but they might not be optimizing their credit cards to the fullest potential to be able to allow them to do all the things we're talking about in this episode. So that brings us to the next part of this, the next important term. And that is what is the due date? And this is the date by you must make that minimum payment to avoid late fees and penalties. And this comes after the statement date. That's a very important part of this section. But in our scenario, we always want to make sure everyone is paying off their balance and amount owed to the bank fully by this due date. It's so, so important. Now, obviously, life can get in the way sometimes. You might not be able to pay it off on the due date, but just make sure you're making those payments timely because we want to shoot for having if you can't pay it off totally, having that utilization be under like that 20% mark. That is a key part of this. Most cards offer a grace period, typically 20, 21, 25 days from the statement date, during which you can pay your balance in full to avoid being charged interest. So this is important as well, because if you use these credit cards responsibly, you're not going to be paying anything for the interest. And that is key. So the pro tip here is always pay by the due date, ideally in full if you can, to avoid the interest in the fees. And set up autopay on your calendar reminders so you're not in the dark on when that payment's going to hit to make sure you don't get caught blindsided and not get it paid on time. That is the key.
- [09:20]
Austin Hankwitz
So let's back up. I'm Austin, I'm spending a thousand dollars between March 1st and March 31st on my credit card across a bunch of random different things. And then let's say on April 2, I get the statement from the credit card issuer that says, hey, Austin, you spent a thousand dollars during this billing cycle right of March 1 to March 31, that April 2 is the statement date that I get my statement. And then they say you have a due date of at least the minimum payment, which, by the way, we want to pay it off in full. We do not want to accrue interest. So the due date at which you need to pay off everything to ensure you do not accrue interest, let's say in this example is April 15th. Right. So the due date again is after the statement. D. Because on the statement it's going to say, hey, you owe this much money, pay it to us in the next X amount of days. And then again, you might have a grace period of a week or two, sometimes three. But the main thing to remember here is that by the due date, you pay off everything you possibly can on these cards because you do not want to accrue interest. Now, let's use my example before here, Robert. So remember we talked about spending $1,000 between March 1 and March 31, and then April 2 is my statement date. On April 3, the credit bureaus are going to look at Austin Hankwitz's credit and they're going to see, oh, he's got $1,000 on his account. Okay, Austin racked up a little bit of credit card debt, and they're going to look at that. They're going to look at the credit utilization. Right. Let's say, you know, I had a $10,000 limit. So 1,000 of that 10,000 is about 10% credit utilization there. You want to keep that below 30% if you can. And they're going to look and they're going to say, okay, Austin's got some credit card debt. Sounds cool. Let's see if he pays it off next month. And so what's going to happen is on that statement date, it'll get reported to the credit bureaus and then will pay it off after the statement date, but before the due date and its entirety. And so then next month, when I do not have any sort of balance before that statement date. Right. The credit bureaus are going to see it and say, oh, so Austin went into debt and he paid it off. I like that. I'm going to increase Austin's credit score. So that's kind of how they're thinking about that stuff. It's really important to understand the differences between the statement date and the due date and the balance is between those two days, what you really owe, how to make sure you don't accrue interest, things of that nature.
- [11:38]
Guest Speaker
Yeah. And it's important to note for all of you, because you might not be paying attention to this utilization part of your credit that it makes up 30% of your FICO credit score. So make sure you keep that in mind. That's why we want to make sure you're paying them off every month or at the very least paying them down as far as you can get it.
- [11:55]
Austin Hankwitz
And by that, Robert means if you have a credit utilization of like 100%, let's say I had $10,000 of credit limit on my card and I spent all $10,000, my credit utilization would be above that 20 to 30% range, like the healthy range that the credit bureaus agree to. But if it's above that healthy range, then they're going to think red flag, red flag. And my score might drop by 30% the next month. Right. Like bad things happen when you get up beyond that healthy range. So yes, keeping a healthy credit utilization below 20, 30% is a wonderful, wonderful practice.
- [12:31]
Guest Speaker
Okay, so let's define our next term. And that is the balance. What does that mean? And the total amount you owe on your credit card at any given time. That is the balance. So we're going to break down the different types of balances. The first one is statement balance, the amount owed as of the statement date. Again, very important. Make sure you're understanding that. The second is the current balance. This is the real time amount that you owe, including any new charges or payments since the last statement date. And number three, very important is a minimum payment. This is the smallest amount that you can pay by the due date to keep your account in good standing, which is usually 1 to 3% of your balance. We never want to just be making these minimum payments. As I always say, you can't out invest high interest debt. And with credit cards they're 25, 28, 30, 32%. So we want to make sure we're keeping them paid off and paid down. So don't get in the trap of paying the minimum balance and think you're ever going to get out of that trap. Earlier in the show we mentioned that 60% of US adults currently carry a credit card balance for at least a year, paying 30% interest on that debt over that period of time. So having a five thousand dollar balance over twelve months, just making the minimum payments equals fifteen hundred dollars in pure interest that you're paying for no reason because you're living beyond your means and you're not paying attention to this. This episode is so critical because we don't want to see anyone that follows us and follows this podcast Being in this situation of carrying credit card debt for long periods of time, paying only the minimum keeps you in debt longer due to the interest and the interest growing. So aim to pay the statement balance in full to avoid any interest at all, if you can do it.
- [14:32]
Austin Hankwitz
I want to double click on the difference you mentioned between the statement balance and the current balance. Right? So back to this example. March 1st to March 31st, I spend $1,000, and then on April 2nd, I get the statement. Well, the statement balance at that time, we'll say a thousand dollars, because that's what I spent during that billing cycle, that period of time on the statement. But to your point, Robert, maybe on April 1st I go out and spend another 500 on top of the thousand that I spent in the month. My current balance is now the 1000 plus the 500. But the statement only says 1000. And the reason for the difference there is because when it comes to the minimum payment, that will be reflected on that 1 to 3% that you alluded to. That is only applicable to the previous statement. Right, the statement balance of that thousand dollars there. So it doesn't include the 500 I might have spent between the closing of the billing cycle and when I got the statement. So I love the section, Robert, and I completely pay off your balance in full. Do not go into credit card debt. It is a bad idea. And speaking of credit card debt and not paying off your balance, let's talk about the interest accrual that's happening behind the scenes if you are carrying a balance. So what's the definition of interest? The definition is it's the cost of borrowing money on your credit card expressed as an annual percentage rate, right? This is apr. You'll see it online, you'll see it in the fine print, you'll see it everywhere. Everywhere. When it comes to interest, interest is charged on any balance not paid in full by the due date. Remember we talked about the statement date? Now this is the due date. So if you do not pay off your card in full by the due date, you are accruing interest. Interest accrues on a daily basis of the unpaid balance. So if you've got that thousand dollars, Austin, and you didn't pay it off before the due date, first day after the due date, you are accruing interest. So in that example, assuming the APR is about 30%, right, the interest rate's 30%, and I keep that thousand dollar balance for 30 more days, I'm accruing 82 cents of interest every single day, or about $25 over the course of that 30 day month. Now here's something you never want to do when it comes to interest accrual, Robert. You never want to go out and get a cash advance on your credit card because not only are you going to be paying a higher interest rate, a higher apr, you're also going to pay a fee and the interest begins accruing that very moment. There's no statement date, due date, there's none of that. It goes, oh, you got the cash, we want our interest now. So here's the pro tip. Avoid interest again by paying off your balance in full each month. And if you can't, because I know some of you are listening right now, you've got some high interest credit card debt, you're digging your way out of it. Prioritize the highest interest rate credit card first, because that is called the avalanche method when it comes to paying off your debt. And it's going to allow you to save as most money as you possibly can when it comes to paying interest to these banks.
- [17:40]
Guest Speaker
I love that breakdown. You crushed it. It's just so important for everyone to understand these. And one of my favorite sections for this is probably the simplest one to understand, but probably the one that cuts the hardest for most people and that is credit limit. What is your credit limit limit? It is the maximum amount of money that you can borrow on your credit card that you can use the credit limit that they give you. And I think this is probably the worst one because people just like when they're buying a house or they get these credit cards, they think because they can borrow that much that they should spend that much. And it's just really important for people to understand just because they'll give it to you doesn't mean you should use it. And I think that's why such a high percentage of people have and carry so much credit card debt as well as buy too much home, because they're going to give you this limit based on this debt to income ratio, the highest range of your debt to income ratio. That does not mean you should utilize it or accept it. So that's why I like this section of the podcast today, because it's just so important to understand just because you can get it doesn't mean you should spend it. So the next one is really important, and that is is how does your credit limit impact you? So let's break that down. You've got your credit utilization ratio, which is your balance divided by your credit limit. And how does that affect your credit score because remember, keeping it below 30% is ideal. So you keep that utilization in their happy range so they don't ding your credit score on a monthly basis. And now the tip here, the pro tip that we like to say is don't max out your credit cards ever. As high utilization hurts your credit score and is a sign of overspending and definitely a red flag. And as we said earlier, this utilization makes up 30% of your credit score. So you just want to be really, really careful of how much you use and make sure you get it paid down below those levels.
- [19:39]
Austin Hankwitz
I totally agree Robert. We all have that credit limit that is given to us whenever we open a credit card. I remember I felt ecstatic when I got my first real credit card. I had no credit shout out to the disc it cashback card and they gave me a $9,000 credit limit and I thought I was like big man on campus. I felt so cool. I'm 24, I got a $9,000 credit limit right now. To your point, what's important is to keep that credit utilization below that 20 to 30% range. So again, the easy way to compute that is to take your statement balance. So in this example, let's call it $1,000 and divide it into your credit limit of $9,000. So that would be an 11.5% credit utilization on that specific situation. And just to reiterate what you said earlier, 30% of your FICO credit score is made up of having a low credit utilization. So by understanding the credit limit, the utilization and keeping it low, you're setting yourself up for credit success. Now before we jump into the final important term to understand when it comes to credit cards, let's take a moment to hear from this episode. Sponsor NEOS Investments NEOs offers ETFs that seek high level of monthly income with a keen focus on tax efficiency while providing core portfolio exposure across equities, fixed income, real estate, cryptocurrency and cash alternatives like t bills. Their ETFs may be especially interesting for people looking to generate tax efficient monthly income inside of their investment portfolios. Their funds may serve as a compelling income focused alternative or even complement to many of the investments already in many investor portfolios.
- [21:19]
Guest Speaker
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- [22:08]
Austin Hankwitz
Now, the last thing I want to talk about here, Robert, is the common fees that come with owning credit cards. Some of the most common ones are the annual fee, for example. This is a fee that's charged every single year to use some of these premium cards with better rewards. For example, I just got the Chase Sapphire Preferred card and I'm paying 95 a year for that. You have the American Express Gold card. You pay $325 a year for that. And the reason why people pay these fees is because the perks offset the fees nine times out of ten, right? If it's the Uber credit, if it's the hotel credit, if it's the Clear, if it's the TSA pre check, there's a ton of cool things that happen and are given to you for free by having these cards. And so nine times out of ten you can figure out a way way to offset those fees with these perks. The next fee is the late payment fee. You miss that due date, you're paying 40 bucks nine times out of ten. That's just kind of how it works. You also have a really fun one for the people who fund credit card debt. Ever fun. This is though, is an interesting fee. It's the balance transfer fee. So we talk about all the time, right? People have these high interest credit cards, they're in high interest credit card debt. What you can do is let's say I've got my 30% interest rate on my Discover it cashback card at $5000 and I'm accruing now 1500 dollars a year of interest if I don't pay it off. What you can do is transfer that $5,000 balance from your Discover IT cashback card to a different credit card that has a 0% introductory 18 month normally is what it is interest rate on that balance. So you won't be paying any interest at all for the first 18 months on that balance. But, but you do have to Pay between a 3 and 5% transfer fee. So in that situation you're paying about $250 to transfer the balance from one to another. And then finally the foreign transaction fees, 2 to 3% depending on the card and where you're traveling to. I learned just the other month when we were in Toronto, Canada that the Apple card does not work in Canada. I had to use my American Express. So just make sure you understand if you are traveling, what cards work, what cards don't, and if they charge you fees, what that begins to shape up as.
- [24:18]
Guest Speaker
And the pro tip here, and that's a great break down, we both went through this in different ways in Canada. But the pro tip here is always read the fine print before you sign up for a card. It's super easy to do. And you can avoid these fees by paying on time and choosing cards with no foreign transaction or no annual fees. If you don't want to build on these premium perks and it's just really understanding what these perks are and the benefit to you if you want to, you exercise your right and ability to be able to go after some of these perks like we do.
- [24:52]
Austin Hankwitz
So let's talk about those perks as we wrap up this episode about credit cards. I found the best way ever to plan out a way to strategically spend some of your points and it is called Grok G-R-O-K.com it's created by X Xai. I'm sure ChatGPT can help you do this as well, but it was about two weeks ago I sat down and I was like, okay, I've got about 320000 on my chase cards. How can I use that money to plan a really cool vacation? And it walked me through what airport, what airline, first class, what Hilton? You know, to stay at what I would have to pay out of pocket, like the taxes and things like that. It walked me through like a $17,000 all paid for vacation from these 320,000 points which by the way I received as a reward for spending, I think it was like $5,000 or something in the first three months with the Chase Sapphire preferred card. Newsflash, I'm going to spend $5,000 in the first three months anyway. If that is between Uber, if that's between my groceries, if that's between my subscription services. Everything I'm already spending on a debit card or with cash, I just put it on this new credit card. I get a hundred thousand points right now and then I can go use those points for a really cool vacation or a trip or anything like that. So if you're someone who's trying to figure out the best way to use your American Express points, your capital one points, your chase points, go to ChatGPT or Grok or whatever, tell them what you have and tell them to plan. What I said is plan me a dope vacation with 320,000 chase points. And it gave me like a nine page report. It was really cool.
- [26:38]
Guest Speaker
It's crazy to think that so many people are fearful of AI. And after you shared that document with me, I was blown away. It probably took Grok a minute to provide and it spelled it out item by item for the entire trip and how many points it would take and the dollar amount value. And so for people to not understand how beautiful that is to have AI be able to do that, how many hours, let's think 10 years ago, how many hours would it take to have done that same task that took Grock a minute minute. So anyone that's afraid of AI think about this story because I was blown away at how incredibly detailed Grok was able to present that to Austin. And it was like instantaneously so, so.
- [27:25]
Austin Hankwitz
So cool to see 100%. So if you're someone who is trying to figure out how to become a credit card person, you're responsible with paying off your cards. You're doing all these things. Highly recommend looking into right now there's a bonus offer for a hundred thousand points on the Chase Sapphire Preferred card. I recently opened up the Capital One Venture X Car Think and I got like 80,000 bonus points and like a $350 companion credit for flights. Like there's a bunch of really interesting perks that come with opening these cards. Just again, make sure you're not opening a card and spending money. You don't have to get one of these perks. You're not going to become a millionaire from points and miles and perks. You become a millionaire from investing consistently over a long period of time and living on less than you make. Now before we jump into our first question in the Q and A section, which by the way, if you have a question to ask us, email us Rich Habits podcast gmail.com Send us a DM on Instagram @ Rich Habits Podcasts. That's actually where we're getting all of these questions from for this episode. Or ask us a question inside of the Rich Habits Network. Let's take a moment to hear from this episode sponsor, Masterworks, because according to a recent bank of America survey of wealthy individuals, by next year some of these ultra high net worth people could be devoting up to 11 of their portfolios to fine art and collectibles. Now, tariffs will of course have its own impact on the markets, but lucky for us, art has historically been an asset class celebrated for its lack of correlation to other popular assets for the last three decades. Sotheby's just had their first big auction of 2025 and it topped their highest end of their internal estimates. Not to mention, the co founder of Blackstone has been buying up art for himself for very impressive prices. Now it's important to keep an eye on multiple asset classes, not only because we talk about diversification, but because we have our own investments in artwork as well. We've both been using Masterworks art investing platform to diversify five years now.
- [29:21]
Guest Speaker
That's right, both of us invest through Masterworks, the sponsor of today's episode, and we've even interviewed their founder and CEO Scott Lynn on the show. Since then, they've crossed over a billion dollars in capital raised featuring artwork offerings that typically range from half a million to $20 million. Although with masterworks you don't need to spend millions or be an expert in art. Masterworks has offered investments in over 450 work works and exited 23 works as of today, with investors realizing annualized net returns including 17.6%, 17.8% and 21.5% on those works held longer than one year. So join over 1 million Masterworks users at Masterworks Art front slash rich Habits, which is also in the show notes below. As with any investment, past performance is not indicative of future returns. Investing involves risk Sale returns are not inclusive of unsold works. Important regulation A disclosures can be found@masterworks.com.
- [30:26]
Austin Hankwitz
CD all right, let's now jump into our first question coming from Katie asked on Instagram. KDM says hey guys, I'm loving the podcast. I'm learning so much and it's really easy to follow along with how you explain everything. We have owned a rental property for about nine years now and two years ago we tapped into our equity and took out a HELOC to invest into a business. Unfortunately, that business is not doing so well. We also have high interest credit card debt along with this HELOC that we're trying to pay off. Should we sell the house, use a 1031 exchange and snowball that HELOC payment into high interest debt? Do we hang on to the asset? How do we get ourselves out of this situation? Robert, I'll let you kick this off.
- [31:08]
Guest Speaker
This is a hard one to kick off, but I'll try first and Foremost, does the business have assets? Can you sell your percentage? Does it have equipment? Does it have a bill building? Could you sell the business to be able to get out of the HELOC and the credit card debt? That would be my first question. Secondarily, are there other assets that you could sell where you've made a profit in the past or you've purchased in the past, but they still have a lot of value? Maybe a classic car, maybe another piece of equipment, something to get you out of this mess? Because what I don't understand Here is the 10:31 exchange to snowball that HELOC payment into high interest debt. I don't get that part of the question, but I just feel you need to do a complete inventory of where you're at and you need to make drastic changes. Now, if you're talking about the 1031 exchange to maybe go to another property that is a lower value and a lower payment to help you get out of this mess, that I could see making sense. But I feel like you're just overcomplicating things right now. I would do the inventory, figure out exactly what moves you can make. Austin alluded to earlier in this episode, you know, maybe there's a way where you could do a balance transfer into a zero interest credit card on the high interest debt for the credit cards to get out of that portion of this. That would give you an 18 month window for that portion. But you really just need to have a very, very difficult conversation, go through each item of your financial situation and figure out how to stop the bleeding as soon as possible. And I don't know, that's just selling the property outright. The 1031 exchange, I'm not really sure. We'd have to have more information, but that would be my take of taking this seriously and figuring out how to get out of this mess.
- [32:55]
Austin Hankwitz
So do you think that Katie should sell the rental property, take the equity that they have in the rental property to pay off the HELOC and the credit card debt?
- [33:03]
Guest Speaker
Yes, I would sell the property, pay off the credit cards, pay off the heloc, step back a little bit, get that base built and just not try to get so fancy. HELOCs a lot of times don't work out. People pull their equity out, they get the heloc, they forget that you're not just getting your equity, you're getting charged to get your equity. And normally it's 7 or 8% interest, which is pretty hefty. And people just, I feel, don't consider enough how much that payment adds into their monthly budget. And that's why they end up falling behind, because they're using it to invest on something that's a maybe you should never borrow money with higher interest to invest in a maybe. It just doesn't make sense. And in this instance, you use it to build a business or buy into a business that's not doing well and now you're stuck. So that's my take. That's what I would do. And just really do a deep dive and figure out what's next and how to get out of it.
- [33:59]
Austin Hankwitz
I totally agree with you, Robert. You know, they've had this rental property for nine years. I'm sure they've got equity in it, right. Nine years later that they can use now to pay off the HELOC once they sell this rental property and pay off this high interest credit card debt. But want to just reiterate, it's never a good idea to get a HELOC to go throw it into a business venture that you think is going to turn into something. Like we talked about this like three episodes ago, like I'm such a big believer of not going into debt to start a business. Like there's so many things you can do before going into debt to start a business. This is a prime example of what happens when you do go into debt to start something that doesn't have a for sure ending to it. Y you know, you start this business or you partner with someone and the business goes belly up. Not only does the business have debt, but you went into debt yourself to go start it. And it's just like you move backwards financially, like five years time because you've made this mistake. So I just, I try and sell the property, take the equity and use that to pay off the HELOC and the credit card debt.
- [34:58]
Guest Speaker
Yeah, for me, I always want to see people take the risk on themselves, but I think a lot of people get ahead of themselves ourselves, especially now in modern society we have so many incredible tools, so many educational ways to understand what to do. So like you said, it's just tough for me to think it's a good idea to pull the equity out of your home for a maybe like we discussed. So in this instance, I would have rather seen them build the base further. And if they were going to take a HELOC out on a property they've had for nine years, I'd rather see that go into buying another property because at least you have a tangible item that more than likely is go up in Value rather than a business that you don't know the future. I own a lot of businesses and I've failed a lot in business and lost hundreds of thousands of dollars on investments in businesses. But until you really get your base built to where that business failing doesn't really affect you very much, I think it's a bad idea. And that's why I agree. I think they should sell the property, start over, get the base built and just try to stay out of harm's way for a little bit longer.
- [36:04]
Austin Hankwitz
Okay, we're going to linger on this a little bit longer. Do you think that they should sell any investments to try? Obviously, like if you have investments, you should definitely sell them, assuming that they're not in retirement accounts. To pay off this credit card debt we talk about, you can't out invest high interest credit card debt. So if you've got a bridge account, you've got, you know, maybe some emergency funds sitting somewhere, you've got, you know, we talked about it recently too. Do an inventory around your house. What can you sell to get 2, 3, 4, $5,000 quickly to pay off this high interest credit card debt? But do you think that they would sell investments to pay off the heloc?
- [36:37]
Guest Speaker
Yeah, I mean you could. Especially if they're investments that have done well for you in the past and you're using profits to pay off this high interest debt. So I think that works. And I always go back to a story that really is related to this episode. When I founded Silly Bands, I originally had a group of investors that were going to put 250000 in to invest in silly bands and went from 250,000 to 100,000 to then they wanted to give me a $50,000 line of credit to be able to invest in Silly Bands. So I could have taken my own personal credit cards to launch Silly Bands. But I did the smart thing. I sold an asset. I sold a classic car that I absolutely love. I restored it, it was beautiful. And I think I sold it for $30,000. Back then this would have been 2009 and I took all $30,000 to bet on myself for this company Sill, which has now gone on to do hundreds of millions of dollars in sales. But I didn't borrow the money with a high interest rate to do that. I bet on myself, which is fine. It was still risky. I still could have lost. But if I did lose, I wasn't going backwards and paying interest. Cause I wouldn't have had to pay a payment on it. So keep that in mind, I think it's important to really flush out because every business idea seems great, but most small businesses fail. I don't know what the percentage is any anymore, but it's definitely above 50, 60%. So keep in mind I always want to see people betting on themselves and opening businesses. But just make sure you don't put the card ahead of the horse and do it too soon.
- [38:15]
Austin Hankwitz
So our next question comes from Tina J. Tina says. Hey Rich Habits team. First of all, I am a huge fan of your show. I've been listening to the podcast for a few months and I can't thank you enough for your insights. My husband and I are both 40 years old. We have two kids, 7 and 11. 11. He works in corporate and I'm the co founder of an AI healthcare tech startup. We plan to retire by 55. We earn half a million dollars a year. We have $800,000 in our 401ks, $150,000 in a brokerage, 60,000 in a high yield savings, 20,000 in our checking account with monthly expenses of about 20,000 because our kids go to private school, which is about $6,000 a month. We own our home at only a 2% mortgage rate, only have 10 years left to pay on it. We have two rental properties that are about cash flow neutral and we've invested $200,000 into gold. We're just starting to invest more actively and we're considering an allocation of 40% to the S&P, 520% to the NASDAQ, 120% to SCHD, 10% to the Dow Jones, and about 10% to Berkshire Hathaway. My question is, should we focus more on doing the backdoor Roth IRA or should we continue maxing out our 401k? Is it smart to do the 529s for our kids? Do we put that in a brokerage instead? We've got a ton of money, we just don't know what to do with it. We'd love your perspectives. I'll kick this off, Robert. So I love this whole setup, right? You've got 60,000 in a high yield savings. That's three months of expenses for you. You've got 20,000 in a checking account which is one month of expenses for you. Spending 14,000amonth outside of the private school. That's a lot of money to spend. But hey, you do you, you make a lot. You're doing your thing. I'm not mad at it. You got, you know, a million dollars invested here. If I were You I would do what Robert and I always say, which is the match beats Roth, beats taxable. So if you have a 401k, which you said you have 800,000 in your 401ks, I would invest up to the match to get the free money from your employer. Then I would do $7,000 into each your Roth IRA and your husband's Roth IRA via a backdoor conversion. So there's no income limits if you have Autonomy over your 401k, which means you can like invest it into things you want and not just have in target date funds or international stuff or bonds and cash and things like that, but you can actually trade inside of it, which I hope you do. If you have $800,000 in there, go back and instead of going to the taxable, you want to go back and max out the 401k, which I think is like another, call it $50,000 between you and your husband. And then if you still have money left over to invest, which I think you guys probably should, then you put money into the taxable brokerage account on public.com youm said you already have 150,000 in your taxable brokerage. Get that up to 200. 250, 300. I love the breakdown between the S and P, the nasdaq, the Dow Jones SCHD and Berkshire Hathaway. It's a wonderful percentage weighting there. Do not feel bad about any of that. And congrats also on owning $200,000 of physical gold. If I were you, I would be, I don't know, I don't know what, 200 grand of physical gold. Like, I would be really scared to have that much gold. Like put it like, what are you doing with that? That's. Maybe you should buy the ETF stuff or, I don't know, $200,000 that people can like just take. I feel like that's scary.
- [41:32]
Guest Speaker
Well, I'll tell you what I did when I first got into precious metals. I was like, okay, I want to own physical, but I also want to own the ETFs. So I bought a very expensive at the time, gun safe and we had it craned into the basement of a building. Not to be determined because it's still there. And then we welded that and concreted that safe into the building, into the basement. And that is where I stored my physical gold and silver for a very, very long time. I like having physical gold and silver myself just because I can touch it, feel it, and I know no one can take it from Me, it can't get scammed. It'd be very difficult for it to get stolen. And so I agree with them and I love this. And I, I think everything that Tina is doing is fantastic. It is a really, really good blueprint and I don't think that I would change anything. And they mentioned also, is it smart to contribute to the 529 for our kids? I know you're the Expert on the 5 29s, but I think that's a great idea to get that started as well. But just congrats, Tina. I think you guys are on the right track. You're doing a phenomenal job. I love the waiting as well as described. So I just think you guys are crushing it. Keep doing what you're doing and just make sure that everything Austin alluded to that you're building off of that kind of blueprint that he provided, because you guys are crushing it and we want to see you keep going in the right direction.
- [42:59]
Austin Hankwitz
Yeah, the 529, I missed that one. So what you want to be doing is depending on the state you live in, you actually might be able to write off your 529 contributions against your adjusted gross income up to a specific amount per year. Obviously you want to be contributing as much as your kids need to go to college. Don't just go up to the limit for the write off. But the 529 is a great way to be investing towards your kids future. I use Vanguard for that. I think you can open up a 529 account with them with like $3,000 of a minimum. Right now I've got like 8 or $9,000 in that account. It's super simple. You open it up, you put on the auto invest. You can select where you want it to go. I've got 80% in the S&P 500 and like 20% into like these growth vug is is the ticker I use. It's like a growth ETF with Vanguard. Very similar to the NASDAQ. But I love the 529s because what's cool is that they don't go to college or they don't use all the college funds or maybe they still go and you still want to do this. Which I would recommend is you can roll over up to $35,000 from that 529 account toward the children's Roth IRAs. And so now the kids are in their early 20s, they've got $35,000 already invested on their behalf in the S&P 500. And if that continues to grow by 7 8, 9% per year over their lifetimes, they have a million dollars in retirement account tax free that's already adjusted for inflation. I love this. I think it's a wonderful way to generational wealth.
- [44:22]
Guest Speaker
I agree totally. What a great job. I just love seeing all aspects of personal finance just because then we can give our take on it and try to nudge people in the right direction. So great job.
- [44:34]
Austin Hankwitz
Now before we jump into our final question asked by Ali on Instagram, let's take a moment to hear from this episode sponsor Blossom. Because investing is more fun when you're doing it alongside like minded people. From dividends to growth stocks. There's a community for everyone on Blossom. And remember, Blossom is not an online broker. They're a social investing app built around transparency, a social media platform for investors.
- [44:58]
Guest Speaker
Transparency is key when it comes to investing and you all know how important that is because you listen to our podcast. I've already connected my personal accounts to Blossom and I enjoy seeing how everything is divided up and performing on a daily basis. Additionally, they offer duolingo style educational video content for those of you still learning.
- [45:19]
Austin Hankwitz
They were recognized as a Top 25 app for 2025 by the Apple App Store for good reason. So if you've not yet joined Blossom, we really encourage you to do so. You can see my portfolio and Robert's as well, as well as joining over 250,000 other investors. It's an easy way to find both your community of like minded investors, but also manage and analyze your portfolio in a really clean way. So click the link in the show notes below to sign up for Blossom or simply type Blossom in on the App Store. All right Robert, let's now jump to our final question coming from Ali on Instagram. Ali says, hey all, I'm a huge fan of the show and I've been listening for years. Thank you for the thorough education around complex topics and the simple tips to set us up for financial success. My husband and I are both 28 years old. We have a joint income of $280,000 a year that does not include our rental income and we've been following your advice with the goal to build generational wealth for our family from day one. We're doing a couple things right now with the first thing being house hacking. We bought a triplex recently and we're currently living in one of the units and renting out the other two. It's been an excellent investment. The total mortgage every month is 4,600 we bring in 3,550 from the other two units. So our cost of living is pretty low. One day when we rent out our own unit, we will be able to cash flow $2,000 a month. The second thing we're doing is we're building our base. Combined with having 160,000 in our 401k, we really want to build this up to hundreds of thousands of dollars. When it comes to high interest debt, we don't have any, but we do have some nice cars and we have a jet ski, so there's that. And finally, we're consistently investing into the index funds and ETFs you talk about. So here's our question. Once we've built our base, once we're done house hacking, once we've set up our recurring investments, what is next? We are considering maybe another multi family property before we buy a single family home. We know if we live in the multifamily, we can do the 5% down with a lower interest rate. But if we don't live there, we're going to have to put 20 or 25% down for a single family home with a higher interest rate. So we'd love to hear from Robert what a potential long term real estate strategy could be for us since we are open to house hacking and buying up to potentially 10 multifamily throughout our life.
- [47:27]
Guest Speaker
Wow, what a great situation and a great question. I would say your strategy is keep doing what you're doing. I love the idea of buying another multifamily. I just think if people can get ahead of it with these duplex triplexes or quad plexes, there's so many great programs out there for individuals like yourself. You would as a couple to be able to get into the real estate game. And I just think if you did this and got yourself up to 8:12, 16 doors, you could still self manage or have someone that's very inexpensive on payroll to help you manage the doors. And it would just really set you off so well from an investment perspective to be able to build that wealth. Because like you alluded to with the first one, the first multi family is getting that $2,000 a month in cash flow is so massive. Might not sound like a lot to most people, but you get that up to 8, 10, 12, 16 units and all of a sudden you have $10,000 a month in cash flow from these properties. Plus you have the capital appreciation each and every year on these properties. Most of the time, depending on where you're at, you're going to have 4 or 5, 6% capital appreciation yearly. Plus you have the depreciation on these properties to offset some of your ordinary income income. So I think it's a great strategy. That's what I would do. I would keep going. But also make sure you don't sleep on what you alluded to. And that is continually and consistently investing into the VOOS and QQQs that we talk about. Because we want to make sure that you're building your base alongside of building your portfolio in real estate. I love this question and you guys are really crushing it and we really appreciate this.
- [49:11]
Austin Hankwitz
So you guys are making $280,000 pre tax, let's call it $200,000 a year, post tax, it's about $17,000 a month. My girlfriend and I are in the same age range as you all are and we easily live off of $7,000 a month. We have no children. You didn't mention you have children or not. I'm going to assume you don't have any children. I'm sure once people have children, costs go up dramatically.
- [49:34]
Guest Speaker
Right?
- [49:34]
Austin Hankwitz
But that means that you can save and invest here year about $10,000 a month. Theoretically that's $120,000 a year. So I just want to make sure, like you might feel good about where you are right now with your rentals and the multi family and the potential cash flow and the money you're making in your investments. But do not feel like, oh, I got a good head start, we're ahead of our peers, we're doing great, we can pull back on the gas, we can hit the brakes a little bit, we can strike, we can, you know, just kind of hang out and glide. Do not do that. Now is the time before you have children, before, you know, all these big life events, events happen that you can really begin to build wealth into your early 30s. So here's the long term goal. The long term goal is to retire early. Well, what does it mean to retire early? In anyone's situation? Retiring early means the money your portfolio is generating for you on a monthly and annual basis completely offsets your monthly and annual living expenses. So If I'm spending $7,000 a month to comfortably live my life, my portfolio income would need to make after taxes, $84,000 a year or 7,000 DOL. $7,000 a month. And theoretically I would be financially independent, retire early, things like that. And so that's your goal, right? Figure out, okay, how much every single month do we spend? Is it 7,000, is it 8,000? Is it 9,000? Is it 6,000? Like what's your number? Figure out what that looks like on a monthly basis and an annual basis and lay out a five to ten year plan using multifamily, using Neos funds, using other investments and other things that's going to provide monthly income to you that will be able to provide so much monthly inc income that it will offset in its entirety the 6810 000amonth that you expect to spend now. Of course, whenever I say like retire early, make sure I'm super clear here. Retiring early means you no longer have to trade time for money doing things you don't like, right? I know a lot of people hate their jobs, they hate their boss. If you are retired early, that doesn't mean you just sit on a beach and drink your margarita all day. What it could mean though, however, is that you now have time to pursue passions, to work a really enjoy even if it pays less. Right? Do things that actually bring you joy on a daily and weekly basis. Not having to worry about a paycheck or having to worry about trading time for money to just get by in life. So you guys are really, really crushing it here. Ali, super excited for you and your husband. You have a great income, you've got a great amount of money invested so far. Stay out of the credit card debt and do the multifamily thing. Get four, five, six different multifamily families, 10, 12, 15 doors eventually. And then also start picking up some neos funds that are going to be paying, you know, call it a thousand, two thousand, three thousand dollars a month depending on how much you have invested in them. And you are going to be retiring in your late 30s, early 40s.
- [52:26]
Guest Speaker
Wow. So I want to tell a story. I think that most of the world does it backwards and that is we see people every single day, millions and millions of people. Is. It's kind of like the wrong way to live. And I don't know how to put it eloquently, but it's basically you get out of school, you're in your 20s, you go out drinking on weekends, you're partying all the time. You wake up, you're in your 30s, you're fighting off the fact that you're not ready to completely get serious about life yet. Then all of a sudden you're 33, you're 34 and you have that oh crap moment. You're like, I got to get my business together. And then you wake up in your 40 and you're like, oh, I'm way behind financial financially and you get the drill here. I love this question in this scenario similar to you, Austin, because I think people do it backwards. I think you should as soon as you can, make as much money as you can, take as much risk as you can and build your finances early. So then later you have it easy. So many people screw around till they're 40 and then go, I have to, to catch up. Otherwise I'm going to be a Walmart greeter at 70. And I just hope this episode helps a few people not do that. Because when you have no kids, you don't have all of the things that go along with a busy, busy family life. That is when you should be on the grind. You should be making the money and building that wealth early. Because trust me, when you can own your own time sooner than than later, you're going to have so much better quality of life later on.
- [54:06]
Austin Hankwitz
I could not have said it better myself. I am the biggest believer. Like I remember working my 9 to 5 job out of college and I wrote about this on my substack because I was still working my 9 to 5 job and I was thinking to myself while I was writing, like, is this really all life has to offer? Going to this desk every day and getting a paycheck of, you know, four or $4,500 a month and you know, getting this money after taxes and trying to skimp buy and invest some of it and like golly. And so like I'm just so thrilled to hear that people are taking notes and taking action. They're house hacking, they're doing the Roth ira, they're doing the Neos funds, they're doing the side hustles, they're like, they're doing these things that on a day to day basis seems small, but over the course of years and decades are going to compound into hundreds of thousands, if not millions of dollars that they can now use to begin to pursue their passions, retire early, take care of their family, like do things that make them really happy. Happy. So what an incredible episode.
- [55:02]
Guest Speaker
So, so good. And I want to make sure all of the older listeners. This isn't to say that it's too late. We all make mistakes. Life gets in the way. And sometimes you end up in your older years where you're not where you wish you were financially, but that's okay. Because everything we teach and everything we talk about can help all walks of life at all levels of financial freedom, or not freedom. Because you can implement these strategies and these tactics so easily. That is why we enjoy breaking it all down and giving you the insight from two guys, two different levels of experience and a 30 year age gap so we can cover all of those age gaps and help people understand it's never too late and it's never too early to get started.
- [55:50]
Austin Hankwitz
With that being said, everyone, thanks so much for tuning in to this week's episode of the Rich Habits Podcast. If you've not yet joined the Rich Habits Network, we're still running a seven day free trial. Over one hundred and fifty of you have joined us over there. We hop on a zoom call once a week. It's two hours long. We answer your questions, we give you market updates, headline news, everything that we think you all should know. There's also eight hours of video coursework inside of the Rich Habits Network covering how to build your base, how to build a portfolio from scratch, how to analyze stocks, how to invest in businesses, like all the stuff that we talk about here on the show. And then also we offer some private investment opportunities. If it's in real estate or pre IPO companies or other private, private things like you're gonna like that. So go check that out. There's gonna be a link in the description below to learn more about the seven day free trial of the Rich Habits Network. With that being said, thanks everyone and have a great start to your week.