Rich Habits Podcast Episode 115: How to Recession-Proof Your Wealth

Release Date: April 28, 2025

In Episode 115 of the Rich Habits Podcast, hosts Austin Hankwitz and Robert Croak delve into actionable strategies to shield your finances and wealth from the impending economic uncertainties and potential recession. Drawing upon Robert's extensive business experience and Austin's entrepreneurial insights, the duo offers a comprehensive blueprint for listeners to build financial resilience.

1. Introduction

Austin Hankwitz [00:54] kicks off the episode by welcoming listeners and setting the stage for the discussion on recession-proofing wealth. He introduces himself and Robert Croak, highlighting their distinct perspectives—Robert as a seasoned entrepreneur with over $300 million in lifetime revenues, and Austin as a young entrepreneur with a robust background in finance and economics. The hosts emphasize their commitment to sharing the financial habits of the rich, their personal financial mistakes, and strategies for financial success.

2. Economic Outlook

Robert Croak [01:46] provides a snapshot of the current economic landscape, highlighting indicators that suggest a looming recession. He notes that the Expectations Index is at a 12-year low of 65 points, and the Michigan Consumer Sentiment Index has plummeted to 51—the sharpest decline since 1952. These metrics point to widespread economic pessimism fueled by tariffs, inflation, and other uncertainties. However, Robert also balances this outlook by mentioning that core inflation hit four-year lows in March, tariffs were paused for 90 days under the Trump administration, and corporate earnings remain positive. He underscores the uncertainty of economic forecasts but emphasizes the importance of equipping listeners with tools and resources to make informed financial decisions.

3. Strategy 1: Build a Financial Fortress (Emergency Fund)

Austin Hankwitz [02:53] introduces the first strategy: building a robust emergency fund. He stresses the importance of having liquid savings to provide financial stability during economic downturns. The recommendation is to aim for an emergency fund covering at least six months of living expenses.

"Having a liquid savings gives you optionality. Aim for an emergency fund that covers at least six months of living expenses." [02:53]

Austin advises starting small if the goal seems daunting, suggesting automating $50 to $100 weekly into a high-yield cash account. He specifically mentions public.com’s account offering 4.1% APY, potentially earning listeners $5,200 in interest over a year. A crucial tip is to keep this fund separate from checking accounts to avoid the temptation of dipping into it for non-emergencies.

Robert Croak [04:34] reinforces this strategy by emphasizing discipline in not accessing the emergency fund for non-critical expenses. He advocates for conducting a household inventory to liquidate unused or undervalued items, which can bolster the emergency savings.

"If you don't wear, use, or do something with an item for one year, it's time to sell it." [04:34]

4. Strategy 2: Diversify Income Streams

Robert Croak [06:14] presents the second strategy: diversifying income sources. He likens reliance on a single paycheck to "putting all of your eggs in one basket," which is risky during recessions. Diversifying income can reduce stress and provide financial stability.

Some avenues for diversification include:

• Freelancing: Utilizing skills on platforms like Upwork.
• Online Tutoring: Capitalizing on the booming demand for remote education.
• Rental Income: Renting out spare rooms on Airbnb.
• Affiliate Marketing: Leveraging platforms like TikTok Shop for affiliate sales.

Robert cites a 2024 survey indicating that 40% of Americans have a side hustle, and those with multiple income streams experience less stress during economic downturns. He encourages listeners to explore existing skills or assets to create new revenue streams.

"Millionaires have up to seven streams of income." [06:14]

Austin Hankwitz [08:40] expands on this concept by outlining the seven common income streams identified among millionaires:

1. Earned Income: Salaries and wages.
2. Business Income: Profits from owned businesses.
3. Interest Income: Earnings from savings accounts or bonds.
4. Dividend Income: Dividends from stocks.
5. Rental Income: Earnings from real estate properties.
6. Capital Gains: Profits from the sale of assets.
7. Royalty Income: Earnings from intellectual property.

Austin advises listeners to focus on scaling what works before diversifying into too many new ventures, a phenomenon he refers to as "shiny ball syndrome."

5. Strategy 3: Diversify Investments

Austin Hankwitz [13:10] introduces the third strategy: investment diversification. He warns against the common mistake of pulling out of the stock market during downturns, which could lead to significant losses. Instead, he recommends reallocating investments to more stable and diversified assets.

Key points include:

• Avoiding Market Timing: Instead of trying to time the market, maintain consistent investment habits.
• Strategic Allocation: Move profits from high-risk single stocks to more predictable investment vehicles like ETFs and bonds.
• Public’s Bond Account: Highlighted as offering over 7% returns.

"The key here is not to try and time the market by buying and selling... but instead to strategically allocate capital away from those explosive single stocks." [13:10]

Robert Croak [15:53] emphasizes the importance of dollar-cost averaging, encouraging consistent investment irrespective of market conditions. He shares a historical example where investing during a market dip resulted in substantial long-term gains.

"Patience pays off... it's always best to build a plan and stick to it." [13:10]

6. Strategy 4: Cut the Fat, Not the Fun

Robert Croak [18:10] presents the fourth strategy: reducing non-essential expenses while maintaining quality of life. He advises listeners to eliminate unnecessary expenditures without sacrificing the aspects of life that bring joy.

Actionable steps include:

• Cancel Unused Subscriptions: Gym memberships, streaming services, vitamin subscriptions, and car wash memberships.
• Self-Service Options: Opt for DIY solutions like washing your own car instead of paying for services.
• Evaluate Bills: Regularly review and negotiate bills and insurance premiums.
• Smart Spending: Avoid financial pitfalls like putting Coachella tickets on payment plans, which he terms "financial suicide."

"It's okay to spend money, but make sure you're spending money on things that bring you joy." [15:53]

Austin Hankwitz [19:09] echoes Robert’s sentiments, advocating for intentional spending. He shares personal preferences, such as investing in experiences like dining out rather than material goods. Austin emphasizes redirecting the money saved from cutting non-essential expenses towards building an emergency fund or paying off high-interest debt.

"It's okay to spend money on things that actually bring you joy." [15:53]

7. Q&A Session

The hosts address questions from listeners, providing personalized advice based on individual financial situations.

a. Joe’s Question: Paying Off High-Interest Credit Card Debt [22:11]

Listener Profile:

• Age: 26
• Occupation: Police Officer in New York
• Income: $90,000 annually
• Debt: $8,000 credit card debt at 29% APR
• Investment: $22,000 in Robinhood ETFs, $24,000 in a deferred compensation plan

Question: Should Joe use his $22,000 in Robinhood to pay off his high-interest credit card debt?

Advice from Robert Croak [23:50] and Austin Hankwitz [24:48]:

• Robert:
  • Immediate Action: "Pay off the credit card. You can't out-invest high-interest debt." [23:50]
  • Rationale: High-interest debt (29% APR) is unsustainable and cannot be offset by typical investment returns.
• Austin:
  • Supplementary Advice: Emphasizes creating an honest budget and redirecting funds from paying off debt back into investing once the debt is cleared.
  • Encouragement: "It's time to be an adult. Devise a plan with your money and stick to it." [24:48]

Conclusion: Joe should prioritize eliminating his high-interest credit card debt by liquidating his investment to prevent further financial drain and then rebuild his investment portfolio.

b. Segura’s Question: Moving Portfolio to Covered Call ETFs for Early Retirement [29:28]

Listener Profile:

• Name: Segura
• Age: 37
• Location: Colombia
• Investment Portfolio: $500,000 in SCHD, SCHG, Bitcoin, and gold
• Goal: Early retirement through covered call ETFs

Question: Is moving his portfolio to covered call ETFs a viable strategy for early retirement?

Advice from Robert Croak [29:28] and Austin Hankwitz [30:30]:

• Robert:
  • Portfolio Diversification: Suggests maintaining a diverse portfolio with allocations in S&P 500, NASDAQ, Dow Jones Real Estate, Bitcoin, etc.
  • Crypto Allocation: Recommends increasing cryptocurrency holdings to 10% for higher growth potential.
• Austin:
  • Cost of Living Consideration: Notes that Segura can maintain a comfortable lifestyle in Colombia on approximately $10,000 annually, which makes the $5,000 monthly potential from ETFs more feasible.
  • Personalization: Encourages constructing a portfolio based on desired index weightings and risk tolerance.

Conclusion: While covered call ETFs can provide steady income, Segura should ensure his investment strategy aligns with his retirement goals and cost of living. Diversifying within index-based ETFs and considering higher-risk, higher-reward assets like cryptocurrency may enhance his portfolio’s resilience and growth potential.

c. Nikki’s Question: Selling a Negatively Cash Flowing Rental Property [32:47]

Listener Profile:

• Name: Nikki
• Rental Property Details:
  • Purchase Price: $350,000
  • Down Payment: $40,000
  • Outstanding Mortgage: $340,000 at 6.4% interest
  • Current Selling Price: Approximately $350,000 (no appreciation)
  • Financials: Up $100,000 total loss ($70,000 out of pocket, including $30,000 negative cash flow)
  • Monthly Cash Flow: -$800

Question: Should Nikki sell the property to stop the negative cash flow or hold onto it for potential appreciation?

Advice from Robert Croak [34:07] and Austin Hankwitz [35:38]:

• Robert:
  • Recommendation: "Sell the property." [34:07]
  • Rationale: The property is both negatively cash flowing and not appreciating, making it a net drain on finances.
• Austin:
  • Supportive Advice: Emphasizes viewing the loss as a learning experience and redirecting the $800 monthly savings toward investing in more profitable avenues like the S&P 500.
  • Encouragement: "Don't feel bad about this. Everyone makes mistakes." [35:38]

Conclusion: Nikki should sell the negatively cash-flowing property to halt further financial losses and reinvest the saved funds into more lucrative investments, thereby recovering from the setback and enhancing future financial growth.

8. Conclusion and Final Thoughts

Robert Croak [37:51] and Austin Hankwitz [39:30] wrap up the episode by reinforcing the key strategies discussed. They highlight the importance of community and open communication about financial challenges to alleviate anxiety and foster collective growth. Robert urges listeners to share both their financial wins and losses to build a supportive network.

"Personal finance is personal, which means these strategies might not fit perfectly for everyone. But we hope to have shared some frameworks you can use in your day-to-day life to ensure that you can endure an economic recession and that you're prepared." [21:12]

Austin adds a motivational close, urging listeners to remain calm amidst economic uncertainties and focus on controllable aspects like budgeting, career, and personal relationships.

"Take a deep breath, focus on what you can control, which is your budget, your career, the relationships you have with the people that mean most in your life. And everything's going to be just fine." [39:30]

Notable Quotes with Timestamps

• Austin Hankwitz [02:53]: "Having a liquid savings gives you optionality. Aim for an emergency fund that covers at least six months of living expenses."

• Robert Croak [04:34]: "If you don't wear, use, or do something with an item for one year, it's time to sell it."

• Robert Croak [06:14]: "Millionaires have up to seven streams of income."

• Austin Hankwitz [15:53]: "It's okay to spend money on things that actually bring you joy."

• Robert Croak [23:50]: "Pay off the credit card. You can't out-invest high-interest debt."

• Austin Hankwitz [24:48]: "It's time to be an adult. Devise a plan with your money and stick to it."

• Austin Hankwitz [19:09]: "It's okay to spend money on things that actually bring you joy."

• Robert Croak [34:07]: "If the property is not currently appreciating at a decent rate, it probably isn't going to in the next two years."

• Austin Hankwitz [35:38]: "Don't feel bad about this happening. Everyone makes mistakes."

• Robert Croak [37:51]: "Share the problems you're going through, share the emotion and share the instinctual things that are happening to you."

Key Takeaways

1. Build a Robust Emergency Fund: Ensure you have at least six months of living expenses saved in a liquid, separate account to shield against unforeseen financial setbacks.

2. Diversify Income Streams: Reduce dependence on a single income source by exploring side hustles, passive income opportunities, and leveraging existing skills or assets.

3. Invest Diversely: Spread investments across various asset classes to mitigate risks associated with market volatility. Maintain consistent investment habits like dollar-cost averaging.

4. Cut Non-Essential Expenses: Eliminate unnecessary expenditures without compromising on personal enjoyment. Redirect saved funds toward savings, investments, or debt repayment.

5. Learn from Financial Mistakes: View financial setbacks as learning opportunities. Share experiences to foster community support and personal growth.

6. Seek Community Support: Engage with financial communities to share challenges and successes, reducing anxiety and promoting collective wisdom.

By implementing these strategies, listeners can enhance their financial resilience, navigate economic downturns with confidence, and continue building wealth despite external uncertainties. Whether you're tackling high-interest debt, reassessing your investment portfolio, or exploring new income avenues, Episode 115 of the Rich Habits Podcast offers valuable insights to guide your financial journey.