Loading summary
Transcript41 lines
- [00:00]
Venmo Advertiser
With the Venmo Debit card, you can Venmo everything. Your favorite band's merch. You can Venmo this or their next show. You can Venmo that. Visit Venmo Me Debit to learn more. The Venmo MasterCard is issued by the Bancorp bank and a pursuant to license by MasterCard International, Inc. The card may be used everywhere. MasterCard is accepted. Venmo purchase restrictions apply.
- [00:15]
Christian McCaffrey
Hey guys, it's Christian McCaffrey, pro running back. I'm partnering with Abercrombie this season to tell you about their viral denim. All you need to know is denim should fit like this. Abercrombie's athletic fit is a game changer. They're designed for guys with an athlete's build like mine. Just enough room and the perfect stretch. When a jean fits that well, I'm wearing it on repeat. Shop Abercrombie Denim in the app, online and in store.
- [00:45]
Austin Hankowitz
Hey everyone and welcome back to the Rich Habits podcast, a top 10 business podcast on Spotify brought to you by public.com today's episode walks through Robert's nine figure framework for launching new online brands. My name is Austin Hankowitz and I'm joined by my co host Robert Kroke. Robert is a seasoned entrepreneur with lifetime revenues of over 300 million and I'm a multimillionaire in my late 20s with a background in finance and economics. As the show name might suggest, every episode we talk about Rich Habits as they relate to business, finance and mindset. So Robert, what are we going to be talking about in today's episode?
- [01:20]
Robert Kroke
Today's episode of the Rich Habits Podcast is going to be a blast because we're going to share the exact same step by step framework I use to launch sily Bands and continue to use to this day. So whether it's a beauty product, a garden tool, or some trending idea, I use this step by step framework for every launch to ensure we cover all of our bases and give ourselves the best chance for success. And hopefully it'll help you along the way as well. Since Silly Bands in the early 2010s, I've launched a clothing organizer, product sanitizer, bracelets in response to the 2020 crisis we dealt with and most recently a travel puzzle company. All three of these products came with their own teachings and challenges that have helped me tweak this framework into perfection and I am here to share it with you today.
- [02:09]
Austin Hankowitz
Yeah, this is going to be a fun episode because I think a lot of people listening right now are ready to kick off that entrepreneurial journey, but don't want to go buy a big cash flowing business and go hundreds of thousands of dollars into debt. Right? So instead, this could hopefully be a framework. You take an idea from 0 to 1 and begin to make a little bit of money on the side. I have a friend named Charlotte. She actually came up with an idea a couple years ago when she was in college to have charms on water bottles. And now her product is in Target Dick Sporting Goods Academy Sports and she was recently featured on Shark Tank. She's doing like $10 million a year in revenue right now. And it was literally an idea she had in college. And so we share this example to inspire you guys to think like charm on a water bottle that doesn't make a bracelet that turns into Batman. Silly bands, right? That doesn't make any sense. No idea is too small, too silly, too crazy to like go try and figure it out and have some fun. So hopefully this episode can help you go from idea to execution.
- [03:12]
Robert Kroke
I remember the stories with silly Bands. People are always like, man, I can't believe that took off. And I would always just say to them, well, you thought the pet rock was crazy too. You have to go with your gut on an idea. You know, who would have thought that silly bands could go on to be this global company for shaped cool fun rubber bands and do what it has done over the last 15 years? So I really like that line of no idea is too silly or too small to explore.
- [03:38]
Austin Hankowitz
So by the end of this episode, you'll understand the due diligence process. That means coming up with an idea, doing your research, understanding your competition, the legal work, around launching a new online business. We'll have taught you all about the manufacturing process, finding them on Alibaba, doing the manufacturer as a agreements, the non disclosures, as well as the timeline it takes to have a product created and delivered to you. And then finally the distribution and scaling of this product. Right? You want to sell tens of thousands, if not hundreds of thousands of units. So we'll give you some ideas on how to do that as well. So, Robert, let's jump into the due diligence process.
- [04:14]
Robert Kroke
Every successful business started as an idea. If you have an idea for something, write it down. I keep all of mine in a notepad. If you can't come up with an idea, look around, go shopping, talk to your friends, talk to your family. What trends are there that are happening that you could take advantage of? What is out there that solves a problem and it doesn't have to be a huge problem. It could be a niche that you see that is something for kids or dogs or pets. That's a huge category. I get new ideas every single day. And whether I jump on them right away or sometimes they can wait, I still want to make sure that I have that framework of where the idea came from, where, when did I think of it and get myself involved in it mentally by writing it down and keeping track of it. Because then you have a record and you can remember it and not forget what could be an important product down the road. I don't take all ideas to market and neither should you. There is only so many hours in a day.
- [05:12]
Austin Hankowitz
Coming up with an idea can be the hardest part. Sometimes an idea could be something you see your friends do and you're like, man, I could invent something. Or oh my gosh, like, I bet if you did this and this instead, it could be better, right? So like just having that investor, owner, owner type mindset, not just that consumer mindset, of course, when it comes to owning stocks and things like that, but that, that really opens up your sort of third eye, as you will, into all of these different things, including online brands and businesses and products and things of that nature. So coming up with an idea, I feel like, is probably the easiest part of this entire process.
- [05:47]
Robert Kroke
Now that you've got the idea, you've done what we talked about, it's time to research. This is one of the most important phases. Before you get ahead of yourself, you need to understand the growth potential and the competitive landscape because you won't want to waste too much time and money without understanding what you're up against. How big is the market? How much of the market do you believe you can get with your iteration of this product? Or if it is a brand new idea that's never been done, understanding what you think the target market is for the product and how big could that be? So I like to use TikTok and Instagram, YouTube, Google, Amazon, and even Etsy for my own research. Because then I can poke around on Amazon, I can look at best sellers on Etsy, I can do that as well and really try to figure out where in my research this product could fit and how big is the market and is there too much competition? Because the point of the research is to ensure that your idea has legs and can make you thousands per month, maybe even 10,000 per month of profit. If you can outwork the competition, maybe you build a better mousetrap, you market it better, you do some value adds but all of this has to happen before I move forward.
- [07:04]
Austin Hankowitz
I would be like, okay, does something similar exist and how well are they doing? Right? Is this a really popular thing, like blue light blocking glasses? I know is a really popular product online that does a ton of sales on an annualized basis. Maybe I could come up with a new idea around that, spin it around a little bit, come up with some new thing, but making sure that I'm operating in a niche that has some legs and has some real growth potential in the future.
- [07:27]
Robert Kroke
There are many categories out there. There's beauty, there's supplements, there's hair care. There's all of them out there. You don't have to come up with a brand new idea or a brand new sector. You don't have to do that. You can iterate on something that already exists and still make millions of millions of dollars. Because as I have said for decades now, yes, I love real estate. Yes, I love investing in the S&P 500 cryptocurrency gold and silver. But in my opinion, one of the best ways to build real wealth fast is to create a product, an online product like we're talking about today, because you can go from zero to $10 million a year in sales pretty quickly. And that is what I love about the consumer products market. And this episode kind of spilling out my framework of what I've used to build all of these brands on my own. So that brings us to the next. We have an idea. We know it has legs, but it's time to come up with the name and the brand surrounding the product. I like to look at it from not only finding out a name that works, but take it into consideration the virality aspects of the name. Can I get a good URL for the name? Because that's important as well. Are the social media handles available for the name? So that's what I like to do is really understand the totality of how to put together a really successful name for this concept and this product. So what I generally like to do is I use word recognition. I will take an idea and say, all right, this is the product. This is what I think the search words are going to be. These are words that associate well with the product generally. I'll come up with 30, 40, 50 words that I believe can fit the product category and the demographic and use that as a reference point to come up with the name. You could use chat GPT for this, you could use GROK for this to give you some concepts and ideas. I love using AI now to get us started and give us several options. But from there we will refine the name, the logo, the branding and the colors. Through traditional graphic design and color selection, you can really do a lot of research and make sure this point you do handle. Don't just pick colors you like, really do the research and find out what colors really work well for the demographic that will help you get better sell through when developing this product because if it's a female product, the colors might be totally different than a male dominated product. So make sure you understand that.
- [10:00]
Austin Hankowitz
So now that we have a name and a logo, let's talk about the website and the social media accounts. Walk us through the different types of platforms you use and how you approach acquiring them as well as getting the handles.
- [10:12]
Robert Kroke
For social media, yeah, we use very specific platforms and for the websites we would generally either build them on WordPress or Shopify. But it really starts with nailing down the URL so you can secure that. And my favorite platform for URLs is enom.come n o m.com I think they're awesome, they do a really good job, they're very secure. And the reason I don't use a GoDaddy or those is just because they have so many upsells. It's not as secure in my opinion. And a lot of times you could search something on GoDaddy, not buy it at the time you want to buy it, or maybe you come back to it a couple weeks later and it's gone. And GoDaddy will actually take those URLs and make them as sold so they can charge more for them. And also Enom is much less expensive for yearly updates of those URLs. Recently we even had Harley Finkelstein, the president of Shopify on the show. Highly recommend listening to that episode and using Shopify, especially if you're selling a specific physical product. They do a wonderful job. The add ons and everything that you can do to upgrade your website are very intuitive. The UX is great. It comes to social media handles. I really like to make sure we secure all of them on the prominent platforms like YouTube, Instagram, TikTok and LinkedIn right out of the gate. A lot of the marketing is going to revolve around social media and you want to make sure you have really good social media handles. You have a bunch of iterations that don't ring well with the brand name and don't work well with the URL of the website. It's going to be harder for people to find you or worse, find you again if they have to search for that brand. So I think that's very important as well.
- [12:02]
Austin Hankowitz
I largely agree with a lot of that there not thinking toward like competition. I'd imagine you'd start thinking about looking up, you know, existing products on Amazon, maybe using Google keyword, things like that. Niching down even on Amazon to better understand the best sellers and how different competitors are marketing the product or type of variation of the product category you want to compete in. I know Etsy is a really great platform as well, especially using this domain plugin called Everbee. I've heard it helps you better understand how many sales specific products in storefronts get on designs and different things of that nature. So there's a ton of different ways that you should be thinking about looking into your competition. How are they selling their products, how are they getting their marketing across and are they using Amazon, are they using Google, how are they getting in front of their customers and how much are they actually doing right? Because if you're seeing an Etsy shop that's trying to sell a product similar to yours and they're only making a couple hundred bucks a month, month, maybe this product niche is too small, right? Maybe it's not worth your time.
- [13:02]
Robert Kroke
That is one of the most beautiful things about today as we film this episode. I think back to when we built custom silicone bracelets back in the day. And even in the early part of Silly Bands, it used to cost me 15 to $20,000 to launch a website and build a shopping cart. Now entrepreneurs right now as we film this episode can literally have a hundred dollars and launch a brand, maybe even for free. I'm not sure. Maybe you could do everything for free now, but you don't really need any money. You need a good idea and a little bit of hard work and elbow grease. You can go get a Shopify website for free, you can go get your social media handles for free, you can set up YouTube for free, you can use AI, a free trial to do your logo and branding. So we have never had a better time for people to create that side hustle and really work on building their own brand and taking their own product idea to life. It is so simple and the tools are so incredible now compared to when I got started back in 2000 where everything cost tens of thousands of dollars to launch. So you had to be pretty sure it was going to work. Now you can test and iterate over and over and try different ideas until you find one in Strike lightning in a Bottle. Researching the competition, make sure you guys all understand it doesn't have to be a direct competitor. You could be doing a supplement maybe in a category of weight loss and you have a better idea. You're going to add moringa or you're going to add some other ingredient, you're going to change it up a little bit because you found some research that this combination could be better for this type of product. You can still use the competitors, what they're doing, what is their ad strategy, what is their affiliate marketing strategy, how is that all working as a way to better judge your opportunity moving forward? And is there enough room in this category and in this product niche for you to go ahead and take the plunge and launch this product? So the final step for me in the due diligence process is the legal. This means everything from your LLC and your operating agreement to potential trademark and patent searches and making sure you have all your licenses in order and if applicable, in order for you to move ahead. And for many other products, you're going to want to look into a design or utility patent if necessary, because it depends on your specific product and what's needed to ensure you bulletproof yourself from the competition so they don't steal it and knock you off. This is very, very prevalent in modern society. People see that something's working on Amazon, they see that something's selling like crazy on TikTok shop, they're going to come for you, and the better your protection, the better off you're going to be.
- [15:51]
Austin Hankowitz
So to summarize the due diligence process, you're coming up with an idea. You're looking around you, you're trying to scheme with your friends and family as to what they might need. Problems solved. And don't forget, any idea matters. Write it down in a notebook, keep track of it. Once you have an idea, it's time to research. This is arguably the most important phase because it tells you if it's going to be a waste of time or not. Research might include understanding the competition landscape, different types of branding, different types of naming, all the different things that go taking an idea from an idea to an actual product. Once you have that idea for a product, you've done your research, it's time to build a name, a logo, a website, the URLs, the social media handles, and all that fun stuff after the fun stuff's over, gets more complicated with legal, but that's what we have Lawyers for and ChatGPT if you're anything like me. Now, let's jump into the manufacturing process, how you do it, who's going to do it, different types of agreements you're using with these manufacturers, how you vet them, the whole process there.
- [16:51]
Robert Kroke
Before everyone gets ahead of themselves, themselves and starts contacting firms, you want to make sure that you have a really solid manufacturing agreement ready and a non disclosure agreement and a non circumvent agreement ready before you start sharing your concepts and your drawings. This is huge, huge, critically important because too many people are just so excited about getting started. They get on Alibaba, they start sharing with random people on there without knowing what they're doing. So I love to get those contracts in order, say, hey, I'm looking for a manufacturer to do XYZ for a product I have. Would you mind signing a manufacturing agreement and this NDA agreement with me? Because I want to make sure that I'm protected if this product is highly successful. Now I use a lawyer, but you can likely get away with ChatGPT, feed it some really good prompts, or maybe even find a template online that you can put into ChatGPT and modify it for your liking. Cover your bases and you are fully protected before you release. What could be this multimillion dollar idea because you want to make sure that you have total ownership and protection over your intellectual property. When we started Paragon Puzzles, we went to Alibaba and I started researching potential factories to handle that manufacturing. When doing this on Alibaba, make sure you understand the difference between a manufacturer and a trade partner. A lot of times when you're researching, you will see when you research puzzle companies or skin care products or whatever it is you're researching, you will see in the name XYZ manufacturer or XYZ trading partner if you can. You want to avoid working with a trading partner because all they are is a middleman advertising on Alibaba to get your business. And so for me, I found for Paragon Puzzles, a manufacturer. And one of the first steps I do with any manufacturing like I talked about is getting those documents in place. So moving ahead, one of the things I like to do is do a phone call, preferably a video call, right out of the gate. You've got the manufacturing agreement in place and you're ready to move forward. I like to put the onus on them and say, hey, I'd really like to see your factory. I'd really like to see the equipment used to make my product. Because you want to verify, do they actually have the equipment needed? Are they a real factory? Because there are a lot of scams online, and I want to make sure you don't have that happen. So I always do a zoom call, make them walk the factory floor, show me the equipment, show me the staff.
- [19:25]
Austin Hankowitz
So after you found your manufacturer and after you found sort of the factory you wanted to use, talk to me about, like, the sizing. Talk about how many orders, how many units, how long it took and going from sharing the ideas to delivery and time to start selling.
- [19:43]
Robert Kroke
I like to start small. When we launched Paragon puzzles, we had six designs and we bought only 100 units of each to start. Why do you ask? Why is that important? Because I see so many people that make the mistake of ordering thousands of units because they get baited into this price break. And I think that is a horrible idea. Ordering thousands, maybe tens of thousands of units of inventory. And you end up losing money because you haven't proved the concept yet. You don't know if there's good product market f fit. You don't know if people love the product. You don't know if you have to change things in the product. Maybe you made a mistake and you want to change it later. That is why in almost every instance, I start really small. Because in that first order, that first production order, you shouldn't be so worried on how much profit you're going to make on the units. You should be worried about getting the processes dialed, making sure the product is perfect. Yes, you already got your samples, you check them out, they work, they fit, you know everything is what you want, but you still don't know what the customer's reaction is going to be. So I like to start with very small numbers of inventory so I can make sure to get it out there, test the market first and then worry about price breaks for higher inventory splits that you would get when buying your product for your second order. When you're at this stage of the process, buy just what you need to test and sample, get it out to influencers, get it out to distributors, and let people see, touch and feel and use the product first before you go spend tens of thousands of dollars. From sharing the designs with the factory to taking delivery, the Puzzles took two to three months. And make sure you're keeping that into consideration when you're considering your launch strategy or you're trying to figure out your cash flow and all of that, because the timelines vary dramatically from different products to different products, but also whether you're flying in the product and you're going to do air freight or you're going to vessel, ship a Normal vessel shipment is going to take four to six weeks, maybe eight weeks, depending on what part of the country you're in.
- [21:53]
Austin Hankowitz
Now the manufacturing process, Robert, seems pretty straightforward. We've got some designs, we've got some renderings, we've got some ideas we've come up with. We're putting them and we're giving them to the different manufacturers in China via Alibaba. But before we do that, we're making sure that we have our agreements in place. We're making sure that they're not copying us or selling anything behind our back. We're working directly with manufacturing, not third party trade partners or people who are going to be doing this for us want to do it ourselves. And when we want to make that first order, we're making a small order. We don't care about how much we're going to save. If we go order 10,000 units, we want to make sure we have a couple hundred units, test the market, sell it, see how our customers react and go from there. All right, Robert, let's now talk about the final process of launching an online brand, the distribution and the scaling. Talk about how Paragon Puzzles made their first $10,000 online and what you're doing today to ensure that becomes hundreds of thousands of dollars a year.
- [22:48]
Robert Kroke
What we like to do right out of the gate, we like to start by seeding the product, especially if we're selling predominantly online. So what we do is we ship the product to a list of micro influencers who we've worked with in the past. They're going to help us get those eyeballs and get our first, first bit of momentum. Next we look at TikTok shop. It's a great place to push a product right now. Get that TikTok shop set up, get the approvals done. This can be a very arduous task. There's a lot of paperwork, you got to get a lot of approvals. But once you get that done, then you can start affiliating with creators on the platform. You're going to have a list of maybe 10 or 20 of these creators that fit well within your budget, but also their content and their audience fits well with the product. So if you have a fitness product, you want to make sure that it's not basket weavers that are pushing your product. You want to align your product with the right type of people so you get the right eyeballs from your TikTok shop because you're going to use that user generated content to not only build sales, but use that content elsewhere. It might be posting it on your Amazon page, it might be posting it on Instagram or wherever else you're going to be pushing the product product to build your story. And then finally, we like to give ourselves a window of 60 to 90 days to start building up those sales and that momentum organically and through TikTok shops. Then it's time to start testing digital ad strategies. And for Paragon puzzles, we started out with Facebook ads and we budgeted $50 a day and we tested a ton of ad sets. Because at the end of the day, you have to test, test, test, test. You don't want to just have one set of ads. It doesn't work. And then you give up. And then once you find the ads that are working and you're getting good conversion, you're getting the roas that you desire. That is when you ramp up the ad spend. When someone asks you, what's your budget for ad spend? It doesn't matter. You'll spend whatever it takes if the roas is there and you're getting the return on your ad spend, that is key. Eighteen months later, this brand is doing passively. Thousands a month in sales is on autopilot with. But keep in mind, we are always testing new strategies and affiliates with all of our brands and we are excited about the future because you don't want to just sit back. Things change, markets change, audiences changes, Facebook changes, all of it changes. You need to stay on top of these things because if you don't have eyeballs and you don't have sales, you won't have sustained success. And that's what this episode is about, is teaching you the framework I have used over and over and over again for 15 years to build massive online presence and sales to make millions of dollars over time.
- [25:39]
Austin Hankowitz
So to summarize the distribution and scaling, you want to seed the product with influencers and micro influencers. You want to make sure it's easily affiliated via Amazon or TikTok shop or some other places that someone can say, hey, look, I bought this, go buy it over there. And then finally give yourselves a window to see some organic growth before testing. 50, 100, $150 a day in marketing.
- [26:03]
Robert Kroke
Could start the digital strategy right out of the gate. But I think it's important for a new brand to have an online presence. And if someone is going to check you out like they should, they see you on TikTok shop and they go to your Instagram and you have three posts and 12 followers, they're probably not going to trust the brand because they know you're brand new. That's why we like to seed things, give it a little bit of time, be patient, build the audience, build the content and really concrete yourself as a real company and a real brand so you can build that organic following eyeballs and hopefully sales along the way.
- [26:40]
Austin Hankowitz
And finally, not to be pessimistic, but it's also important to know when to stop, right? When to stop wasting money, pouring money into an idea that doesn't work, or, you know, spending money on marketing a ad that's not converting. Right? Have some common sense. This is a business, not a hobby. Hobbies don't make money, businesses do. So if this is a business business treated as such, and if it's time to take it behind the barn and let it go, don't be afraid to do so. It's only learning, not failure. We only learn we don't fail.
- [27:11]
Robert Kroke
Yeah, not every product and brand is successful. A lot of them are going to fail. But as long as you stick with it and know when to cut ties with that product, you've already learned so much. Whether it's your first one, your second one or your fifth one, you're always iterating and you're always learning. So I love that you brought that up because I don't want people to think that they're going to launch one product idea, make millions of dollars and it's going to happen overnight. Sometimes you might launch a product and have to stick with it for months, maybe a year, year and a half before you start to see a profit. But the key is to make sure you're still growing and moving in the right direction. Because like you alluded to Austin, you don't want to just dump money month after month after month. And it's not going anywhere and you're not seeing any momentum.
- [27:55]
Austin Hankowitz
Now, before we jump into our Q and A section of this episode, big shout out to public.com they are an investing platform for investors who take investing seriously. So if you're serious about investing toward your financial future, it's time you learn more about public.com on public. You can build a multi asset portfolio of stocks, bonds, options, crypto and more. And Public's artificial intelligence is not just a feature that's built into the platform, it's actually woven into the entire experience. From portfolio insights to earnings call recap caps. Public gives you smarter context at every touch point of your investing journey.
- [28:30]
Robert Kroke
And for a limited time, you can earn a 1% match on all IRA deposits, IRA transfers, and 401k rollovers Let me say that again. 1% match on all IRA deposits or transfers and 401k rollovers. Fund your account in 5 minutes or less at public.com rich habits paid for by Public Investing. Full disclosure in the Podcast Description Description.
- [28:53]
Austin Hankowitz
So our first question comes from Instagram dms. Remember if you have a question for us, email us@rich habitspodcast gmail.com or DM us on Instagram at Rich Habits Podcast so this question's coming from Jules on Instagram. She says hi, I was hoping to submit a question for the podcast which I absolutely love. I make $166,000 in my W2 job. I max out my TSP at $23,000 every year. I'm also an S corp with my business and this year year we will net after expenses 2 to 300,000. I'm also maxing out my SEP IRA at 15,000. I have a fully funded emergency fund of a hundred thousand dollars and I currently have another 200,000 sitting in a high yield savings account because I do not know what to do with it since I've maxed out my retirement accounts. You never know what's going to happen with the business. So I'm wondering if I should try and diversify, invest in some real estate, save more in the business. What do I do with all this money Money? Robert, you want to kick this one off?
- [29:52]
Robert Kroke
You're sitting on too much cash. That's always going to be my statement in this situation. I would get less of that money on the sidelines because yes, it's great that you have an emergency fund, but I don't know that you need a hundred thousand dollars unless you're spending 25 or 30,000amonth on your lifestyle. And you definitely don't need $200,000 sitting in a high yield savings account unless you have millions elsewhere. I would dwindle down the high yield savings to maybe be 25 or 30,000. I would take back the emergency fund to that same 25 or $30,000. I would get the rest of that money working in the markets. I know you have the TSP and I know you have some other money in your sep, but I would get a traditional brokerage account set up. I would get some of those index funds and ETFs we talk about. I would also get some of this money working in cryptocurrency and maybe some precious metals as well. Well, because you want to be well diversified and not letting so much money pass you by by sitting in cash and high yield Savings.
- [30:55]
Austin Hankowitz
So my take is I would keep 25% of your annualized business expenses in a business savings account. Right? So let's call it three months of expenses. Because let's say you've got some employees, some subscriptions, some rent, whatever your business is, we don't know. But three months of business expenses sitting aside for you is about what you need to operate your business in case you have a slow couple of months, lose a major customer, maybe you have some unexpected reinvestment you have to do back into the business because something broke. Three months is generally what I think is perfect. And then of course, three months of expenses for yourself in your own emergency fund. So only you know what those numbers are. But I'd imagine the emergency funds about maybe 20,000, 25,000 of that, a hundred thousand that you have. And then of the 200,000, I have no idea what your monthly expenses are for your business business. But three months is about where you should be. The rest of that, what do you want to do with it? If I were you, I would open up a mega backdoor Roth solo 401k on Carrie.com, fully fund that for the year of 2025, which I think is like $70,000. That'll be a big chunk of that money and it will absolutely turbocharge your retirement investing. Next, I would pay myself the difference. I would make sure that I'm taking advantage of all the normal tax strategies that we actually talked about recently with Carlton Dennis. But, but regardless, think QBI deduction. Think different types of, you know, business expenses, home, office expense. If you're doing any of that, whatever else, make sure you're taking advantage of your tax code, all the fun stuff that come with that, and pay yourself, set aside the taxes and invest it in a taxable normal brokerage account. Go open up an account on public. You get 1% match on contributions for your retirement accounts or any 401k rollovers. But like what Robert and I do, we pay ourselves. And then we take that after tax money, we invest it for the future, and. And we're off to the races that way. Not sure I would try and diversify into real estate. Not sure I'd try and get anything fancy here. I would continue to build up my stock portfolio until it's in the hundreds of thousands, if not more. And then if you really want to get into real estate or maybe operate a boring small business passively, that could be a cool thing to discover as well. But I wouldn't try and get too fancy too quick. So Our next question comes from Chris. Chris says. Hey guys, I'm Chris and I live in New Zealand. Longtime listener to the show. You've helped me massively since I started listening you talk about the emergency for fund and having it in a high yield savings account, but why not just put it into spyi, QQQI or QQQH in a brokerage account? It can be sold pretty quickly. So if I need quick access to my money, I can do that. Plus it'll be better returns than the 4%. Thank you so much. I'm really excited to hear your answer here. So the reason why we don't invest our emergency fund into any index fund, ETF for single stock or anything else out out there is because the emergency fund is not an investment, it's insurance. Your investments are investments. And the reason your investments can stay investments is because you have insurance, right? So let's say, for example, there was someone recently that asked a question on the podcast about coming up with $20,000 for an unexpected expense and they had to go into credit card debt to do it. But they also have all these investments over here on the side. And so we told them, hey, sell your investments and pay off the credit cards because you can't out invest high interest debt. They didn't have an emergency fund where if that same person had a $20,000 unexpected expense and an emergency fund, they would just spend the emergency fund, not have to go into credit card debt or sell the investments at what could be an unopportune time. Like imagine if you had a big emergency and it was in the peak trough of the Trump tariff tantrum that happened in the markets in April where the market sold off 22% and now you're selling your investments at a loss, you're pissed off at the world and everything's going wrong, wrong because you didn't have an emergency fund. It's like that's why they're so important. Your investments are your investments. Your emergency fund is insurance to ensure your investments stay invested.
- [34:47]
Robert Kroke
This is one of the points that you make frequently, often that nobody else talks about. And I think it is so hyper, hyper special because you say your emergency fund is your insurance and it's not an investment, and your investments are your investment. I don't think people quite get this distinction. So I'm so glad you covered it again today because that is why it is the magic sauce, why that high yield savings account is there. Because just like you alluded to what happens if the market corrects 15 or 20% and then that emergency fund gets wiped out and you need that money, then you're in trouble. So I am so glad you spelled that out again today. It is one of the best points I think that you have in your arsenal that you bring up a lot. Just so good that people get to hear it because it's really life changing changing in my opinion.
- [35:36]
Austin Hankowitz
Now before we jump into our final question from Victoria Robert, a State street piece caught my eye a couple days ago and it was actually talking about some stuff we talk about pretty recently here and often on the show, which is that half of financial advisors are now allocating to alternative investment strategies to build and manage portfolio risk. Over 2/3, millennials are now investing into alternative assets. And the advisors that they're using are saying that with diversifying into alternatives, they are able to reduce exposure to public markets and find alternative sources of return, which makes a lot of sense.
- [36:10]
Robert Kroke
Obviously we're not art experts, but that's kind of the point. We've both been using Masterworks art investing platform to diversify for roughly five years because it's easy to do. You don't need an art history degree. That's right. 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. With Masterworks, you don't need to spend millions millions to invest in multi million dollar art. They've offered investments in almost 500 works to date, with over $1.2 billion in invested capital. They've also exited 23 works so far, with investors realizing annualized net returns including 17.6%, 17.8% and 21.5% on those works held longer than one year.
- [36:57]
Austin Hankowitz
Join over 1 million Masterworks users at masterworks.comartforward/rich habits, which is also in the show notes below. And as with any investment, past performance is not indicative of future returns. Investing involves risk sale returns are not inclusive of unsold works and important regulation A disclosures can be found@masterworks.com CD all right, let's jump to our final question now coming from Victoria H. So our final question on Instagram comes from Victoria H. Victoria says hi Austin Robert, I love listening to your podcast and learning more about how to grow my work, wealth and tactical ways to do so. Keep it up. I have a situation and would love to get your perspective. I'm 33 years old. I have $300,000 invested in my 401k, my Roth IRA and my brokerage accounts. I own my home. I have $120,000 mortgage at 5% interest and I have no other debt. I also have $70,000 in a high yield savings account and if I keep only 25,000 for an emergency, I now have 45,000 left over to invest best. I'm debating on purchasing a long term rental with that 45,000 or throwing it just into my brokerage account. I live in the Midwest and realistically can get a house for 160, $180,000 and be cash flow positive. But at a 7% interest rate, is it actually worth buying the property and doing all this or should I just invest it in my brokerage? Once again, love the show. Thanks for taking my question. Robert, kick us off.
- [38:22]
Robert Kroke
Off. Victoria, Congratulations. You are absolutely crushing it. I'm reading these numbers. I am so proud of you. What a great job you've done and I think you're on track. You've got your base built multiple times. You're in a really, really good spot. I would definitely consider especially in the Midwest. I'm in the Midwest right now. You can buy some incredible, incredible homes around the Ohio, Indiana, Michigan area where the they still meet the 1% rule as long term rentals. That's very important for all of us. So I love this idea of expanding your portfolio into real estate by doing this. I think it's a tremendous idea. And just getting that cash flow, that capital appreciation we talk about, there's so many things that go along with this as building your wealth. I think it's a great idea to use that 45,000 and do it and just make sure you stay within your means and your budget because you don't want to spend, start pulling money elsewhere. Just stick with what you can buy with that $45,000. And I think it's a great idea.
- [39:24]
Austin Hankowitz
Yeah. If you want to diversify into some real estate, I think that's a wonderful idea. Just make sure that you're not doing it from a place of need, but a place of want. Right. So like don't feel like you need to go out and buy some real estate and because you think that's the next thing to do with your money when in actuality maybe you have no, you know, you're not handy and you will have to lose money on this in the first six months or the first, you know, year and a half because it doesn't cash flow and like it's a force. Right. Don't force it. If the numbers make sense, heck yeah. If they don't make sense, just throw it in A brokerage account. Park it in the S&P 500 and you're going to be just fine. There's no wrong answers here. Now, the other consideration is the passive income. If you're someone, Victoria, that wants the passive income that comes from real estate because you want to retire early and, and like, that's amazing. Run those numbers against the Neos funds. Right, so Neos funds are paying 12, 13, 14, 15% annualized yields on spyi and qqqi and even 25% on BTCI. And that's completely passive. No landlord, no hey, my water broke, come fix it calls in the middle of the night, right? That's just you park money and you get paid money. Compare that to whatever the cash flow might be with your real estate. Now, real estate comes with tax rider write offs. It comes with a bunch of appreciation. It comes with a bunch of cool other considerations that the Neos funds obviously don't have. So you really have to weigh your different options here. But our job is to make sure that you guys have full information and you have everything you need to make an educated decision with your money. So, Victoria, congrats on all you've accomplished and we are wishing you the best. Everyone, thank you so much for listening to this week's episode of the Rich Habits podcast. You all continue to show us so much love on Instagram, all over inside the Rich Habits network. You continue to subscribe to the Rich Habits newsletter and the podcast gets all these five star reviews and everything else. We're just so, so grateful that a hundred thousand of you come back every single week to listen to the show. Thank you so much for doing that. And we cannot wait to continue to provide value throughout the rest of the summer, the fall and the winter, and all throughout 2026. And don't forget, new episodes have started August 1st. These Friday episodes, we're having fun.
- [41:40]
Robert Kroke
Fun.
- [41:40]
Austin Hankowitz
Make sure you're tuning in, make sure you're hanging out and be sure to keep those notifications turned on on either YouTube or Spotify or Apple or wherever else you're listening to the show.
- [41:50]
Robert Kroke
That's right. We appreciate each and every one of you following along, sharing the episodes. You know, we hear so many great stories, we get all these five star reviews and we love what we do and sharing, you know, all of our best information to each and every one of you every week. So thank you.
- [42:06]
Austin Hankowitz
Thanks everyone and have a great start to your week.