A (3:19)

It certainly sounds crazy. But this real math is based upon the above shared assumptions, right? A 9 1/2% inflation adjusted return in the S&P 500 over that 45 year period of time. Now, people ask us all the time, how much do I need to have saved before I can start investing, right? Is it $100 a month? 500amonth? $1,000. Some guy on the Internet told me I need 10 grand to start. No, it's literally that $32 example that we just gave you, right? That $32 turns into 2,250. That same $32 that you're spending like it's nothing turns into thousands by the time you're 65. And this is $2,250 that you're not getting because you are spending that 32 bucks every weekend out with friends. And this 2250 you're not going to have in retirement is what us money nerds call opportunity cost. The cost of the 32 that you're spending, what that turns into over time. Now, we're not saying that you should stay home and not have any fun, right? You should go have fun, meet people. You're in your 20s, do your thing. But you need to understand what every dollar could turn into if you had instead invested it from age 20 to age 65. Understand that this is how you 70x your money throughout your lifetime.

B (4:36)

Yeah, I love this episode because it really illustrates. Do you need that next beer? Do you need that avocado toast every single weekend? And it's really all about taking those little differences and what it looks like in retirement, you know, 40, 50 years down the road if you didn't do it. And like Austin said, we're not trying to tell you not to have fun, not to go out with your friends, not to go out to dinner. We're trying to get you to understand that every little bit you can chunk away in your 20s turns into massive amounts later on in retirement. So let's go into number two, and I think this one is going to hit a lot of you really hard, and that is wasting money in your 30s. So now you're into your 30s, you're likely married, have a couple car payments, take an annual vacation, and maybe you're even investing towards your retirement. How does the math shake out now for you in your 30s? Well, we don't say invest early and often because it's fun. We say it because it's true. Every dollar invested in your 20s turns into 70, and in your 30s it only turns into 26. But $26 is a whole lot better than the minuscule returns you're earning in your checking account because you never started investing.

A (5:55)

So let's be clear. A dollar invested in your 20s turns into 70 in retirement. A dollar invested in your 30s turns into only 26 in retirement. That's a big difference, right? That is not linear. That is quite literally the exponential compound interest we're talking about, right? So just by pushing off investing for 10 years, you are losing so much steam and compound interest throughout your life. But remember, let's talk about that car payment, right? The average American has a $775 per month car payment for a new car. That is $9,300 per year being sent to these big banks to finance the new car you just had to have, right? So let's say instead of sending the $9,300 a year to Wells Fargo, you took that $9,300 a year and you parked it in the s and P500. Fast forward 35 years, it's now worth a quarter million dollars. So every year that you keep that $775 per month car payment, you are losing a quarter million dollars in retirement, in opportunity cost, right? That is what that new car is. It's funny, I was listening to a podcast and someone's like, where's all your retirement money? He says, I don't know. And he goes, well, what's your car payment? They're like, well, 700 bucks. Do you eat out? Yeah. Spend about a thou. You're eating your retirement, you're driving your retirement, right? Like, that's how you should be thinking about these. You know what feels like, oh, I have to have a car payment, I should go eat out. I should do these things. That's what everyone else does. Everyone else is broke. You're not. You're building rich habits.

B (7:31)

It's so true. And we know all of you need a car and some mode of transportation. So first and foremost, especially with this double digit used car interest rates, consider paying cash for something you can afford. But if not opting for that $400 a month payment and buying used versus the $775 monthly payment that Austin illustrated and investing that difference turns into $127,000 in retirement if invested over that 35 year period of time. So you've invested another 4,500 the following year and that is another 127k in retirement. This is so powerful to think that just by adjusting that one thing from that $775 a month car payment to $400 a month equates to $127,000 in retirement every single year. I love this illustration. I think this is such a great way to help everyone understand that at some point you have to put the brakes on your spending, live within your means and put that money away for retirement. And these numbers are mind blowing.

A (8:46)

So $1 invested in your 20s turns into 70 in retirement. A dollar invested in your 30s turns into $26 in retirement. What is a dollar invested in your 40s turn into?

B (8:58)

Yeah, so we did the math on this and let's talk about wasting money in your 40s. So we fast forward now you're in your 40s. This is the part of people's lives where they love to keep up with the Joneses. And the easiest way people fall victim to lifestyle creep is by buying too much house. Their monthly payment many times exceed 40, even 50% of their household take home pay. And not only are they struggling to keep up, but they're literally investing nothing towards their future when arguably this is the time it matters most. So every dollar invested at 40 only turns into doll. Now again, that's a whole lot better than a sharp stick to the eye. But you're beginning to realize just how important it is to invest early and often and stay invested. So that $1,000 a month extra you're paying towards a mortgage that you can't afford is $12,000 per year or $120,000 in retirement. Assuming you're someone who might be late to the game. That 120k is a real needle mover for anyone.

A (10:08)

So let's make sure people understand this, Robert. A dollar invested in your 20s turns into 70 when it's time to retire. A dollar invested in your 30s turns into 26 when it's time to retire. And a dollar invested in your 40s only turns into $10 when it's time to retire. That is what it means to invest early and often. And you see the exponential growth as it relates to compound interest. So what's the solution here? Lifestyle creep is real, but it's not something you need to fall for. Right? Have gratitude for what you have. And be sure that your monthly mortgage payment falls between 25% and 35% of your monthly household take home pay, ensuring that you're not house poor, you have some margin, and you can invest that money. That's $120,000 extra in retirement because you decided that keeping up with the Joneses is what was actually keeping you broke.

B (10:58)

I love this episode in the Breakdown. So I got to give Austin all the credit for figuring this out because it's really mind blowing to me because we're always talking about investing early and often. But I think more importantly is getting people to understand if they let their money sit in their checking account, they're going to blow it. They're going to go to the farmer's market, they're going to go out to the new sushi place, they're going to do all of that. And we're okay with that as long as you're being intentional with your money and putting aside enough for retirement. And these numbers are real. This is the math. And we are so hopeful that all of you take some notes and really consider this. The next time you're going to buy that avocado toast or get that extra drink that you don't need anyway, and just really focus on what that money turns into. What is the opportunity cost lost and the difference it makes in retirement if you really think ahead, starting at your 20s all the way into your 60s.

A (11:56)

Well, I think too, Robert, that people in their 20s, they think, oh man, that's like, I don't have like hundreds of dollars a month to invest, so like, why even start? Like, I don't have 7,000 to max out my Roth IRA. So I'm not going to put anything in my Roth IRA in my twenties, when in actuality every dollar you would have put inside of that account would turn into 70. Right? Every thousand turns into $70,000. And so. And it's the same in your 30s and your 40s, right? But I think people just forget that money matters when it gets invested. Right. It might feel small in the beginning. It might feel like, oh, I'm not really taking advantage of the markets or I'm not contributing enough to make a difference for my future. And it might feel like that in the beginning, but we promise compound interest. 5, 10, 15, 20, 25, 30 years is what's really going to help you build wealth over that long period of time versus, you know, trying to squirrel away so much money that it starts to kind of feel a little overwhelming.

B (12:49)

Yeah, I remember when I think I was 19 years old, my cousin Tim got me started and I was already, you know, really interested in finance, studying, understanding how to build wealth and all of that because I grew up really poor. And I remember I started out with $20 a week. That was it. And I think everyone is just so caught up in what the fake gurus tell them. If you don't have ten grand, don't bother. It's ridiculous. The numbers don't lie, the math doesn't lie. I don't care what you have to put away. It's all about investing early and often and staying consistent. And this episode illustrates it better than anything we've ever produced.

A (13:28)

Now, before we jump into our Q and A section of the episode, which by the way, if you have a question for us, be sure to email us at rich habits podcastmail.com or DM us@rich Habits Podcast on Instagram. Gotta give a major shout out to Our episode sponsor, Public.com Public.com is the investing platform for people who take investing seriously. So if you're serious about investing towards your financial future like you should be if you just heard some of these examples, it's time you Learn more about Public.com On Public you can build a multi asset portfolio. If you want stocks, you maybe want some bonds, some crypto, some options, whatever, they've got it on there. And that's not all. Public's artificial intelligence isn't just a feature that's built into the platform, it's woven into the entire experience. So that could mean portfolio insights to earnings call recaps, whatever you want. Public gives you smarter context at every touch point of your investing journey, with some artificial intelligence sprinkled in.

B (14:20)

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 forward/rich habits paid for by Public Investing Full disclosure in the.

A (14:43)

Podcast description and Robert we just talked about. You know, you're in your 30s and every dollar you invest turns into $26, which means this 1% match, right, is is money, free money. So if you max out your Roth IRA in your 30s, $7,000, 1% of that is $70. It doesn't seem like a lot, but you multiply that by 26, that's nearly $2,000 of free money that you are getting from public with this 1% match. So take advantage of it. Shout out public.com Go take advantage of all the perks you guys get by being rich habits listeners@public.com rich habits. Now our first question comes from Molly B. On Instagram. Molly says, hi, Austin and Robert. I've been listening to your podcast with my boyfriend. I'm 24 years old, I'm a year out of college and I'm working full time making 60,000 a year. I contribute 5% to my 401k and my company matches 4%. I recently opened a Roth IRA this year and plan to max it out. I have four $40,000 in my savings account. Oh my gosh. Molly, let's go. Molly says I pay around $600 a month in student loans and I have a $450 per month car payment. I know that I need to do something with this $40,000. What would be the best way to allocate my savings? Thank you in advance. Robert, you want to kick this one off?

B (15:55)

Yes. Well, congratulations, Molly. You're crushing it at 24 years old. We really appreciate anyone that has a plan at that age because so many people like this episode illustrates, they just kind of kick the can down the road in and 30s and think retirements. I don't have to worry about it right now. It's a long ways away. But the real key to building wealth is starting early and often as we talk about all the time. So yes, you're right, that $40,000 needs to be active. You need to get that into, at the very least, a high yield savings. But we would rather see it go towards building your base. So we would love to see you get that basket of ETFs, maybe get some precious metals, a little bit of cryptocurrency and work towards the future with some of these investments that we think everyone should have in a diversified portfolio. But don't panic because you are doing very, very well. And I don't think it's too bad to have that $450 a month car payment. Assuming that it is a normal interest rate on the car. That is what I would do with the money. So that way you're Making money while you sleep, building towards your future. Even though you still have some debts. We all have debt. It's just making sure that you're not trying to out invest high interest debt, which it doesn't seem you have currently.

A (17:13)

Molly, let me shoot you straight. We just talked about this. $1 invested in my 20s turns into 70 in retirement. Same math, same assumptions. $40,000 invested into the markets, growing at 9 1/2% per year from 24 to 65 is $2,016,701. At 65, your retirement is at you in the face. You just have to be smart with it. So what does that mean? If I were you, I would open up a Roth IRA on public. I would contribute immediately, $7,000, get that free match, make sure half of that's invested in the S and P. The other half is invested into the NASDAQ Vooq. Let it ride. And then the other $33,000, I would also deposit that onto public. I would open up a taxable brokerage account, normal taxable brokerage account, we call it a bridge account. And I would make sure the money is invested 50, 50 just the same into the S and P and the Nasdaq until your base up to that hundred thousand dollars. And then once you have a hundred thousand dollars invested into these index funds and ETFs like the NASDAQ and the S P500, then you can begin to diversify into some precious metals, maybe some blue chip single stocks, maybe some cryptocurrency, maybe some real estate. Right, but there's a bunch of different ways to think about that once you've hit that hundred thousand dollar goal. But right now you need to get invested so you can really enjoy this compound interest over the next 40, 50 years of your life and guarantee millionaire status adjusted for inflation and by the time you're 65.

B (18:37)

And I want to piggyback on that for everyone listening. That $40,000 in Austin's illustration turning into 2 million at 65 is a one time investment. That's not 40,000 a year, that's one time. And I want to make sure everyone understands the math, how that works with compound interest. Because I've seen so many times over the years where people get a 20, 30, $50,000 lump sum payment from a settlement or an inheritance and then they just go blow it. Whereas if they would have taken a chunk of it, put it away forever, they would set themselves up for multi million dollars in retirement, no matter what else happens through their investment journey.

A (19:18)

So our next question Comes from Brady P. Brady says. Hey Robert Noston, I just started listening to Yalls podcast and I love everything you're teaching. I do have a question though about whether to save for school tuition or take on some student loans and invest the remaining amount of money now so I won't miss out on that sweet, sweet compound interest. I am a junior in college studying finance and economics and plan to get my Master's in financial management and accounting. I'm paying for everything myself and would like to know whether I should try and save as much as I can to pay the least amount of student loans, AKA pay cash for my tuition or I should still make all that money but instead of paying cash for my tuition, allocate it towards a Roth IRA and max it out and then take on some more student loans as a byproduct of this strategy. Thank you guys so much. So Robert, here's how I'm thinking about this. Brady probably doesn't have much invested to begin with and he's saying that he can really get some money turbocharging in his Roth ira. He probably has four more years of school, right? He's got his junior year, senior year and probably two years to get his master's in financial management accounting. So four years of a potential maxed out Roth IRA is $28,000 by the time he's call it 24 years old. Same math equation that we just gave Molly, right? That 28,000 from 24 to 65 turns into 1.4 million DOL for Brady. Now it's assuming he can get up to 28, maybe he only hits 10,000. Still $10,000 that he would have spent on his school tuition turns into half a million dollars of tax free money in retirement. So I guess what I'm trying to say here Brady, is you're young, take advantage of this compound interest. You know, again, every dollar turns into 70 for you right now in retirement. And if I were you, I would make sure I'm taking out reasonable student loans. I'm not going more than, you know, one year salary's worth of student loan debt for my, my, you know, projected salary once I get a job with this financial management accounting degree. So call it 50, 60, 70,000 tops. But at the end of the day, what's important here is that one, you're getting invested early and often two, you're actually studying something that's going to make you 60, 70, $80,000 a year right out of college and three, by the time you're in your late 20s hopefully you'll have continued to invest in your Roth IRA and pay down these student loans. No problem to set yourself up for a lot of financial positivity in your 30s.

B (21:36)

What a breakdown. I really, really love how you illustrated that. So I think you killed it. I don't have anything to add to that. I really enjoyed that.

A (21:45)

Now, Robert, before we jump to our final question from Akon, want to give a quick shout out to Masterworks? I was actually looking at a State street analysis from a few days ago and I saw that half of financial advisors are now allocating to alternative investment strategies. And over 2/3 of millennials are investing in alternatives as well. And these advisors are saying that they're diversifying with alternatives because they want to exposure to public markets and find alternative sources of returns. And of course there's a lot of options out there when it comes to alternatives.

B (22:16)

And obviously we're not art experts, but that's kind of the point. We've both been using Masterworks art investing platform to diversify our portfolios for five years now because it's easy to do and you don't need an art history degree.

A (22:30)

Both of us invest with Masterworks, the sponsor of today's episode. And we've actually interviewed the founder and CEO Scott Lynn on the show. With Masterworks, you don't need to spend millions or invest into multimillion dollar art deals or go with Sotheby's or some auction. They're offering investments right now across 500 different works to date. It's awesome. They've got over $1.2 billion of invested capital on their platform and they've 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.

B (23:05)

Join over 1 million Masterworks users at Masterworks Art front slash rich habits, which is also in the show notes of this episode. As with any investment, past performance is not indicative of future returns. Investing involves risk sale returns are not inclusive of unsold works. Important regulation A disclosures can be found@masterworks.com.

A (23:28)

CD okay, so Robert, I know this is obviously not part of the call out for Masterworks, but I wanted to log into my own Masterworks account to see how I'm doing. I'm up 38.9% over the last two years. So you can deduce what that looks like on an annual basis. Whatever you want to do there. But when it comes to having some, you know, exposure to things that aren't the stock market blue chip artwork on masterworks. It's good enough for me. All right Robert, let's now jump into our final question coming from Aiken you so Akin says, hey gentlemen, I had some emergencies come up that required me to go $20,000 in credit card debt. I currently have $44,000 of stock sitting in my Schwab account that I was actually planning to sell and reinvest into some different ETFs and index fund funds. But after listening to your podcast about how you can't out invest high interest debt, I'm wondering if I should instead sell these stocks, set aside some money for taxes, and then pay off the credit card debt. And if there's anything left over, then invest the remaining into an index fund or an etf. Thank you guys for your time for addressing this question. Any advice you have would be very much appreciated. Robert, I'll let you answer this one.

B (24:36)

Yes, this is a tough situation that I see. Many people fail the test in one aspect. You have this cash. You're like man, I got all these stocks, I have all this money. But you really don't because over here you have this high interest debt that is eating you apart. And so I always look at it. You're absolutely right Akon. You cannot out invest high interest debt. So assuming that these credit cards are at 25, 30, 32% interest rate, you're never going to win this battle. I think you're spot on and you already know the answer to this question. This situation. I would sell what you need to sell, set aside the money for the taxes, get this high interest debt paid off so you're starting from scratch and you are ready to go. And then begin investing in the proper fashion because it doesn't matter how much if you're making 8, 10% return on this stock because over here you're paying 30%. So you're at a negative arbitrage of, let's call it 20, 22% and that is never going to be a winning formula for you. So do exactly what you laid out. Sell the stock, pay off the high interest debt, don't let it happen again if you can, because you don't want to be in that situation where you're constantly making money to pay off high interest debt and then start over. And you'll be so glad you did because you won't have that hanging over you eating away at your hard earned money.

A (26:00)

The only thing I'd add here is make sure you're setting yourself up to be in a situation where you don't have to go back into $20,000 credit card debt in case of an emergency, right? Maybe you should have 15 or $20,000 of an emergency fund building interest in a high yield savings account for you, right? Like that's how you avoid these tricky situations, making it so you don't have to sell stock. I mean, what if you didn't have the stock? Maybe you have to tap into your 401k, maybe you do something crazy like that or go into HELOC debt or whatever, right? So like having an emergency fund is exactly for these situations. So the money we do have invested can stay invested and grow for us over a long period of time. So if I were you, sell the $44,000 of stock, 20,000 will pay off the credit card debt. Set 15,000 of that in a high yield savings account on public.com they call it a high yield cash account. Pays 4.1% right now. And whatever the difference is there, I don't want to do the math. Take that money, go put it in the s and P500 or the NASDAQ and let it grow for you over the next several decades. Robert, what an awesome episode of the Rich Habits podcast. Another great one in the books here. It's just so important people to understand opportunity. Cost is everywhere. And if you understand what that $3 beer in your 20s or that $775 a month car payment in your 30s or that extra thousand dollar a month mortgage payment in your 40s because you want to keep up with the Joneses, what that turns into in retirement, right? We're talking hundreds of thousands, if not millions of dollars. If you had just said, you know what, I don't want that right now. I don't need to do all that. I don't need to keep up with anybody. I'm content, I'm grateful, and I know where I'm going and I'm rocking and rolling. I'm sticking to the plan.

B (27:41)

Man, just an incredible episode. We talk so much about these things, you know, invest early enough and it's not what you make, it's what you keep. And all of them, when you really break it down mathematically, it shows you how important it is to do these things and just be consistent. So what an incredible episode. I'm so, so happy with, you know, providing this information and really highlighting what matters so people can build their wealth and retire with financial freedom.

A (28:11)

With that being said, do not forget the new Rich Habits Radar Friday episodes where Robert and I are going to be sharing the biggest headlines and happenings that's impacting you and your money every single week. If it's an earnings call, if it's a crazy new economic update, something that the president does, something that Jerome Powell says, whatever's going on behind the scenes, you're going to know about it. So you can actually keep up with the same stuff that we are looking at and making sure is making our portfolios trend in the right direction.

B (28:41)

And as always, thank you all for the support, the five star reviews, sharing the podcast with friends, and just really engaging with the Rich Habits Podcast and the Rich Habits Network. We couldn't be more thankful for each and every one of you.

A (28:55)

Robert Speaking of the Rich Habits Network, we are closing in on if we've not passed it already. Yes, 675 members right now inside the Rich Habits Network. We're filming this on a Tuesday. And don't forget, every Tuesday night we are doing live streams inside the Rich Habits Network. They're about two hours long. Robert and I jump on a zoom call with, I don't know, a couple hundred of you, answer your questions, give you some updates as it relates to what we're seeing in the markets, our own portfolios, trades we're making, stuff like that. All of that happens inside of the Rich Habits Network. So be sure to click the link in the show notes and check that out. With that being said, everyone, thank you so much for joining us on this week's episode of the Rich Habits Podcast and we will see you on Thursday. You say you'll never join the Navy, Never climb Mount Fuji on a port visit or break the sound barrier. Joining the Navy sounds crazy. Saying never actually is. Learn why@navy.com America's Navy forged by the sea.