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- [00:01]
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- [00:29]
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- [00:43]
Austin Hankwitz
Hey everyone, and welcome 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 my co host is 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. As you can see, right now we are sitting in Spotify's studio here in New York City. Major shout out to Spotify for allowing us to film an awesome episode while we're here in town for a couple fun events. So, Robert, what are we talking about in today's episode?
- [01:24]
Robert Kroke
We're talking about money, red flags in relationships, and not the obvious stuff like don't date someone 100k in credit card debt, which would be insane, by the way. I mean, the subtle patterns that show up early and predict major relational problems down the road. That's what we're covering today.
- [01:40]
Austin Hankwitz
I'm excited for this episode, Robert. We just had a Red Flag episode. Red flag, green flag. Now, these are specific red flags for relationships, money, all that stuff. Very timely right now. So why don't you kick us off with the first red flag as it relates to money and love.
- [01:56]
Robert Kroke
Well, before we get into these red flags, if you're in a romantic relationship right now, please take note of what these red flags are and figure out if they apply to you. If they do, please understand these red flags are a sign of what's to come. You need to get ahead of these as soon as you possibly can because the number one reason for divorce are money problems and money fights.
- [02:18]
Austin Hankwitz
Money problems and money fights. If only we could align on those things, I feel like a lot more people would be happily married.
- [02:24]
Robert Kroke
Robert got to have these tough conversations. And that leads us into the first red flag, which is financial transparency. This is one we've been talking about for years that people need to do and really have the tough conversations, because so many couples lack this. I've watched couples who've been together for two, three, four years, and one person has no idea what the other person even makes and no idea what their debts are. And I think that is the key. I'm not saying everyone needs to dig in each other's business early on in a relationship, but you at least need to have this understanding as you move further into the relationship and get more serious. And so many of these people don't know what their partner's money goals and aspirations are. And if you can't talk about money when the stakes are low, you definitely won't be able to talk about money when stakes are high, like going through a pregnancy or buying that new home. So I think it's critical. Have the conversation, have the transparency.
- [03:18]
Austin Hankwitz
Yeah, it's the transparency and the lack of transparency. Right. That's just as important. Couples who don't discuss finances before marriage are 30% more likely to argue about money regularly throughout their marriage. But what really predicts problems is having different attitudes about their debt. So you've got one person on one side who sees credit cards kind of like we do, as a tool. They put everything on the card. They pay it off every month. They get the points that they're supposed to be getting. They think they're being smart. Then on the other side, you have this other person who sees credit cards as borrowing from their future self and they'd rather not touch them. So neither are, like, necessarily right or wrong. Different strokes for different folks. You say personal finance is personal all the time, but if you never talk about the core differences in your money habits, specifically here, with some credit cards, you're gonna have conflict. This is how resentment start. You don't want to go into a marriage with resentment. It'll build. So please have the conversation so this never happens to you.
- [04:15]
Robert Kroke
And you definitely don't want to be in a relationship where you start keeping score. We see this all the time in content on Instagram and TikTok, where the guy's trying to go golf and the girl's trying to go do yoga or whatever it is, and it's tit for tat with the money related to it. That is why the transparency is so important. So let's get into red flag number two. Normalizing overspending. I think this one is A really, really rough. Because overspending gets treated as normal or even inevitable, especially when it's backed by comparison. Everyone I know lives like this. Everyone has a car payment, everyone carries a balance. And that's how lifestyle creep really sneaks up on people and ends up burying them in a position where they can't get ahead and get financially free like we want them to be because of this red flag. And they don't consciously decide to overspend. They just slowly raise their baseline to match what they see around them. We talk about this all the time where we live in this comparison based lifestyle because of Instagram and TikTok and everything we see on the Internet. And it's just really difficult to overcome this because you're seeing that highlight reel and that is a really tough thing for people. And almost half of American credit card holders, 47% of them are carrying a balance month to month and they don't even have a clear plan of how to pay that off. And some even worry they may not be able to make the minimum payments. We talk about this all the time. The difference between using credit as a tool and using credit to overspend and not stay on budget and stay on task.
- [05:45]
Austin Hankwitz
Yeah, I think the comparison call out is the most important in my opinion because while one person in the relationship, and this is me in my relationship, I just don't care what people do, what people have, where maybe the other person might feel like they're not living life to the fullest. So that comparison, the highlight reel, you got to make sure that you all are on the same page as to what and how you want to live your lives together. Being on that same page about lifestyle expectations ahead of time. Right. Having those conversations helps to ensure that these fights don't happen. Because one person in the relationships thinks that they should be driving a Range Rover and spending their summers in Italy and the other person knows that they just can't afford to do that. And remember, if your reference point for happiness keeps moving, you will never arrive. If your lifestyle is growing faster than your financial literacy, debt fills the gap. So Robert, we've talked about the first red flag, which is financial transparency or maybe the lack thereof. The second red flag, of course, being normalizing this overspending, have very different ideas on how you guys want to live your life. Two major red flags when it comes to money and relationships. So round off the episode with our third red flag.
- [06:51]
Robert Kroke
Red flag number three is value by cost. Our final red flag is how people respond to doing something free or low. Cost. For example, you suggest a picnic in the park or maybe even a hike, and they act like you insulted them. We see this on Instagram and TikTok as well, where everything's got to be this expensive first date. And that is a mistake to me because what they're really saying is I measure value by cost. And I really want to sink in on this and really dial in. I measure value by cost. I think that's a huge mistake. And if that's how someone thinks, then anything that doesn't cost money is going to feel like it doesn't matter to them, which sometimes becomes unsustainable really fast. And it creates this dynamic where you're constantly spending to prove you care. I've been in this situation before where I feel like it's this perpetual hamster wheel where if I don't spend more and everything isn't this glamorous bougie date or accommodation that I'm not doing enough. And that is a huge red flag. And probably the biggest red flag is, I think in this episode for people in relationships, because you don't want to get in a situation where you can't just have a lazy Saturday afternoon and enjoy a picnic or something fun or going for a hike or something like that, because then you're just always going to be on the chopping block. How much did this person spend? Is it enough? And I feel like that is just a recipe for disaster.
- [08:17]
Austin Hankwitz
Yeah, my fiance and I, we just did no spend January and it was awesome. Lots of just random little trips and things here and there around Nashville to keep us entertained. It's one of those things that if you can enjoy each other's presence as friends, you don't have to be spending money to, to hang out. You don't have to be experiencing a concert or going on a vacation. You guys can just be together watching a movie, going for a walk, like walking the dog and drinking some spin drifts like lock me in on that one. Now listen to this one, Robert. Couples who equate spending with love have higher rates of what's called financial infidelity. Hiding purchases, secret account in undisclosed debt. Recent surveys show that 40% of people in relationships admit to hiding a purchase from their spouse or their significant other. About 20% have a credit card or an account their partner knows nothing about. And honestly, those numbers are probably low because people are under reporting the stuff anyway. But even taking it at face value, that means a huge percentage of couples are operating on some level of financial dishonesty. And it usually Starts small. They had that $50 purchase or that $100 purchase, whatever it might. The pattern, the financial infidelity pattern is what actually matters. You gotta look out for that. It's a major red flag.
- [09:33]
Robert Kroke
And for me, I think it starts with the little things. If you're hiding small things, it means you don't trust your spouse will understand. And to me, that's just going to be a recipe for disaster where you're going to hide more and more and more or you don't want to be accountable for your decisions to spend the money. And lack of trust compounds. We've talked about it all the time. That keeping score gets worse and worse. And now you're not just hiding the purchase, you're hiding your anxiety about money and your spending habits and your actual financial future. And the picture of what that looks like for yourself and your spouse is making decisions based on incomplete information because you're hiding the little things and potentially the big things. I always say personal finance is personal, even when it comes to relationships, but I still think the conversation has to be had on both sides so there aren't any unmet expectations.
- [10:24]
Austin Hankwitz
100, 100%. Every time you avoid a money conversation in a relationship, you're not just avoiding the discomfort at the moment, you're teaching yourself that money is too uncomfortable to talk about. You avoid the Valentine's Day conversation, then you avoid talking about summer vacation, then you avoid the conversation about whether you can afford the apartment you want. And pretty soon money is the thing that you guys are just all tiptoeing around here and the stakes keep getting higher and higher. You said if you can't have these conversations when the stakes are low, you're not going to have them when the stakes are high.
- [10:56]
Robert Kroke
Yeah. I did a one on one call recently with a woman that's in a relationship, a long term relationship, and she said that they were engaged, but she had just learned that he had over $100,000 in credit card debt and she had no idea this even existed. So I think that's important for everyone to make sure you have the conversation earlier than later so you're both on the same page. And if you haven't built the muscle for having hard money conversations when the stakes are low, you're definitely going to be in trouble when stakes are high. And the research shows that couples who don't discuss major financial decisions together are three times more likely to report being unhappy in the relationship down the road. So if you're making major life decisions in a vacuum, your partner feels excluded from your future and you feel like you're carrying all the weight alone. And we don't want that. That's why we want you to follow this episode and do the things. Have the hard conversations earlier rather than later so everyone knows where they stand in the relationship, especially as it relates to your finances. So let's bring this back to Valentine's Day. This one day, this relatively small decision can tell you a lot about your financial future with someone. The question isn't how much are you spending? The question is, how are you making this decision? That is it. Are you sitting down together and talking about what would be meaningful to both of you and what you can actually afford? Are you just doing what you think you're supposed to do and hoping it works out?
- [12:23]
Austin Hankwitz
Yeah. One is intentional and the other is reactive. And those two things might look identical from the outside, but they feel completely different in the moment. One is empowering, the other is draining. And if you're in a pattern of reactive spending where you're just responding to external pressure without really thinking about whether it aligns with your values and your financial situation, that's going to show up everywhere else in your life. But if you can make intentional decisions about money, then you can spend less and feel better about it. You can opt out of things that don't serve you. You can build wealth, because you're not letting other people's expectations drive your financial decision making.
- [13:02]
Robert Kroke
And it's not about whether Valentine's Day is worth it or not. It's about whether you're making conscious choices or just reacting to pressure from your friends, society, and what the expectations are out there and whether you can talk about it with your spouse or significant other, I think that's the key takeaway for me because if you can't have a conversation about a $200 dinner without turning into a fight, you can't have a conversation about those big things we mentioned. But if you can sit down and say, here's what Valentine's Day means to me, here's what I'm comfortable spending what matters to you, and actually listen to your significant other, that's a skill that's worth more than any amount of money and is going to help put you guys in the right place to make sure you're moving in the right direction on small decisions and big decisions. So there's no secret.
- [13:51]
Austin Hankwitz
So in summary here, our first red flag was the lack of financial transparency. Make sure you guys are talking about money, debts. You might have ways that you think about money, your Money, aspirations and goals, things of that nature. Our second red flag was normalizing, overspending. One person over here thinks you should have a crazy, inflated lifestyle, the other might not. And our final red flag was assigning value to the relationship in congruence with how much money is actually being spent on the dinners, on the car, on the expenses, experiences. Because if y' all can get along when no money is being spent, y' all are going to be just fine.
- [14:27]
Robert Kroke
I think the value by cost for me is the biggest red flag that I've seen over my relationships, over what I see on the Internet nowadays. Because you have to be able to enjoy each other's time whether you're spending a bunch of money or not. And if one person in the relationship is always forcing that, you have to spend a bunch of money to have enjoyment and care for each other and have a good time. And that is a huge red flag for me. And you should run if you're in that situation right now.
- [14:55]
Austin Hankwitz
So I think the big takeaway for me is if you find yourself in any of these situations, it's very important to start having those conversations with your significant other, even if that person is already your spouse. Maybe you have children with them, maybe you've never talked about money. Let this episode be your wake up call. Write down on a piece of paper the three red flags we just went through and start thinking about your own life and then comparing your life to if any of these red flags start coming up in your your relationship. Wait, do I know about my spouse's credit cards? Are they doing some financial infidelity? Does my spouse think that if we don't go on these two vacations every year, that I don't love them? Right? Just begin to reflect upon this episode. Go take the time and as Robert says, take notes, take action, and you're going to be just fine with money. So, Robert, before we jump to the Q and A section of this episode, got to give a shout out to public.com, the investing platform for those who take it seriously. Because on public, you can build a multi asset portfolio of stocks, bonds, crypto options, and now generated assets, which allow you to turn any idea into an investable index using artificial intelligence.
- [16:04]
Robert Kroke
And it all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and let the AI do the work. It screens thousands of stocks, builds a one of a kind index, and let you back test it against the S&P.500. All with just a few clicks.
- [16:25]
Austin Hankwitz
Yeah Robert, Generated assets are like ETFs with infinite possibilities. They're completely customizable and they're based on your thesis, not someone else's. So go to public.com rich habits and earn an uncapped 1% bonus when you transfer your portfolio over to their platform. Again, that is public.com rich habits paid.
- [16:47]
Robert Kroke
For by Public Investing. Full disclosure in the podcast description all.
- [16:51]
Austin Hankwitz
Right, Robert, first question comes from Ryan. As a reminder for everybody, if you have a question for the show, we always answer your questions on, I think every episode of the show now every week coming out. But if you have a question for the show, you can DM us on Instagram at Rich Habits Podcast or you can email us@richhabitspodcastmail.com Ryan over here emailed us. Ryan says hey guys, my name's Ryan and I'm a huge fan of the show and excited to be submitting my question to you. I've got an opportunity to invest in my company's employee stock purchase plan, so I need your thoughts on whether if I should participate and if it's a good way to save up and buy a house. For background, I'm married. My wife and I are both 25. We live in the D.C. baltimore area. We're both engineers, make a combined income of 250,000 a year, currently have $275,000 invested between our four 1Ks, our Roth IRAs and $100,000 base. We also have a three month emergency fund and we're completely debt free. My company's employee stock purchase plan lets me purchase up to $21,250 per year in company stock. I' shares at a 15% discount based on the closing price of the stock on the last day of the buying period. There is no minimum holding period for the stock, so I theoretically could get shares at a 15% discount on the last day of the plan and then the very next day sell the shares for an automatic 15% gain at their normal price. This seems almost too good to be true. So I wanted to ask you guys as the experts here to see if I'm missing anything. Thanks for all you do. We are huge fans and we are in a great financial position because of your podcast. It has truly changed our lives. Ryan, thank you so much for the kind words my friend. And we're super grateful that you've been able to take notes and take action. And you guys are such high earners. Geez Louise. 250,000 a year household income here at 25, y' all are crushing it. So what do you think, Robert? Do you think Ryan should buy into his employee stock purchase plan?
- [18:43]
Robert Kroke
Well, he's going to know more than we are about the inner workings of the company. What's the stock looking like, what's the growth looking like? All of those things. So if he loves the company, getting that 15% discount is nice. But he also has to consider if he's going to do this flip trade that he's talking about. Is it too good to be true? Kind of, because. And help me with this, but I believe there would be a short term capital gain situation there that's going to eat up a lot of that versus a long term capital gain. But I would really need to know more about the company itself and is it a better play to buy it and hold long term? Because they're already crushing it. They have all this money put aside. They've got the high yield savings account, all of this, and they're making a really, really good income collectively. So for me, I would consider the short term capital gains tax that I assume they would have to pay on this flip trade versus long term capital gains if they held it longer term and if the company is crushing it.
- [19:39]
Austin Hankwitz
Yeah. So just doing some math here. Assuming they are able to buy it at a 15% discount and they put all $21,250 into their company stock, and then the very next day they flip it for a 15% profit. That profit is about $3,200. And then let's say they have an effect rate of 25%. So they're paying about $800 in taxes there on that short term. So they're talking about 2,400 bucks, which is. That's a lot of money to a lot of people and including everyone listening to the show here, I'm sure. But Ryan, if I were in your shoes, there's something here about your question that stood out to me, which was do you think that this employee stock purchase plan is a good way for us to. To save for a house? Yeah. You said if it's a good way to save up and buy a house, the answer is no. No, I don't think after taxes, $2,100 is going to be the needle mover for you on an annualized basis to go save up and buy a house. I think if you want to save up and buy a house, you should be actually intentionally saving money in a high yield savings account or, you know, if it's over, call it Two years down the road you want to buy, then that money is invested into index funds and it's right in the wave of the market up, down, left and right and in circles. But over the Next, call it 2, 3, 4, 5 years, that's going to grow exponentially and you're going to use that as a down payment on a home. I don't think to Robert's point here, flipping this little 15% profit on $21,250 of company stock is going to be the needle mover for you to buy a house if you want to do it and you believe in this stock. I would only do this if it was a way for me to invest into the company, right. That was my move. Let's say I worked for Google, right? Or Amazon or Apple, right? One of these companies that I really believe in for the next 5, 10, 15, 20 years. Then of course I can get it at a 15% discount and I'm going to hold it throughout my life. But you're treating it as a way to try and make a little extra money. You mentioned buying it, selling it the next day. I just don't think that $2,100 difference there that you're going to actually arbitrage from this is going to help you buy a house or not. If you do this for three years, we're talking about $6,000. Median house in America right now is half a million, right? Like that's not really going to move the needle. I think what's going to allow you to buy a house or not is to actually have a plan to save for a down payment and then that is call it invested for two, three, four years or maybe it' in two years or less and you've got it. You know, just dumping money in a high yield savings account or using public.com for your, you know, earning some interest there with their T bills and different products they've got. But at the end of the day here, the employee stock purchase plan is exactly that. It's a way for their employees to invest into the company they work for. And using the term invest there means you're holding it for several years or decades and they're giving you a little bit of a discount along the way.
- [22:20]
Robert Kroke
I agree with that and I think that's a great breakdown and I think that they should just focus more on, on putting aside a certain amount of money every single month that goes into the bridge account. Have that be for their house fund in two, three years down the road. Keep that money Working either in the bridge account or the high yield savings and rock and roll because I feel like this, this little swap trade is more of a chasing pennies why dollars fly by kind of thing. And so I really like your breakdown on that.
- [22:46]
Austin Hankwitz
Yeah, Ryan's making $250,000 a year alongside his wife, which means you guys are taking home about $15,000 a month after taxes, after your 401k contributions, after your healthcare. Like 15 grand. Yeah, y' all could probably carve out 2, 3, 4, $5,000 of that even living in D.C. baltimore area and have the ability to save for a sizable down payment. I mean, you do that for two years, that's call it 60 to $100,000 depending on how much you're saving every single month. So I agree with you, Robert. I think you're Ryan trying to chase some pennies while you see the dollars fly by. Our next question comes from John R. Also by email. Again, rich habitspodcastmail.com John says you guys percent rule as to how one should use their investments in retirement. It looks like the 4% rule is only to ensure that the money will not run out over a 25 to 30 year period of time. How should I compute my freedom number if I plan to retire early, wherein it's almost guaranteed that I will live for more than 30 years? Will the 4% rule still work or should I go down to 3%? That's a good question.
- [23:51]
Robert Kroke
Will the 4% work or should I go down to three percent? I think it's more important if you're going to try and retire early. And again, we don't know your age. Based on this question, I would look at it as where do you believe at retirement your monthly spending is going to be? And then I would apply the 4% rule to that. So for that reference, if you say I'm going to need to live on $15,000 a month in 15 years when I'm ready to early retire higher, then you need to figure out how you can get from the 4% of your portfolio to that $15,000 a month so you don't run out of money. And then you can adjust it down to 3% if you wanted to to help you be able to thrive and keep that same lifestyle. But I think it starts with understanding and make sure you add inflation in when you're doing this calculation. Use Chat GPT as your friend to figure out how much money are you going to need in that portfolio to be able to extract the 4% yearly and meet that $15,000 a month.
- [24:54]
Austin Hankwitz
Could you imagine 15,000amonth in retirement? That's a good healthy retirement if you ask me. Yeah. So John R. What a good question. So let's take a step back and think about the 4% rule in general. The 4% rule is essentially the Trinity study happened at Trinity University. Essentially what happened was a bunch of economists and smart people with calculators came together to figure out out what's the ideal portfolio and withdraw rate from that portfolio to assume a sizable healthy retirement without running out of money for that 25, 30 year period of time. And they said 60% of the portfolio should be invested into stocks, 40% of the portfolio should be invested into bonds. And if you take out 4% of the total value of that portfolio every single year, you should be able to live off of these, the portfolio itself for that 25, 30 year period of time. Now of course there's anomalies if you, you know, retired in 2007 and 2008, came around with the great financial crisis, like oh my goodness, I'm sure that would be terrible. Or maybe you retired in 2019 and then 2020 happened. Like there's a bunch of different, you know, anomalies to this, but that was their general broad stroke rule of thumb and I largely agree with it. It's very, very smart and back tested. Now Dave Ramsey, on the other hand, he says you can do 6, 7, 8%, but he also believes to not have so much in bonds. So in my opinion, John R. If you're trying to retire early, I would, depending on my age, I might not want to have so much in bonds. I might want to be more focused on dividends over bonds. You know, we're not financial advisors. We literally don't know your age, we don't know what you make. We know nothing about you here. So we're just kind of spitballing. But I think for me, if I was going to try and retire early, yes, you could do 3%, you probably could do 4%. You could also think about, you know, you're going to be pretty bored, right? What's your encore career, how are you going to make some money? You also aren't thinking about what potential Social Security income could come again. Who knows if Social Security is going to be around in 15, 20, 25 years from now. But there's a lot of different factors here that I think are supporting your cause here to pull that 4% versus lowering it down to 3. But at the end of the day it's definitely something that you should sit down with a financial advisor for yes. If you're pulling less of the portfolio's from it every single year, then yeah, it could be longer. It could be 35 or 45 or 55 years. Who knows? Just like if you're pulling more like 5 or 6% every year and something bad happens, then you do run out of money in 10, 15, 20 years versus the 25 or 30. So I think at the end of the day it's very much a personal decision and it has a lot to do with what Robert said, which are your monthly expenses, how much do you actually need to retire? Are you trying to thrive in retirement or do you just want to be work optional? I think that's a really self aware question to ask. Do you want to spend 15,000 doll a month in retirement or do you just want to be able to spend 7 because you've paid off your house and you've got a couple kids and you want to go on a vacation twice a year and you want to be work optional. Right. So like it really comes down to how do you want to live your life. Robert says it personal finance is personal. I think this is a wonderful example of having that conversation with yourself to try and figure out how do I want to spend my retirement and if I do want to have a more thriving type retirement, then maybe I do go for more than the 4%, knowing that I have to be more aggressive with my risk tolerance in that portfolio to make up for the amount of money I'm taking out of it.
- [28:15]
Robert Kroke
That is an awesome take. And the only thing I want to add to this, with modern medicine, AI and all the things we're hearing about, people are going to be living longer. So for anyone out there that's coming up on retirement, you're healthy, you're rocking and rolling. Please try to to yes, follow the 4% rule when you're figuring out what you're going to have and what you can withdraw in retirement. But also calculate it a little further out because if we all start living 10, 15, 20 years longer in these healthy lifestyle scenarios, we're going to need more money. So just make sure you're considering that as well. As we move into the future of all this new technology and medicine, we're going to need more money to retire on.
- [28:56]
Austin Hankwitz
Well, I think what's really exciting as well, you know, we had Bilal Little on the show a couple weeks ago, maybe now, but he joined us on an episode of the Rich Habits Radar and I think he shared a stat that there's over 3,000 ETFs now listed on the New York Stock Exchange. There are more ETFs listed on the stock exchange than actual companies, than actual stocks. And that's what's so exciting about the reality we live in right now. There are so many different strategies that people like John R. Can implement by buying these ETFs in retirement that maybe allow them to generate income that they wouldn't have had before. They would have had to park an index fund and take out 4%. But now you've got NEOs funds like spyi, QQQI, they got a ton of different funds over there that generate double digit yield in your portfolio in a very tax efficient way. So if you are doing this in a brokerage account, if you are doing this outside of a retirement account, your taxes are very, very efficient. Right. I'll leave it at that. So consider NEOS funds, consider other thematic ETFs. There's a bunch of different ways to generate yield in your own portfolio. Maybe you implement your own covered call strategy there. But John R. I think you're in a wonderful situation. You can choose and pick different ETF that replicate strategies that you believe in that you want to implement in your own retirement. So really, really great question and we appreciate you listening to the show. Now before we jump to our last question coming from Andrew B. Got to give a shout out to Masterworks. Robert. This past week was like a splash of cold water. Like literally a splash of cold water. Gold dropped 16%. Silver was down 34% from its highs. Even at record highs, that was the worst single day drop of the precious metal since 1980. Bitcoin is down from 126,000 all the way. Oil is around $60 a barrel. Tech stocks have been very volatile. But here's the wild part. People thought they were diversified because they had stocks, they had gold, they had crypto, they had all these different asset classes. But when the deleveraging cascade started, it did not matter. Risk on assets dropped all at once.
- [30:56]
Robert Kroke
Actually, that's the crazy part about this. This is what can happen when borrowed money fuels crowded trade trades, when margin calls hit, everything correlated naturally moves in the same direction. And we saw that like crazy last week. So investors are now asking themselves, what do I own that could do this to me next? Because this has been the fear for years. Everyone's been waiting for the triggers and when they come, you find out real fast what true diversification really means.
- [31:23]
Austin Hankwitz
And it's not adding more assets that move together. It's Better to also own assets that don't move together at all.
- [31:30]
Robert Kroke
That's right. Which brings us to something that didn't show up in this past week's bloodbath. Blue chip art. No futures markets. No overnight gaps where you open your account to see it suddenly down 34%.
- [31:42]
Austin Hankwitz
The art market operates on many different dynamics. Museum acquisitions, collector demand, cultural relevance, scarcity. It's not completely tied to interest rates or margin calls or Fed chair nominations.
- [31:56]
Robert Kroke
This is why 27% of billionaire collectors UBS surveyed plan allocate even more of their wealth to art and antiques this year, and partly why post war and contemporary art has outpaced the S&P 500 overall with nearly zero correlation since 1995.
- [32:13]
Austin Hankwitz
Robert We've been using Masterworks for years. Our sponsor makes it easy to invest in museum quality artworks like Banksy, Basquiat, Picasso, all the cool names without needing to invest millions of dollars. And their members have now invested over $1.3 billion across 5,500plus artworks to help diversify their own portfolios.
- [32:37]
Robert Kroke
A track record of 26 exits to date with net annualized returns like 14.6%, 17.6% and 17.8% on works held over one year.
- [32:50]
Austin Hankwitz
So when you're looking at your portfolio and you're thinking, oh my goodness, what could blow up on me here? Maybe it's time to diversify with something that wasn't designed to be leveraged margin or traded on futures exchanges.
- [33:03]
Robert Kroke
Just like us as a longtime partner, our listeners can skip the wait list at Masterworks Art Rich Habits. That's masterworks Art Rich Habits. Link in the show notes below.
- [33:15]
Austin Hankwitz
Investing involves risk. Past performance does not guarantee future results. Please see important Regulation a disclosures@masterworks.com CD all right, Robert, let's now jump to our final question coming here from Andrew B. Andrew says I've got 100,000 doll across my IRAs and 350,000 in my public.com account. I have $45,000 that I'm direct indexing. I get land contract payments from buildings I used to own. I lost a lot trying to be a landlord because I'm way too nice and I try to help everyone even when I should not. I'm happy with my progress, though. My cost of living is pretty low and I'm starting a little farm. I'm also going to go solar soon, which should also bring down my future expenses. My only concern, though, is I might be a little over leveraged in the stock market. I make 120,000 a year I've got a bunch of cryptocurrency, about 50,000. I've got 30,000 in these heavy metals. I think I've done okay, but I'd love to get your perspective knowing that I want to eventually retire and live on my farm. What a cool situation. So Andrew B. Is like, listen, I've got some, you know, call it 100,000 in my retirement accounts, 350,000 in public. And of that 350, I've got some crypto, I've got some heavy metals, and I'm direct indexing. Andrew, I think you're doing. I think it's a great reminder though, that if you're building a portfolio from scratch, you need to be thinking about the core satellite strategy. Right? So what does that mean? If you're building a portfolio, let's say you have $100,000 to go invest into things that are going to be in this portfolio, 65 to 85% of that 100,000. So 65,000 to 85,000 should be invested into index funds and ETFs, VOO, VGT, QQQ, all of the, the index funds and the Dow Jones. Right. All these things that we know in love and have been around for decades because they tend to go up and to the right over a long period of time. I think the S and P since like the 1920s has averaged 11 and a half percent before, adjusted for inflation. Like, that's incredible. So we want the bulk, the majority of our portfolios to be invested into these index funds and ETFs. The other 15 to 35% should be diversified across a bunch of different things. Maybe that's crypto, maybe that's some heavy metals, maybe that is some real estate. Maybe that's single stocks. Maybe that is some venture investing because you're a part of the rich habits network and you've dabbled in the dark arts of venture investing alongside us. But I think that is what's a really well diversified portfolio is the core satellite strategy. And it sounds like Andrew is, give or take, going with that. But Robert, what would you add here? What advice would you give Andrew for someone that's got $350,000 in public? What couple of things here. As we head into 2026, would you encourage Andrew to look more into.
- [35:59]
Robert Kroke
Well, I think first and foremost, Andrew, you' crushing it. You have over a half million dollars in net worth already. We don't know all the details. You have some decent diversification which we like to see. Your base is built. The IRA is up and running, you are crushing it. So cut yourself a little slack. I love that you're thinking about, am I diversified enough, am I too heavy in stocks, all of that. I think Austin's coverage was great. So for me, moving forward, I would keep doing what you're doing, keep diversifying, make sure you really look at what you do have to follow that core strategy strategy, because that is a really good way for you to not take your foot off the gas and still keep building your net worth and also being a little bit safer so you make sure you have all the right things in diversity. A lot of people, when they're building from scratch, they just kind of pick and choose stocks that they like or things that they hear about, and that's not the best way to do it. So the core satellite strategy is definitely a really good safe play while still not taking your foot off the gas at 32 years old. So I really like what you're have anything dramatic to change or add, I would just keep doing what you're doing because you've solved the hardest part of this. You've figured out how to make really good money early on and you have your mindset in the right place to build wealth and, you know, stay focused on your money. And that's really the keys here, that you've done really well. And following Austin's lead with further diversification and making sure you have the right strategies, I think you'll be all fine and you're going to be a multi, multimillionaire retirement.
- [37:36]
Austin Hankwitz
I totally agree. And the only addition I'll make now, as I've thought about a little bit longer, is direct indexing. I love that our friend here is doing some direct indexing. Andrew. Wonderful, wonderful idea. Because at the end of the day, you, you want your money to grow for you as much as it can. But you also, you say this all the time. It's not what you make, it's what you keep. And when it comes to direct indexing, you're able to do automatic tax loss harvesting on platforms like Public, where you can start direct indexing the s and P500. And maybe the way right we've seen even year to date, there are some names in the S&P 500 that haven't performed all that well. And so with platforms like Public, you can start automatically tax loss harvesting against those names. They redeploy the capital elsewhere in the S and P index here. So there's not too much drift off what the actual performance of the S and P is. But now fast forward 12 months and you've tax loss harvested $4,000. You can use that $4,000 loss, which isn't really a loss, but it's a little bit of a loss here, right, to offset gains elsewhere in your portfolio. He mentioned he's got some heavy metals. That's a gain for sure. We've seen silver up like crazy. Gold's up like crazy, right? So I love the idea of direct indexing on public. Major shout out to Andrew here for doing that. Incredible, incredible strategy. Another awesome episode of the Rich Habits podcast here. Now we got Valentine's Day right around the corner. We hope that you guys are looking at these money red flags and having some important conversations with your significant others. As a reminder, please consider subscribing to the newsletter. The Rich Habits newsletter is going to be linked in the show notes below. Every single Thursday morning. We're over here sharing directly to your inbox the biggest headline news that are impacting your portfolios. Just before we record our new Friday episodes, the Rich Habits Radar, the biggest headlines impacting you and your money. We've had some really exciting guests on that show recently. Katie Stockton, she joined us with some pretty cool 2026 market predictions. So if you've not yet tuned into that episode, please consider checking it out.
- [39:33]
Robert Kroke
What a great day today. We get to be here in the Spotify studio. We're together here filming live. We've got Christian in the building. We don't get to do this very often. So what a fun episode. And everyone have the tough conversations. Make sure you're on the same page with your significant other because we want to make sure everyone can really get through all of this and not have these. What'd you call it earlier? It was the financial infidelity. Infidelity, yes. So important for you guys not to go down that road because if you're going to be in a relationship, if you're going to be married, you need to be on the same page financially so you can build a wonderful, authentic, wealthy life together without any craziness behind the scenes as it relates to spending.
- [40:19]
Austin Hankwitz
Everyone, thanks so much for joining us on this week's episode of the Rich Habits podcast. If you learned something, please consider sharing it with a friend. Leaving us a five star review, voting in the poll below here on Spotify or leaving us comment a a comment on Spotify. We always get back to your comments and we appreciate each and every one of them. And we'll see you on Thursday.
- [40:56]
Robert Kroke
Foreign.
- [41:00]
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