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- [00:00]
A
Hey everyone and welcome back to the Rich Habits Podcast, a top five business podcast on Spotify. My name is Austin Hankiewicz and I'm joined by my co host, Robert Kroek. Robert is a seasoned entrepreneur in his 50s with lifetime revenues of over 300 million. And I'm an entrepreneur in my late 20s with a background in finance and economics. Since quitting my full time job in corporate finance a few years ago, I've built a seven figure media business and actively advise some of the most well known fintech companies around the world. As the show name might suggest, every episode we talk about rich, happy habits as they relate to business, finance and mindset. However, we try and bring you two unique perspectives. One from an industry veteran, which is Robert, and the other, myself, someone who's still in the process of building wealth and figuring it all out. Robert, before we jump into today's episode, we have to give a major shout out and announce our giveaway winners. As you all know from our 93rd episode titled Our Biggest Wins in 2024, we wanted to reward people for their biggest wins in 2024, specifically as it relates to the Rich Habits podcast. What did you lear financially? How did you take notes and take action and how did that impact your financial journey? Well, Robert, we received over 400 submissions to this giveaway and it's just one super humbling to know we've positively impacted so many people's lives. But two, we picked a couple of our favorites here and I want to read a few of them. So the first winner's name is Shane F. Shane says hello. Austin and Robert, thank you guys for being such an inspiration and helping me get my life back on track. This time last year, before I had discovered the podcast, I had a little bit of debt, but I had no savings and I was on the ropes with my wife. I ended up getting sober and I was looking around for an investment podcast because my grandfather always taught me about investing growing up, but never really understood it. I went from hardcore addiction, zero money and living in and out of hotels to now because of your podcast, I have five grand in a savings account, 3500 in my Roth IRA and 1750 in my public.com account. And you all gave me the confidence to open up a small business. I own my truck outright as well. I am now married to my wife. We own a home. I'm not living in hotels anymore. Thank you guys so much. I've totally flipped my life around because of you and your podcast. Robert. What an unreal message to receive from Shane super, super excited for you. SHANE and we just, we just get so excited that you people take our advice and take the stuff we say and can actually make a difference in your life and the people around you.
- [02:27]
B
It is the coolest thing, what we get to do every single day, and that is educate people on how to create meaningful, authentic, financially free lives and responses. This really, really just make it all worthwhile. So this is incredible. SHANE we are so happy and seeing such a huge turnaround in such a short amount of time.
- [02:48]
A
Now our next winner's name is Lonnie E. Lonnie E. Said, my daughter started college this year and I've been able to pay for all of it using the dividends provided by the NEOS funds ETFs that you guys taught me about. After your interviews with Troy and Garrett from neos, I was able to move investment funds out of my bridge account and into sp, pyi, qqqi, and btci. And I'm using the monthly distributions to cash flow her college expenses. And it has saved us from taking out student loan debt. And more importantly, we've been able to put this capital to work in a way that's going to set my daughter up for success in the future. Lonnie I'm so pumped to hear that. I think it's really cool, Robert, because, like, I wouldn't have never thought about that, right? I would have never thought about, like, using my investments to go pay for college in a way that allows me to keep my investments. But also, it's just so cool how we've been able to, like, inspire people action with their money in a way that can positively impact both their lives and people around them.
- [03:45]
B
Yeah, I think it's just all about breaking everything down in these seemingly difficult tasks and making everyone realize it is easy. And I think that is probably the best part of our message with the Rich Habits Network and the Rich Habits podcast is taking these unseemly, difficult chores that people are afraid to try and analysis. Paralysis sets in and saying, nope, you can do it, we can do it, and we're going to help you. And I love it. And this is a great, great story as well.
- [04:12]
A
So our final winner is named Eric. Eric's biggest win was helping his girlfriend. So Eric said, my girlfriend of five years did not grow up with much financial literacy. Her parents never taught her about these things and she was very inexperienced with it. A few years back, while we weren't together, her mom passed away and she was given $20,000 from her life insurance policy. Unfortunately, she spent it all in about a year on entertainment, travel, fancy things, and a lot of unnecessary items. Fast forward to recently and we were talking about it and she said that she felt really guilty, really lost with her money and scared and overwhelmed and didn't know what to do. She said spending that money was eating away at her and she regretted it a lot. She also got herself into a little bit of credit card debt and was concerned about how she was going to even pay it off. After listening to the podcast for quite some time, I was able to help her come up with a game plan using many of the things and strategies that you have discussed on the podcast. This included starting an honest budget, transferring her credit card debt to a 0% APR card so she can focus on paying it off quick, and allowed her to stop trying to invest and then focus on the debt because you guys say you can't out invest high interest credit card debt. That was my biggest win for 2024 as it relates to the Rich Habits podcast because I've been able to provide some relief to someone else, someone I care deeply about. Being able to help my girlfriend have peace of mind and feel confident enough to build a game plan and stick to it is a wonderful win for me and her. Can't wait to listen to the rest of the podcast in 2025. Another awesome win. Another incredible win. Shout Eric for sharing the podcast and taking what he learned and helped other people with it. Right. That's, that's what's so cool about this too, is like one person that's listening to the podcast right now, Robert. They know countless people and if they're close enough with them, they might be able to sit down and say, hey, here's a podcast episode. Weirdly enough to even say that that helped me a lot with building my budget or investing for the first time or, you know, trying to figure out what to do with my own money. You should listen to it as well. And it's just, we're so humbled that you all share the show with your friends and your fiances and girlfriends and family and everyone in between.
- [06:08]
B
Yeah, I love it. And what was the number you said of how many people shared their wins? Over 400 people shared their wins. It was just incredible. I had so many dms. But I think the coolest part about it for me is, and it's so humbling, like you said, is people are understanding that the Rich Habits podcast is not about entertainment. I think we're both good looking and we're funny, but at the End of the day, we are here to help people in their lives journeys, whether it's financial mindset or business, and help them really understand that it's not all rainbows and unicorns, but we are here to help lay out the blueprint and help them figure it all out. And so it's just so rewarding for me every day. So, yeah, I'm super excited about this episode as well. And I just really think it's going to hit home with a lot of people.
- [06:55]
A
Well, with that being said, Robert, what are we going to be talking about in today's episode?
- [06:59]
B
In this episode of the Rich Habits podcast, we're going to be discussing the three biggest mistakes we see people make all the time when buying depreciating assets. We're humans, we buy depreciating assets all the time. And we're not going to get mad at you for doing that. It's fun to buy cars and furniture and appliances and boats and all the cool toys out there if you can actually afford it. And I mean actually afford it. Don't get caught up in those special financing and you see the coupon or your buddy says there's a deal. At the end of the day, you still have to know if it fits within your budget and fits within your debt to income ratio so you can enjoy the asset and buy it. The smart way to avoid these five common mistakes.
- [07:44]
A
I like the term actually afford it because I think a lot of us can afford to buy a new car, we can afford to buy a boat or afford to buy these things, but that just means really, really getting a little thin here on the budget, right? So we'll talk a little bit more about what it means to actually be able to afford something in a little bit. But I want to come back to a moment about what a depreciating asset is. Just so we're on the same page, right? A deprecia appreciating asset is defined as something that goes down in value over time, and we buy them all the time. It's actually a lot of things that we buy go down in value over time. Cars go down in value. Lawnmowers go down in value. Appliances, furniture, boats, computers. Right. There's so many different things that go down in value over time, right. Something becomes used, and now it's a used product that's worth less. So we're human again. What Robert just said is true. We buy depreciating assets. I buy them, Robert buys them. Everyone should go out and buy depreciating assets because I kind of need them to survive. But doing that in a way that is intelligent and smart and follows the strategy we're going to lay out for you will allow you to maximize the use of it while also minimizing the depreciation hit against your net worth. Because at the end of the day, Robert, if someone has too much of their net worth tied up in depreciating assets, it's going to be really hard for them to grow their wealth throughout their lifetime.
- [09:01]
B
Yeah, I mean, one of the biggest arguments I have online constantly is people talking about buying a car. Dave Ramsey is always like, you shouldn't have debt, you shouldn't have debt. Go pay, pay cash for the car. And I think it's terrible advice at the end of the day between a car and a boat. Those are your two biggest appreciating assets. You're probably going to buy the most in your lifetime. And it just doesn't make sense to tie up all your capital in those items. I think it's important for everyone to understand the right way to be able to obtain these depreciating assets and not blow out having any chance of financial freedom by this cycle of continually doing it wrong when buying these depreciating assets.
- [09:41]
A
So the first mistake people make when buying depreciating assets is straight up not being able to afford that depreciating asset. They're stretching themselves too thin financially to buy it. Chances are if you're buying this depreciating asset, you're likely going to finance it. Cars, furniture, boats, big purchases, right. High ticket items here, appliances, you're likely going to finance it. And what I want people to realize here when I say you can't afford it means that whatever that new monthly payment that enters your budget, it takes away so much money out of your monthly budget that you no longer have the 15 to 20% margin that you can go save and invest for your future. Because the only way you're going to stop trading time for money, going to work every day. Right, is by investing the money you earn. And we all want people to be investing 15 to 25% of their take home pay. We call it margin. Everyone can find the margin in their budgets. We have so many episodes that we publish now about finding that margin and really auditing your honest budget here. But being able to invest that 15 to 25% and allow that money to compound over time in your Roth IRA and your 401k in your bridge account is what's going to allow you to retire wealthy. If you're taking that 15 to 25%, let's call it $750 a month and you're using that money to then go out and finance a boat. Where else are you going to be investing from? Right? So you're taking, Robert, this money that's supposed to be growing for you and you're parking it into something that's going to go down in value. So instead of putting it in the markets that go up in value over time, you're putting it into a boat or a car or something else that goes down in value over time. That's the quick and dirty can I actually afford this? Do I still have 15 to 20% of my take home pay that's going to continue to be invested. So in this example, if you wanted to go out and finance something and it was call it $318 a month or even $750 a month, but you still had that 10 to 15% in your budget to go invest, you can afford it. That's cool. You're invest investing, you're enjoying your life, you are enjoying the money, you're earning in your career and everything in between. And you're doing it responsibly, right? You're not doing it at the expense of your future wealth building journey.
- [11:50]
B
So this really comes to the illustration of can you afford it? And at the end of the day, most people are living beyond their means. That's why we always talk about lifestyle creep and not being able to delay gratification. And in this instance, the car is one of the biggest hurdles for people to get over because everyone believes they deserve the new Mercedes or the new BMW.
- [12:12]
A
I love that Robert. And so just to recap, the first mistake people make, the biggest mistake people make when buying depreciating assets is not being able to afford it, which is defined by they're taking their investment money and using monthly investment money to go put that and buy the depreciating asset. Do not do that. It's a terrible, terrible idea. It's a recipe for disaster.
- [12:32]
B
So let's take on point number two. Most people take on too much debt and the interest rate is sky high. I see it it every single day. I know we talk about it all the time, Austin, but it really inhibits their ability to continue to build wealth because all that money is going out in lifestyle creep. And with these high interest rate environments like in cars, buying a mobile home, buying a Jet Ski, all of the above, you might think that that pesky little payment is Nothing. Oh, it's only 439amonth. But you forget then you have the insurance, you have the trailer, you have the gas, you have all of the upkeep that comes with these things. So it's really, really important to understand that total ownership cost. Because too much debt like we talk about is also a recipe for disaster in hurting you from reaching financial freedom.
- [13:22]
A
Yeah, I like the call it, you said here about the interest rate being sky high, because I think that that is something people forget about. They might see a monthly payment they can afford, but the interest rate on that monthly payment is 9, 10, 12, 14% for some used cars. And so if you're, you're borrowing at 14%, you can afford the payment in your mind. Right. But you're still borrowing money at 14%. The stock market averages 8 to 12% per year. Yeah, we've had some great years recently, but those are anomalies. You need to think 8 to 12%. So if you're taking on debt that's above, you know, 10%, that is high interest debt in our opinions. And you should not be in high interest debt. You should pay off high interest debt before investing. So by taking on a payment, like a car payment or to your point, Robert, a mobile home payment or a motorcycle, whatever it is, at a 14% interest rate, that is not good. You should have just paid cash for that. Go save up the $9,000 for the motorcycle instead. Buy it in cash or don't buy it at all and put that cash instead in the markets and invest it. But it's not a good idea to get this double digit interest rate debt. It just doesn't make sense.
- [14:29]
B
Yeah, and it's one of those things, it's really easy to glamorize toys. You own a Jet Ski, how many times did you actually use it this summer? Was it worth the amount of debt you took on for it in the payment? And it's different for you because you have a high income and a lot of people don't have a high income but still buy these depreciating assets. So it really just gets to be a mindset shift you need to understand. And probably the biggest hurdle on this point is so many people are just bound and determined to buy new, gotta have the new Jet Ski, gotta have the new motorcycle, gotta have the new sports car. But they don't realize you could go out and save 20, 30, 40% on that same vehicle, that same Jet Ski and buy it 2 years old, 3 years old, still have a warranty and save that 20 to 30% and then also that helps them keep more money in their pocket. So I just want everyone to understand, really look at the numbers, really understand the total payment and ownership cost as it relates to having high interest rates. Because at the end of the day you can't out invest high interest debt.
- [15:34]
A
To your example, yeah, I treated myself on my birthday and I bought a Jet Ski. I think it was like nine or ten thousand dollars I paid for it. I paid cash for it obviously, because if you go and think about you can go finance a Jet Ski, but it's going to be at that 16% interest rate. That's high interest debt. You can't out invest, statistically speaking, high interest debt like that. So I went, I paid cash for it and I had fun, took it out, brought half a dozen times this summer and I plan to do that every summer going forward too. So again, it's cool to buy those things. But to your point, Robert, I bought a two 2017 jet ski. It wasn't a 2024. The 2024s were, you know, call it 23,000, $24,000. I paid nine or 10. I ticked the boxes and all the things. It floats in the water and it goes fast. That's cool enough for me.
- [16:17]
B
I had a friend, and I'll never forget it as long as I live, and we could also relate it to my recent purchase of my 911 Porsche convertible. But back in the day I had a friend tease me because I bought a Aston Martin DB9 convertible in 20. It had 1860 miles on it, smelled new, looked new, tires still had the little stick out, little nipples on the tires because it had barely been driven. And I got teased of why I bought a used car. And they're the ones that'll never understand. That's why the rich get richer, because we're smart with our money and we don't make big financial mistakes. And so for me, I was more than happy having that one year old car, being able to save all that money on the purchase. I think I saved like $65,000 and it had 1800 miles on it. And that's just what we do to stay ahead of the game and make sure we use our money wisely.
- [17:12]
A
I'm right there with you, Robert. I think that is such a great example to show that I think you said this quote earlier, rich is loud, whereas wealth is quiet. Quiet. Yeah, yeah.
- [17:23]
B
It's so true. It's so true.
- [17:25]
A
So now to recap again, straight up, can't afford it. That's the biggest mistake, number one, biggest mistake number two is you're taking on too much debt and that interest rate is way too high. You can't out invest high interest debt. So don't even do that. Now, the third mistake people make all the time is, and this is kind of counterintuitive, Robert, but they put too much cash down when they're financing something. Now, this is not exactly as apparent in 24 and 25 now, but back in 2020, 2021 and 2022, when interest rates were very low, like when I bought my car at a 3% interest rate, I didn put so much cash down because I knew I could take that cash, the cash I didn't put down and go invest it. So it's kind of like the opposite of the second point. The second point was if there's a high interest rate on it, just buy it in cash. Whereas if there's a lower interest rate on it, don't overindulge the cash. Don't put so much cash down. So in my example here, what happened was I went out, I bought a car, I financed it, I think it was like $55,000 for this SUV that I had bought as a forerunner, bought it brand new, it was amazing. And I plan to drive it to the wheels fall off, and I got a favorable 3% interest rate. I think I put like 3,000 doll down on it. And my monthly payment again reflects that 3% interest rate. And in my brain I'm like, If I put 3,000 down and I have this monthly payment, I could take the other, you know, I had the 50 something thousand in cash, but I could go invest that money, invest it like I did in 2023 and 2024, and now I will in 2025, have that grow for me. It's up 65% over the last two years. Have that money grow for me over time, which way more than offsets the interest rate of that 3%. And so now the question is, hey, Austin, you have all this cash, why don't you just pay off the car? Well, at a 3% interest rate, would I rather save 3% in interest by paying off this car, which is about $75 a month in interest, or would I rather have that $50,000 invested and growing 30% like it did this year, 28% like it did last year? I'd rather have it invested and growing because we know what sectors to invest into. So that's just a mistake people make when it comes to buying these depreciating assets. Is they either if they have a favorable interest rate, if they've got a great interest rate, they put too much cash down trying to lower the payments, or they'll pay it off too early, knowing that it probably was a better idea to just keep the money working for you elsewhere.
- [19:41]
B
And another great example of this that I think people do wrong, and it's not related to this exactly, but it's a great point to talk about is the same thing with mortgages. We see so many people that bought houses when mortgage rates were 2 and a half, 3%, 3 and a half, even 4%, and they brag to us that they're paying down the mortgage and they're making these double and triple payments. And again, it doesn't make sense to do that because if you can borrow money for less than what you can make with it, and in this instance, a 3% down or a 3% interest rate, I should say, is a huge difference if you're making 10, 12, 15% in the market. And that is why you want to use that debt wisely when it's low interest rate debt. So important. And I wanted to put that in there on that point before we move on.
- [20:26]
A
I love that. It's called arbitrage with your money. Now, of course, there's. We don't say that as like financing gurus and trying to get all sexy and arbitrage right. It sounds all sexy and crazy. What we're trying to help you understand is that it would be a mistake for me to go take $50,000 of cash out of my investment account to go pay off my car. Considering the investment account is up 41% over the last 12 months, which is my real returns for the last 12 months? 41% return or a 3% return, which one would you choose? I'm choosing the 41. Therefore, again, it's a mistake take to do that. And this episode's all about the biggest mistakes people make when buying depreciating assets.
- [21:07]
B
I love it. And yes, arbitraging your money and having all the positive arbitrage go in your pocket is definitely the way to build wealth. So the next one is probably one of my favorites and where I see the most mistakes happen, and that is people not doing their research. I don't ever want to hear that you went to a dealership just looking and bought a new car or that you went to the boat dealership because you were in the mood to go boating that weekend or go fishing. At the end of the day, when you have these big Purchases take some time. Get a notebook out, do your research, look up what the reports are saying, look at what the comparisons are saying, look at what the prices are across different places. For instance, when I bought my last boat, I went down the street 15 minutes from my house. They had one in stock, it was the right colorway, it was the model I wanted, but I felt the price was too high. I took the best price they gave me, I shopped around and I found a boat dealer two hours away that had a colorway I liked better. And I bought it from there. And what it did was it saved me $6,500. And all I had to do was get in the car for four hours, two hours there, two hours back, to save 6, 500. And guess what? It doesn't matter. Because if I need anything from the local dealer that's right down the street, I can still use them. It doesn't mean I need to buy from them. So always do your research. Get the notepad out, do the research. And don't make these purchases, these big depreciating asset purchases on a whim, because you'll end up costing yourself a ton of money over time.
- [22:38]
A
And beyond that too. I want to just double click on this idea of making a big purchase on a whim. If it's depreciating asset or appreciating asset, sleep on it. Spend some time thinking about it. Right? Give yourself the 48 hour rule, doing the research and sitting down and saying, okay, why am I choosing this, this piece of furniture over a different one, or this appliance over a different one? Why do I want the $4200 refrigerator, not the 1800 refrigerator, or the $18000 car versus the $14000 car? Or what's difference between this boat or that boat, or this lawnmower versus this lawnmower? Right? Depreciating assets come in a bunch of different forms and factors. It's important for you to do your research, sit down and actually try and negotiate the best price possible for yourself. Because at the end of the day, to your point, Robert, you saved 6,500 do dollars over a four hour period. That's over $1,000 an hour, right? That's pretty good compensation. I mean, if someone's doing a similar thing, they could save hundreds, if not thousands of dollars an hour too.
- [23:35]
B
And everyone needs to realize this is a lifelong skill set that you're building, what we're talking about in this episode. Because for anyone out there listening right now, I promise you there's Never going to be a day, a week or a year that you don't see something you want. There's always something we want, whether it's a new pair of shoes, a new refrigerator, a new Jet Ski, it does not matter. There's so much fun, cool stuff out there. But if you can get it in your mindset to be an investor versus being a consumer and put in that delayed gratification, make sure you can afford it. You're going to be a much better off person down the road because you're going to be able to set yourself up for financial freedom and not always living on the whim and letting lifestyle creep take over.
- [24:19]
A
Now, our fifth big mistake that people make when they're buying depreciating assets is going upside down with that depreciating asset and then rolling the negative equity into the next appreciating asset. It's very common to do this with people's cars. Let's say they buy a car, they overpaid. Robert. Right? They overpaid for the Jeep. They spent $40,000 on it. It's now only worth 20,000, but they still owe 30 on that Jeep. They don't want the Jeep anymore. They go and sell it, they trade it into a dealer, whatever, and then they take that 10,000 of negative equity and they roll it into their next car payment. And that higher interest rate, higher debt amount, it's just this endless loop of bad debt, bad debt, bad. Go get a small personal loan at a credit union, you know, maybe even take on a margin loan in your investment account at 5 and a half, 7 and a half percent like you can on M1 finance and public dot com. Take that money to pay off the negative equity. But do not continue this terrible snowballing effect of rolling negative equity into negative equity to negative equity. Because somewhat someday is going to come where you're going to have to pay all that back, right? And it's going to be a grueling, just terrible, terrible feeling of having to go, wait a Second, I've got 19,000 of negative equity in this Chrysler 300. What am I going to do? I can't afford this. This is nuts. So do not get greedy. Do not roll this negative equity. I don't care what the salesman says. Oh, yeah, it's all good. Here's your coffee. We can roll it. Don't worry, we'll keep your payments low. Don't be so naive.
- [25:48]
B
Don't make that mistake and understand the breakdown of what the new payment is. Let's say your Back's against the wall and you have to roll over the negative equity into the new vehicle. You shouldn't be doing this, but if you are, make sure you get a breakdown because they're always going to sell you on payment and not numbers. And they might be adding in a whole lot of profit on the new price because they know they've got you against the wall with the negative equity. And two wrongs don't make a right. So you want to make sure you negotiate the price of the new car and you negotiate the hell out of your trade in to get as much as you can for it to diminish the negative equation equity, but also get the best price on the new car. Because guess what? The new car is going to depreciate as well. 20, 30, 40% in the first three years. And then you've got this double catastrophe of negative equity and a depreciating asset that's going to set you back years and years from getting yourself straight in the car business and having yourself in a good position financially related to how much of your net income per month is going towards your automobile expense.
- [26:52]
A
Not just automobile expenses, but just depreciation, right? I mean, golly, I want everyone's net income every single month through household income to go toward investing to assets that go up in value to those rental properties, right? To the stocks, to equities, to ETFs, cryptocurrencies, things that go up in value over time. Not a Jeep compass that you got $30,000 of negative equity in or something nuts like that, right? So these were the five biggest mistakes that you need to avoid when you're going out and buying a depreciating asset. To give you guys the recap. Number one, just straight up can't afford it. You're taking that 15 to 25% of household income that you're using to invest to buy it. And that's a recipe for disaster that's not going to allow you to build wealth over time. The second mistake is you're taking on too much debt with an interest rate that's just too dang high. The third mistake is if you do get a good interest rate, like what Robert and I have done in the past here, you put too much cash down, no go arbitrage your money, right? It's a mistake to want to sell that $50,000 of investment that's making 10, 15, 20, 30% in the markets to go pay off a 3% interest rate debt. The fourth mistake is not doing your research. Take Robert's advice here, do your research. Go drive the four hours to save the $6,500 when buying the boat. It's worth it every single time. And the fifth mistake is taking that negative equity and rolling it into the next depreciating asset. If you can avoid those five mistakes, go buy that depreciating asset. You deserve it, you've saved up for it, you figured out the ways and it's not gonna negatively impact your net worth too much. And enjoy life. Robert. That's what's so about everything we do. I think a lot of people make the mistake of thinking I'm investing, I'm stringent with my money, I'm not going on vacation, I'm paying off my debt, I'm doing all these things. But why? Why do I do these things? And it's so that you can enjoy your life later on in a way that your peers, your neighbors, your family will never be able to comprehend. You have so much wealth and income and different, you know, diversified buckets of income across your portfolio of investment that allows you to go enjoy the boat while also the new car and the new house and this, this and that and the other. Right? You made sacrifices today so that you can also enjoy things later on.
- [29:03]
B
And we're never telling people, don't have fun in your 20s, 30s, and 40s because you're setting yourself up for later. We're just telling you to understand the consequences if you don't put aside money for later of what's going to happen later. Because everyone thinks they can kick the can down the road road and miraculously, at 45, 50 or 55 years old, they're going to turn the corner and fix the ship and get it on track. It just doesn't work that way. The longer you can be putting money aside for the future and building your financial freedom, the better off you'll be. Because compound interest is your friend. And that's why we're always harping on it to make sure you get some of those funds put away every single month. Because it's not about timing the market. It's time in the market.
- [29:47]
A
Well, speaking of time in the market, bank of America, Robert all if you saw this, they just came out with a new report that says in just two years. So by 2026, ultra high net worth individuals plan to devote approximately 11% of their total investment portfolios to fine art and collectibles.
- [30:06]
B
Yeah, it's no coincidence that the art market is now back in the headlines. The big story was the banana taped to the wall selling for $6.2 million when there were also other multiple artist records broke tens and hundreds of millions.
- [30:21]
A
It's very important to keep an eye on multiple asset classes because we always preach about diversification and artwork is absolutely in the mix there. We have our own investments in artwork that have done pretty well. We've both been using Masterworks art investing platform to diversify for five years now.
- [30:37]
B
That's right. Austin and I invest with Masterworks, the sponsor of today's episode, and we've even interviewed their founder and CEO Scott Lynn. On the show this summer, they crossed over a billion dollars in capital offering paintings that typically range from a half a million to $20 million. And although with Masterworks you don't need to spend millions or even be an.
- [30:59]
A
Art expert, Masterworks has offered investments in over 400 works with investors realizing realizing these returns in cash in their checking accounts. Net returns including 17.6%, 17.8% and 21.5% on works held longer than just one year. Auction season is in full swing now and listeners can learn more about Masterworks at Masterworks Art Forward slash rich habits, which is also in the show notes of this episode.
- [31:28]
B
As with any investment, past performance is not indicative of future returns. Investing involves risk. Sales returns are not inclusive of unsold works. Important regulation A disclosures can be found@masterworks.com.
- [31:43]
A
CD Robert, I really want to encourage everyone listening. If you've built your base and you have now this portfolio that's growing, make it a financial New year's resolution of 2025. Diversifying artwork. You just gotta do it. It's so simple with Masterworks. I've got thousands of dollars with them. I've got four or five different Basquiat paintings with them. Again, that's Masterworks Art slash rich habits. I am such a big proponent of this and I can't say enough awesome things about the platform.
- [32:11]
B
Yeah, I mean, all investing doesn't have to be serious, you know. And I love Masterworks because I love being in these alternative categories where it's fun and we've done really well with it. So I'm excited for the future of as well.
- [32:23]
A
All right, Robert, let's now jump into our first question from Master Deputy Lutz. Deputy Lutz says, I hope this message finds you well. My name is Philip and I've been an avid listener of the Rich Habits podcast since its very first episode. I want to thank you, Robert and Austin for the incredible advice that you share. Your insights have genuinely set me up on the right path in many areas of my life. While I enjoy the entire podcast, I find myself particularly drawn to the segments where you talk about your inventive process in new product development. Recently I ventured into 3D printing, initially a hobby, but it's quickly become a tool for solving problems in my work. Using my 3D printer, I created a prototype that addressed a very specific need. A fellow canine handler then suggested a modification, which led to an exciting realization. We might be onto something truly innovative in this canine handling world. This has brought me to a crossroads of exploring different patents. I've delved into the complex world of intellectual property and believe that combining several existing products into one with a unique function could qualify for patent protection. However, I find myself hesitant to move forward. While I'd like to give the prototype to another handler for testing, I'm unsure how to protect myself and the concept I've invented on my modest salary. The idea of spending thousands on a patent attorney feels daunting, and I don't know where to start when it comes to ensuring my design won't infringe on existing patents. Are there any steps beyond the traditional avenues that I could take to protect myself if this idea has genuine potential? Additionally, how would you recommend researching whether my design might infringe on on a similar device? Any guidance Robert can provide as to where to research this further would mean the world to me as I consider next steps in this journey.
- [34:03]
B
I love this question and we all go down this road when we're developing a product. First and foremost, I wouldn't spend thousands and thousands of dollars with a patent attorney. I would do a design patent which is infinitely quicker and less expensive. You could probably do it without me seeing the product for 3, 4, $500. Then you can get up and running and have that patent pending on the design patent and then just do the research in. Probably the ways to do it is to really just flush it out on Google, TikTok, Instagram, see what's out there, and then really look on Amazon as well. That's where I look at a lot of products to see if something similar to what I want to develop exists. And then once you do that, I wouldn't worry about the patents as much because you're going to find endless, endless layers of patents around most product ideas. But they could be dormant patents. They could be patents that are no longer effective. And so for me, I would rather you spend the time and money on product market fit, getting the prototypes dialed in, getting a few samples out there to people that can give you the opinions and give you the insight as to is this product meaningful enough to go forward and then take it to production level. And in that instance, you've got me in Austin. Bring it to us when you get that level. I will certainly take a look at your business plan, look at the product, look at the functionality, and let you know more in depth what I think you should do with the product and if it has legs from a retail or direct to consumer perspective. Because you never know. I mean, look at silly bands, the simplest of products, and it's done over $200 million in revenue in the past 14 years. So you never know what your big winner is until you try.
- [35:42]
A
Well, it sounds like too, that you might have something, Deputy Lutz, that other canine handlers of, you know, law enforcement all around the country and maybe all around the world could use here. So beyond just retail and direct to consumer, I mean, this is something that might have some good commercial and governmental use. So it seems like, Robert, what you're suggesting is go with the design patents, not worry too much about a utility patent, and instead just make sure that that doesn't exist already on an Amazon or on TikTok or Instagram or someone else out there using it, and then go get some prototypes made and then go have those prototypes be used, get some feedback, reiterate, and then begin to actually build a business around this.
- [36:21]
B
Yeah, that's what I would do. That's what I do every single day. Because I see people all the time. They'll spend two years in $75,000 patenting an idea before they ever even know if anyone wants it. And then what happens is, a lot of times in that two years, someone else comes to market with it. They just get it launched, something like it, and then that discourages you from finishing. You want to try and see if you have product market fit and get to market as quickly and as inexpensively as possible possible. So you can test the market and see where you're at before you go spend all your money.
- [36:52]
A
I love that. So our next question comes from Rubens R. Reuben says, my question is about managing cash for buying dips. For example, if I'm holding $20,000 in cash and I've got ETFs like Voo, QQQ, VTI and IBIT, and they all drop several percentage points over a week or two, how do you determine when a price drop is significant enough to buy more? How would you invest that cash? Assuming I decide the drop is substantial and I invest 5,000 into each of those ETFs. What should my next steps be? To now build up the cash available for future buying opportunities. I don't like having cash sitting around not working for me, and I struggle to determine a solid strategy to always have enough of it on hand for the next investment without selling my existing holdings. Rubens, I love this question. It's one of my favorites. Let me break it down for you. How you should be dollar cost averaging and deploying your capital is as often as you get paid by your employer or earn money in your checking account, right? So let's say, for example, you take home $10,000 a month and you're investing 15% of that every single month. So $1,500 of that gets invested into the stock market on a monthly basis across these four ETFs. Let's say you get paid every two weeks. So $5,000 of after tax money every two weeks or on the 15th and the 1st, whatever you want to do here. But twice a month, that's $750 every two weeks that you now have that you can go invest into these ETFs. Personally, I believe that every two weeks, weeks is enough to immediately deploy that capital if it's a dip, if it's a gain, if it's a left, right, whatever the markets are doing. Buying something every single two weeks is the definition of dollar cost averaging if it's a dip or if it's not. So I guess what I'm trying to get at here is don't overcomplicate this. Don't overthink this in such a way where you're trying to stand over here and save some money and then buy the dip and then maybe, you know, sit over here to try and perfectly time. You're trying to time the market, my friend, we can't time the market. It's about time in the market, not timing the market. So I don't care if that's what the S and P, the nasdaq, vti, or I bet they're going to drop, they're going to go up, they're going to go left, right down and in circles, but consistently every two weeks, putting in that 750 on that Friday every two weeks, which is the definition of dollar cost averaging, do not time the market. Now back to this idea of like building it up if you want to keep maybe one month's worth of your invested capital. So in this example, 1500 bucks in your brokerage account account to opportunistically buy dips here and there, like Be my guest. But I wouldn't keep 3, 4. I wouldn't keep $20,000 is what I'm saying. Right. That's a little too much to keep in cash to wait to buy the dip with.
- [39:29]
B
I don't even know what to add to that. I just know that every single day people ask this question and they think for some reason when they have this money sitting that they can find and wait for the dip. And the problem is when there is no dip and there is no drop drawdown and 1, 2, 3, 6 months go by and that, you know, investment just keeps going up, then you're just sitting on the sidelines. You're losing gains because you thought you could time the market. Don't do that, Reubens. Just get the money in there. If you want a dollar cost average, you know, a lump sum over a few weeks or a couple months, that's okay. But don't sit on the sidelines waiting for a dip because no one can time the market.
- [40:07]
A
Yeah, Robert, I'm looking at it right now. Earlier this year, between May 1 and July 16, there was not a single single dip that happened. So that's nearly. That's two and a half months, right? That's two and a half months where someone like Rubens might be sitting on the sidelines waiting for a dip when in actuality they missed out on 13 gains in the S P500. Right? So that's what we're trying to say is like if you just have a system of buying every other Friday, every other Tuesday, like whatever your system is, have a system of dollar cost averaging once a month even, it doesn't matter over time, you're buying the dips, you're buying the ups, the down the left and right into the in circles. So really good question, Rubens. Now, before we jump into our last question, we have all had that moment where we think to ourselves, man, I wish I'd bought that stock and that company sooner. Good news for you listeners is you don't have to have that wish anymore because there's an app that makes investing fun and easy to understand. As you all know, it's Griffin, spelled G, R I F I N. It's the first app that automatically buys stocks in the companies you shop at every time you actually make a purchase. It's like turning your everyday spending into an investment habit built around your life. And honestly, it's pretty genius.
- [41:13]
B
Yeah, absolutely. I've been using Griffin and it's a game changer for me. Here's how it works. Whether you're grabbing groceries at Walmart, paying your Shopify subscription, or shopping on Amazon. Griffin automatically invests $1 into that company's stock and if you want, you can increase it to more than $1 per purchase. That's just the base rate. The idea is simple. Be part of the growth and benefits from the brands you're using every day. You're already spending money at these companies, so why not get a piece of the ownership every single single time?
- [41:43]
A
We've said that so many times, Robert. Helping people move their mindset from consumerism to being an investor. And Griffin helps you do that automatically. I've been a believer in Griffin for years now. I even invested in the company in 2021. It is so easy to use. Just download the Griffin app, connect your favorite credit or debit cards or bank account to the app, and start passively investing into the companies you shop at. You can join over half a million other Griffin members for just $5 dollars per month.
- [42:09]
B
So here's what you do. Check the link in the description, visit our link in Bio, or search for Griffin in the App Store. And when you sign up with the code Habits Capital H A B I T S for a limited time, you'll get 40 off a yearly membership and $5 towards your first investment. That's Griffin G R I F I N Let us know if you have any questions. We'd love to hear about your experience. Experience.
- [42:35]
A
All right, Robert, let's now jump into that final question. Now our final question comes from Brian B. Brian says hi Austin and Robert. I love the podcast and I haven't missed a single episode. I couldn't wait to email you both after receiving an email from Vanguard this morning about vti. Tech is driving the majority of the markets these days, and VTI is becoming so overweight in technology that according to the sec, it is close to being categorized as non diversified. As I understand it, I know you all recommend voo, vti, qqq, vd, GT and things like that, which is the majority of my portfolio and it's been doing very well. But now I'm wondering if it doesn't even make sense to hold one of those tech ETFs as VTI is becoming its own tech ETF. I guess what I'm trying to get at here is am I overweight in technology? I'd love to hear how you all recommend navigating this new market. I haven't heard any other sector ETFs being recommended, so tech feels just kind of like what we need to Be doing thanks to you all and have a merry Christmas. Good question, Robert. I'll take a first stab at this. I think this is going to be more of like a back and forth here over the last 20 years, Robert, and I'd assume you're going to agree with me here. Has tech taken over the markets? Absolutely. And that's because tech is going to eat the world and will continue to eat the world. Technology equals efficiency and American capitalism thrives on efficiency. And so if technology is efficiency and efficiency is American capitalism, therefore technology is also American capitalism. So in my opinion, that's why we've seen 25, 30% of the S&P 500 be so consolidated now into these magnificent seven technology companies, because those are the companies who have figured out efficiency at scale through technology. Therefore I want exposure to that as an American capitalist investor. So to this idea of like VTI being like non diversified. Just want to give you some quick stats here, Robert, for you to reflect upon this as I pull it up in real time. VTI's top 10 holdings represent 30% weighting and most of those holdings besides Eli Lilly and Berkshire Hathaway, which only make up about 2%, are technology stocks. So 28% of the fund is technology, which is fine. But also you've got the other 15% in financials, 12% in healthcare, 9% in industrials, 4% in energy. Right. So it's like. Well, I hear what you're saying, Brian. It's just I think technology is something that you want to have, you know, in your portfolio, even if it's, you know, not diversified in the eyes of the sec. But what's your take on this, Robert?
- [45:05]
B
So yeah, I agree with that, Brian, and I love vti. And the basket of funds we talk about is just to give people exposure in the right indices like the NASDAQ and the S&P 500. Because so many people when starting out in their investment journeys, they get caught up in this, you know, rat race of trying to figure out where's the next 10x and where is the overnight success, the get rich quick schemes. And we're trying to prevent people from doing that. But other sectors that we're always talking about, especially as the markets change, is looking at these URAs like we're looking at nuclear and uranium sector, we're looking at the bond sector with bndi. We've also talked about ibit. So you have some exposure in the bitcoin world world. So there's a lot of different sectors that we talk about and different things that we like within those sectors. But we certainly want to keep the bases always covered for people because we want to make sure people build their base in a meaningful and protective way, which might leave a little money on the table, but it's also going to get really good gains over a long period of time without so much volatility.
- [46:13]
A
I like that take, Robert. Yeah. Just to reiterate, technology is eating the world as it has been for the last 20 years. And the world appreciates how, how efficient technology is, especially now artificial intelligence. Right. That's what we've seen a lot of this momentum come for the last 24 months. And if AI, I mean, hear me out, Robert. Right. Every company is going to use AI somehow to be more efficient. And so does that mean that every company is a technology company? No, it doesn't mean that. It just means that there are going to be the technology companies that are selling everyone else the AI that are going to benefit the most. And so those are the companies I want to be invested into. And yeah, do they make up 30% of VTI or 28%, whatever it is, sure. But I mean 28% of a portfolio and technology I don't think is really that intimidating.
- [46:58]
B
This is a great question and we answered it well and it gives you a good idea of what we see happening in the future and what are the best moves to do.
- [47:07]
A
Brian, thank you so much for listening to every single episode of the podcast. And major shout out to our big winners of the 2024 Big Win Giveaway here, Eric, Lonnie and Shane. Shane, Eric and Lonnie. I'll send you an email with more information on how to claim this $250 each. And everyone else, thank you so much for listening to the Rich Habits podcast. Happy Monday and we're rooting for you for the rest of the year. I know it's last couple of weeks, but you can do it. You got this and we'll see you on Thursday.