60: What To Avoid When Picking a Financial Advisor in 2024

This episode provides insights into the potential pitfalls when choosing a financial advisor, emphasizing the importance of understanding fee structures, the distinction between fiduciary and non-fiduciary advisors, and the impact of financial products on investment returns.

1. Be wary of financial advisors' fee structures, especially those based on a percentage of assets managed.
2. Understand the critical difference between fiduciary and non-fiduciary advisors, with the former legally bound to act in your best interests.
3. Be cautious about investing in high-fee, underperforming financial products like mutual funds and target-date funds.
4. Consider the suitability of robo-advisors for initial investing phases, particularly for those with simpler financial needs.
5. The choice of financial advisor should evolve with the complexity of your financial situation.

1: Introduction to Financial Advisors

Discussion on the basics of financial advisory services, emphasizing the need for awareness about who manages your money and their compensation methods. Austin Hankwitz: "The first thing you need to understand are fee structures and how they work." Robert Croak: "Every single year, they're collecting a percentage of your invested assets for themselves."

2: Fiduciary vs. Non-Fiduciary Advisors

Comparison between fiduciary and non-fiduciary advisors, highlighting the legal obligations and fee differences. Robert Croak: "A non-fiduciary advisor is not bound by law to sell you the products most beneficial for you." Austin Hankwitz: "Fiduciary advisors are bound by law to sell you the financial products that are best suitable for your risk tolerance."

3: The Impact of Financial Products on Investments

A deep dive into how certain financial products can affect your investment returns negatively. Robert Croak: "Some of these funds have one to 2% expense ratios on top of the 1% fee they're already charging their customer as an advisor."

1. Verify Fee Structures: Always confirm how your advisor's fees are structured to avoid excessive costs.
2. Check Advisor Credentials: Ensure your financial advisor is a fiduciary to align their advice with your best interests.
3. Assess Financial Products: Investigate the financial products recommended by your advisor, particularly for hidden fees or poor performance histories.
4. Consider Robo-Advisors for Simplicity: For less complex financial needs, robo-advisors can be a cost-effective and straightforward option.
5. Review Investments Regularly: Maintain regular checks on your investment performance and fees to ensure alignment with your financial goals.

In this episode of the Rich Habits Podcast, Robert Croak and Austin Hankwitz share their three most important avoidances as it relates to finding and choosing a financial advisor in 2024.

High fee structure

Bad financial products

Lack of guidance and planning

Ready to diversify 1-3% of your investment portfolio into fine artwork like Austin and Robert? Skip the waitlist and invest in blue-chip art for the very first time by signing up for Masterworks:

https://www.masterworks.art/richhabits

Purchase shares in great masterpieces from artists like Pablo Picasso, Banksy, Andy Warhol, and more. See important Masterworks disclosures: masterworks.com/cd

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Austin Hankwitz, Robert Croak

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Austin Hankwitz

Hey everyone, and welcome back to the Rich Habits podcast, a top ten business podcast on Spotify. My name is Austin Hankowitz and I'm joined by my co host, Robert Croke. Robert is a seasoned entrepreneur in his fifties with lifetime revenues of over 300 million under his belt. And I'm an entrepreneur in my late twenties 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 advised some of the most well known fintech companies around the world.

As the show name might suggest, every episode we talk about rich 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. So, Robert, what are we going to be talking about in today's episode? In this episode of the Rich Habits podcast, we're going to be spelling out the three reasons why you should never let a financial advisor handle your money and your dreams.

Robert Croak

We're going to break down all of the things you need to know and understand prior to signing on the dotted line. By avoiding the mistakes we're about to lay out for you, you could make yourself potentially hundreds of thousands of dollars more in profits, adding to your net worth over time. Now, don't get us wrong. We believe in financial advisors, but only when you're ready. We see people all the time think that they can't invest into the stock market until they have a financial advisor doing it for them, and that's just not the case.

Austin Hankwitz

When ready, we want everyone to make sure they do their homework and make the right selection for them. So, Robert, let's jump into the episode. Yes. The first thing you need to understand are fee structures and how they work, and this is going to take me a while. 98% of financial advisors share the same fee structure, which is called percent of assets under management.

Robert Croak

You see that AUM term all the time. All this means is as a form of compensation for their hard work. Every single year, they're collecting a percentage of your invested assets for themselves. Industry standard is 1%, but this figure might be higher or lower depending on how much you have invested with the firm. So if you have 250,000 invested with a financial advisor charging you 1% in an annual fee, you're paying $2,500 per year to this advisor to handle your money.

If it was 500k, that's 5000. And if it was a million, that would be $10,000 for the year. This amount is paid to your advisor every single year, regardless of performance. Also important to understand is the difference between a fiduciary advisor and a non fiduciary advisor. A non fiduciary advisor is not bound by law to sell you the products most beneficial for you and your wealth building journey.

Also, they charge commissions on trades and sometimes hourly rates, allowing them to squeeze out more and more in fees of the money they're managing on your behalf. So if choosing a non fiduciary advisor, always do your homework. Find someone that's solid and came from a good reference. These people aren't all bad, it just comes down to your personal preference. Now, opposite of that is we have the fiduciary advisor.

This is always my recommendation and here's why. Number one, they're bound by law to sell you the financial products that are best suitable for your risk tolerance and investment thesis. Number two, they do not charge commissions on trades. And number three, their overall fees are generally lower than a non fiduciary advisor, usually starting around 1%, with the opportunity of being lower depending on how much money you have under management. Yeah, alternatively too, if you're closer in age to myself, I turned 28 here in about a month.

Austin Hankwitz

You might instead want to work with a robo advisor. Think betterment or wealthfront. These are online only financial advisory firms that park you in sort of cookie cutter portfolios based on your age and risk tolerance. Now, these firms are able to charge much less than in person financial advisors because they don't have the same overhead. They don't have the offices and the nice water bottles to give away and the cute little pens.

It's all online. But again, this allows them to only charge as little as 0.25% annually. So about a quarter is what you'd pay to an actual in person advisor. Now, if you're somewhere between 100,000 to 500,000 in invested assets, a robo advisor could be a good idea. But again, once you're moving closer to that several hundred thousand dollars range even into the millions.

Maybe have a couple kids, they're in college, you want to a house, maybe you have a couple houses, a couple investment properties. Right? As things get more complex, these robo advisors aren't really going to be able to help you out much, right? So make sure that this is a solution for someone who is starting out and is moving in the right direction, but they're not yet as complex enough where you need the planning and guidance. Something I know, Robert's going to talk about here pretty soon.

Robert Croak

Yeah, I love that response, Austin. And it really is important just to understand overall what you're doing with your money, who's handling it, and are they doing a good job and charging you a fair price. I think everyone, like Austin said, as they move along in their financial journey, you're going to want some help. And the key here is just making that proper selection, just like you would a doctor, just like you would an insurance agent or your dentist. Okay, so let's move into the second thing to consider bad financial products.

You hear us talk about mutual funds, target date funds, and other underperforming financial products that we don't agree with. Well, financial advisors love them. So keep in mind, if they're a non fiduciary, they have every right to put you in some of these financial products that they want, including the ones that they may get the highest commissions on. So keep in mind, if they're a non fiduciary, they have every right to put you in any financial product they want, including the ones that make them the highest commissions. So how do they get away with this?

It's simple. There are countless issuers of financial products like mutual funds and target date funds who pay financial advisors to put their clients money inside of them. This is how they make money beyond just collecting a fee from you. Unfortunately, clients aren't monitoring their accounts performance enough to catch this. And this is crazy, Austin.

Some of these funds have one to 2% expense ratios on top of the 1% fee they're already charging their customer as an advisor. It's crazy. So that's two to 3% a year of your money going down the drain because of all these bad financial products. I hate to see this in people's accounts. I deal with it all the time with people in my community and people I do calls with.

And it's just really sad because so many people just don't really know what they're getting charged, what they're getting charged for. It's just tragic. And I want people to really pay attention to this and understand more that you need to keep your eye on the prize, because they're not going to. I couldn't agree more. I remember a couple weeks ago, to your point, Robert, of being this sort of double fee structure.

Austin Hankwitz

I was reviewing my friend Derek's portfolio, and this was a portfolio his financial advisor was charging him 1% per year to manage, and 80% of the funds inside of his portfolio. They're like ten or 15 different funds but 80% of them were both, one, underperforming the s and P 500 since he invested into them, and two, we're charging a separate expense ratio of that one to 2%. So at the end of the day, he's paying to your .2% to 3% per year because one to 2% goes to the fund itself, and another up to 1% to the actual financial advisor. So two to 3% per year just to invest his money only to underperform the s and p 500. It's crazy.

So, of course I shared this information with him. I told him what was up, and because, you know, he didn't know what was going on, he was thought he was doing everything right. He was using the same financial advisor his dad was using, so he thought all was well. But once I shared this with them, he was pretty upset. Yeah, I had a call with a client the other day from the community, and she was alluding to the fact that her broker, she only talks to like once a year.

Robert Croak

And last year she had $4 million in her account, and it performed, barely touching 6%, which is just crazy to me. And again, this account was filled with so many underperforming bond funds and mutual funds and target date funds, and it just didn't make any sense. Because of her age, she has plenty of time to be aggressive still. So it's really sad when you see this, because people just don't know any better. And that's why I love what we do here with the Rich Habits podcast is really just breaking down all the information into bite sized chunks so people can get the real deal of what is best suited for them and provide them options.

And that's why I think we feel that reasonably priced ETF's are a better product for our listeners than mutual funds or various target date funds. Not only are they cheaper, but ETF's are much more tax efficient than mutual funds. So, for example, when the manager of a mutual fund sells a security inside of the fund, everyone invested in the fund is taxed on that sale, whereas with an ETF, that's not the case, allowing the investors to keep more of their money in their pockets when April comes along. So, speaking of ETF's, Austin, let's take a moment to talk about some of the funds we personally like a lot. This of episode of the Rich Habits podcast is brought to you by Neos investments.

NEOs offers ETF's that aim to offer monthly income while providing core portfolio exposure across equities, fixed income and cash alternatives like t bills. Their ETF's may be particularly interesting for folks looking to generate passive income inside of their investment portfolio. They even offer ETF's that provide exposure to the S and P 500 index or the Nasdaq 100 index. While aiming to offer high monthly income beyond what investors investors would receive from plain exposure to the index. Their funds may serve as a compelling income focused alternative or complement to many of the investments already in investor portfolios.

Austin Hankwitz

So if you're looking to add passive income focused ETF's to your portfolio, consider learning more about Neo, says ETF's at neosfunds.com. And as with all investments, investors should carefully consider their investment objectives, risks, charges and expenses of NeOs exchange traded funds before investing. Containing this and other important information, please visit neosfunds.com dot. Please read the prospectus carefully before you invest. Neos ETF's are distributed by Fourside Fund Services, LLC.

Robert Croak

An investment in Neos ETF's involves risk, including possible loss of principal. The equity securities purchased by the funds may involve large price swings and potential for loss. A funds income may decline when yields fall, and the fixed income securities will decline in value because of an increase of interest rates. We love ourselves some spyi and qqqi. We hosted Garrett and Troy on another webinar a couple weeks ago, Robert, and we had a blast.

Austin Hankwitz

So if you are looking for some new ETF's to add to your portfolio, or to even introduce to your existing financial advisor, perhaps mention Neo's funds to them and see what they have to say. So with that being said, Robert, we've talked so far about fee structures and how they work. We talk about fiduciaries. We've talked about non fiduciaries. We've talked even about the bad financial products that unfortunately, people find themselves in.

But let's now move on to the third important topic, which is the one I was alluding to earlier and arguably the most important reason in consideration when you're looking for a financial advisor. Yeah, every day I have calls with people in my community and the first thing they complain about with their current advisors is that they barely ever get to talk to them and they have very little engagement as to what they're doing with their accounts and any changes they're making. And this really should stop today. You should not be working with someone you do not have active management and engagement with, especially in times like this where there are so many incredible opportunities throughout multiple investment sectors. There's just too much going on to not have active management.

Robert Croak

And most of the advisors out there offer quarterly updates via email, and sometimes we'll offer an in person review, but this just isn't often enough, especially if you're someone who's intentional with your money and you're really looking to grow your financial base. So here's the solution. Have a conversation with your current advisor that makes you feel like you're just a cog in the wheel and tell them that you want more attention for your time, your money, and your investments. If they don't take that seriously and you don't feel like you're getting the attention you desire, it's either time to change advisors or explore the option of fee only advisors. Austin, talk about that a little bit with our listeners and break that down for everyone.

Austin Hankwitz

Yeah, this is a newer concept, but it's something I think a lot of listeners right now might benefit from, just depending on their specific situation. So, essentially, a fee only advisor charges a flat hourly rate for their attention and services. So if you're someone who wants to talk to an advisor, like, all the time, if that's weekly, bi weekly, monthly, quarterly, like, whatever, like, that's great, but you're gonna have to pay for it. Right. It's not kind of putting the responsibility of like, hey, you know, I've got all this money with you.

Like, if you think about it, Robert, some of these advisors give more attention to the clients that have more money with them. Right. That's kind of this, like, misnomer we see a lot about. It's really unfortunate, but, I mean, if I'm making a lot of money from one person, I'm gonna be talking to them all the time. Sure, they keep their money with me, kind of stroking the golden goose that keeps laying the eggs for me.

But fee only advisors are different. They don't care about how much money you have. They don't care about any of that. They're getting paid a flat 150 or $200 an hour, and they're sitting down with you and they're walking through all the steps to ensure that you not only understand what you're investing into, but that you understand everything that you're working toward. So financial advisors should also be in your corner from a planning perspective, always encouraging you to do the right things with your money, to grow your net worth steadily over time.

Unfortunately, we see, you know, stuff about financial advisors telling people to go a quarter million dollars in debt to go start a tanning salon or something crazy like that. Right. If that's your financial advisor, you're talking to the wrong guy. You need to fire him. Yeah, I just think it's important for everyone following along with this episode is this is a game changer.

Robert Croak

So many people put that money in the think that's a retirement plan, or they transfer their money to a financial advisor and they take their eyes off the prize. This is bad, bad news and not a good strategy. You need to keep an eye quarterly, monthly, weekly, I don't care to understand where you're going, what the performance is, and have these strategies in place that are going to be good for your future. Because so many people are like, I will immediately say, hey, what was your performance in 2023? Oh, I don't know.

What is the fee structure for your current advisor? I don't know. And sometimes it's really difficult to find these answers, and it might be intentional in certain situations where. Where people just don't even know what's happening with their money. And that all stops with this episode.

This is very, very critical and so important for everyone to understand where they are. So we talked about the three reasons why you shouldn't let anyone blindly handle your money or your financial dreams. And this episode spells out what to look for, how to understand it, and what to do so you can optimize your gains every single year during your journey to financial freedom. I love this episode, Robert, and I hope people listening that do have financial advisors are now sort of on edge, asking themselves the questions that you laid out. Right?

Austin Hankwitz

What is my fee structure? What products am I in? How have they performed? Why am I in these products? Do they have expense ratios?

Am I being double charged for these products? How is my financial advisor helping me, you know, increase my net worth? Are they planning alongside me? Or are they telling me what to do? Are they, you know, holding my hand and teaching me what I should be considering?

Or are they giving me bad advice? Are they sort of pushing me in the wrong direction? Right. I want you listening right now. If you have a financial advisor, write down some of these questions, write them down and take them to the next meeting.

Ask about the expense ratios of the funds you're invested into. Ask about the mutual fund versus ETF. Right. The ETf's are more tax efficient. Ask about different types of generational planning you're doing to make sure that your kids tax efficiently are also going to be getting this money as an inheritance in a way that it's not going to cause a burden.

I want you sitting down with your advisor asking the right questions. And if you're not someone who has an advisor, maybe your dad has an advisor. Maybe your uncle has an advisor, maybe your neighbor does. Send this episode to them. Let them know that you're thinking about them and you want them to be moving in the right direction, and that Austin and Robert over here talking about things that not a lot of people know when it comes to using a financial advisor.

So, Robert, you crushed this episode. I learned a lot, and I hope our listeners did as well. Now, before we jump into this episode's Q and a segment, let's take a moment to hear from Robert Nye's absolute favorite way to invest and define art. Now, as we know, the market is still in a holding pattern, and as prices rise, it's getting even more expensive just to insure our own assets. Market volatility likely isn't going anywhere, and there aren't too many options that can beat all the high yield debt on the market.

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Now. You can get it from the palm of your hand. Yes, over 930,000 users have joined the platform. This includes some pro athletes, small business owners, no art knowledge necessary. Since inception, they've had 21 exits, each of them individually delivering a profit.

Robert Croak

Not counting artwork still in holding, they've distributed over $55 million total back in investor proceeds. And when you've offered work from artists like Picasso, Basquiat and Banksy, shares can run out in a hurry. But in honor of our relationship, rich Habits podcast listeners can still skip the waitlist and start investing today by going to masterworks art. Front slash rich habits as with any investment, past performance is not indicative of future returns. Investing involves risk, important regulation, a disclosures@masterworks.com.

Austin Hankwitz

CD Robert I was just looking at the other day, my masterworks portfolio. I have two Basquiat investments that I made. I think it was maybe in 22 or 23. One of them is up 36% and the other is up 29%. I mean, it's unbelievable stuff.

It's a really cool way, in my humble opinion, opinion to diversify your portfolio, right? I'm not saying we all need to bet the farm on artwork, and I'm not going to pretend I'm an expert. But what's cool about masterworks is they sort of lay out, and they only give you opportunities to invest in artwork that they're very optimistic about. Right. They've had 21 exits.

$55 million of profits were paid back to investors over, you know, the last couple years here. So there's a lot to be excited about with this platform. Robert and I both love it. I've got my own little portfolio rocking and rolling, and I definitely am going to continue to purchase more and more of those pieces of art and continue collecting and diversifying my assets. Yeah, I like it because, you know, as you get further and further along in your investment journey and your wealth building journey, you want to have a little fun with your money.

Robert Croak

That might be collecting art or investing on masterworks. It might be collecting classic cars. It might be investing in, you know, collectibles. There's just so many different ways to make money, and this is a great one. As the returns have shown over the.

Austin Hankwitz

Past few years, 100%. Right. And, you know, we talk about how people should diversify five to 15% of their total portfolio into cryptocurrency. I'd argue one to 5% could also go into fine artwork. Right.

I mean, if you've got a million dollar portfolio, you could 100% get away with putting 10,000, $20,000 of that into fine art. I mean, that's sort of what I've done myself, and it has definitely paid off. So with that being said, go check out masterworks art slash rich habits. There's going to be a link in the show notes below. And of course, there are those important disclosures to check out as well.

So our first question comes from David T. David says, I have $30,000 in high interest credit card debt. But the good news is I've got a lot of equity in my home. Should I use a heLoC to clean up and consolidate this high interest debt, or should I just pay it off normally over time? Robert, what's your perspective here?

Robert Croak

My perspective is this, you kind of have a few options here. The HELOC is a good one because you could pull some equity out of your home, pay off that high interest debt, have that positive arbitrage in your favor. Or if the HELOC seemed a little expensive, you could do a balance transfer to a, let's say, 18 month, 0% interest credit card, get that money moved out of the high interest debt into that, and then see if you can wipe it out without further interest due over that 18 to months so you have a couple really clear options to get yourself out of this high interest debt and I think those are two good strategies you could look towards. You know, Robert, I'm also going to put a link to Lendingtree in the show notes below for you here, David, because I know Lendingtree is also a really cool debt consolidation platform to sort of marketplace rather to go find sort of like a personal loan at this call it 810 12% interest rate that you could probably do that at. I love the idea of a 0% intro APR bounce transfer.

Austin Hankwitz

And you know, HeLOC is not a bad idea, just depending on the rates. I'm always in the boat of if you could avoid a heloc, just considering the fact that if you don't pay on it right, you're in thirty k of high interest credit card debt for a reason. David, you're not the best with your money, my friend, no offense. And if you forget to pay off this heloc or you miss a couple payments, congrats. Your house is now the banks, right?

It's the same thing as kind of losing up on your mortgage payments here. So, you know, that's my perspective. I would start with a lending tree. I would then, you know, also on side of that to check out Robert's perspective here, the 0% intro apr, definitely check that out, right? Check out some of these other alternatives and then if you realize, like wait a second, I can get a heloc at 8% or 9% and I am going to pay and I'm going to be good at it here, then try that as well.

Good question though, David. Our next question comes from Gabriel. Gabriel says, I'm 18 years old and I'm about to go off to college. What should I get a degree in so that I'm setting myself up for wealth later in life. You know, when we were looking through these questions, Gabriel, Robert and I talked about this for a little bit and what we were going to say about it.

And we've decided that, you know, there are two types of kind of people that go to college. One side of people that go to college go to learn how to do a job, doctor, lawyer, engineer, nurse, finance. Right. A very specific I want to learn how to be an investment banker. I want to learn how to be a neurosurgeon.

I want to learn how to be a, you know, chemical engineer. They go, they study. They know exactly how much that job is going to pay them out of college. They've ran the numbers on how much it's going to cost them in debt to get that degree, how long it's going to take them to pay that off. Like, that's the responsible way to go to college.

Unfortunately, that's not everyone that goes to college. Other people go to college and they get a general communications degree or psychology degree or political science degree, and they just, like, they're interested in something. They know that, but they don't know what the end goal is. And so they make the mistake of just, like, getting this general education degree that at the end of their college career, they don't have any specific knowledge to take to an employer and say, I can do ABC XYZ for you. They just kind of say, like, yeah, I'm kind of good at everything.

Like, try and hire me and I'll do something. Right. And so, Gabriel, if you want to make sure that you're moving in a direction to set yourself up for wealth later in life, do not get a degree that's like general, right? You want to study something. I don't care what it is.

I don't care what you're passionate about. But as long as you know, one, what that's going to pay you as a salary every year when you graduate to how much it's going to cost you in debt to go borrow and get that degree. And three, have a clear plan to pay that debt off so that you can begin building wealth in your life. Going to be fine, man. Generally speaking.

You know, I got a lot of friends that went and studied marketing, and they're now working at American Express and all these other really cool, you know, Nike and these other really cool companies. I've got friends that studied supply chain, and they're now working in the supply chain departments of some of the largest companies in the world, like Amazon. I've got friends from college that, like myself, studied finance. Now they're doing, you know, corporate financial planning and analysis or, you know, mergers and acquisitions or investment banking. I've got friends that, you know, we're nurses and they're crushing it doing the nurse stuff, right.

It doesn't matter what you want to be. I think what's more important is you go in with a plan, you stick to the plan, and you use that as a way to earn, pay off debt, and build wealth. I would say my only takeaway for Gabriel and everyone listening is if you're considering going to college, like Austin said, a general degree isn't going to do much. But I think more importantly to understand is that look at the fields that are going to be here in four or six years, if you're just getting started with technology moving so quickly, artificial intelligence, humanoid robotics, everything that's happening with technology, you don't want to spend four, five, six years in college getting a degree that may be rendered useless by the time you get it. Keep that in mind to look at something in the future that's going to be high paying and guarantee that it's worth the time and money you spend getting the degree itself.

Yeah, I know a lot of lawyers, friends personally here that are kind of shaking in their boots when they see the GPT four that is able to read these contracts and write contracts very quickly. Web developers, you know, there's so many developers, so many jobs out there that are going to be rendered useless right in front of our eyes in the coming months and years. So just make sure whatever you're looking at that you're looking at in the distance because that's going to be the key here. I'll tell you what, Robert, I paid a plumber $400 on Saturday to fix some stuff around my house. AI is not doing that.

Robert Croak

Yeah, anything. Manual labor like that is where it's going. And those are the businesses I'm looking to acquire because of the fact that we're flip flopping. Finally in this digital age where being the blue collar hard worker doing those tasks is going to be the higher paying jobs in the future. A hundred percent.

Austin Hankwitz

So, Gabriel, do some research, man. Don't be afraid to, you know, ask people different questions. Get plugged in in your church, your community, wherever you can. Talk to, you know, people that are in their twenties that have gone to college and they can give you their candid perspectives and feedback. Right.

Robert Croak

Definitely. Do your research here. Don't waste 60, 8100 thousand dollars by going to college and studying something that's obsolete. Our last question comes from Chris C. Chris says, I'm a huge fan of the show.

Austin Hankwitz

You guys always say though, get your 1st 100k invested. But what should I do if I'm trying to buy a house? Do I still need to invest that much money? Should I save that money and put it aside and then go buy a house with it? I just don't really know what the process is here.

Robert, you want to kick this one off? Yeah, Chris, I think you're on the right track. You're following the show, you're listening to what we say. And my point of view is always going to be this. Your first investment, in my opinion, should not be real estate.

Robert Croak

That's why Austin and I always discuss building that base, whether it's 50 or $100,000. So that way you have compound interest and time on your side. Now, if you're hell bent on buying a property, I personally would not recommend you buy a primary home. I would start out with house hacking. Look at the duplex, the triplex, the Quadplex.

Get that Fannie Mae 5% down mortgage. That way you're keeping more of your money in your financial accounts and those investment accounts. We talk about the Roth IRas and the crypto, and if you really want to get the property first, then go for it. It's your choice. I just believe everyone should have a base first, then look at house hacking as their first investment property.

Austin Hankwitz

I think it's a great idea, Robert. Right. You know, we kind of have the same approach with student loans, and one of the questions we answered on Thursday's episode was, you know, this guy is like, listen, I don't have much invested. My income's up a lot. I'm making all this money.

I'm saving a lot. However, I have 100,000 of student loans. Like, what should I do? And so it's the same deal. It's not so black and white.

You don't have to choose one or the other. So, Chris, it's the same thing for you, man. I think you should definitely aim to have that 50 to 100,000 invested before you go out and buy a house, because I don't care where you buy the house. It's likely going to appreciate by three to 5% a year, maybe 6% some years, maybe 2% other years. But let's call it three to 5% per year.

On average, the stock market goes up about ten to 12% per year. Right. That's over a long period of time. So it's more advantageous, monetarily, to have money invested into the ETF's and index funds we talk about than it is to tie up tens of thousands of dollars in equity in a house as a down payment. So we think have a little bit of both.

Right. I own two properties in Nashville. Don't get me wrong. I am a real estate owner through and through, but I choose not to pay off my higher interest mortgage, call it 6% or so, because I want more money invested. I know my money could work harder for me than, you know, paying down a 6% interest rate on a mortgage.

So that's where I'm at, right. It's not so black and white. I'm doing the same thing here, Chris, and I think it's something for you to consider as well. Yeah, and it's kind of that proverbial hamster wheel effect. So many people start making money, they get into their career, they save up $60,000, they buy a house, then they have to wait five more years to save up 60 more thousand to start investing.

Robert Croak

Whereas if they didn't buy the house first, tie up their credit, tie up all their money, they could get a big chunk of money, started investing earlier. So then that way it's building their wealth alongside of their dreams to have a home. That's why we just like to have that base first, rather than starting out by save, save, save, and then plunk it all into one property that's a primary home. Because guess what? You're not even going to keep up with the S and P 500 on the gains you would make with that money versus tying it up in a primary property.

That's my opinion. I think the math does its job here. And we always want to just be having as much money as we can invested in these index funds through the Roth IRA and letting compound interest do its job. Thanks everyone for tuning into this episode of the Rich Habits podcast. Don't forget to register April 24 at 04:00 p.m.

Austin Hankwitz

Eastern time, we're hosting another webinar about direct indexing. This is a way for you to optimize tax loss harvesting in your own portfolio, ensuring that you take home more money come tax time. This is going to be a great webinar. No one's talking about direct indexing like we're going to be talking about it. I don't care who you follow on instagram.

No one talks about it like we're going to be talking about it here. So we are very, very excited about it. And don't forget to register using the link below. And yes, don't forget the money mindset. Wealth building summit is coming up April 26 and 27th.

Robert Croak

There will be a link below in the show notes. We'd love to have you, but if you can't make it, there are virtual tickets. And yes, it will be recorded. Love to see you there. Austin and I will both be speaking, of course, and we have several other really great speakers.

We'll be covering a ton of topics, so we look forward to seeing you there again. Thanks each and every one of you for following along the rich habits podcast and our journey to help so many of you figure out all these crazy things to building wealth and really understanding your financial matters so you too can have financial freedom as early as possible. If you liked this episode, please leave us a five star review. We would appreciate it more than you absolutely could imagine. And if you learn something, share it with a friend.

Austin Hankwitz

If you know someone who's, again, going through some turmoil with a financial advisor, send this episode to them so they know the right questions to ask. I don't care if it's your daughter, your aunt, your uncle, your neighbor, send this episode to them because they're going to learn something. Thanks, everyone, and have a great start to your weekend.