Time to take stock and see what’s what for 2025 so far. With half the year over, it’s as good time as any to check your progress and make sure you are still headed in the right direction for whatever your goals are.
For the year I’ve retained $20,151.25 of free cash flow. From this free cash I’ve purchased $15,566.00 in stocks and transferred $4,000 to a High Yield Savings Account.
On top of the free cash flow that has been allocated, $12,842.00 in pre tax money has gone into the 401k through my employer. So a total retained earnings of $32,993.00 so far for the year.
No debt has been added.
As far as the more balanced approach I’ve been taking to life and money, I’d say that has been going really good. I’m like over 2 years into this new Beau and it’s been interesting to say the least. I find myself having more time for me, friends and family. Which has been pretty cool. Still no regrets for the many years of grinding, but it’s sure nice to take my foot off the gas!
I have been consistently spending what I like to call “just because” money. Sometimes when I do my monthly numbers I find myself kinda shocked how much I spent on stupid random shit.
And when I feel like my work-life balance is out of whack, I will take a few weeks off from any extra shifts and just relax. I usually take overtime only when it’s convenient and decline when it isn’t. I’ve used sick days rather than pushing through like I would have in the past. So long story short, it’s been good.
I’m 39, and next month I will turn 40. I started investing when I was the ripe age of 22. I remember going to the Meryl Lynch in Stuart, FL. to open my first IRA account. They declined my money because I didn’t have enough assets. I understood at the time. No hard feelings. But the advisor there told me that I’d have a million dollars by retirement if I started that young and kept at it. I remember thinking that’s kinda crazy and probably not feasible. Well, I’m happy to the report that the million dollar mark has been hit at 39. Needless to say, a celebratory cocktail was had. It should be noted this is just money invested in stocks. Doesn’t include real estate equity or cash.
No special formula or secrets to offer, sorry. Just had a lot of luck, kept my living expenses super cheap and Invested aggressively and consistently. And the rest took care of itself.
Our capital markets are incredible here in the U.S. and we have some of the best companies in the world that are constantly working to increase value for not only their shareholders but their customers. I simply bought into that idea with full confidence.
Hope the year is going good! Maybe next time I write I’ll be the owner of a new Lexus 😬. Keep embracing the grind. Go Dolphins! 🐬
Many financial pundits will tell you to avoid credit cards. And for good reason. You can get yourself in a hole real quick. And with 25%+ interest rates in some instances if you carry a balance, it can be suffocating to say the least. And if you are the type to use credit cards to fund things you can’t afford, they can be financial suicide!
However, for those of us on a solid financial footing who keep close track of money in\money out a.k.a cash flows, credit cards are legitimately free money. BUT, there are rules. Well, really only two rules. Know your cash flow like it’s your child, and never carry a balance.
There are of course some secondary rules pertaining to how opening cards can affect your credit and how to mitigate this, or how many welcome offers you can accept in a time period etc etc. I’ll admit I’m no expert with these secondary rules. I just try my best and google if needed. Or speak to friends who are better skilled in regard to these secondary rules.
One thing I will mention. When selecting cards, try to make sure that the statement credits it offers are for things you use regularly so it’s an actual benefit to you. For example, if you don’t drink coffee but then get a card offering a statement credit for coffee, this is kind of a waste. Now you will be simply spending on something you don’t normally buy to get a credit. Not ideal. On the flip side if you are a coffee addict like me and buy coffee regularly anyway, this is value added in my opinion.
With all these necessary cautionary tales and warnings behind us, let’s get into some actual numbers from November 2024. I will also share two stories of some wicked welcome offers I utilized this year.
My credit card game is pretty complex. Different cards are used for different things. All with the goal to maximize offers, points/cash back and statement credits. Let’s distinguish for a second the differences between offers, statement credits and rewards.
Offers: change periodically based on your spending habits and have to be added to card first. Usually there is some fine print you have to read to ensure you qualify.
Statement Credits: typically you enroll in these offers once and whenever you use the card you have enrolled you get credited back.
Rewards: these are either cash back or points usually. Point valued can vary depending on how you use them.
For the month of November I received a total of $123.47 of free money for using my American Express cards. I say cards with an s because I’m using multiple to maximize the rewards. This 123.47 in cash back offset expenses that would have happened regardless. I received cash back on a Broadway show, a hotel in NY, Dunkin’ coffee, Five guys, Grub-hub, Walmart Plus membership, Amex food credit and Home Chef. Just by using a little effort.
Keep in mind these are just the offers and statement credits. This $123.47 does not include the normal rewards for using the cards. This can range anywhere from $50-$125 a month. In fact, on average through November 2024 I’ve used $163 of offers and statement credits per month. That’s real money that has a real impact on my bottom line. As far as my rewards, I have accumulated roughly $5,045 in value for the year. (Some of this was welcome offers that I will get into later.)
Now for the holy grail of welcome offers. I had to make two rather large purchases this year. A new HVAC unit for my personal residence and a new PVC fence for a rental property. I searched around and researched the products, read reviews and carefully studied what I was buying. For the HVAC, because I was doing a size adjustment from what I had (going down half a tonnage) I was reading HVAC Reddit forums searching for information.
I said all that to highlight this: I put equally as much effort into financing the two purchases. Because that’s equally as important.
Looking online I found a Business Credit card through chase that had 0% for 12 months. Also, a welcome offer: spend $6,000 in 3 months and get the equivalent of $750 back in a statement credit. Well, since the cost of the AC was $6,284, this was a no brainer. As soon as I received the card I immediately requested a credit limit increase. It was granted. Then I ended up putting more than 6k on the card so my total credit back ended up at $840. So my new HVAC was $5,444.
Lastly, I had an email from American Express for a card where if you spend 15k in 3 months you would get 175k American Express member points. Plus 0% for 21 months! The fence I mentioned earlier was just over 9k. BUT, I also needed to pay for my property taxes and home insurance. So this opened an opportunity. Combined, this would get me pretty close to the 15k of required spend to get the massive welcome offer.! Considering the value of those Amex points of roughly 2 cents per point when transferred to travel partners, the net cost of my fence project will be $5,250. Pretty epic!
And now for the cherry on top. All the cash I need to pay all this recent credit card spend is currently sitting in a HYSA earning a recently decreased-to 4.45%. So, I set reminders on my phone of the dates where the 0% ends and I will transfer the balances in full upon the requisite due dates. 😎
The personal finance space is vast and overwhelming. Everyone would love to be financially secure, but where do you start? What is the secret to getting ahead? Are there a few simple action steps you can do now that pay huge dividends throughout your life? See what I did there? you’re welcome.
Much like investing my money and ultimately seeking a satisfactory return, I like action steps that require little upfront time yet provide a windfall of lifelong benefit returns. Think of this as a personal finance hack. It’s so simple yet almost nobody outside of personal finance nerds such as myself actually do it. But this is to good not to share. What is this life altering free hack? Know what you spend money on. Boom. Done. Ok ok, I’ll elaborate.
When I say “know what you spend money on” I don’t mean tell me your bills such as your mortgage, cell phone and your utility cost. Everyone knows their bills almost to the penny, and that’s good too. But the real value comes from knowing your total spend. For example, food, gas, random trips to target, gifts, travel or even random vending machine purchases etc. Every penny is key. Looking at your bills and all your discretionary spending together gives you what your total monthly expenses are. This is key. So why is this such a big deal? With this data you can answer so many questions about the past and future. Suddenly things are crystal clear. This clarity brings a sense of calm and focus. Let’s talk about the benefits.
PerspectiveIf you’ve been struggling financially, which let’s face it, a lot of people are the days, having accurate data on where your money is going helps to have perspective. You may be thinking, who the hell cares about perspective when you are broke?! Stay with me, it will be worth it. Take a second to write down what you think you spend a month on your total food costs. Not just groceries but take out, restaurants and anything else that you would classify as “food.” Then try keeping receipts for a month for all these food items. Try to be as accurate as possible. I’m willing to bet your actual spending on this category will shock you. Now let’s take it one step further and keep every single receipt for a full month on every purchase you make. Again, this number may shock you. Little mindless purchases add up to big spending over a 31 day period believe me. Once every penny is accounted for, next let’s compare it to your total take home pay for the same month. If done correctly you should have a very accurate bird’s eye view of where your money is going and what is left after all the spending has happened.
Now that you can visually see where your money went, start scrutinizing what was wasteful or excessive. If your total spend was very close to your take home pay, then this is a problem. I call this treading water. Yea you are staying afloat, but you aren’t going anywhere. And if you catch a cramp, you are toast. The title of this blog is Build The Gap. The gap meaning the difference between your income and total expenses. Some would call this free cash flow. It’s considered free because you can do whatever you like with it. If you keep track of spending accurately, then you should know your gap each month.
Now a little perspective. Spending $600 a month for a family on restaurants for an entire month may not seem excessive. Hell in todays world this may be 2-3 dinners only. But If you consistently have no gap or even negative gap, meaning more expenses than income, suddenly these dinners seem more outrageous. On the flip side if you have consistent gap, in line with your financial and lifestyle goals, then $600 is money well spent. How would you know this insight If you didn’t keep track? The answer is you wouldn’t. Operating your budget on hopes and prayers is like treading water in the middle of the ocean. Sure with the salinity in the water you may be able to stay afloat for quite a long time. You may even eventually make it to safety, but would you want to? Probably not.
I always enjoy seeing actual figures when I read peoples blogs. It’s more personal and relatable. And let’s face it it’s a natural thing for us to compare ourselves to others. This can actually be healthy in many ways. But also destructive if done for the wrong purpose. For the sake of this blog post, I’m sharing because I want to demonstrate what I would call rational exuberance and what that looks like. Use it as a benchmark for your own fanciful spending. Two rather large expenses I made in 2023 were purchasing a new car and going on a week cruise with Norwegian. The total car purchase out the door was $35,134.62 for a 2022 Camry XLE Hybrid with 15,344 miles. This was about $7,000 less than the brand new out the door figure I was getting from dealers in my area. And my cruise was $1,462.00. It should be noted that I financed 100% of the car. Reason being is despite having a 7 figure net worth I don’t keep much cash. But I do recognize with interest rates being what they are presently, the rationale for holding higher levels of cash is elevated. So I will make that adjustment going forward. That being said, I used a Line of Credit against a rental property with a teaser rate of 4.9% for 6 months to purchase the vehicle that is interest only in terms of my payment. So I have a payment of $185.92 that gets adjusted down with each payment made. So when I do my free cash flow statement each month I’m only factoring in what is required of me to pay. So the $185.92 for instance. And of course I fully expensed the entire cost of my cruise.
So where did that leave me financially?Through October of 2023, I have had a total free cash flow figure of $37,609.31 or for you monthly people, an average of $3,419.04. Keep in mind this is cash flow. I fully max out my 401k at work which is $22,500.00. But this comes out pre tax. So my free cash flow figures would be net of that. I also included in free cash flow the net income for my rental properties.
So essentially I was handed $37,609.31 to build my net worth the most intelligent way I could. What did I choose to do? Well, first I maxed out my Roth IRA. So deduct $6,500. Then I had a little debt on a HELOC from some roof replacements last year that I decided to pay off, so deduct another $10,467.00. The remainder of my free cash went to paying off the new car.
All in all, I allocated $31,000 (24,500 401k + 6,500 IRA) of retained earnings to stocks and $31,109.06 (roofs and new car) to paying off some debt. Not a bad year. And I still have a month of cash flow to go! Now, just imagine if my gap was negligible or god forbid negative. Then that car purchase would have been idiotic. Considering my situation it was not a big deal at all. This is perspective. And keeping spending and investing in the proper perspective is imperative to being financially successful.
Work Backwards let your mind wander to the future. Where would you like to be financially? Paid off house? 1 million in retirement accounts and debt free? Write it all down. Then calculate how much you need to put away each month. Work backwards. Based on your present levels of income and expenses are your goals achievable or so adjustments need to be made? If you don’t know your expenses to the penny it’s nearly impossible to plan for things like this. You are operating under the hope and prayer method.
Make More or Spend Less a cool thing about getting ahead financially is you can take many approaches. Remember, the secret sauce is your gap. The difference between what you bring in and what you spend. If you are a high earner bringing in 25k a month, and you keep your spending like you were a broke college student and you are saving and investing 22k a month or 264k a year, then you will get rich very fast assuming you do intelligent things with your gap. For me personally. I’m an average guy with average earning power and I would argue below average skills. So taking the high earner approach seemed like a reach. And I didn’t want to sit around wasting time, thinking well, if I don’t make a lot of money I can’t get ahead. Hell with that. Give yourself a raise by spending less. After all is said and done, your free cash flow is indifferent if it came from making more or spending less. It’s all the same. It’s free cash. Period.
Suppose you say to reach my goals I need to have $3,500 a month of gap. that’s 42k a year to pay off your debt and then invest. Over a period of time this will get you to your goals. Well you can sit around and wait for some huge income opportunity. And if it doesn’t come you use that as an excuse. Or, you can say ok, I’ll be a frugal badass, have a more efficient lifestyle and cut my expenses by $3,500. Your gap won’t know whether it came from more money or spending less. And I’m guessing your future self won’t care either. And an added benefit is you will have learned to get the same level of happiness on far less money. And if I’m honest, you will likely be happier as a result than you were before. Because now your gap has a purpose. It’s working for you. And that progress and growth takes on a happiness of its own.
I often get asked, what is the ONE thing I can recommend to help someone with their finances. After hearing a range of problems over the years, my answer is ALWAYS understanding your cashflow. While it certainly isn’t the only thing you should do, it is definitely the first thing and probably the most important. Cash flow is to personal finance as aloe vera is to basically all ailments, being nature’s most powerful natural healer. As such, all problems with money start and end with cash flow. It’s true if you are talking personal finance or business and investments. Understanding the relationship between cash coming in and cash going out is foundational. This cannot bet skipped or done half ass.
So how do you start tracking your cash flow? Brace yourself… keep every receipt or somehow record what you spend money on! And this is your total spending not just your bills. If you give someone a quarter, record it! Ha! No but seriously. It needs to be dead on balls accurate (My Cousin Vinny reference) for you to have confidence in your monthly figures. I also categorize things I’d like to track. For example, food, gas, miscellaneous, entertainment, travel & gifts. This embraces that old adage of what you keep track of you naturally improve. And by improve I mean get more efficient in your spending. Cutting waste, and determining what is truly important and what isn’t. And how that spending is fitting into your long term financial goals.
When I started out I decided that there was a ton of ridiculous Americanized fancy pancy wasteful spending going on. Things that added no lasting value and or happiness to my life. We get sucked into this idea that we work hard. And spending money on things is a natural byproduct of this and we deserve it like a birth right. I was a bit extreme with this early on. I basically didn’t buy anything I “wanted” for years. I bought things I needed of course, like new running shoes yearly, and other things like that. But never just because I wanted it. As I get older and I’ve accomplished some goals financially, i’ve learned it’s ok to every now and then buy a want. Especially if it has lasting value. I recently bought TWO pair of Oakley sunglasses. One for casual every day wear and boating and one mainly for running and outdoor fitness. But these are things I will use every day for a long time. And I have to say they were well worth the money. I love running in them.
I think the key with “want” spending is to avoid impulsivity. Also to scrutinize your spending to see if it improves your life, has lasting value and adds happiness for long periods of time. Avoid the sugar high spikes off happiness that impulse shopping provides.
Ok ok ok, this all sounds simple and easy. If it were that easy then why doesn’t everyone do it? This question is one I think about often. And I don’t really know. If I told you all you had to do was rub aloe on your arm every night before bed and you’d be healthy forever, everyone would do it. Tell people to keep a record of every penny earned and spent and they look at you like you have two heads. The following is an example..
Sometimes I think people doubt I actually do that every month. I suppose it is a lot to do at first. That is until you get used to it. I’ve been doing that for over a decade actually. Month after month. My job is to make sure I have more money come in than go out. And I will do whatever I have to, to make sure of that. It’s that simple.
When I tell people this they start blurting out estimates and ranges. “I spend about 650 on food and 300 on gifts” etc. This is it NOT going to work.
You need to have full accountability. Like you were running a business. Imagine. If every month and therefore every year you knew exactly where all your money went. To the penny. Even more important, you knew how much you spent relative to how much you made. How empowered and in control you would be! The secret to getting ahead is to build the gap between the income and the expenses. And then take that gap and set yourself up financially. But there has to be a gap. Month in and month out. The only way to be sure of this is to keep track. Otherwise you will naturally start to say crazy things like we can afford this that and a third. Spending all the way up to your income. And then the gap is gone. You are now treading water financially.
Do your current and future self a solid and build your gap between income and expenses. Do this by keeping track of your expenses like a religion. Your life will take so many positive steps forward and it will be so much easier. You will be in full control of your finances. Done right and you will have thousands in extra cash every month to pay down debt and later invest. You will be stunned how powerful this is over time. How simple your financial life can be.
Let me give you an example from my own personal situation that will demonstrate how powerful knowing your cash flow is. I have three homes. Two single family rental properties and my primary home. I just replaced all three roofs with 5V Metal. Total cost was $49,040. I don’t have that kind of cash sitting around. Strategically. Better to have it invested. But, I have two lines of credit at low rates. A Home Equity Line of Credit & a credit line against my brokerage account. Both are variable rates. But much lower than a credit card because they are collateralized. In fact, they are cheaper than a mortgage currently. Now using this kind of debt may seem daunting. Admittedly I had anxiety at first as well. But then I realized how much data I have to analyze to determine my expected pay off time. And this alleviated my worry.
I averaged out my free cash flow over the past two years. $4,372 a month is what I averaged, after of course maxing out my 401k. So while still contributing the most I can to my retirement, I still had plenty of cash each year to work with. Suddenly this became an 11 month problem. ($49,040/4,372=11). Ahhhhh the power of knowing what you spend. Been sleeping like a baby every since. And! Now my biggest capital expense at each property is complete. Should be smooth sailing from here.
Now imagine if I was barely squeaking by each month, spending right up to what I made with no accountability and no free cash. I’d be very discouraged and this would be a mounting problem.
Unfortunately, If you don’t have full accountability, you will spend most of what you bring in or possibly even more than you bring in. Cash will dwindle down, forcing you to use credit, refinance your house, take from retirement accounts or even borrow from others when expensive things happen. Imagine a life where you have $8,500 a month coming in on average and $2,500 being spent. This is equivalent to financial angel handing you $6,000 solely to put aside to build your financial empire. Your life expenses have been paid from the $2,500.
Only thing is, it HAS to be used to build your financial future. For example, to pay off debts, build college funds for your children, pay off your house or cars etc. and hopefully build assets once the debt is cleared up. If you start to squander it on useless consumer items the angel takes this “future” building money away. The debt comes back slowly and you backtrack. Fortunately, you don’t need an angel, at least not in this context. You just need to understand how much you spend relative to how much you make.
First off, why am I blogging? Because I lhave thoughts I’d like to write down and keep track of. My thinkings if you will. I read a lot. I process a lot of information, and over the past 15 years of learning about investing and business almost obsessively, I’ve formed some rather strong opinions and learned some valuable skills that have served me well. Some of which are none to popular. So, this blog will act as kind of a financial journal, a collection of what I’m personally doing, what I’ve learned, the mistakes I’ve made and all that fun shit in between. From time to time I will share actual numbers of my finances, to offer a blend of self deprecation and realness. I personally enjoy actual figures in the blogs I follow. From this, I hope someone can learn something, and maybe I can learn some stuff too. As I learn new things, some of which will be incredibly nerdy, I will try to blog about it for future reference and or for your reading pleasure.
You may be wondering what qualifies me to write publicly about business, personal finance and investing. Full disclosure, I’m not qualified at all. I live a worthless existence spent reading the newspaper, books on investing, biographies and from time to time an annual report I find interesting. But I have somehow through strokes of luck, discipline and grit amassed well over a seven figure net worth, even excluding my primary residence which is paid off. This net worth is 55 times my annual spending, since I’ve done a solid job on the debt side of my balance sheet. Presently, this fully qualifies me for early retirement and then some. When I reflect on this success, I’ve come to realize that there are some habits, knowledge and skills that are both useful and replicable. So why the hell not share. I also have plenty of screw ups you can learn from too. Why should you have to make the same mistakes I did? So there you have it. I’m an unqualified business nerd who reads the newspaper. I would consult a professional before taking anything I talk about on this blog seriously.
One last point on the name of this blog. Build The Gap? What does that mean? Well, the gap equals the difference between income and expenses. Better known as free cash flow. That gap is where the magic happens. It is where your focus should be. Whether you are analyzing an investment or evaluating your personal finances, knowing that gap is incredibly important. Dare I say it, the most important. It is how my net worth was built. I have spent the better part or my adult life slowly building that gap. My main job as I see it is taking the free cash flow accumulated and reinvesting it into assets that then produce more cash flow.
Build The Gap 