🍞 The Money Games - Part 5
A 5-Part Guide to Earning, Saving, Borrowing, and Investing Money Wisely
Life Update
Hello, my fellow Bread Crumbers!
Apologies for my absence these past few months. Life has been a bit of a whirlwind, and writing unfortunately took a backseat. But I have some exciting updates to share—I recently got engaged and started a new job!
Looking ahead, my goal is to return to a monthly publishing schedule. That said, depending on the demands of my new role, posts may be sporadic.
To make up for the break, I’ve put together what I hope is a fitting conclusion to the 5-part Money Games series. Without further ado, let’s dive in!
Introduction
Two little words dominate finance. Cash. Flow.
Cash flow is freedom. Unfortunately, most Americans don’t have it. They’re beholden to the people that do – banks, payday lenders, and buy now pay later schemes. This power imbalance has existed since the days of King Soloman. The rich rule over the poor, and the borrower is the slave of the lender.
Cash flow is the sword capable of breaking the lender’s chains. In theory, it’s simple. Earn more than you spend. In practice, it’s difficult. Especially in a capitalist system that encourages you to buy, buy, buy. You don’t have the money today? No problem! Borrow! Like the snake in Eaden, the lender will encourage you to try the apple and ignore the consequences.
It’s easier to swipe a credit card and push your problems off for another day than to confront your excessive spending. I get it. I’ve done it. We’re practically trained to do it. This is a lender’s world.
The goal of the Money Games essays is to show you how this world works. Arming you with the knowledge required to outsmart the snake. It all starts with cash flow. If you’ve got that, you’ve got the wind at your back. This essay is my attempt to create a blueprint for generating cash flow.
You don’t need any special abilities to implement the system I’ll describe. All you need is some discipline, consistency, and humility. At the end of this essay, you’ll know exactly where you stand financially and how to improve your position. Let’s begin.
Step 1a – The Set-Up
To start, you need to become a financial detective. Your past expenses are clues. To expedite the clue finding process, I recommend two tools:
1. The Empower Personal Capital App
2. A Google Sheets Spreadsheet
The Empower App is where all your financial data will live. It can connect to your bank account, Venmo, retirement platforms, investing apps, or anywhere else your money lives. It consolidates this information into an easy-to-use dashboard. Best of all, it’s free and safe.
The Empower App sets the stage for the second tool, Google Sheets. This spreadsheet calculates your monthly cash flow. Before it can start working its magic, you’ll need to categorize your expenses in the Empower app.
Step 1b – Sherlock Homes Mode
With the Empower app up and running, the real detective work begins. You can start to review your earning and spending patterns. Using the Empower app, organize your expenses into the following categories: Rent, Food, Debt, Transportation, Home Maintenance, Utilities, Healthcare, Restaurants, Travel, Entertainment, and Other.
In Google Sheets, you’ll split these categories into two groups – Core and Fun. I define Core Expenses as those that are fixed, essential, and difficult to change.
Core Expenses
Rent – Rent or mortgage payments for your house, apartment, or yurt.
Food – The grocery and lunch bill each week. Avoid putting restaurants or take-out in here. Those will come later.
Debt – Student loan payments or other debt payments that aren’t your mortgage or car loan.
Transportation – Car payments or public transportation. Avoid putting Ubers in this category.
Home Maintenance – Furniture, cleaning supplies, laundry, plants, dog food, and the like.
Utilities – Electric bill. Gas bill. Cable bill. Internet bill. You get it.
Healthcare – Doctor’s visits. Gym memberships.
If you take revenue (your paychecks) and subtract these core expenses, you arrive at what I call “Pre-Fun Cash Flow”.
Assuming you’re a terribly boring individual, this is your monthly cash flow. But if you’re like most people, when you finish your TPS reports, you like to do fun shit. Fun shit costs money.
Fun Expenses come in all shapes and sizes, but they have a few things in common. They are variable, non-essential, and, if necessary, easy to change.
Fun Expenses
Restaurants – Brunch with the girlies. Drinks with the fellas. You get the idea.
Travel – That time you went to Miami and “peaked”. Put it in here, big guy.
Entertainment – Remember, those $700 T Swift concert tix you said, “were like totally worth it!”
Other Expenses – Whatever weird stuff you do that no one else knows about. I’m not judging. Just track it.
Take “Pre-Fun Cash Flow” and subtract “Fun Expenses”. You arrive at “Post-Fun Cash Flow”.
Post-Fun Cash Flow is true cash flow. At this point, you might realize you’ve been having a little too much fun. That’s alright. The first step to fixing a leaky boat is finding the hole. The next step is plugging it.
Step 2 – Budgeting is Cool
Did that Miami trip with the fellas do a lot more damage than you thought? Wonderful. It’s time to build a budget.
I know what you’re thinking. I’d rather jump from a 10-story building into a flaming pile of garbage where a Jabba the Hutt-sized Harvey Weinstein lives than build a budget. You’re being a little dramatic. What you need is a change of perspective.
Budgeting is cool. I know writing those words puts me at risk of sounding like the guest speaker at your local high school assembly saying that celibacy is also “cool”. Whatever.
For the non-haters, when you hear the word “budget”, I want you to think “game plan”. Like a game plan, a budget is a documented strategy for accomplishing a goal. A budget just happens to be communicated via numbers. Like any good game plan, the first step is establishing a goal. What outcome do you want the game plan to create? Here’s a few suggestions if you aren’t sure where to start.
Pay off my credit card debt
Build an emergency savings fund worth 6x my monthly salary
Put $300 into my Roth IRA each month
Whatever goal you choose, break it into smaller pieces. If you have $1,000 in credit card debt, you need to ask yourself two questions:
How quickly do I want to pay this off?
To do that, how much “Post-Fun Cash Flow” do I need each month?
For this example, let’s say you want to pay the credit card debt off in 2 months. With the goal identified, you can start to build the budget.
You need $500 of Post Fun Cash Flow each month to hit your goal. If, on average, you earn $5,000 per month, that’s a 10% cash flow target. Using the Benchmarking tab of the Google Sheets Spreadsheet, you can assign spending limits for each category to create a budget for generating $500 of monthly cash flow.
With your budget set, the Benchmarking tab can help you compare your actual spending to your goals. The beauty of the budget is that it enables you to make decisions on what to do next with your money. If you are consistently breaking your limit for restaurants, maybe you cook at home for the next month. The budgeting process creates a positive feedback loop. Your actions are reflected in your spending data.
This system builds the necessary discipline to start consistently producing cash flow. Once that muscle is built, you’ve nearly won. The final step is storing the cash flow you’ve created. Don’t skip this step. If your cash flow is stored incorrectly, it might vanish.
Step 3 – Bank It
The first stop for your cash flow will be your checking account. This account serves as the central hub for your day-to-day financial needs—like withdrawing cash from an ATM, paying credit cards, and receiving paychecks. Any excess cash that accumulates in your checking account should be moved into a separate high-yield savings account (I recommend Capital One).
Savings accounts are for long-term goals, such as an emergency fund, vacation fund, or a house down payment. Think of it as a one-way door: once the money goes in, it shouldn’t come out unless it’s for its intended purpose.
To avoid temptation, I suggest opening your savings account at a different bank than your checking account. If it takes three business days to transfer funds, you’ll think twice before using your savings to fund impulse purchases. It’s like keeping junk food out of the house: it’s easier to avoid temptation when the option isn’t readily available.
Closing
That’s it, folks. If you can track your spending, build and stick to a budget, and manage your savings and checking accounts wisely, you’ll no longer be at the mercy of lenders. Instead, you’ll have compound interest working for you.
I hope you’ve found the Money Games series valuable. These essays provide the knowledge and tools necessary for navigating the capitalist system on your terms. But, it’s up to you to put them into practice.
In the next Bread Crumbs essay, we’re switching gears. I’ll be diving into the philosophical concept of non-attachment—how it can help you at work, at home, and even at da clurb.
See you then!