Hey friends,

Last week was a highly read newsletter and a lot of great feedback. It’s basically the kickstart guide for anyone getting started investing. Take a read here: The Goodwill Investing Journal - Issue #132

Eddie

While buoyant consumer spending and a roaring stock market signals the economy is doing well (despite a war, inflation, etc), it really is a tale of two worlds, or what we have come to know as the so called “K” shaped economy.

One group on the upper arm of that K is getting wealthier and wealthier, their assets and portfolios growing, the wealth effect leads them to spending more money than ever, which makes economic performance and stock market earnings appear solid.

If you are an investor and are consistently putting money into your portfolio of investments, you are participating in this broad trend.

But a lot of people are struggling to make ends meet, living paycheque to paycheque.

So today let’s talk about how people that feel like they are treading water (income = expenses = no cash in the bank) can improve their situations, immediately.

First, download and print credit card and bank statements for the last 3 to 6 months (more is better). Then, with a pen and highlighter, go through line by line and identify where your money went.

Categorize everything into needs vs wants, and be honest with yourself here. A lot of the things you think you need are actually just desires. We are convinced by social media, friends, and corporations (lions) themselves, psychologically, that we need something that is nothing more than an unnecessary item.

Once you understand where your money went you can then make a budget for the next 6-12 months and cut all the waste. I have a budgeting template I use once or twice a year to forecast the year ahead. It’s pretty straightforward, you can download it here:

The first major area to save money is on transportation. I look around and I see a ton of overpriced cars, $75,000, $100,000, for a machine that gets you from A to B. And while they sit around parked 23 hours a day, they depreciate in value very quickly. I don’t even like that a car is categorized as an asset…it’s kind of like dropping a stone into the water, it just goes down in value. It provides some utility, yes, of course, but at what cost? So sell the $75,000 car and buy a $20,000 car with 100,000kms on it and that thing will last another 10-15 years anyways. Bus, or bike to work, get some exercise.

The next major area is travel. Every time you get on an airplane, that’s expensive stuff. Tourism is expensive. You go to high priced locations and they are going to gouge you for every dollar that you have. If you are struggling to get by, cut this out. You’ve got a bachelor party trip or a wedding to go to? Start saying no. For two years. Just say no to stuff. If your friends get upset with you, maybe they’re not really as good of friends as you thought they were.

Another obvious one is housing. A lot of people live in homes (whether owned or rented) that are actually just too big for what they need. They have all these extra rooms and then guess what? They buy things so that they can fill up those extra rooms for that one time maybe someone comes to stay for a weekend. Ditto for storage rooms for all that unnecessary crap that we hoard. Reconsider your living situation, do you need that much space?

Then we have food. We need to eat right? Yes, but not delivery or restaurants every day. The markups are insane and the food is usually lower in quality anyway. Going out as a family of four these days for a lunch is $120 bucks minimum, and that’s not counting a $10 pint of beer or $16 glass of wine. If you start home cooking, batch cooking your meals, you’ll start saving at least 50-75% of your annual food budget.

Finally, where I see a lot of excess fat is with subscriptions that are easily unnoticed on your statements: Apple TV, Netflix, Prime Video, Crave, Hulu, Roku, Zulu…whatever…there’s too many, and you don’t need all of those.

Keep one and buy a book, learn something along the way. Psychology of Money by Morgan Housel is excellent.

So, those are some key areas where you can save some money almost immediately. Remember, back to basics, see where your money went, make some changes to the Housing, Transportation, Travel, Food, Subscriptions and other unnecessary categories, and I guarantee you will cut the fat and start noticing your cash balances going up.

Then, and only then, we can talk about investing.

“Financial success is not a hard science. It’s a soft skill, where how you behave is more important than what you know”

—Morgan Housel

What is one change you could make to your spending today that would improve your cash flow?

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