Category: Personal Finance

Many people go through life wondering how they seem to never have enough money, complaining about how much debt they have, and getting upset at those who do have money.

While there may be a number of reasons for this, I’d argue one contributing factor for many people is that they are not tracking where their money is going. They just work, keep swiping their credit card, and hope they have enough money this time at the register.

But that’s a complete guessing game. Maybe over time, you will make more than you spend and have some savings, but maybe not. 

To me, guessing at your personal financial situation is just plain irresponsible. 

Money can be a great stressor in life. And so what do many people do: they ignore it. This coping mechanism only hurts them more in the long run.

So what’s the alternative? 

Understanding your personal financial position at all times, and systematically working to improve it.

As Peter Drucker famously said, “you can’t manage what you can’t measure.”

There are a few key things I like to keep track of to manage my personal financial position.

1. How Much Do I Spend vs. Save?
   I like to track how much I am spending each month and if that is more or less than I make. By tracking how much we spend, we can see where the leakage is happening and make adjustments to help us work towards our savings goals (whatever those might be for you).
   
2. Net Worth
   How does my net worth change over time? Am I adding to it or subtracting from it?
3. Am I Financially Free?
   Does my income from investments surpass my living expenses? If so, I am financially free and do not need to work. If not, how much more do I need to get there?

I track these in a simple Google Sheet. I update the sheet once per week based on any changes that have happened and reflect on what could be adjusted. Over time, it’s not a guessing game, but rather a methodical march towards my financial goals.

If you want the template for the personal financial models I use myself, you can grab a copy below.

 

If you’ve been following along my journey to $100k per year from investments, you’ll know that while I’m waiting to deploy my cash into higher-yielding investments I have been earning a nice interest rate in the meantime.

Some people have asked me what accounts give good rates, so I figured I’d make a list to share. These are listed in no particular order. The interest rates listed are as of 1/11/2020. Please note that they may have changed since then.

Marcus (created by Goldman Sachs) – 1.7%

American Express Online Savings – 1.7%

Betterment Cash Reserve – 1.83%

Ally – 1.6%

Wealthfront – 1.82%

Citi High Yield Savings – 1.85%

Enjoy your returns 🙂

As part of the Journey to $100k per year in income from investments, I believe real estate will play a key role.

I originally thought I’d play in the Miami real estate market because earlier this year I moved from NYC to Miami.

However, after spending about 6 months in Miami and exploring the market, my girlfriend and I have decided it’s not for us. 

I then thought about exploring other Florida markets but my girlfriend had been pushing me to consider Fort Wayne, Indiana.

If you don’t know where that is on a map, I don’t blame you; I’d never heard of the city until I met Sasha. 

Sasha grew up in Fort Wayne. 

Even though we’ve been together for a few years now, I still had never gone to visit her hometown because I had zero desire to go to the Midwest.

For reference, I grew up in San Diego, lived in NYC for a decade, and Miami for a while this year. Coasts are my friend and I have avoided anything but the West or East Coast my entire life.

But here we are.

As I’m writing this I’m sitting in a Starbucks in Fort Wayne.

So, why Fort Wayne?

Well, the first reason I took a look is because of my girlfriend. I believe having local knowledge of an area will come in very handy, and instead of having to learn a totally new market, I figured having her knowledge could speed up our process a bit.

But just because she grew up there wasn’t enough. Especially not enough for me to be ok spending time in the Midwest.

I needed to dive into the market a bit more.

So I started my research.

And what I found I liked quite a bit.

Here are some things I like about the Fort Wayne market:

• 2nd most populated city in Indiana
• 77th most populated city in the country
• Total population over 250,000
• The population has been growing slightly above the national average
• There has been a large amount of public and private investment into the city over the past couple years and will be hundreds of millions invested by the public and private sector over the coming 5 years
• Low unemployment of 3%, which is lower than the national average of 3.7%
• No single employer concentration
• No single industry concentration
  • Major industries include: health care, manufacturing, insurance
  • * One thing I don’t like is that manufacturing provides so many jobs here. It’s not the only industry but in general, I’m a little concerned with manufacturing from a long term point of view

So after learning more about the market, I started contacting local investors, real estate agents, property management groups, looking at historical records from the city, etc.

Here’s what I learned:

• There are low vacancy rates
• Rental rates, especially in downtown, have been rising
• Property values have been rising
• There are not many modern apartments
• Cap rates are much better than in NYC or Miami
• It’s possible to get a 15% cash on cash return in this market, which is virtually impossible right now in NYC or Miami

Ok, so this all sounded good on paper, but now I needed to actually go see it for myself because there’s nothing like actually walking around and getting a real feel for the area.

So, 2 weeks ago we flew into Fort Wayne. 

Luckily my girlfriend could play tour guide for me so we have been able to explore things well. It’s also much smaller than NYC so it has been easier and quicker to get a feel for things.

I have to say, I have really liked what I’ve seen.

Seeing the construction happening downtown, walking the neighborhoods, viewing listings, meeting investors, real estate agents, the local people, etc had made me more excited about this city and its future.

And it has confirmed to me that I want to start making some investments here.

Our cash will go much further here than it would in the Miami or NYC market.

And because of the cash on cash returns that are possible, achieving our $100k per year goal is much more feasible in this market.

So, we’ve decided to go all-in on Fort Wayne.

And we are actually going to be moving here, at least for the next 6 months.

We just signed a lease on a new apartment here.

I believe our best shot at achieving our goal is to be on the ground and in-person here.

So that’s what we are going to do.

As a bonus, our overall cost of living will go down.

Our monthly expenses will go down to about $4,000 per month. For reference, in Miami, we were spending about $6,500 per month and our last year in NYC we were spending even more than that.

Now, our monthly expenses will not always be this low. But for now, we will keep them low like this so we can have our investment income cover our living expenses sooner. And as we increase that investment income to $100k per year, we’ll slowly increase our living expenses again as well.

But this time, it’ll be in such a fashion that we can continue at that level of spending for the rest of our lives.

So, that’s why Fort Wayne and an update on what we are doing.

If you told me a year ago I’d be moving to Fort Wayne, I’d have said you’re absolutely insane.

But here we are.

And really, it’s not that surprising.

Because when it comes to business and achieving my goals, for those of you that know me, you know I’ll do whatever it takes to put myself in the best position to succeed—even if it means moving to Fort Wayne.

 

A couple of years ago I started doing something that many people told me I was crazy to do (including my lawyers) — share the financial results each month of my company Jakt.

We were a private company and had no obligation to do this, but I decided I wanted to.

Why?

Well, when I started Jakt I had no idea if how we were performing financially was good or not. And no other agency that I knew was releasing their financials. Eventually, I decided, why not do it? I always wanted to see others so I could learn, so why not do it myself? And that’s exactly what we did. We released our financials every month of 2018.

If interested, you can find those on the Jakt blog. 

In June of 2019, I sold the company and it closed a chapter of my life — including releasing company financials because, well, I can’t make those calls anymore.

But now I’ve decided to up the ante.

Business finance is taboo, but I think personal finance is even bigger.

So, I’m going to go against the mold a bit and release a couple of things every month:

• Personal net worth 
• Income from assets + investments 

I never told anyone this (not even my family), but I had a personal goal to be worth $1 million by the time I was 30. 

I ended up achieving that.

I have to say, it wasn’t that exciting. 

I set the target when I was a teenager because I thought $1 million was so much money then.

Now that I’ve achieved it, I have to say, it’s not that special. It’s not like with a $1 million net worth I can buy anything I want.

But what it has given me is time freedom.

I don’t have to work now for the next 10 years if I don’t want to.

For those of you who know me though, there’s no chance I’ll be doing nothing for 10 years. I love the game of business way too much.

In the last few weeks, I’ve had a lot of time to think about things.

And one thing I realized is that even though I have time freedom now, it will end in 10 years.

When I was a kid I thought being a millionaire would be when I made it.

What I’ve realized is that what I really want is time freedom — that lasts as long as I live.

Right now, I have 10 years of time freedom. But because most of my net worth does not generate cash flow, it means I’ll slowly burn through it.

So now I have a new goal: 100k per year in income from assets and investments.

I figure with 100k per year I could never need to work again (although I don’t think I’ll actually not work). 

But that total freedom of choice and time is what I’m after.

So how am I going to get there?

Well, I’m not exactly sure. 

But I plan to document the journey so you can follow along.

What I can say is that my initial plan will be to adjust the allocation of my current assets into more highly income-producing assets. I’m not sure that doing this alone will get me there though. I think I’ll probably need to create some additional income to help get me to the 100k.

I’ll explain more why this is the case in my next post. In my next post, I’ll lay out where I’m currently at with my income from investments, where my net worth is allocated and my next steps.