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Robinhood’s use of SRR in portfolio performance reporting, and why I don’t use it to track my investment performance.

Cover Photo by bruce mars on Unsplash

Something I just noticed today and thought it would be worth sitting down and writing out a brief post about it. I wanted to share this since it’s a pretty important bit of information for anyone just getting into trading stocks.

If you’re a Robinhood trader, you should be aware that Robinhood includes deposits as part of the portfolio returns they report within the app, and the website. This means that they are reporting returns using a Simple Rate of Return:

EMV = Ending Market Value
BMV = Beginning Market Value

This is bad for two reasons:
A) It’s not an actual measure of trader performance
B) It can vastly overstate returns, as well as vastly understate returns depending on your deposit strategy.
C) It can underreport the impacts of large market swings, and how you’ve done in the interim.

Simple Rate of Return is just that, very simple to calculate. It’s generally used to track indices and things where inflows and outflows of cash are not important to track for performance reasons. You’re only seeing a very simple view of performance with an SRR.

Another way to calculate returns is to use an IRR (Internal Rate of Return).

DtDUG = Date to Date Unrealized Gains
DtDRG = Date to Date Realized Gains
DV = Dividends
Int = Interest
PA = Purchase of Accrued Interest (For Bonds)
SA = Sale of Accrued Interest (For Bonds)
∆ai = The change in accrued interest from the beginning of period to end of period
MaxFees = Remove any fees paid (commissions) during the period. This is optional but recommended
BMV = Beginning Market Value
⅀Cashflows = This is the sum of all cashflows for the period
(di/td) = Date of Flow over days in period ( IE if a $200 flow happens on the 15th of November h, it would be 200*(15/30) )

The nice thing about an IRR is that it does include the size, and timing of cash flows to create a more specific and useful measure of portfolio return. However while it accounts for them, IRR still includes the cashflows of a portfolio in the calculations, so these can skew your overall measure of how good your trading strategy is doing.

The last and most complex measure of performance that I’ll cover here is the TWR (Time Weighted Return)

The IRRs taken here are between each cash flow, so every deposit or withdrawal that’s made comprises a new IRR to remove the impact of the flow on the return.

While it seems like it’s more simple than the others, the TWR includes all of the accounting for the IRRs, and chains them together into a return stream to offset for the individual flow based IRRs. By doing this it’s removing the effect of the cash flows in the portfolio and actually focuses in on the actual performance of the investments in the portfolio rather than the cash movement muddying it up.

For my deposit strategy I tend to do big chunks here and there, and am not regularly adding to my Robinhood account until I have a purchase I want to make. Because of this the Robinhood SRR under-reports my returns. If you are following good financial advice and adding a bit every month, this would greatly inflate your RH returns as it wont account for market movement very well. It’s important to track your real performance so you can measure the effect of different strategies. I tend to use different brokerages to track different strategies because I can break up the performance by account. Some trading platforms allow you to break up the accounts within the platform as well, which is also helpful. Example from my own account. First graph is RH, second graph is from PersonalCapital (Which does a Time Weighted Return, if you use my link to sign up for an account we both get $20)

Top graph is screenshot from my Robinhood portfolio, bottom graph is run for same period on only my Robinhood account in Personal Capital.

I really like PersonalCapital because I can pull all my investment accounts into one place, and report on performance in a unified manner. I have upwards of 13 financial accounts loaded to it right now and I get to see everything on one dashboard which is amazing.

I love being able to report on individual accounts as well as the mix so I can see how my overall plan performs against the market as a whole. If you’re serious about investing and growing your wealth, I cannot recommend PersonalCapital enough.

What can make an entrepreneur successful?

What makes a successful entrepreneur and why?
Perseverance. No really. You can be a brilliant MIT graduate with all the connections in the world, and a groundbreaking technology, but nothing happens overnight. You have to be able to stick with it through all of the trials, all of the awful pitches, all of the no’s, being broke, being lonely, being frustrated. If you don’t have the grit and will to push through all of the negatives of being an entrepreneur, and just survive, you wont last too long. Rarely do you found the next Instagram or Snap chat, going viral overnight and being picked up for billions in a matter of a year or two. Often you slog through horrors until the market is ready for you, it might be 3 years, it might be 20 years.
 
What skills or traits do I need to be an entrepreneur? 
Entrepreneurs need to be able to take in a lot information, and glean some insights from it to apply to what they are doing. I read constantly, and am always surprised at what can spark ideas or solve problems. Being able to look at a 30,000 foot view of a problem, do a quick survey of an industry or area of science, and then zoom in on a solution is a really important ability to have.
Entrepreneurs usually need to be humble as well. There’s always someone who’s been there first, always someone who’s smarter than you, and always someone you can learn from. If you go in like you’re the end-all-be-all you wont attract the right people to make yourself successful.
 
How do I succeed? 
Beyond what I said above, you really need to commit to it. It’s a lifestyle, and if you have a family, the whole family becomes an entrepreneur family. It might mean no vacations, a smaller house, tighter budges, and often meager Christmases. If everyone isn’t committed to it, you’re going to have a lot of distracting strife. You have to be able to keep motivated and sacrifice today’s comforts for tomorrow’s returns, always looking at the long game.
 
Pro-Tips for entrepreneurs
  • Learn everything you can, from everyone you can.
  • Network like crazy, always provide value to people you meet, and be humble in the process.
  • Find a mentor who’s been there before.
  • Have your own house in order.
That last one is probably the most important part. Personally, professionally, financially, you have to have your ducks in a row or you’ll miss opportunities. Your finances need to be awesome so you can A) have enough money to take opportunities and make leaps of faith, and B) when you’re in due diligence you should probably have decent credit, or a great story why you don’t. I meet a lot of entrepreneurs that put more value on the lifestyle, and looking and acting like an entrepreneur than they do in actually being an entrepreneur. If you walk into my office hours with all the gadgets, a $2,000 suit, and a BMW, but complain you don’t have enough cash to bootstrap, I can’t feel sorry for you because you did that to yourself.

Competition is For Losers

For the next 12 weeks I’m going to be creating a set of blog entries for a series of videos I’ll be watching as part of “How to Start a Startup” which is a program hosted by CoLabJax and put on by TheBunkerJax.

If you want to watch the video to follow along, check it out here on YouTube: Competition is for Losers presented by Peter Thiel

Peter Thiel is a pretty remarkable guy, and he’s worth a few billion dollars. He’s got some great books out there like:

Very good reading, put them on your reading list today.

Now lets talk about why competition is for losers.

Thiel talks about his view that there are only two kinds of businesses, ones that are perfectly competitive, and ones that own a monopoly. This is a section of the video that you will probably have to watch a few times to really understand what he’s talking about. In a very round-about manner, Peter is talking about market positioning and fit. He touches on the way that companies frame themselves against their competitive landscape to define their relationship to the rest of the market. Depending on the goal of the presenter, they can frame their company as perfectly competitive, or monopolistic, which requires a deeper dive to really determine what the truth is. His position is that competitive companies don’t make any money, and successful companies have some level of monopoly.

He goes on to talk about the importance of picking a specific niche, conquering it, and then expanding outward. The goal here is to achieve some level of monopoly in every sector you reach into, so if you control your reach you can systematically gain / retain monopoly as you expand into new frontiers. Large markets mean numerous competition, so keep your markets small and focused, and try to define their size with your positioning.

I love his comment of “If you copy these famous people, you’ll never learn from them”

This is something I’ve stressed off and on to people that cling dogmatically to the success stories of the big internet companies. These are great things to read, and there’s tons of wisdom to be gained from their successes and failures, but it’s important to realize a few things:

You are not them

We are the sum of our experiences, connections, and upbringing. The things one person accomplished are not directly transferable to other people simply because you are different people. Thiel touches on his own ‘success fast track’ from growing up in high achiever household through Stanford, into a great law firm. This sort of story happens over and over if you dig into the success stories of the big tech companies. There’s a thread of privilege, networking, and happenstance that simply cannot be replicated by the average person, and it’s import to realize that it’s okay that it took you a little longer to make it, you’re building your own ladder as you go, you didn’t have it handed to you. It doesn’t make you any less remarkable.

Your company is not their company

In the same way that we’re all our own little unique snowflakes, our companies are even more so, as they are just big snowballs filled with snowflakes. The people that make up your company are incredibly important (TEAMS!) But the timing is incredibly important as well. If this wasn’t the case, it would be impossible to ever gain a true competitive edge. The important thing is to find the formula that works for your people, in your circumstances, and exploit the hell out of it.

All that being said, these are still great stories and books to read. Those who do not know history are dooms to repeat it, which is why I stress looking at peoples mistakes more than their failures, because there’s a lot more good stuff to be gleaned from them.

Peter’s points about where the bulk of your real revenue comes from in your projections are really subtle and important as well. Starting companies is not a quick way to riches unless lightening strikes (Screw those Instagram guys!), which it probably wont for you. You have to create a lot of value to your users up front, with the knowledge that it could be 5-10 years before you’re really in the sweet spot of getting value back out of the company yourself. The truly valuable companies are the ones that out-last the others. You don’t always need to be first, or maybe even the best, you just have to the last.

 

Growing from Zero to Hero

For the next 12 weeks I’m going to be creating a set of blog entries for a series of videos I’ll be watching as part of “How to Start a Startup” which is a program hosted by CoLabJax and put on by TheBunkerJax.

If you want to watch the video to follow along, check it out here on YouTube: Building Product, Talking to Users, and Growing presented by Adora Cheung (Homejoy)

ad-huge-mistake-9

There are a ton of really good, but very hard to digest bits of information in Adora’s talk. For the most part it’s telling the story of her startup HomeJoy, but interspersed in the narrative she goes into a little bit of detail about the mistakes she and her partners made while starting their business. This is a very rare, and incredibly powerful opportunity we have to look into the good and the bad decisions that went into a successful business. So often we see the founders of startups talking about all of the great things they did to launch their company to the moon, but we rarely get to hear about the stumbles, pitfalls, and downright stupid things they did that almost sunk them. Personally, I feel like this is an awesome opportunity to dissect these mistakes a little bit, so I’m going to pick out my favorites and go into those.

We spent a year doing something we weren’t passionate about

This is something I touched on briefly in my last post, but it’s something we should be repeating ad nauseam. If you’re picking a product or an idea because you think it’s a million dollar idea, you’re doing it for the wrong reasons. You should be doing it because you’re sick and tired of being without it. This should be the idea that makes you mad that it doesn’t exist yet (or isn’t in wide use). You need to feel emotional about it, because if you the creator aren’t feeling that emotion, chances are neither will your customers. Thinking back to my first real startup, orderbolt (More details in a future post), my partner and I were sitting in a bar eager to get our Friday night going, but we had been waiting a good twenty minutes, and hadn’t seen our server at all. While we’d been waiting other groups had come into the bar, sat down, and then left for some place with better service. Now, you might be thinking that this is just a failure of a particular waitress, and you would be right, but it’s also a systemic problem in the service industry. Your service is only as good as the employees you hire, but why can’t we mitigate this a bit with some technology? We were sitting there in 2011 with smartphones more powerful than the ones that took astronauts to the moon, but we were still living within a service paradigm that has been around since the beginning of time.

As you can see from that tangent, I had a ton of passion for my idea… I still do. Every single time I have to wait for a check, or go find my waitress I fume inside that I can’t start and finish the transaction from my phone. I tell you all this because it’s crazy important. Your passion is what’s going to infect other people, and get them on board with your idea. It’s also likely the only thing that will keep you going strong with things get tough. Try to be your number 1 best customer.

You should be able to explain your idea in one sentence

im_bored_himym

I love this one, because if you listen to Adora’s elevator pitch, it’s actually not that terrible. It could use some polish, but it’s mostly in line with what many entrepreneurship thought leaders push as a good elevator pitch. But one thing you need to keep in mind is that not everyone is willing to give you thirty seconds, and thirty seconds in an elevator doesn’t really translate as well to print media, ads, blog posts, or the front page of your website.

There has been research by Akamai.com that says for an ecommerce website, you really only have about 4 seconds to grab your customer’s attention with something before you risk losing them to the next google search result. To that end, it’s important to be able to boil your idea, and your reason for existence down to a very quick, concise statement.

Be willing to beg

prettyplease

This isn’t something Adora highlighted as a mistake, but it was a great illustrative point that she made. You need to be willing to beg for your first few customers. Not many people want to be the first to use something, especially if they have to pay for it. There’s a lot of intrinsic risk to being the first, and risk is something that we as humans usually avoid at all costs. Her story of going out during the festival and guilt tripping people to sign up for home cleanings with frozen bottles of water is both genius, and the exact kind of thing you should be willing to do if you want to start a successful company. For the right customers, you should be willing to do whatever it takes to get the valuable golden nuggets of feedback that they could give you. So go out and do it!

Don’t over automate

robotfail

This is a really subtle, and maybe counter intuitive to most people. I know I tend to get into this trap when I’m designing a solution, because I want to avoid rework at all costs, and scrapping code is painful to my pride as well as my pocket book. I tend to automate everything I can, but to Adora’s point, if you’re over automated you’re missing out on that human interaction that can not only be very positive for consumers, but it can expose things that are less than ideal in the user experience. If your business is completely automated, you’re probably missing out on really valuable feedback and analysis that could be happening. Another point she makes on this topic is that if you’re spending a lot of time automating systems, you’re less agile and more married to your systems, and you wont be willing to scrap things when you need to. It’s important to be able to change gears really quickly and adapt to what you’re learning from customers before it sinks you, if you’re heavily invested in code and automation for a given feature, you’re way less likely to nuke it if the time comes. Don’t worry about the edge cases when you’re small, focus on who you have not who you might get.

“S is for Stealth, and Stupid”

hedgestealth

Even though this gets a slide in her presentation, she doesn’t really go into much detail why you shouldn’t be stealth as a startup. I have seen this in every startup related class, networking event, meetup, and function; I come up to someone and introduce myself, and ask what someone is working on: “Oh man, it’s really great, but we’re keeping it under wraps right now because it’s so awesome”. Oh… okay… bye then.

Eye-Roll-gif-6

Never develop things in a vacuum! Unless of course you’re working on impulse engines, and then you should really hurry up already. If you aren’t talking to customers, investors, curious people, users, developers, etc you’re missing out on an incredible amount of feedback and data you could be using to improve your idea. Worse, and more harmful is that you’re developing a product that exclusively fits your view of the world. News-flash, you’ve probably got it wrong in a few places. You might get lucky and you’re more right than wrong, but why the hell would you take the risk? The more you speak about your idea and the more feedback you get the more you can mitigate the risk that you’re building something no one cares about.

Fear of being beat to market is real. It does happen. The problem with that logic though, is that if anyone can bring the idea to market, it doesn’t really matter if you came first, or second, or third, you’re going to be dealing with competitors, and if you don’t have some sort of advantage over them, you’re screwed anyways so you might as well bow out now. First to market doesn’t necessarily win anymore, in fact, it rarely does.

For you engineers with a bit of intellectual property law knowledge, you can talk about your idea without revealing trade secrets, or technical designs that would compromise your ‘public display’ timing for filing your patent applications, so stop worrying about that.

Remember that every person that you can talk to about your company can be a potential Customer, Resource, Employee, Investor. So always be selling, and don’t be afraid to let the cat out of the bag.

Lets talk about growth

growing

This is a pretty dense section, and there’s a lot of math and graphing involved. For those of you who haven’t taken a stats class for a while I’ll try and paraphrase what she was going for here.

So we have a few different kinds of growth that we will see as a business owner

  • Sticky
  • Viral
  • Paid

The fact of the matter is that you’ll be relying on all of these at some point in your businesses’s life-cycle, there’s no way around it. Sticky growth is when your customers love you so much that they stay around, and buy more. Viral growth is when your customers love you so much that they tell all their friends, and they tell their friends, and BAM we have a growth chart that looks like a hockey stick. And paid growth is what is required to move from just getting early adopters to getting the more mature customers that are out there. Hopefully you’re getting a ton of the first two to get started, but you’ll always need to be working on paid growth so that you have these skills when they become more and more important as your company matures.

The first thing to understand is that all businesses lose customers. You’ll never have 100% retention, unless you’re a mortuary, so don’t get discouraged when people stop using your product. If you think about your business as an hourglass and the grains of sand are your customers, as long as you’re pouring more sand than is coming out of the bottom you’re going to be set. The goal here is to focus on making the bottom hole as small as you can, and get getting the incoming flow as fast as you can.

The second thing to understand is that every customer comes with a cost. Not only do you have your cost of providing what you’re selling (Servers, coders, bandwidth), but you have your cost to actually get the customer (Advertising, sales, marketing, onboarding, etc). The goal here is to make sure that not only are you breaking even with your product costs, but also your customer acquisition costs. You can have 100 million users, but if they are only paying you $1 each, and it costs you $2 to provide the product, you’re screwed. It’s important to find the most cost efficient methods to create, deliver, and sell your product without sacrificing important components of customer experience.

I really recommend Traction by Gabriel Weinberg. It’s a great book about how to build your users in a way that maximizes your startup’s key performance indicators.

That’s the post for this week, please feel free to reach out to me on LinkedIn, Twitter, or in person

My Thoughts on “Before the Startup” Presented by Paul Graham

For the next 12 weeks I’m going to be creating a set of blog entries for a series of videos I’ll be watching as part of “How to Start a Startup” which is a program hosted by CoLabJax and put on by TheBunkerJax.

If you want to watch the video to follow along, check it out here on YouTube:  Before the Startup (Paul Graham)

This is primarily a brain dump of thoughts and ideas I had while watching the video, they are laced with opinion and your mileage may vary. There are areas I disagree with Mr. Graham, so keep in mind that he’s worth hundreds of millions of dollars, and I am not. I’d love to chat about them on twitter though! Follow me @axe9

Work with people you genuinely like and respect

This is crazy, crazy important. Starting a startup with [a] co-founder[s] is pretty similar to being married. Actually in some cases it may even be worse than getting married. There aren’t any social or religious stigmas about breaking up a company to consider when things get rough, so the only thing keeping founders together is passion for the product, and a desire to succeed at all costs.

Picking co-founders is incredibly difficult, but here would be my suggestions:

  • Pick people you really enjoy being around. They should energize you, make you happy most of the time, and generally contribute to your well-being. There will be 50, 60, 70, 80 hour weeks when you’re starting a company, and they’ll likely be around a lot.
  • Pick someone with similar tastes and lifestyle to yourself. You can’t imagine how much friction and dissension can brew from the dumbest things.
  • Pick someone that has the same views on money that you do. When it comes to making hard financial decisions later on, this can only help.
  • Pick people you trust implicitly if you can. You’ll need to have a lot of faith in these people, and there are times when you need to hand over the reigns and let them make decisions without driving yourself mad with worry.
  • Pick people with complimentary skills, traits, and personality to yourself. The only reason to have a co-founder is if you can enhance each other so that the partnership is greater than the sum of it’s parts.

Don’t get trapped by the ‘startup’ culture.

Do things you need to do, not what you think you should be doing. This seems like a very obvious thing, but not as much as you might think. Startups, and the culture that tend to go along with them are currently in vogue. Every college student, basement programmer, and guy on the street is coming up with starutp ideas, and they all think they know the best way. This is my favorite part about living in The United States, is that in most cases these people could go on to be millionaires if their idea catches on.

You need to take some caution though when proceeding with your startup , as starting a company isn’t really the way they portray it on TV. It’s not all loft offices, parties, VCs, and trade shows. Only one in a thousand companies will make any real money, getting funding is soul suckingly hard, and you will work your ass of for a very long time, with very little support. Only do things you need to do to be successful. And treat every dollar as if it was your last dollar. You’ll be amazing at how much more runway you can have following those rules.

Read ‘The Lean Startup’ by Eric Reis if you can, I would also recommend ‘The Ultralight Startup’ by Jason L. Baptiste as great starting points to getting into the right mindset for building your company. Read The Lean Startup first, as The Ultralight Startup builds on it.

There are no tricks, or shortcuts to success.

You have to have something worthwhile to be successful.
Different ideas have different levels of possible success, you cannot expect that every idea is a million dollar idea. Some ideas are only lifestyle businesses, and that’s okay too. The goal here is gauge the potential of each idea, and put the correct amount of effort and investment into it. You will work hard, you will suffer, you will invest everything you have, so it’s important to know if you’ll see any return.

Startups are hard work. You can’t bullshit and part time it, you need to be ready to commit everything into it, or you should walk away. You need to have a plan for gritting your teeth and getting down to business. Having a startup is like having children, it’s all-consuming, rewarding, but tough. You’ll laugh, you’ll cheer, you’ll cry, and you’ll get into fights with people you care about, but it’s all worth it if you can power through and meet your goals.

The market knows what it needs, or rather, it will know it when it comes around. It probably wouldn’t be able to articulate what it needs, but there’s a Darwinian component to product success, and that cannot be ignored. In the world of new products, it’s very much the survival of the fittest, or rather the survival of the best fit. You can’t fool your customers, and you can’t game the system.

Only two things you need?

Paul says there are only two things you need to start a startup; an idea, and a co-founder, but I’d argue that a third, and even more important component is your personal / professional network. When I look back at the businesses I’ve started, I wouldn’t have been able to do any of it without the help from my friends, family, colleagues, professors, mentors, and advisers. Whether it came to paying the bills, or getting past a tough problem, I had to rely heavily on my network to build my businesses. This may have been an implied point, but I really think it’s worth explicitly stating. You need to have a healthy personal and professional network before you even start to build your business.

I think I’ll dedicate an entire post to this at some point, and link it here when complete.

The best ideas are natural, pulling ideas that have their own gravity.

They will tug at your mind; when you talk to people about them, they draw people in; and when you put pen to paper you’re carried along and are not so much creating the idea, as you are following where it goes. It’s a living breathing concept or vision that has it’s own path and personality.

The reason why the unicorns of the startup world don’t start as startups are because of the ‘why’. People were working on the project because they had a need, and solved it to make their lives easier. They had passion to solve this need, and it gave them the motivation to tough it out through the myriad of challenges that are thrown their way, and complete it. Without a real need, and without real passion to succeed it is much, much harder to complete your task.

With passion, you need expertise.

Not necessarily in programming, or engineering. But you need to have expertise that will be complementary to your idea. Like Paul said, the non-technical co-founder can sometimes be the hardest working person. You could be a sales expert, an industry expert, a technical expert, a growth expert; you need to be able to contribute something to the startup of yourself. If all you have is an idea and some passion, you don’t have a company yet.

To Business School or not to business school

One of the questions from the audience was around whether or not there was value in going to business school if you’re interested in entrepreneurship. Paul gives a bit of a glib, narrow answer on this topic, but you could devote a whole ream of writing on the pros and cons of a business degree for entrepreneurs.
I’ll admit that I am terribly biased when it comes to business school because I went to business school, but I went to business school for a very important reason for me.

As a highly technical person by temperament, I’ve never been very naturally good at networking, disseminating ideas, or winning people over. I’ve found that rare is the technical person that possesses any of that triad of traits requisite for a successful entrepreneur. Seeing these deficiencies in myself, the first thing I did when considering schools is pick up marketing and business administration minors to my computer science degree. These were hard classes for me, and they stretched me as a person quite a bit. When finishing up undergrad I still felt like I had some work to do on what I was missing, so I dove into the MBA program to learn more presentation skills, and to build my professional network.

To me, an MBA is more about learning how to assimilate large abstract ideas, and disseminating them to your stakeholders in such a way that convinces them you know what you’re talking about is a worthwhile concept, and this is an extremely important skill for an entrepreneur. You need to take vague ideas, and communicate them effectively enough that people will give you money and resources to make them happen.

Yes, some people are naturals at this (You see them on the covers of Forbes and Entrepreneur on a regular basis) but for every entrepreneur that has this skill from birth, there are thousands of them that have to read books, get a mentor, or go to business school to gain them.

Also if you trust my anecdote, I find it funny that some of the first hires that most startups make after their series A round usually involve CFOs, ivy league MBAs, and COOs, but you see the CEOs of these companies constantly trashing MBAs and business schools… You also see these people telling people to drop out of college altogether, but then if you look at the job ads at their companies, they all require college degrees to even be looked at.

Money out of nowhere

Late in 2013 my wife announced that we’d be expecting our first child in 2014. Early on we’d decided that when Mira was born, she’d quit her job and be a full time mom.

The next spring it finally dawned on me that we’d be cutting our income by about 35%, and with our current budget that would be…  Problematic. The nice thing was that I had very good job security and our savings were relatively healthy, but our cash flow would be too crimped

Triage

When looking at our budget, I pinpointed a few low hanging fruits:

  1. Tax Inefficiency
  2. Credit Card Debt
  3. Incorrect escrow on our mortgage
  4. Student Loans
  5. Cellphone bills
  6. Cable Bill

To me, it was important to take out the big chunks first if I could, to get our monthly cash flow up enough to really make a difference for our budget.

Tax Inefficiency

I did a bunch of research and found that when you have a child, you can get the child tax credit for the entire year. This, can be a massive savings on your per-paycheck tax amount. I worked with my HR representative at work to figure out the correct deductions, it all worked out to about $500 a month in extra cash in our pockets. The caveat to this is that you’re going to forego a bigger tax return next tax season, but personally, I don’t see a point in giving Uncle Sam a tax free lone every paycheck.

Credit Card Debt

This was a big struggle for me. We had some debt on an interest free credit card (American Express), but when it’s interest free, what’s the harm in carrying the debt? Well, the harm is that if you get into a cash flow crunch and you reduce your payments on your interest free debt, it can catch up with you pretty quickly. You don’t want to be on the receiving end of a years accrued interest. I bit the bullet and paid this off out of our savings, which reduced our monthly expenses by another $360 a month. It was painful, but rewarding in the end.

Incorrect escrow on our mortgage

This was an odd one that took some research. We’d purchased our house the previous year and when they estimated our taxes and insurance they actually estimated our monthly escrow far too high. Most things I read online said that you had to wait for the next year for the escrow to re-balance automatically, but I ended up making a slew of phone calls and was able to get the mortgage company to correct our escrow amount, the overage was refunded at the end of the year. The overage would have been refunded at the end of the year anyways, but money now is always better than money later. This saved us about $ 145 a month, and at the end of the year we got a check for $800.

Student Loans

Between my undergraduate and graduate degrees I ended up with quite a lot of student debt. We were shelling out over $1000 a month towards my student loans, and this was far and away the most painful thing. At the same time though I was very concerned about reducing my payments, which would result in a halt on any progress we’d been making on them. Unfortunately, this would shave another $220 a month off of our monthly bills, so I bit the bullet and put my federal loans onto the Pay as you Earn plan. We’re doing a bit better financially these days, so I’ve upped our payment significantly to try to get back lost time.

Cellphone bills

At this time we were shelling out $180  a month to Verizon between my phone and my wife’s. She had a pay-as-you-go phone, and I had a smartphone with a data plan, which was required for work. I got a little bit of reimbursement from my job, but it barely made a dent. I knew there were better options out there, so I started researching. For a long time, I was torn between TING and Republic Wireless.  Ting is nice because if you already have an AT&T device, you can use it on their network and save a bit of up-front cost. The monthly carrying cost for Ting (In our situation) was a bit higher than Republic Wireless, and even though we had to purchase two phones to move to Republic Wireless, we still came out ahead after only a few months. Since my wife would primarily be at home with our daughter, we got her the cheaper MotoG with the 3G data plan. Since I need internet for work and travel, I got the more expensive MotoX. All in we had to spend about $400, but it saved us $120 per month, so the payback period was very short.

Cable bill

This one was a lot easier. We’d been paying $90 a month for cable, but we also have Netflix and Amazon Prime. We decided to drop our cable down to internet only, and shaved only $40 per month off of our expenses.

In the end, most of these cuts were easy to accomplish, and weren’t very painful. We also cut down on our eating out, shopping expenses, and other items. I’ll blog more about those at a later date.

All told, we were able to either reduce our expenses, or increase our cash flow by $1385 per month.