Listen Money Matters - Free your inner financial badass. All the stuff you should know about personal finance.

This week the guys get nerdy about the numbers and chat about how to calculate cash on cash return to see if a property will be a smart investment. Is This a Good Investment? If you’ve been talking about buying a rental property with friends and family, there was probably someone who told you some horror story about owning rental property. Before letting them scare you out of it, do the math. It’s important not to make an emotional decision when buying a rental property. Instead look at the numbers and have systems in place to protect you. Some of us are just not numbers people (including myself). Although real estate investment math isn’t calculus, there are a lot of calculations involved. Don’t worry; we’re here to help. Cash On Cash Return The cash on cash return is a simple way of measuring the performance of a potential investment property that is quick and easy. It can be a good starting point for quickly filtering potential investment properties. Cash-on-cash return = annual pretax cash flow / total cash invested. For example, if you put $100,000 cash into the purchase of property and the annual pretax cash flow is $10,000, then your cash-on-cash return is 10%. Cash-on-cash return is the actual return you will get at the end of the year your rental property after all property specific expenses are paid out like mortgage, taxes, insurance, HOA, etc. It’s a great metric to determine if a property will be a good investment right off the bat and a quick, easy way to compare different properties. Although cash on cash return is a useful back of the napkin evaluation, there are many other essential calculations to take into consideration. Yup, more math. We’ll Do The Math For You Unless you enjoy getting elbow deep in nerdy spreadsheets, we have something that will do all the math for you. Simple Wealth is a platform that will help you research, evaluate and track rental properties. It not only will it calculate your cash on cash return, it will also help you understand your properties income, appreciation, and equity using our sexy graphs. Simple Wealth will help you calculate cap rate, NOI, gross yield, rent estimates, and vacancy rate. What does all that mean? Let us get into it. Key Numbers Here are some of the key metrics we use to evaluate rental properties so you can get a better understanding of how all the math works. Annual NOI (Net Operating Income) is income after property expenses. NOI is simply the annual revenue generated by an income-producing property after taking into account all income collected from operations and deducting all costs incurred from operations. NOI excludes any financing or tax expenses incurred by the owner/investor. In other words, the NOI is unique to the property, rather than the investor. Cap Rate is the annual return on investment without financing. Return if you bought the property in full, in cash. Gross yield shows the rate of return on investment. It is a good rule of thumb number you can use to compare properties quickly.  It is an easy calculation which is the monthly rent times 12 then divided by purchase price. Not the amount you would invest but the full cost of the home.  Key Costs The purchase price is the biggest lever you can pull to make a property a better investment. Even negotiating 1k lower can significantly improve your cash-on-cash return. Learn more about your ad choices. Visit megaphone.fm/adchoices

Owning a rental property can be a great player in your overall investment strategy and an excellent way to build wealth.It typically isn't affected in the same way as the stock market so that it can provide diversification in your portfolio.However, it's important to understand the risks of the real estate market. Andrew just started investing in rental properties earlier this year soon today's episodes he will give us a broad overview of why real estate can be a great investment and what he has learned from his experience.We understand investing in real estate isn't for everyone, but it is an awesome way to build wealth. We are going to tell you why.View Episode Show Notes Learn more about your ad choices. Visit megaphone.fm/adchoices

Whether you are looking to move to Denver or Denmark, there are a lot of things you need to take into consideration before moving to a new city. When you are moving to a new city, everything is new and exciting, but it can also be a little scary. Preparing will help you get past that insecurity the unfamiliarity of a new city can bring. And overspending is almost always a result of under planning. One of our awesome listeners has been thinking of making a move to a new city and asked us for some tips on how he can prepare. Thomas has been planning a move to Denver and will share some tips and resources he in today’s episode. Financial Prerequisites Before you move to a new city, you want to have your finances in order. Get your debt situation under control and work on your credit score. If you are planning on renting, landlords look at that very seriously when considering a tenant. Make sure you have a job when you get there. If you’re moving because of a job, get a relocation bonus. ASK FOR IT! You’d be surprised what you can get if you ask. Creating a moving budget. This will show you how much money you will need to save up for all expenses including broker fees, security deposits, moving companies, possible storage, furniture and at least the first month’s rent. Step 1: Choosing the new location If you’re relocating because of a job or school, either for yourself or a spouse, apparently you’re skipping this step. For Thomas, he just wants to leave Iowa so he can have a new place to call home. Start by researching locations you might be interested in. Figure out what you want out of a new location and make a priority list with value scores. Don’t get caught up in what you might do when you get there. Make a list of real priorities and things you truly value. Maybe you don’t have a car, so you want a city to be walkable. You love hiking and the outdoors, so you need to find a place with the nice weather most of the year. Since it is more likely than not that you’ll need a job when you move, some of your top priorities should be:  * What’s my industry like in this city? * What’s the probability that I can get a good job? * What’s the cost of living index, and will my likely salary be able to manage it? * Will I have to downgrade my current lifestyle because the new city won’t let my dollars stretch as far?  Compare your cost of living now to what it will be on the move along with your new salary. Thomas has been using Numbeo to compare the cost if living between Des Moines to Denver. He figured out he will need $4,837 each month to get the same standard of living I’d get on $4,000 in Des Moines. Also, check out tax rate differences. If you have children or plan to have kids, then you need to consider schools and daycare costs in the area. Once you have all the info you need, start scoring cities you’re interested in based on your priorities.Check out city-data websites, forums, and Reddit to get the low-down from locals. Thomas has found this pretty helpful except for those few people who don’t want any newcomers in town. Once you have your shortlist, visit a city or two if you can. It’s probably not feasible for most people to visit every potential city, but if you can try to Air BnB it up for a few days in your top pick. You can tour some apartments and get a feel for the place. Thomas did this in Denver, and that was fantastic. It solidified the decision for him. Step 2: Start preparing Moving sucks, so make a plan for everything that needs to be done way ahead of time and work on it in little chunks. Pare down your life and get rid of stuff you don’t need or use. You are starting a new life so leave some of the old behinds. Learn more about your ad choices. Visit megaphone.fm/adchoices

If someone told you they were starting a franchise, what would be the first thing that came to mind – Mc Donalds, Chick-Fil-A, 7 Eleven? When you start to look into the world of franchises, you’ll be surprised at what you’ll find. These days they come in all different shapes, sizes and niches. Today the guys chat with Laura Novak, owner of Little Nest Portraits Franchise, about starting a franchise. She talks to us about how her franchisees work, why she decided to go franchise and what systems she has put in place to make them successful. Why Franchise Laura started out as a photographer when she was only 23 years old and grew her passion into a successful small business of her own. As the years went on, she wanted to spend more time with her family and was ready to build a business that was bigger than her. For most entrepreneurs, it’s hard to let go control of their business. After being approached by someone about opening another Little Nest location, Laura started to think about starting a franchise. Doing this would allow her to still be in the business, but its success wouldn’t be tied to her hours. There is a significant difference between working in the business and working in the business. It was well said by Michael E. Gerber from the book The E-Myth Revisited about The Franchise Model. “It is a proprietary way of doing business that successfully and preferentially differentiates every extraordinary business from every one of its competitors. In this light, every great business in the world is a franchise.” Laura began to see fasting growing franchises in the women’s services sector such as workout studios and blow out salons. These companies were giving women the chance to have successful careers while being in control of their schedules and lives. She wanted to help people do what they love while balancing their families and home. With Little Nest Portraits she wanted to empower others and offer them a chance to be a successful and profitable entrepreneur. She has opened three locations, and there are a few more in works. How It Works With a franchise, you are for the most part trusting your brand in other people’s hands, so it’s super important to find the right people. The Little Nest vetting process is pretty extensive. It starts with 3- hour long webinars to get to know a little more about the candidates and give them the opportunity to learn about the company. Next, Laura will spend a day together with the candidate in person to learn even more about each other’s values. During these meetings, she looks for qualifiers such as level of management experience. There is already a lot to learn about the business itself, so she needs someone who already knows how to manage people successfully. They also need a decent amount of business experience and understand the basics. Most importantly, personal values need to match. All these things help Laura determine if an individual can capitalize the business. She has found the best owners do not have much experience with photography but instead have excellent sales skills, and of course, a passion for running their own business. Laura and her team provide weekly reports to all branches to show how everyone is performing. Franchises are all about partnership. The location owners success is also her success. Laura and her team provide owners with proven systems to support the growth of the business from marketing to customer service to decor. They want to give franchisees all they need to run a Little Nest successfully. Costs Some franchises require you to have a certain amount of assets as well as liquid funds to purchase a branch. For Laura and her team, all they are concerned with is if the franchise can get the appropriate fu... Learn more about your ad choices. Visit megaphone.fm/adchoices

It’s hard to know how to prioritize your financial goals. Personal finance is personal, so there isn’t one answer for everyone. It’s important to understand how to prioritize your financial goals and help you figure out what to focus on first. Should you start an emergency fund or save for retirement? Pay off debt or start investing? Everyone will give you different advice, and it can get confusing. Know What You Want You can’t do anything meaningful until you decide on some goals for the short term (this month), medium term (next 3-6 months) and long-term (1-2 years). What stage are you at in life and where do you want to be? Your financial goals can be buying a new home, saving for college, starting a family or creating an emergency fund. When you take this step, it’s important to think about both your short-term and long-term goals.  Perhaps you want to plan a family vacation to Europe within the next five years. Or, you may wish to have enough of a buffer in your finances so that you and your significant other can afford to go out for a nice dinner every couple weeks.  No matter your vision, be sure to create SMART goals.   For example, how much should you have budgeted before you begin planning your trip? Or, how much money would you like to spend each time you go out to dinner?  To that end, it is critical to tie real numbers to your goals. You should also have a feasible timeline for when you would like to accomplish each goal. It’s OK to be ambitious, but you should also avoid setting yourself up for failure by giving yourself far too little time to reach your goal.  No matter what they are, it’s time to get ideas out of your head and make a list. Writing down your goals is critical. However, you should also make a habit of revisiting your goals and making sure you are on the right track. If so, remain consistent and do not let yourself get complacent.  If you’re not currently on track, remember why you set your goals in the first place and find ways to get to where you want to be. Don’t be too hard on yourself — change is hard, and many people fail several times before they find the right formula for success. If you get off track, the best thing you can do is make some adjustments right away. Prioritize Your Important List Once you have figured out your goals, give priority to each of your personal goals in order of importance, and then determine how long you have to save for each of them.  Remember to put your oxygen mask on first. Debt destruction is probably more important than kids college fund. Putting your retirement on track is more important than buying a new car. Debt is costing you money and will move you figure away from your goals. If it’s more than you can handle debt consolidation or refinancing could help you out of the hole. Having an emergency fund is so important. Unfortunately almost half of Americans couldn’t come up with $400 if an emergency came up. A good rule of thumb is having 3-4 months of your salary in a savings account and then contribute to an investment account like Betterment. Making more money can help you get to your goals faster. Not everyone has the time for side hustles so if you are looking to make some extra cash, every month then asks for a raise. Salary negotiation can be scary, but studies show that people who ask for a raise make more money than those who don’t. Know What You’re Worth Asking for a raise can be difficult, Learn more about your ad choices. Visit megaphone.fm/adchoices

Becoming an entrepreneur is not for the faint of heart. Running and growing a business can be challenging – that’s why about 90 percent of all new businesses fail. Since the odds are stacked against you, it takes hard work and perseverance to achieve success. Whether you have a business or looking to start a one, it’s important to listen to your peers and mentors. Some lessons you will have to learn on your own but some small business tips you can learn from others. Collectively, Thomas and Andrew have ten years of experience under their belt running small businesses. Today they will share their most valuable lessons and small business tips. Don’t quit your day job. When you are just starting out, bringing in a consistent profit month after month can be challenging and stressful. You don’t want to be the position where you’ll do anything for a quick buck. You want to focus on building something that will make you $2000 passively everything month down the road and not worry about making $100 to survive the week. “A successful business is a marathon, not a sprint.” Keeping your day job until your business is financially stable will reduce pressure so you can focus on what matters. Remember – it’s not how you start the race, it’s how you finish it. For Andrew, constraint breeds creativity. Having limited hours to get work done forces him to do the things that matter and make the most out of his hours. Study the pros. You can read all the books on what you need to do to grow a successful business but what will push the needle is to study what the pros do. Find people inside and outside of your industry that you admire and dig into what they are doing with their businesses. For example, let us say you are super inspired by Pat Flynn and looking to run a successful online business. He has some great content online outlining what to do but go beyond that. Study what the pros do more than what they teach. Analyze their code, writing styles, videos, etc. Of course, don’t blatantly rip people off but take influence and make it your own. You will eventually develop your own style. First, get inspired. Improve 1% every month. Give yourself realistic growth goals. Growing 1% every month doesn’t sound like much, however, after a year you will have increased 12.68% and 26.97% in the second year. Just a little bit of growth consistently will start an exponential growth cycle. Just because you are improving 1% every month doesn’t me that every single thing you make will grow that one percent. That’s why you need to follow The Equal-Odds Rule. Thomas has an excellent video on it. Watch it. He believes if you want to make things that are amazing, things that become fruitful and well-known then you have to make a lot of things. The more you do, the more you will fail, and the more you succeed. Throw things at the wall. You never know. Don’t put yourself in the box. Many people limit themselves to what they think they can do or what people expect you to do. Don’t ever feel you need to fit into a box. Put your weirdness into your work” that weirdness sets you apart. There are not a limited amount of opportunities. There are an unlimited number, but if you chase every opportunity, you will never make meaningful progress on the ones that matter. Only pursue opportunities that help you achieve your key goals. Say no to everything else. Also, stop thinking all the good ideas are taken. It will just paralyze your creativity. Your idea most likely has already been done. There are very few “new” ideas out there but who cares! Learn more about your ad choices. Visit megaphone.fm/adchoices

Your paycheck gets deposited, groceries purchased, bills paid, and then you’re broke again until the next payday. That is the story for almost half of American households, and the vicious cycle is hard to break. It won’t be easy, but you can stop living paycheck to paycheck. An NYU study found that about 70 million Americans live in “wealthy hand-to-mouth” households. These are families that own assets like homes, retirement accounts, college funds and cars but yet still live paycheck to paycheck. They spend almost every dollar of their annual income to keep up their lifestyle and pay all the bills. Why is it happening? If you want to stop living paycheck to paycheck, you need to find the root of the problem. It is probably very simple – you are spending more than you earn. You may not throw your money away on extravagant things, but you are still living above your means. It’s time to consider making some lifestyle changes. Start by making a list of necessary and optional expenses see where you can save. If your spending is already very low, ask yourself what you need to survive and reframe your lifestyle choices. That can mean moving to a cheaper apartment, stop eating out,  taking the bus to work, making lunch at home, getting rid of the gym membership or get your bills lowered. There are many people who people survive on very little – look at Mr. Money Mustache. Take a hard look at the choices you have been making and create a budget that will give you the flexibility to save, even if it’s just $50 a month. You can build wealth one dollar at a time. Prosperity Mindset The mind is a powerful thing. To make real changes in our lives, we need to create a positive shift in our thinking. I’m not talking about The Secret “think it and it shall happen” bullshit. Well, maybe a little. Having a bigger vision for what you believe is possible for yourself is the first step to getting there. There is truth in the law of attraction. If you feel that you will never be financially stable or you’ll never get out of debt you most likely won’t. That negativity is reinforcing your limitations. Take full responsibility for your financial circumstances. Your willingness to change it is a key factor in your ability to make better financial decisions. Remember, prosperity is not about having a big house or ton of money. It is about being happy and living comfortably, and the way to get there is with a positive attitude and motivation. Breaking the Cycle Think for a moment on what you’ll gain from breaking the cycle. How will it feel to have extra money at the end of the month? Once you start having money left at the end of every pay cycle, you’ll begin to feel a little freer. Having financial breathing room will significantly reduce your stress.  Give yourself a pay cut. Living slightly below your means will help you stashing away some savings every month to grown an emergency fund. Try to pretend you earn less than you do. Start a crash savings program and do it in a short period like one to two months. Try saving 5-10% of your paycheck. Set up an automatic transfer to your account so it is easier to stick with it. Roughing it for a short period is all you need to get out of the cycle. Once you see that it is doable, it will be much easier to stay on course. If cutting expenses aren’t enough, then you need to build more income. Having an additional stream will make a huge difference even if it’s only $100 extra a month.  It doesn’t necessarily have to be another job. If you have a few extra hours a week, Learn more about your ad choices. Visit megaphone.fm/adchoices

This episode was inspired by a tweet we received from one of our listeners Alexa who asked, How many side hustles are too many? She has been working on a few things that she loves and was questioning if she should just focus on one and ditch the rest for now. Both Andrew and Thomas have struggled with focusing on one project from time to time. When trying to build a business you have a lot on your plate. Staying focused can be tough with a constant stream tasks and new ideas demanding your attention. In this episode, the guys talk about why focus is so important. They share how they get focused and deal with working on too many projects at once. To answer Alexas’ question, it really depends on what the goals are for these side hustles. If they are just fun activities that make you happy and keep you busy, then you can have as many as you want. However, if you are trying to grow something that you would like to eventually turn into a money generating business you need to focus on one thing. That is only you’ll be able to get the momentum you need for it to grow. Determine which ones are hobbies and which ones are actual business ventures. Once you figure out “the one”, run with it. WWAD (What Would Andrew Do) If you have a few ideas for side businesses and not quite sure which one you want to pursue further, experiment with a few things until you get some results.Use the skills you have to narrow down possible fields and match your interests to something you are good at. After a couple of months if your lemonade stand is flopping but your computer repair business is profiting then you know where to focus your attention. Giving it the time it needs will help you reach your goal of growing it into a full-time job. Andrew as dabbled in my projects, side hustles, and business ideas sometimes many at once. What he has learned through his successes and failures is not to spread yourself too thin. Giving your time and attention to many things will either result in failure, burnout or a much longer path to your ultimate goal. Getting focused on one thing and sticking with it has been the main factor in the success of LMM. Get Focused So no that you’ve figured out what you want to do, how will you stay focused on whats important? We all battle distraction and it can overwhelm us sometimes but there are plenty of ways to fight it. Whatever you are doing throughout the day should have clear value towards building your craft. Build a system to help you achieve things every day. Choose a few tasks to complete each day and write them down. Before moving on to anything else, these must be done. Create a schedule and plan time for each task and make sure you give yourself enough time. If you schedule 60 minutes for something and it takes you longer the time crunch will stress you out. If you haven’t created a system for getting things done, you’re likely losing a lot of productive time to inefficiency. There are many tools out there to help you out. Thomas is all about building habits so he uses Habitica, a free habit building and productivity app that treats your real life like a game. OmniFocus and Evernote are also great for organizing tasks and making lists of actionable items. You can also a try a “Not-To-Do List. The idea is to list all the things you are not going to go through the day to support your productivity. Avoid putting effort into things that will have little or no impact on the task at hand. Spend time on work that will show results. Self Reflect Diving headfirst into a new project can completely consume you. It is so easy to get lost in all the work, and our thoughts. Keep a journal to reflect on what you accomplished and how it measured up to your goals. This way you can see what is working for you and what ... Learn more about your ad choices. Visit megaphone.fm/adchoices

We love to answer questions from our listeners, and sometimes we make a whole episode around it. Today we answer five questions about drinking on the job, Lending Club, borrowing from family, green mutual funds, having fun, buying a first home, Bonus Question: I have noticed that you tend to be drinking beer on each of the podcasts, let me just first say, fuck I’m jealous.I would like to know what kind of job I can get that will let me drink beer in the morning (without the whole judgey this guy is probably an alcoholic vibe). If you do respond to this email, please don’t use my name as my current job frowns on asking questions like these. This question is great. You have to work for yourself or work for some hipster-ass startup that has beer on tap all the time. But even then they’ll probably give you the stink eye if you’re drinking it at 8 a.m. Question One: Do you feel Lending Club is still a prudent investment given the recent scandal issues they’ve run into? Will it have long-term impacts on the business and the quality of loans? I’m considering a 50/50 split of my available investment funds between Betterment and Lending Club (in addition to my 401k where I’m already contributing 12%). – Matt So, a little background in case you didn’t hear. LendingClub CEO Renaud Laplanche resigned after it was found that the company had altered application dates on some large loans. It was also found that Laplanche “failed to fully disclose to the company’s risk committee a personal interest he held in a third party fund while the company was considering an investment in the same fund, which purchased LendingClub loans.”  Tisk-tisk That said, after a full internal analysis of company reporting, it was found that 99.9 percent of loans were above board. Since the companies stock has plummeted but their loans were not effected. Many people were fired, so the few bad eggs are gone. Although Andrew lost money with his stock, he still has some money invested in loans. Thomas thinks he will wait this one out and see if and when the company gets back on its feet. Question Two: Need advice on relative claiming we owe them money. Last year my wife & I became debt free and were on our way to saving a down payment for an investment property.  Now my mother-in-law is demanding a large sum of money from my wife.  She kept every receipt from when my wife was 18 onward (she’s 36) and now wants to be paid back. The list includes things like brakes on my wife’s first car and new basketball shoes from her senior year.  My wife never signed anything but apparently verbally agreed at the time to pay back some of this money. I realize that from a legal standpoint we probably owe nothing, but I feel as though morally we are responsible for whatever my wife agreed upon. Just where should the line be drawn? We can probably all agree that this is a pretty terrible parent. At first glance, the situation can make you cringe, but you have to ask yourself, what is really going on here? Is her mom desperate for money or is she just crazy? Keeping receipts for 18 years shows intent like she has been waiting deviously to cash out. Staying out of it would be the easiest thing but because they are married paying back this loan will be affecting both of them. The guys think that the most important aspect is to try and salvage the relationship. Sit down and have a talk with the mom and try to come to some middle ground. If she needs financial help, she should just ask, and they can figure it out together. Don’t lead with anger and find her intent before making any moves. Question Three: My name is Matthew, I’m 25 and just recently married and am on my way to having my first child. I have been looking at buying a house but after recently finding your podcast I’m not sure if I&#... Learn more about your ad choices. Visit megaphone.fm/adchoices

Becoming a new parent is a wonderful life experience, but it also comes with a ton of work, sleepless nights and some financial stress. Today the guys talk to Kim Palmer, mother of two and author of Smart Mom, Rich Mom about how to build wealth while raising a family and preparing financially for parenthood. New Expenses There are many new expenses that come along with a new family member. According to Kim, on average a new child will cost $11,000 in their first year which doesn’t even include childcare but well get to that. It just goes up after that costing you about $250,000 by the time they are 18 years old. Besides the basics like diapers and baby food which can cost upwards of $75 per week, you’ll want your new bundle of joy to have the best and most safe baby gear. Some of those big-ticket items like cribs and strollers and cost hundreds. You can buy gently used clothing, but car seats and crib are being recalled all the time so avoid buying those second hand. Most families have to make the decision whether or not to pay for childcare. Cutting one parents salary out of the equation and it’s a tough call. With all these new expenses the thought of removing a salary even for a few months can be a scary thought. On the other hand, childcare costs are pretty high. Depending on where you live, it can cost $2,000 a month for daycare and $4,000 a month for a nanny. Child care will likely be more than your mortgage payment. Kim loves using Amazon Family which gives Prime members save 20% on diapers subscriptions plus additional family-centric discounts and recommendations. She buys a lot online so she can compare prices and maximize her family savings. Start saving sooner than later. She and her husband saved for fives years before having their first child. It will get much harder after you have children. As a parent, you also need to start to think about saving for college tuition or buying a larger home for your growing family. Maternity Leave Unfortunately, most women do not get paid maternity leave. If you are planning a family in the future, this is critical to take into consideration when looking for a job. Unless you are planning on giving birth at your desk, then you will need some time off before and after the baby is born. If you want to know more about the company culture and policies of a potential employer, check out Fairy God Boss. They offer a platform for women to get the scoop about companies, and their policies from other women. Before asking about taking your time off, talk to other co-workers about their experiences with maternity leave. See how they navigated it and came up with a plan – how long will you need (providing exact dates) and who will be taking over what duties in your absence. This will give your boss a clear picture of what the next few months will look like without you. The Future Saving for your children future and education should start as soon as possible but not before you pay yourself. Contributing to your retirement is a priority then you can begin saving for your children’s’ future. College costs are rising and if you want to help your kids pay for college, opening a 529 savings plan is the way to go. You can set up automated monthly payments so you can make steady progress over eighteen years. How much should you be saving? Kim says Fidelity suggests $5,000 per child per year if you can swing it. Eventually, your kids will leave the nest, and you want them to go with as much financial knowledge as possible. Talk to your kids about sacrificing now for future goals. When they ask questions, try to give an answer that will introduce them to new concepts. Learn more about your ad choices. Visit megaphone.fm/adchoices