Cashflow Cook Book Article Art

Every cookbook contains recipes. But how many cookbooks contain the recipe for retirement with one-to-two million more dollars in the bank?

That’s exactly what The Cash Flow Cookbook is designed to do. For the author, Gordon Stein, it started with a few simple, profound discoveries.

“I kind of stumbled into the idea of Cash Flow Cookbook,” Stein said to Ricci Truong of the CamaPlan Podcast. “I found a way to get car washes for free. You know, which saved $25 a month. Not really a big deal, but what was interesting was it was so easy.” 

“And then not long after that,” he continued, “I discovered how to slash the cost of my home alarm monitoring system. Another $25 a month. And I got curious, and I built a list of these ideas and they all had to be minimal effort, minimal sacrifice.”

Don’t Give Up Your Pleasures

For Stein, a native Canadian, the minimal sacrifice component of his cash flow recipes is paramount. What’s the point of making it to retirement with an extra million dollars if the path to get there was a miserable slog?

“If you read all the personal finance books out there,” Stein said, “a lot of ’em are pretty similar. You know, you wanna save 10% of what you earn. You want to give up things you love, you wanna do some detailed budgeting, and if you do all that and you invest consistently over a long period of time, you’ll become wealthy.” 

“And you know what? I think the advice is correct,” he said, “but I just don’t think it’s a whole lot of fun. If I were to say to my spouse, ‘Let’s take this weekend and do some detailed budgeting,’ I’m gonna be sleeping in the garage. so, you know, I mean, it’ll work, but it’s not a lot of fun.” 

“If somebody says to me, ‘Give up the things that you love …’ Well, I’m not giving up my guitars. I’m not giving up my kayaks, my bikes, [going] out for nice meals. I want great concert tickets.”

An Extra Million (or Two) at the Finish Line

Inspired by these early successes, Stein went on a two-year quest to build a massive list of often-overlooked opportunities for average households to cut their costs — without impacting their lifestyles or having any less fun.

He then did the math on what would happen if an average household invested that savings for their retirement. He found that at the pace most people grow their retirement nest egg, the extra savings added up over time to $2 million in extra retirement savings. 

“You could read the thing in a couple of evenings,” Stein said, “but you want to put some sticky notes on the pages, make it yours … say, ‘Geez, I haven’t thought about this recipe.’ Another one you might say, ‘Geez, I’m already doing that.’ But if you go through the book, I’ll all but guarantee you’ll find yourself at least $400-$500 of monthly savings that you weren’t aware of.”

As an example, from his own life, Stein describes his 1938 home in Ohio with a ¾-inch gap below the door. Many people don’t even think twice about that gap — but at 30 inches long, as Stein pointed out, “that’s the same as having a six-inch hole in your wall.” 

Stein sealed the gap beneath the door and watched his energy bill plunge 50% overnight.

So what do you do with $400-$500 worth of savings? Stein recommends that you first pay down high-interest debt, and then turn your attention to accumulating assets in a vehicle like a Roth IRA, which lets you pay taxes at today’s historic low rates, grow the nest egg tax-free, and withdraw at retirement completely tax-free.

Beware the Lifestyle Creep

While he doesn’t believe in sacrificing your simple pleasures (the guitars, the concert tickets, etc.), he does caution against “lifestyle creep” — the all-too-human tendency to spend more as we earn more.

“Most people feel they don’t have the 10% [to set aside for retirement]” Stein said. “When I speak with people who are earning $50,000 a year, what they’ll say is they’ll say ‘I just don’t have the 10% because I can barely fit everything in.’ When I speak with people who earn $500,000 a year, they say ‘I can’t free up the 10% cuz I can’t fit everything in!’”

What’s going on? “The more we earn, the more we spend,” Stein said, “and then we have this sense of entitlement. ‘I’ve worked hard. I made $500,000 this year. Of course, I’m gonna get a BMW.’”

Instead, Stein recommends that households respond to pay increases by increasing their savings, not their expenses. 

“One of the really great ways to save,” Stein said, “is if you see a raise coming in or your business starts to kick into gear, you’re making more money, immediately carve out a big chunk of that and get that working for you in savings.” 

“You did just fine with the house before you did fine with the vehicle you had before,” he said, “so let’s just stretch that a little longer and get that money invested in assets that are gonna grow over time.”

Listen to the full podcast with Gordon Stein