Mastering Cash Flow: A Roadmap to Financial Freedom with Olivia Kirk and Tim Yurek

Olivia: ​ Hello, and welcome to The Control Your Cash Podcast. I’m your host, Olivia Kirk.

Tim: And I’m Tim Yurek.

Olivia: Today, we’re going to talk about why it’s not what you buy, it’s how you pay for it. That really matters. Um, Tim, tell us a little bit about, about this concept and how, how we came, came about it and why it’s so important in people’s lives.

Tim: Well, you know, it’s interesting because let’s face it, everybody thinks they’re using their money in the most efficient and most effective way because they’re following conventional wisdom. But what they don’t realize, and what I didn’t realize is that, you know, we’ve been trained by the financial institutions, by the government, by the large corporations we’re dealing with.

To use money in a way that benefits them. And, more importantly, it’s to our detriment. So, as I started realizing this, I figured that, you know, maybe it’s not what you buy. Maybe it’s how you pay for it that is holding you back from reaching your full financial potential. So that’s pretty much how I, how I sort of discovered this by accident.

Olivia: Yeah, absolutely. And, and it’s so true that everything we buy is financed, whether we pay cash or finance traditionally through a credit card or bank. Um, but what people tend to forget and don’t realize is that our cash has a cost as in, if we spend down that cash, that account balance, whether it be draining an investment account, draining our savings account, whatever it is.

We’re giving up opportunity cost on that money and that opportunity cost also compounds, right? So we have, you know, the interest we could be earning on our money now, but also the money, the interest that we could be earning on that money in the long term. And that’s money that we could never recapture.

So, you know. If you have a major capital purchase to make and you have the money in your bank account, how tempting is it to just drain down that bank account to avoid the finance costs? But what people don’t realize, and it’s easy not to realize because there’s no price or no interest necessarily on our savings account.

So you don’t see the interest that you don’t earn.

Tim: Yeah, and that’s one of our, one of the things we always tell people is you’ll never see the interest you don’t earn. And It’s funny because everybody obsesses over the interest they’re going to pay on a loan, whether it’s a car loan or a mortgage. You know, a lot of times when you see the HUD sheet and you get when you’re buying a house and you’re like, Oh, I’m buying a $200,000 house and I’m going to pay $435,000 in interest.

I’m paying more in interest than the value of the house. Well, yeah, that’s true, but the answer isn’t to pay cash because if you paid cash for a $200,000 house, you probably would be out $600,000. total, which would be like $400,000 of interest that you could have earned. So, you know, you have to look at the numbers.

And I think that’s really the point. Again, it’s not what you buy, it’s how you pay for it.

Olivia: Yeah. And the numbers, the numbers are, are actually pretty tricky once you look at them because, um, the banks know how the numbers work. That’s their job. That’s how money. But every…

Tim: That’s their, that’s their business,

Olivia: Yeah, yeah, absolutely. And you don’t logically in the human mind, you don’t think, oh, if I have money sitting in account earning 4% and the bank wants to charge me 6%, obviously, like, I’m not earning as much money on on this, this pool of money.

So I’m going to drain it down to avoid that 2% extra interest that they’re charging me. But there’s a big difference between compounding interest, growing money on a large balance, a growing balance versus amortized interest where we’re paying interest on a decreasing balance.

Tim: Yeah. And so that concept of the difference between amortized interest versus compounded interest is bedrock in the foundation of what the banking industry is all about. And it’s something if we, if you don’t fully understand the implications of amortized versus compounded interest. You’re probably going to be making some bad choices only because your fear is that you’ll be paying interest.

And, you know, uh, we joke, but, you know, it’s sort of like a caveman. Uh, you know, compound interest, good, amortized interest, bad, you know, and it’s not that way, uh, but anyway, you know, again, that’s something that once you understand this concept, the decisions you’re able to make, you’re going to make them with much greater clarity.

And you’re going to make much better decisions. You’re going to position yourself, your family, or your business to take advantage of whatever the economy or the government or the financial institutions throw at us. Which I think is a good segue into some of the data that we pulled up, uh, doing some research recently.

So think about this. Americans are being squeezed from every direction. Inflation is up. Savings is down. Our access to cash or capital is running out. And what we’re seeing are some really troubling trends. First and foremost, that consumer debt, according to the New York Fed Q4 household credit report, was up over 16.9 trillion dollars which was up 2.4% from Q3 of 2022. That’s a, that was a record. Credit card balances reached over 986 billion dollars in Q4, that was up, get this, 6.6% from Q3 of 2022. Now, the Q2 report came out for 2023, credit card balances in America are over 1 trillion dollars. This was the highest quarterly growth ever.

So let’s face it. Things are getting bad and it looks like it’s probably going to get worse. Now, on top of all of that, according to a MetLife survey, uh, of small business owners, 50% of small business owners. see inflation as the greatest challenge. And that was up 31 points over 2021. But worse than that, a whopping 71% of small business owners think that the worst is yet to come as it relates to inflation.

So, you know, they’re, they’re saying the government’s saying “Oh, inflation’s down. We’re, we’re taming inflation”. Yeah. I don’t know about that.

Olivia: It certainly doesn’t feel like it. 

Tim: Right, you know, every time you go to the grocery store, every time you fill up your, your, uh, gas tank, uh, you know, the cost of college, the cost of housing, everything is almost out of reach.

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Tim: Now, Olivia, I think you had some interesting information about this, uh, pending United Auto Workers strike and what effect that’s going to have.

Olivia: So, so today is November. I’m sorry, September 15th, 2023. And I believe at midnight last night, the, um, the auto workers, the auto workers are going on strike and. There’s such detrimental effects that are going to come downstream to the consumers, ultimately, um, in the form of lost jobs all costs all across the country in the form of we’re not only affecting the three car companies that are going on strike, but also, um, all of the other people in the supply chain, whether it be parts, whether it be, um, you know, the people who make the radios for the, for the car companies, this, this strike could have. The effect of hundreds of billions of dollars and just a short time on the American economy. And that’s not to mention that the student loans are coming out of forbearance.

I think that’s going to have a huge effect on our economy, right? Because, you know, all the millennials, if they stopped paying, and majority of them did stop paying back their student loans. It was like we got a raise, you know, um, because that cashflow is no longer coming out of our pocket to go towards student loans every single month.

Instead, it’s going towards our lifestyle. You know, we bought new cars, we bought new houses. Um, we bought whatever we want. We have an increase in cashflow. We got a raise in essence. And, our cash flow is about to be pinched, right? On top of inflation and on top of rising interest rates, on top of the cost of housing and gas and food going up.

Now we have to start paying a large chunk of our paycheck back towards the student loans that we put off for three years now. That’s going to hurt because we all know that our incomes aren’t necessarily, rising enough to even keep up with inflation, add on the credit card debt that we just mentioned is on the rise, right?

Because the cost of living, it’s really a compound and snowball effect that this is having on our cashflow. And that’s why it makes so much sense to make that cashflow as efficient as possible. And it’s more important to do that now than ever.

Tim: Yeah, that’s such a good point, right? So just getting all of that data and looking at it, what does it mean? Okay. So because think about it, they’re reporting that, hey, the economy is healthy, its getting stronger, we’re having all this record growth. Well, where’s the money coming from? Right? So now you got to sort of dig deeper and and read between the lines and and read the tea leaves and, and what’s going on there?

Well, yeah, people are using the money that they were paying towards college debt. Now they’re using that for their lifestyle. And the old saying stands true, a luxury once enjoyed becomes a necessity. So now, when student loans start, start up again in a few months, or actually it’s in November, right? So, you know, a little over a month. Wow, that’s going to be a pinch. That’s why credit card debt is up. People are, you know, the economy might be growing, but where’s the money coming from? Well, it’s coming from credit cards. So, you know, continuing with some of the data, 66% of Americans worry that a recession is right around the corner.

That’s up 48% from a little over a year ago. Now, how does this whole thing manifest, right? It manifests, and it affects, it causes stress. And stress affects our health. It affects our relationships. So the incidence of heart attack, stroke, cancer, kidney disease, depression, suicide, every, all these markers are up in, in, on top of that, what is it doing to our relationships?

What is it doing to it’s the incidence of divorces up. Um, what is it doing to our ability to do our jobs and our ability to run our businesses? So every, you know, every splash out there has a ripple. And again, Olivia, as you had said earlier, that’s why it’s more important than ever to make sure that you’re using your money properly.

We’re not saying don’t make the purchase. What we’re saying is make the purchase in the way that’s most advantageous to you. And that will give you more control. And again, we feel so out of control in so many aspects of our lives. This will give us some, a little control in an area that quite frankly is probably one of the most important areas because financial, if you’re out of control in your finances, that causes stress and worry, and that creates issues in every other aspect of our lives.

Olivia: That’s absolutely true. You know, when you’re, when you’re stressed about money, it’s so easy to lose sleep, right? And sleep is so important for the entire, the entire system, mind, body and soul, and your ability to work effectively and efficiently and to make an impact with your kids and your community.

And, you know, if if you’re worried about money and working harder, that takes away time from spending it with your family. It takes away time from contributing to your community. It impacts so much with just this one area of your life. So it’s so important that we keep it balanced and the way that we talk about doing that is by being in control of your cash flow, you know, giving away as little of your cash flow on a monthly basis as possible and regaining control of that finance function wherever possible, because with that, then you’re calling the shots.

Not a financial institution, not the government, not, you know, Citibank or Visa. These, these principles can also have a ripple effect in the opposite way. By controlling your cash flow, by making your cash flow more efficient, you could live a more worry free life because you’re calling the shots.

Tim: Yeah, that’s so important. And you know, that’s one of our key, key themes with where, how we help our clients most is in re, regaining control of their money. And so how does this happen? Right? And I think, you know, think of what we’re up against as individuals. We’re up against the marketing machines that are financial institutions, the propaganda machines of the government, large corporations.

They’re conditioning us to accept as normal, things that really aren’t normal, things that are advancing their interests and basically holding us back again to our detriment. So we can’t get ahead financially. How many people do we talk to on a weekly basis that are saying, you know, I’m making good money, but I just don’t feel like I’m getting ahead.

They’re all financially stuck and it’s so easy to get into that when you’re following all of this conventional wisdom and doing it the way that everybody else is doing it. And that’s where I realized back in 1993, I was doing very well and, and I was stuck. I was, I was living pay to pay. And how many people, I mean.

You know, Olivia, we, we had that one client. He was a surgeon, is a surgeon, making $800,000 a year, and he couldn’t take his family on a vacation to Disney without putting it on credit cards and paying it off over a three or four year period. Now, come on. It’s not the amount of money he was making that was holding him back.

It couldn’t be.

Olivia: Yeah.

Tim: It clearly was how he was using his money.

Olivia: Yeah. I was just thinking while you were talking, one of my favorite parts about, you know, what we do is that we’re able to help, um, the whole spectrum. It’s not just the people who, who are making exorbitant amounts of money. We could make cash flow more efficient for anyone, you know, whether they’re earning $40,000 a year or $800,000 a year.

But the key is a lot of people think and have the belief that I could out earn my problems. If I just earn more income, make more sales, get a better job, my problems are going to go away and I’ll be financially free. But we know from experience with people on every, every scale of the spectrum that if you don’t make your cash flow more efficient, those problems are going to continue to grow and compound as your income does.

It just makes the problem bigger if you’re not addressing the leaky holes in your bucket, we call them. You know, um, we liken it to a bucket with holes in it. There’s two ways to fill it up. Number one is to turn up the faucet. And number two is to plug the holes and then even if there’s just a drip, that bucket’s going to fill up.

And we know this very simply from when we have a leak in the house. If you have a leak in the house, that bucket fills up pretty fast. Doesn’t it?

Tim: That’s an inside joke, but, uh, tell them about it, Liv.

Olivia: You tell them about it.

Tim: Well, I guess, I guess their tenant left the hose on…

Olivia: Oh, my goodness. So we have a. We have a double block and the tenant left the hose on our usage quadrupled in one month and like, what the heck is going on? But it was just on very low for a long time. And it really makes an impact.

Tim: Yeah. So that’s the point. And you make a good point. Entrepreneurs, business people, sales people, we all think that we could earn our way out of anything. There’s, there’s no problem that we have that can’t be solved by the next sale, or the next, you know, bunch of sales, or the next large sale and we’re always, you know, everything’s on the come, but the problem is, okay, let’s say those, those sales come, come about and, and that you realize that you get this big sale and you have this big commission or this, you know, large amount of revenue coming into your business. If you don’t plug the holes in the leaky bucket, you’re going to go back to using the money in the way that you’ve been trained to use it, again to your detriment, and then eventually you’re going to be back to square one again. And what you’re doing is you’re losing time in this process. And that’s our most valuable asset.

Olivia: Yeah, let’s, let’s give an example of that. So one of, one of the biggest, I’ll call it mistakes that business owners are making and an easy way to adjust the cash flow is looking at your debt, your business debt, the amount of money that’s going out to creditors to lenders every single month, right? Because we all know we all think I should say that debt is bad and that it’s not good to be in debt because of that control factor, right?

When you’re in debt, you’re out of control of your cash flow. So as those sales come in, it’s natural to want to pay off those debt as soon as possible, you know, get the shortest amortization schedule possible, um, put extra money towards those payments. But when we do that, what’s actually happening, it happening is we’re decreasing the amount of cash flow that we have going forward.

We’re giving it all away to the control of the banks and the creditors. And then we’re left with a little piece. We don’t pay ourselves first. We don’t build a pool of cash for ourselves along the way. So that. We’re totally dependent. It’s backwards, but we’re totally dependent on the banks and creditors.

The next time we need to make a purchase the next time we need access to money because we don’t take this first step of creating a pool of money that we own and control and could leverage against in the first place.

Tim: Yeah, so if you don’t, if we don’t create our own pool of capital, we have to use somebody else’s. So that’s one of the, one of the things we see so often is business owners, they’re in a race. I always call it. They’re in a race to get out of debt so they can get back into debt. So, right? So they go from a situation where they have debt and they want to get out of it.

So they pay that debt down as quickly as possible, ignoring the idea of saving or creating their own pool of capital. And then, because they don’t have all their money, then because all their money went to the bank to pay that debt, another opportunity comes along, or an emergency, a piece of equipment breaks down, or an opportunity comes where you could buy a business or some, you know, some accounts and then all of a sudden you need capital. Well, you don’t have any capital. So what do you do? You go hat in hand back to the bank. And what does the bank say? Okay, no problem. You’re a good payer. We’ll, we’ll gladly give you this loan. And then here’s the question. Whose money are they giving you?

If you went back to the same bank. They’re giving you back your own darn money and they’re charging you interest and fees and you got to qualify to get it. Well, why don’t you just cut out the middleman, create your own pool of capital, and then you’re in control. Now you can loan it at your discretion, back to yourself or your business and pay it back at your, at your discretion, back to yourself.

From yourself and from your business. So, you know, these are some of the principles that we teach. But again, the foundation here is what? It’s not what you buy, it’s how you pay for it that matters.

Olivia: Yeah, and another thing that another scenario that could happen there is because you’re at the mercy of the bank for access to that money. If your credit isn’t, not in tip top shape. And especially now that the banks are squeezing, they’re not, they’re not loaning out as much, there’s a good chance that you may not qualify for money.

And then what, you know, you gave the bank all of your money, paying off that debt as quickly as possible. And now they’re saying, we’re not going to give you any more money. Um, and then you’re kind of really stuck because you’re not able to grow and expand and continued on your financial journey in the way that you want it to.

And that’s not a good situation either.

Tim: And this is, this is the reason why you want to create your own pool of capital. So you don’t have to jump through anybody else’s hoops to get to your money. Because think about this, when the economy slows down, if the economy slows down, what have you, what’s going to be the first thing that dries up for a business owner?

What’s going to be the first thing that dries up for an individual? Isn’t it going to be your access to banks, capital, or to money? And we’re seeing that now, right? Interest rates are rising. So it’s going to cost more to buy a house. And now you have to, you have to either buy less of a house or not qualify for a loan.

So all of a sudden your choices are going, are narrowing. But again, think about it. If you had your own pool of capital, you don’t have to play by the bank’s rules. Now you’re in control. You can go to the seller who, let’s say you’re, you’re looking at buying a house. You can go to the seller and say, Hey, you know, 250.

I can give you 225 cash, take it or leave it. And if, again, you have to be willing to walk away from that deal. But if that’s the case, now you, you let, let them make the decision as to whether or not they want to accept your offer. And again, if you’re willing to walk away from the deal, who’s in control, you or them?

Well, obviously it’s you. 

Olivia: Yes, absolutely. And those things that we believe are moving us forward financially are actually designed to move financial institutions and the government ahead financially because they have a lively head to think about as well. They have a bottom line. But if you’re ready to increase your bottom line and increase cash flow, you’re, for your family and your business. Be sure to check out our website at tier1capital.com. You could schedule your free strategy session today. We’d be happy to speak with you one on one about how we could make your cashflow more efficient, how we can move your family, your business forward financially, not just now, but for generations to come.

Thank you so much for joining us today on The Control Your Cash Podcast. We look forward to seeing you in our next episode. Be sure to subscribe wherever you listen to your podcasts. We’ll see you next time.