"Recapture and Reallocate" Money - Basic
Level 3 - Master Of The Mundane
**This was previously paid content. We decided to make it free because if you are considering joining the Guardian Academy, the exercise below will probably pay for it for you. If you are not considering the Guardian Academy, that’s okay, reallocate it toward whatever you want.
We’ve noticed that everyone seems to be pursuing more of something, but very few have a handle on how to allocate resources strategically.
You think you need more time, more money, more energy, etc..
You might, but first you need to recapture the resources already available to you that you are hemorrhaging.
“Plug the leaky bucket”.
This will put you in a better position and free up resources to reallocate to solving the most immediate constraint or problem.
Removing the most immediate constraint should unlock more resources. Recapture waste, reallocate to constraint, repeat.
The first step in resource allocation is to identify the currencies you are working with.
There are multiple currencies that we all value differently, at different times. We use the acronym TIMER:
Honorary Guardian Joe Polish uses the acronym TAMEE:
You can adopt either or create your own. The important thing is to realize that there is more than one currency - recapturing one may increase your capacity to produce another. Getting time back, for example, can increase the capacity to earn more money.
The fastest path to having “more” of any currency is to stop wasting what you already have.
We call this process “Recapture and Reallocate”. It has two steps:
Step 1 is to recapture the currency.
Step 2 is to strategically reallocate it for maximum benefit.
The first currency we look to recapture is typically money.
It’s typically not the most important currency, but it’s the easiest to measure. And generally speaking, everyone knows how to value it. Other currencies like energy, reputation or time are often priorities, but they are much more difficult to measure. They fall into the advanced category.
The basic recapture exercise should take no more than forty five minutes and pay for years of your Guardian Academy subscription.
If you can’t take 45 minutes to do the work and put yourself in a better position, you should definitely not upgrade to anything paid that we offer. This is the path of the Earned, Entitled travelers1 will not find what they are looking for inside TGA.
Why We Recapture, First
“First we optimize, then we maximize”. -Dan Nicholson
It’s the most efficient path to cash.
We’ll give two examples, below.
The first is someone that already owns and operates a business. The second, a W2 employee paid hourly or on salary.
Business Owner/Self Employed
In this example, the business has 25% profit margins …and the basic recapture exercise recaptures $5,000 a month.
Since what is recaptured is 100% profit, that’s the equivalent of $20,000 in new revenue per month added to the bottom line:
$5,000 profit / 25% margins = $20,000 in sales
$20,000 a month is the equivalent $240,00 in new revenue per year.*
*If saving $5,000 a month doesn’t seem as exciting as selling an additional $20,000 a month does - you are in for tough sledding as a business owner.
Saving $5,000 a month adds $5,000 to your bottom line without increasing risk, expenses or obligation. Selling $20,000 adds $5,000 a month to your bottom line - but increases risk, obligation and potentially expense - you have to fulfill on the work.
If you would take forty five minutes to lock in a $20,000 a sale, you should take 45 minutes to recovery $5,000 slipping through the cracks. This is a fundamental shift from top-line thinking to thinking in terms of cash flow.
This shift in thinking is where you can find a tremendous amount of leverage.
We’ve seen over to $50,000 a month recaptured in small businesses. That’s forty five minutes to add $600,000 a year in recurring income.
You may not recapture as much, but the time spent will be higher leverage and more profitable than pretty much anything else you could do with that time.
In this example, the employee pays 35% tax rate and makes $30 an hour.
They go through the basic recapture and finds $350 a month slipping through the cracks.
That’s the equivalent of $538 a month* or $6,461 a year in new income.
*100% of what is recaptured is kept, only 65% of what is earned is kept - the rest goes to taxes.
You can do the math and figure out how many hours of work that is equivalent to. Finding $350 a month is worth significantly more to a W2 employee than making an extra $538 is.
Again, huge returns on the time.
Recapturing and Reallocating Is a Skill
We encourage you to think of this is a skill to develop not a one time event.
If you do the exercise frequently the returns on the recapture diminish, that’s okay. The returns on the skill development are exponential. Developing the skill of recapturing will save you outrageous amounts of money - developing the skill of reallocating it will compound those savings over time.
Now, the elephant in the room:
When you see the steps you will think “this is so simple”. So simple, in fact, you might think it’s not worth your time.
If more people did the simple stuff, they’d be way better off.
Here are the steps:
Basic recapture is a version of Dan Nicholson’s The Two Oreo Principle.
Identify all of your recurring expenses. You can do this in quickbooks or from a bank statement. Keep an eye out for those yearly charges, they’ll sneak through the cracks if you only look at a few months of statements. Do this for the previous 12 months.
Cancel all recurring expenses that are not critical and/or or not providing a demonstrable return. Remember, with margins of 25%, saving $10 is the equivalent of making $40. Start to rewire your brain to think in terms of impact on cash flow.
Add the expenses up an annualize them.
Complete the following statement:
“I have recaptured [dollar amount] dollars per year that I can now reallocate toward [most important thing].”
I know it seems silly. Just make the statement.
It may not seem like much, but remember the impact on cash flow. We aren’t here for vanity metrics, we are here to create the highest probability you get the things that matter to you in life.
If you are a business owner or self employed, divide that number by your margin and you will get the equivalent in new sales number.
The Compounding Effect
Here are the averages of the last workshop we did live [these were all small business owners]:
Average recaptured: $6,135.11 per year
Average profit margins: 35%
Thats the equivalent of $17,528 in new recurring sales for 45 minutes of work.
Over ten years that’s an extra $61,351.10 in cash - the equivalent of $175,288.85 in new sales.
Assuming you reallocate that cash flow to an investment:
At 7% return that’s $192,876 in ten years:
At 20% return: $451,743 in ten years:
For 45 minutes of effort.
The above is just to demonstrate the compounding effect, strategic reallocation would have custom timeframes based on your goals. This is discussed in Advanced Recapture and Reallocate2, but is highly personal.
The paid tier will have advanced recapture and reallocate and an accumulative resource list compiled/crowdsourced from the Guardian Academy ecosystem.
But…you do not need to be in the paid tier(s) to do the work above. You just have to sit down and… do the work.
Our methodology is to recapture, reallocate and earn until on track to reach our goals. Once on track, any additional capital recaptured or earned goes to taking risk off the table or collapsing time with high risk bets, depending on your personality. But we only do this with overage. Our basic financial methodology can be found in the footnotes.3
One way you could choose to look at it is “house money”. If you want to take bets that are volatile or risky you can recapture first - and make your bet with the “house money” recaptured.
This is entirely up to you.
Most of our “house money” goes to crypto because our macro belief lies in blockchain long term. You have to know yourself and make your own decision on how you reallocate overage.
Basic Recapture Tips:
One of the best ways to force recapturing is to cancel your debit and cards each year. It can be irritating to get all the notifications to opt back into charges, but it does force you to opt back in. We got this one from Rigging The Game Author Dan Nicholson.
Another options is using Privacy.com4 to create individuals cards for each vendor so you can cancel cards by vendor. This works great for free trials; start your trial on a privacy card and then cancel the card.
Look out for the yearly expenses. Remember that time you chose the yearly option for the discount? Those are the buggers that slip under the radar if you only go back a few months in statements.
Basic Recapture Resources:
Workbooks and checklists can be found in the section below
Here’s an an example/case study of applying recapture and reallocate to the things you actually want in life.
Recapture and Reallocate Video Trainings and Workbooks
Guardians get a one-on-one recapture and reallocate deep dive with the team.8
Subscribe for more Recapture Insights and our opinions on the most strategic ways to reallocate what you recover.
Live To Learn, Give To Earn
Step one is always doing the work for yourself. If you find it helpful, share it with others. Members share their experience in comments below (paid), twitter (free) or the facebook group9 (free)