Basic "Recapture and Reallocate": Money In Plain Sight

Level 3 - Master Of The Mundane

Jul 18, 2023

Future Guardian! This was previously paid content. We decided to make it free because if you are considering joining TGA+, the exercise below will probably pay for many years of your subscription. If you are not considering TGA+, that’s okay, reallocate your found money toward whatever you want.

If you do the exercise and submit proof, there are bonuses on the other side. You can watch the training free and submit your homework here.

Ever feel like you need more time, more money, more energy… more of something (or everything)? You probably don’t. Hear me out.

Imagine you’re trying to fill a bucket with water because you want a full bucket.

…“because you want a full bucket” is a really important part of that sentence. We’ll come back to that in a minute.

To fill the bucket, you’ve attached one end of a hose to a water faucet and placed the other end in the bucket. It stands to reason, then, that if you turn the water faucet on, the bucket will fill with water. So you turn the water faucet on and the bucket starts to fill. This is where is gets tricky.

Your brain makes the association: more water coming out the faucet = full bucket - which is what you want. So you start obsessing over getting more water out of the faucet instead of the most efficient path to having a full bucket.

They are different things.

This is the fundamental problem with the pursuit of “more”.

If there are holes in the bucket, the fastest path to a full bucket is to plug those holes.
If there are kinks in the hose the fastest path to a full bucket would be unkink the hose.
If the hose is leaking because it’s not attached to the faucet fully, the fastest path to a full bucket would be to tighten it or attach it properly.

You get it. Getting a greater output from the faucet is not always the most efficient path to filling the bucket. Most people don’t need more water to come out of the faucet…

They simply need to start hemorrhaging what they already have access to.

Do you need more time? Maybe.
Do you need more money? Possibly.

But you’d be surprised how much you’re wasting.

Recapturing the waste may very well fill your bucket. And if it doesn’t, it will at least give you a more realistic of idea of how much more you need from the faucet. You’ll so in a better position to make whatever changes you want to make because resources that was not being wasted can be reallocated to something important to you.

Recapture what is being wasted, Reallocate it strategically and thoughtfully to fill your bucket. Rinse, repeat.

The first step is to figure out what is being wasted. There are handful currencies we look at first.

Currencies

There are multiple different currencies that we all value differently, at different times. Someone with an abundance of money with little time may value time more than money. Someone with an abundance of time but little energy may value energy over time.

We generally start with the acronym TIMER:

Time
Identity
Money
Energy
Reputation

Honorary Guardian Joe Polish uses the acronym TAMEE:

Time
Attention
Money
Energy
Effort

You can adopt either or create your own. The important thing is to realize that there is more than one currency and everyone values them differently. Recapturing one may increase your capacity to produce another. Getting time back, for example, can increase the capacity to earn more money. Recapturing money, may afford one to buy time back. We’ll save that for advanced recapture & reallocate, for now here’s what you need to know.

The fastest path to having “more” of any currency available to you is to stop wasting what you already have.

That’s the first step of Recapture and Reallocate.

Step 1 is to recapture the currency slipping through the cracks.

Step 2 is to strategically reallocate it for maximum benefit or toward your most important priorities.

The basic recapture is always money.

Money

Money is typically not the most important currency. However, our brain tends to make everything about money because 1) it’s easy to measure 2) it’s easy to compare to others. Other currencies like energy, reputation or time are often priorities, but they’re more difficult to measure. Our monkey mind doesn’t like when things are difficult.

The Basic Recapture

The basic recapture exercise should take no more than 45 minutes. You may not feel like taking 45 minutes to do something so basic and, frankly, boring. If you can’t take 45 minutes to plug the holes in a leaky bucket, it doesn’t make any sense to spend hours trying to get more water out of the faucet.

We always recapture first. Recapture comes before we do anything else related to cash flow. Why?

It’s the most efficient path to cash.

Whether you’re self employed as a business owner or a W2 employee, the most efficient path to more cash in the bank is to recapture:

Business Owner/Self Employed

For the example below we’re going to assume 25% profit margins and the basic recapture exercise recaptures $3,000 a month.

Here are some quick notes:

Recapturing $3,000 a month adds $3,000 a month to your bottom line.
$3000 in new sales adds $750 to your bottom line ($3,000 in new sales at 25% profit margins)
New sales introduce new risk:
- Fulfillment risk (time, effort, cost)
- Reputational risk
- Obligation
Recapturing $3,000 has either removed risk or is risk neutral

In other words, if you have the choice between recapturing $3,000 and selling something for $3,000 you’re deciding between:

$750 in profit to take more risk and
$3,000 in profit to reduce or risk the same

The point is not that you shouldn’t make new sales. It’s that it’s significantly more profitable and efficient to plug the holes first.

In fact, recapturing $750 would be better than selling $3,000 in new product or service - same profit with less work, effort, and risk.

“But, selling $3,000 is way more exciting than saving $750!”

I get it*.

*If saving $750 a month doesn’t seem as exciting as selling an additional $3,000 a month does - you are in for tough sledding as a business owner.

For starters, you’re taking on more work and more risk than necessary for the same outcome. Over the years, the work piles up - and so does the risk. This is the hamster wheel everyone talks about.

And all you have to do to avoid is make a habit of recapturing; scooping up the cash hidden in plain sight.

The Frameshift. If you would take forty five minutes to lock in a $3,000 a sale, you should take 45 minutes to recovery $750 or more slipping through the cracks. This is a fundamental shift from “more water out of the faucet” thinking to “full bucket” thinking - from “more is the answer” to actually getting what you want.

There is tremendous leverage in this frameshift.

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.

Whether you capture more than that or less than that doesn’t matter. Recapturing is not a one time event, it’s a skill to develop.

Employee:

For the example below we’re going to assume the employee pays a 25% tax rate and makes $50 an hour., and the basic recapture exercise recaptures $250 a month. You can plug in your own numbers and it will fundamentally be the same.

Here are some quick notes:

Recapturing $250 a month adds $250 to your bank account.
Increasing your incomes by $250 a month adds $187.50 to your bank account - since 25% is going to taxes in this example.
Recapturing $250 a month is the equivalent (to your bank account) as making an additional $333.33 a month in income.

At $50 an hour, $333 a month is 6.66 hours a week of your time.

Again, that’s not to say that working more hours or getting paid more per hour is a bad thing, it’s just not as efficient as plugging the damn holes.

Okay…so what’s the the actual exercise?

First, 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 that’s the case, I suggest you start at the top and read this whole thing again.

If more people did the simple stuff, they’d be way better off.

The basic recapture is…well… basic.

Here are the steps:

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. This helps us get a handle on what we just accomplished. We recommend that you take the time to do the above and to complete the following statement:

“I have recaptured [dollar amount] dollars per year, the equivalent of [dollar amount / profit margins” in new revenue”

I know it seems silly. Just make the statement. It will help your brain understand how much you accomplished in terms it likes better (new money).

And then, complete the following statement:

“My number one priority is ]number one priority]”

And one final statement:

“I have recaptured [dollar amount] dollars per year that I can reallocate directly to funding [number one priority]”

If you do the above you’re developing a skill; the ability to capture what’s slipping through the cracks and reallocate it to getting closer to what matters most to you.

By doing the math to discover the “equivalent in sales” number you’ll start to realize when saving money will get you closer to what you want than making more will. Note: ideally, you’re doing both; cranking up the water faucet with little to no waste.

Data, Time and The Compound Effect

From time to time we do recapture workshops with small business owners. Here is the data from the most recent workshop.

Full disclosure. This workshop was not our typical demographic. Our typical demographic falls into two categories: 1) small businesses between 3 million and 10 million in revenue 2) companies between 100 million and 300 million a year. For some reason, the companies between 10 million and 100 million don’t really jive with us.

Anyway, the workshop data below is from small business owners with revenues between $70,000 and $400,000 a year.

Average recaptured: $6,135.11 per year

Average profit margins: 35%

Some Notes:

Thats, on average, the equivalent of $17,528 in new recurring sales for 45 minutes of work. There was some resistance to doing the exercise, even though every single person on the workshop would spend 45 minutes to make a $17,528 sale. This tells us that something in the way they are processing cash flow is a little off.
Over ten years that’s an extra $61,351.10 in cash recaptured - the equivalent of $175,288.85 in new sales.

Let’s assume you took that $6,135.11 in cash and invested in somewhere with a 7% return, contributing what you recaptured ($6,135.11) each year

In ten years, that’s $192,876.

That may not be what you want or choose to do. This is not meant to be prescriptive, it’s to get you to think about the most efficient path forward.

The above is just to demonstrate the compounding effect, strategic reallocation would have custom timeframes based on your goals. This is a highly personal process, you have to do the work, don’t blindly copy us or anyone else.

And that’s the basic recapture.

Recapture Notes:

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.1

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.

When we want to gamble, make bets or take huge risks - we recapture and make the bets with house money. You have to know yourself and make your own decision on how you reallocate overage or found money.

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 instead of staying in a bad situation because it’s comfortable.
Another options is using Privacy.com2 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.
See this recapture and reallocate case study3 to learn how to apply recapture and reallocate to a solvable problem.4

Basic Recapture Resources:

Bumpers. If you want to take it a step further and start to recapture your time, we recommend the book Bumpers. You can get it on Amazon here or a free digital copy here.
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.

Advanced Recapture:

There are two ways to get access to the Advanced Recapture and Reallocate:

TGA+ members can navigate to advanced recapture here.
Non TGA+ members can get the advanced recapture by doing the basic recapture and submitting their results here.

Live to learn. Give to earn.

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