What Are Stock Options?

TLDR at end

The market has been on absolute tear since 2020. In times like these, investments like options come up and may seem tempting. After all, it seems like everyone else is making money with these things so why shouldn’t you?

Options are something that everyone knows about but few truly understand. That’s not surprising, because they are a complicated financial instrument. We’re going to walk through the basics of them so you can stay better informed. For 99% of investors all you need is a surface level understanding of options and how they are utilized by professional investors. This will keep you out of the latest investing fad and allow you to determine whether options make sense for your portfolio.

The Two Types Of Options


A call option gives you the right but not the obligation to buy 100 shares of stock X at a certain price by the expiration date. These are bullish because if the stock price goes up past the strike price you are going to make money. You make money because you can buy the stock for less than the market price using the call option.


A put option gives you the right but not the obligation to sell 100 shares of stock X at a certain price by the expiration date. These are bearish because if the price falls you make money by being able to sell your shares for more than market value.

It’s okay if you’re totally confused at what that means……

Options Explained

Options are derivative contracts whose value is based on the underlying stock. They don’t have intrinsic value, their price is derived from the price of the stock or commodity that they are written for.  Options allow you to buy or sell (depending on the type) 100 shares of a stock at a certain price (strike price)  at a certain point in the future(expiration date).

Their value is determined by whether that strike price is more profitable than the current market price. You can then sell the stock for more than its current price (puts), or buy the stock for less than its current market price (calls).

Interestingly, you do not have to buy or sell the shares at that price yourself. You can sell the contract for a profit once the underlying stock passes the strike price instead of exercising and using it to buy or sell the 100 shares yourself. This is how most people trade options.


American options are the type that are available on the NYSE. These options allow you to exercise the option at any point between buying and the expiration date. So, you can buy or sell (depending on the type of option) a stock at the agreed upon price at any point during the life of the option. Obviously, you would only do so if it were profitable to you.

If you have at least 100 shares of X stock or equivalent cash, you can sell options. The person selling the option is essentially betting against the person buying the option that the price will not be at or above the strike price by the expiration date. The person selling options is required to hold the 100 shares or cash as collateral during the life of the option. They may have to sell or buy  those shares at the agreed upon price at or before the expiration date if the buyer chooses to use the option.


You pay a premium for the option. This is essentially the cost of the option because the seller is taking a risk by selling it to you. The premium is determined by:

How close the strike price is to the current price (making it more likely the option will be profitable)

The time until the expiration date. More time means you have longer for the price to move to the strike price.

Both of these factors increase your chance of success and increase risk to the person buying the option so the premium is more. 
An option that has reached it’s strike price (the agreed upon price) is known as at the money

If it reaches it’s strike price plus the premium you paid for it then it is in the money. At this point any upward price movements are pure profit.
 If it has not reached the strike price then it is referred to as out of the money.

The Basic TakeAways

  • An option is a contractual agreement between two parties about buying or selling 100 shares of X stock at a certain price at any point when it would be profitable to the buyer over a predetermined period of time.
  • The party selling the options owns 100 shares or equivalent cash in order to make the option valid.
  • The person buying the option and the person selling the option are betting against each other.
  • A call option is valuable when you buy 100 shares of stock for less than market price. The person who sold it to you is betting this won’t happen because they have to sell their 100 shares of X stock at the price you agreed upon which is less than market price. They have to maintain at least 100 shares of the stock through the life of the option so they can’t back out.
  • A put option is valuable when you can sell 100 shares of the stock for higher than the market value. The person who sold it to you is betting this won’t happen because they are required to buy those shares from you at a higher price. They are required to have that amount of cash on hand when they sell the option and throughout the life of the option so they can’t back out.

In order for either side to make money they need to meet the following criteria:

  • They have to correctly predict stock movement. Either up or down depending on the type of the option but the seller is always betting the opposite direction of the buyer because they don’t want to sell or buy shares at a loss.
  • They have to correctly time stock movement. Whether buyer or seller if the stock doesn’t move to where you want by the expiration date you’re out of luck. This is made more difficult for the buyer by the decay function. The decay function  is driven by theta which you can read more about in the greeks section below. Options lose their value exponentially as they approach their expiration if they are out of the money. This is because it is increasingly likely the option will expire useless.
  • You have to correctly predict the level of stock movement. Options by potential stock prices in $5 increments (known as the option chain). The further away from the current stock price the cheaper they are because it is less likely that the stock will move that amount. As out of the money options approach their strike price their value increases exponentially. This is because they are much more likely to actually be a valuable agreement before their expiration date.

 There are two ways the buyer can profit from an option:

  • Exercising the option and either buying or selling at the strike price. You get a good price relative to the market price at a loss to the seller of the option.
  • The most common method is to turn around and sell the now much more valuable option on the market and pocket the difference at which you bought it and the current price.

The precise price of an option is determined by a few variables referred to as the greeks. We’ll just do a brief overview because these are nice to know not a need to know.

Getting to Know The Greeks

Delta: The rate of change between the option price and $1 of change in the underlying asset price. A delta of .65 means the option price would change 65 cents for every $1 change in the asset price. For a put option it is negative because you want the asset price to decrease.

Theta: The rate of change between the price of the option and the time remaining. If the option is in the money this is a positive value. If it is out of money it is a negative value. A theta of -.37 means the price would decrease by 37 cents everyday. Theta drives the time decay function of an option and is critical to understanding how an out of the money option will lose value as it approaches its expiration date.

Gamma: The rate of change between an options delta and the underlying assets price. It helps you determine the stability of an option. Gamma is higher for options in the money and drives the dramatic price change as you approach the strike price.

Vega: The rate of change between the options price and the implied volatility of the underlying asset. A more volatile asset has a higher vega and therefore a higher value because it is more likely the asset will move to the strike price (although it could go the other direction). More volatile stocks are more risky (think about Gamestop).

Takeaway: Option prices are primarily a function of time, volatility and its relative price change to the underlying asset which is affected by how close it is to being in the money.

Why Do Investors Use Options? 

Investors use options to use leverage. This is because each option is associated with 100 shares of a stock. Options allow you to capture the price movement of 100 shares of a stock for far less money than actually buying 100 shares of a stock.

If you believe a stock price will go a certain direction then you can potentially make more money by buying X amount of options than using that same amount to buy stock. This is better than other ways to buy more stock such as margin because with an option you can only lose the amount you paid for the option. With margin you can lose more than you have.

If you pick the right calls, you can do what is known as a stock replacement strategy and use options to gain the upside for a stock at significantly lower cost out of pocket.

If you are bearish and believe a stock will decrease then you can either short a stock or buy put options. The margin requirements (money required) to short a stock are significant. And your loss is potentially unlimited because the price of the stock can increase dramatically and you’ll need to buy it back at that higher price. This is what happened to hedge funds with GameStop.

Alternatively, if you believe a stock will go down you can buy put options for a lot less and the maximum amount of money you can lose is the price of the option.

Takeaway: Options actually have significant advantages because of the low cost and leverage. This makes them both efficient and less risky than margin/shorting because you can only lose the amount you paid for the option. However with both puts and calls if your price movement prediction is wrong or doesn’t happen within the life of the option, it will expire worthless.

Do Options Make Sense For You?

If done right, options can increase your profit and make your money go further. That being said you will burn money on options every time you do not get it right. There are a lot  of moving parts. Recall that to make money you have to both predict the price movement and time the market. Anyone who has read on investing knows that those are essentially the number one thing not to do. The timing part is probably the most difficult. The reason why is the shorter your timeline is the more random stock price movement is. It is very difficult (if not impossible) to predict price movement over the next few days, months etc.

Recall that the premium is a function of strike price and time to expiration. This means that a lot of stocks you may want to buy actually have really expensive options. So if you want to dabble in options you will be limited to stocks that have a cheap share price.

Example: Premium for call options on two stocks with September expiration and strike price 10% above current price:


  • Current Share Price: $787.90
  • Strike Price 10% above that:  $865
  • Cost of option: $16,825


  • Current Share Price: $35.00
  • Strike Price 10% above that: about $40
  • (sold in $5 increments for this stock)
  • Cost of Option: $950.00

Prices are from time of writing and are for illustrative purposes only.

As you can see options are based on the price of a stock because the strike price is relative to that. The ones that give you a good chance of profit (long time until expiration and not too far out of the money) are actually quite expensive. Yes, this is significantly cheaper than buying 100 shares of either stock. But it’s also ridiculous to pay either $1000, or $16000 in this case to learn the ropes with options.

If you have built up a decent and stable portfolio then there’s nothing wrong with throwing a few hundred dollars at options here and there. However, if you are working on building your portfolio then it makes a lot more sense to invest your money in something much safer. The first rule of building wealth is not to lose money.  Any money you put towards options needs to be money you are okay with losing, because you probably will. Dabbling a few times is totally fine but it doesn’t make sense to keep throwing money at a losing investment. Put it towards building your portfolio with quality index funds or stocks instead.

Bonus: How to Read An Options Chain

An options chain is a list of the available options for a stock.  The dates you see on top are the expiration dates. Options are sold in regular increments in this case 50 cents. The rest is fairly intuitive with RobinHood, you just toggle buy or sell or option and put.

The Pfizer Options Chain

Remember, options with a longer time horizon or are closer to the money are more expensive. Options that are closer to expiration and still out of the money will lose significant value everyday. Again, this is due to theta and the increasing probability that they will expire worthless.

The Mark is the current market price
Here you can see all market data and the greeks


Don’t like reading? We still have you covered


Two military guys helping you learn more about your money.

Learn More, Earn More

How to Invest $700 of Other People’s Money Every Year

Disclaimer: If you don’t have a spouse or a long-term roommate, just skip this article.

We’ve talked a bit about expenses in our articles Personal Cash Flow and Get Your Finances on Track and how beneficial it can be to minimize them every month. There are hundreds if not thousands of little tips and tricks out there on how to do this. The smartest, most lasting, and easiest one that I’ve found is learning how to do haircuts from home. Since my wife learned to cut my hair a few years ago, it has saved us north of $2700. What I like even better is the time it saves us, the flexibility it allows us in our schedule, and the fact that at this point my wife is a better barber than at least half of those I go to on the rare occasion that I have to. 

Whether you want to do it to save time, free up your schedule, or free up some extra money to save or invest, here’s how to do it:

  1. Buy a set of clippers. If you buy these ones using the American Express Platinum card, you can have them delivered to your door for about $14 after the rebate (less than the cost of a haircut). They last a good three to three and a half years if you take 10 seconds to brush them off and put oil on them after each use.
  1. Find a good instructional video on how to give a fade. 
  1. When you need your next haircut, have your spouse/roommate/etc do the best they can using the video. Once he or she is done, have an actual barber touch it up. 
  2. Repeat until you no longer need to have a real barber fix it. This will probably take about three to four attempts.
  3. Pay yourself $15, and then pay yourself another $15 every time you get your hair cut at home.

If you’re a Marine, this will save you a little over $700 annually, assuming you get a haircut every week and it costs you $15 after a tip. If you’re in a branch that requires it less frequently, obviously you won’t be paying yourself that $15 as often, but you’ll still be saving yourself both time and money. Again, the time it frees up for me is at least as beneficial as the money it saves me.

Three ideas on how to safely and effectively use your bonus money every month:

  1. Index: Use Robinhood to put your money into the S&P 500 (or an index fund of your choosing) every month free of charge. Don’t worry about trying to time it, just buy the same ETF every month and watch your money grow over time. By doing this, you will naturally buy more of the ETF when it’s at a lower price and less when it’s at a higher price. This is known as dollar cost averaging. Using the S&P 500 as my index, dollar-cost-averaging the amount of money I saved on haircuts since June of 2017 is now worth about $3300 after expenses and capital gains taxes. It would have been $2500 if I had just set it aside. Setting up your Robinhood account to put $60/month into VOO is a quite easy way to do this.
  2. Dividend Stocks. Certain stocks will give you a small kickback known as a dividend every so often as an incentive for buying and holding their stock. The amount of the dividend is expressed as a ratio of the current price of the stock. For example, a 2% quarterly dividend of stock X valued at $100 would result in a $2 dividend for every share of stock owned every three months. These can be received as cash and are often re-invested back into the company. As with all investment products, ensure you do your due diligence and do NOT buy a stock based on any single metric, including dividends. Buy a healthy stock that you think is a good investment that also happens to have a dividend. This is a great way to slowly but surely make your money work a little harder for you over time.
  3. Dividend Index. Certain ETFs and mutual funds are made up exclusively of stocks that pay out dividends. While these funds typically have a slightly larger expense ratio, there are a few ETFs out there with a relatively low expense ratio that still offer exposure to dividends. Examples include VIG, VYM, and SCHD, all with an expense ratio of 0.06%. Again, do your homework prior to investing in one of these funds, but be aware that a dividend fund can give you exposure to dividends while keeping you more diversified than you would be with a single stock.

Do you have your own creative ways to save? Let us know!

How To Invest in Real Estate Using the VA Loan

Why Rental Properties?

What if there was an investment that built your net worth, gave you monthly income and reduced your taxes all at the same time?

It really exists, it’s called real estate.

I’m not talking about the guys who make Youtube videos or host a $500 online course to show you how great they are at flipping houses. You’re not going to be able to do that in a repeatable manner while in a busy professional career.

What I’m talking about is finding a way to pair the incredible financial opportunities that real estate holds with military benefits such as the VA Loan. All you need to do is buy and hold properties. This will allow you to grow your wealth in addition to the saving and investing that you are currently doing. Real estate will dramatically increase the rate at which your wealth is growing.

A quick example from one of my properties that uses this strategy:

Purchase Price: $390,000 (Purchased in 2017)

Money Down: $4,000 (total out of pocket cost)

Rent: $2700

Cash Flow per month after mortgage, maintenance and management fees: $300

Current Mortgage Balance: $368,000

Current value of home (estimate): $450,000

This property has made $300 per month since 2017, paid for it’s maintenance and currently has about $80,000 in equity. It has never been vacant and has always been rented to military tenants. All of that started with $4000 out of pocket and has not cost me since. This is what real estate can do for you. If done right, you can begin to build serious wealth without having to save it all from your own income.

How Do You Do It?

You have a busy career and don’t have time to be flipping houses or buying apartment buildings. What you need is a simple strategy that builds wealth over time without taking too much time. It boils down to these steps:

  1. Find a good realtor and a house in a desirable location at your current duty station
  2. Estimate rent to see if the property will have cash flow.  Include the cost of a property manager and maintenance costs. You want to be able to support these costs with the rent you will receive.
  3. Use the VA loan or a conventional mortgage with low interest rates
  4. Live in the place while you are at the duty station- if your personal life supports it, live with roommates. This will save you a lot of money and ease you into the experience of being a landlord.
  5. Find a good property manager
  6. When you move, rent the property out and use the property manager.
  7. When able, repeat the process at your new duty station

If this seems like a common sense approach that’s the whole point. This strategy works, and does not require an insane amount of time, risk or knowledge. It will allow you to capture the wealth building properties of real estate. If you are ready to reap the benefits of home ownership, then you need to start by buying a house.   

Find a good realtor and a house in a desirable location at your current duty station

The first step is 100% common sense. If you buy a house in a location that is good for your work/life situation you will instantly have a house in a rentable area. Other military members are looking for that same location and will become future renters. Some factors to consider for location:

  • Just outside major city or downtown area
  • Easily accessible from a highway
  • Close to parks or in a nice neighborhood
  • Straddled in the middle of major work centers


The quickest, most effective method is to ask your friends/ coworkers where they live and then dedicate a day to driving to the different areas. There’s no better way to feel out a potential home than to drive around the neighborhood. Find an area you like and then move on to focus your efforts on finding a listing in that area.

A good realtor can confirm these locations are desirable and even suggest others that haven’t been suggested yet. Have a realtor lined up before you go to see any houses. There are many ways to find a good realtor but in our experience these are the quickest ways to find a quality one:

A good realtors experience will back you up on important details you may miss such as property condition or neighborhood desirability. They can also help you get the ball rolling if you see a property that you are interested in. This is a must in highly competitive markets. Real estate is a team sport. Having a good realtor and other key players such as a property manager can make home buying a simple process and help you avoid costly mistakes.

If you are interested in a more thorough explanation of this process or how to find a realtor you can find it here. Once you have a location nailed down, you need to work with your realtor to estimate the rent and see if the property will be a feasible rental.

Estimate Rent To See If The Property Will Produce Cashflow

This is not as hard as it seems. By finding a desirable location where you know other people are living you have already guaranteed your house will be able to rent.  Your realtor should be able to provide a solid estimate of what rents are in the area. If you sign up, rentometer is also a useful cross comparison. I don’t recommend relying on Zillow’s rent estimator. I have never found it to be accurate with my properties. You can also search for a realty company that specializes in rentals (or a property manager) and ask them what the renting situation is in your desired location. By cross comparing these data points you should start to get a good idea of the potential rent.


A quick back of the envelope formula for cashflow:
Rent – (mortgage + property manager + estimated maintenance cost) = Cash Flow

If you are planning on renting it to military members you need to think about what matters from their perspective. They are trying to have their housing costs at or below BAH. BAH is very decent for most areas and sometimes will allow you to get above market rent. You can look up BAH using this calculator. Just  be realistic for who your target audience is. There are a lot more O1’s- O3’s then O6 and above!

Money Gouge Tip

Renting to military members is like having insider information for a large stable tenant base. It will allow you to see opportunities where other real estate investors can’t. My first rental property was down in Pensacola where there are a ton of personnel coming and going all the time. I knew if I bought a large house in between most of the bases I would be able to rent it for above market value. This has worked out really well because 3-4 people split the house. All of them save money because it is half of their BAH individually. Meanwhile, the place goes for well above market rent and has always been occupied. You need to think about who your target audience is when you are buying a home.

Once you have estimated rent you need to estimate the other cost associated with owning a home so you can build the cashflow estimate formula:

  • Capex- industry jargon for maintenance cost. Be conservative with this estimate because it can creep up quick. If you are buying an older home systems such as the AC or roof should be thoroughly inspected before purchasing. Even if they are in good condition you should be prepared for higher maintenance cost.
  • Property Manager- if you’re lucky you may have a spouse that can successfully do this. Otherwise the hassle of fixing toilets and other responsibilities is best left to someone you pay to do it. You simply don’t have time to be dealing with issues like this. Typical rates are 10% although I’ve been able to negotiate some of my property managers to as low as 8%.

Money Gouge Tip

You want to have at least $5,000 in a bank account when you close. This bank account is dedicated to expenses related to the property and will help keep you out of trouble. This is your “zero” and any profits you make need to be dedicated to refilling it when it falls below that.

With most properties in a decent area you can expect a small cashflow once maintenance and property manager cost are factored in. A few hundred dollars per month should be considered pretty good. This is pretty typical for most real estate investors. You can make more cash flow if you buy properties in a cheaper part of town but that may not make sense. Your goal is to buy in an area that military members and their families want to live in. If you go too cheap you will likely end up in a part of town that is not safe or desirable.

Although you need to be thorough with this analysis you are basically sanity checking yourself. If you have found a home in a desirable location that and there is evidence it will rent and cover expenses then that is all you need. A lot of people will fall into analysis paralysis: the point where the uncertainty keeps them from making the decision. It’s not rocket science, if it looks like a good property and the numbers support it you should be fine.

Once you have done the preliminary analysis, it’s time to get a competitive loan that will allow you to lock in these numbers and buy the property.

Use The VA Loan Or Conventional Mortgage With a Low Interest Rate

The loan you choose will determine the performance of your rental property. You want to find a loan that doesn’t require a large down payment but will still have a low interest rate. By avoiding putting a ton of money down, it will free you up to buy more houses in the future or invest that money in the stock market.


The VA Loan will allow you to roll closing costs into the loan to close with zero money down. The drawback is that this will make the mortgage payment larger. You need to check that your mortgage payment is less than potential rent or it may make sense to put some money down.

The balance with finding a loan is that you want to avoid putting a ton of money down but still have a low enough mortgage payment to have a cash flowing rental property. One great financing option is Navy Federal’s conventional mortgage which only requires 5% down and currently has an interest rate below 2%. Financing a property with this or the VA loan will essentially guarantee that you are getting the best rates. We recommend a fixed interest 30 year (or 15 if you can swing it) to keep the cost predictable when your property becomes a rental.

Living In The Place While You Are At a Duty Station

If you have a family then you will be moving into the first home that you own. This is an incredibly exciting time of your life. You will be able to have animals and make the house yours without having to check with a landlord. If you have time on your hands you have the opportunity to do projects that will increase the value of your home.

If you are single, then you have an opportunity to make this strategy even more lucrative. Have some roommates move in with you. This will allow you to split the rent and will dramatically lower everyone’s cost of living. In the financial independence community (FI) this is called house hacking.

It is a nice way to get a feel for being a landlord and dramatically lower your expenses while you are living in the property. I personally did this at my property in Pensacola and we were each able to pay only $600 in rent while the property had positive cash flow every month.


It’s not all sunshine and rainbows. You really need to put some thought into who you want to live with. Having bad roommates is especially painful because you live with them as the landlord. House hacking can make you a lot of money but it can also create a ton of headaches you may not have time to deal with. The people you live with will determine this.

Whether you live in the place with roommates or a family you will eventually need to move out to be able to rent it. Unless you or someone close to you is interested in managing the place, you will need to find a good property manager.

Find a Good Property Manager

This is not hard at all. Plenty of people in the military own properties that have turned into rentals. They have also lived in the same places as you and faced this same problem. The first step to finding a good property manager is to ask around.

I use Brock Properties for my home in Pensacola. Talking about real estate with people at work multiple people mentioned that this was a great property management company. Once I reached out, he set up a meeting at my house to come see it and understand what I needed for management. I also gave a call to another property management company that I found online. They emailed me back and said they would love to manage my property.

Which would you go with? For me it was evident that Brock properties cared a lot more about the job then other companies. They have done an awesome job managing the property.

Word of mouth is a really good way to quickly find a property manager but first impressions matter too. If you reach out to and they demonstrate that they are professionals who take your property seriously, then you have found a great company.

Money Gouge Tip

You can change property managers at any time if you are having a poor experience. It is still worth doing the legwork to find a good one in the first place because they can cause a huge headache when a property is not managed well. If their performance decreases to the point you are not happy, you need to consider changing companies. 

An additional place to search for property managers is the BiggerPockets forum. This is a real estate investors community and is quite helpful in pointing you in the right direction.

Finding a great property manager is an important piece of the puzzle. It allows you to put the rental on autopilot while you move on with your career. This is absolutely worth the few hundred bucks a month it will cost you.

Moving Out and Moving On

At this point, the legwork for this strategy is done. You need to step back and list the place for rent letting your property manager take lead. If you are in a desirable location, renting the place should be easy. If you are able to rent to other military members than you know you will have a tenant with a stable income with a dedicated housing allowance.

Money Gouge Tip

Property managers will charge you the first month’s rent to find a new tenant and sign a lease. If you know someone that is moving into the duty station then you can pass them off to your property manager and avoid the listing fee. If your new tenant is a military member, offer to make the lease the length of their time at the duty station. This will avoid tenant turnover and listing fees.

Your attention should be focused on your living situation in your new location. If it is an expensive market or you are on a tight timeline then you may want to rent until you get more established. Another consideration is whether you can qualify for another mortgage right away. Your debt to income ratio will be a primary drive of this. I general a property with a 12 month lease should not count against your debt to income ratio. This is dependent on the individual bank and the loan type.

It may not make sense to own at every duty station but most people find buying and renting homes significantly easier after taking the leap of faith with their first property. If you find yourself in another market that meets the criteria listed above, you’ll probably be ready to repeat the process.

Building Wealth Slowly

If done right, this strategy should be a natural progression that allows you to collect houses as you move through duty stations. Even if you do not desire to be a landlord considering this strategy when buying a home will help you sell it. If you rent a property out, will find within a year or two that you are starting to build serious equity in a home while earning a little cashflow every month. The benefits will only grow with time. The best part is that once the place is rented, this growth is on autopilot. It happens regardless of how much you save or your personal finances. If you start to get a few homes rented, this progress begins to snowball relatively quickly.

You will not be seeing the gains of a 500 unit apartment building or flipping houses, but you will begin to build wealth in a sustainable way that frees up your time to focus on your life and job. This strategy is a relatively simple way to get started in real estate without much risk.

Additional Reading

If you are interested in learning more about this strategy the best book out there is: Military House Hacking. It is written by military members who have been successful with this strategy and has a lot of useful tips. For those with the ambitions to use the VA Loan on a property that will be a rental one day this is easily the most insightful book and is less than $10.

Questions? Contact us.

How to Manage Your Money and Get Your Finances On Track

The very thought of budgeting and personal finance is enough to make some people’s skin crawl. Setting aside money for a savings account and limiting how much you can spend going out not only sounds boring, it sounds like it would make the rest of your life boring too.

Additionally, it’s hard to know where to start even if you wanted to. As a result, many of us go month to month paying our rent and utilities, insurance, car, phone, and credit card bills, and hope we have enough left over to have some fun before the next paycheck. When the next paycheck hits our accounts, we do the same thing, and again the time after that. If we’re not careful, we can spend years giving the vast majority of our money to phone carriers, insurance providers, credit card companies, fast food restaurants, and the bank to cover our loans. If that sounds like something you’re comfortable with, good for you. If not, you need to know how to pay yourself first, time and time again. Below is how to do it in six steps.

As with everything here, this involves no tricks, no sales, no software to download. You can, however, use this spreadsheet to help track your finances and see what we’re talking about as you read through this. 

First Step: Your Emergency Fund

We recommend you make an emergency fund your first priority if you don’t already have one. It’s easy to lose sight of this in the military because our paychecks and jobs are about as secure as any in the world, but it’s a good idea to have at least three months worth of your salary set aside to cover any emergency that arises. If you’re getting out of the military or are changing duty stations in the near future or have a family to take care of, building that fund to six months or so worth of your salary is even better. If you can, set aside at least 10% of your income every month towards this until your emergency fund is built up to where you’d like it to be.

Money Gouge Tip

When you are considering whether you should have closer to three or six months savings be sure to include these factors:

  • Will you be moving soon? Moving costs are high and you will likely be required to put a down payment or security deposit on a new place.
  • Are you planning on buying a home? Your down payment should not come front our emergency savings but should be large enough to fix things like that AC that breaks after closing.
  • Will you be deploying soon? Having a larger savings when you leave for deployment will give you the peace of mind that your family or personal financial picture is covered if you are not available.
  • Anything that might increase your cost of living such as moving to a new area or having kids.

Second Step: Eliminate Your Damaging Debt

Let’s say you’ve built up an emergency fund using some portion of your paycheck every month to do so. On to the next step.

Your second priority should be to eliminate any debt with a “high” interest rate. If you have a good idea for what that number is, then great, use that. If not, we recommend you use 5%. Bottom line is that you need to pick a way to pay off your damaging debt and stick to it.

Third Step: Build a Habit of Saving for Your Retirement

Start investing in your retirement early. While you’re in the military, simply use the TSP do this. The S&P 500 (Or C-Fund in the TSP) averages an annualized return of about 9-10% every year. If you can find $500 a month to put into that fund, and keep doing that every month until you’re 65, below is how much that retirement account will be worth down the road. Note the difference between starting early and waiting until you “have more money” later on.

Age 20: $3.1 Million

Age 25: $2 Million

Age 30: $1.3 Million

Age 35: $819 K

Age 40: $500 K

It’s not hard to set up your account to automatically put money into the TSP and let the government match some of it. Our TSP article will walk you through it step by step. There will always be reasons not to start investing in your retirement, but once you start and you see your money begin to grow, you’ll never want to stop. Pay yourself first, early, and often. You’ll thank yourself later. We promise. 

Fourth Step: Your Personal Financial Goals

The first three steps are things that we recommend everybody does, regardless of what your other personal financial goals are. Setting up an emergency fund, eliminating crippling debt, and starting to invest in your retirement can and should be top priorities for all of us. After those things are taken care of, you can start to focus on goals that are much more exciting. These look different for different people, and you should spend some time deciding what they are. Things to consider putting money toward:

  1. Down Payment on a House
  2. Down Payment on a Car 
  3. Miscellaneous Big-Ticket items (TV, Furniture, Appliances, Etc)
  4. Upcoming Travel over Leave
  5. Expenses for upcoming PCS/PCA moves

Regardless of what it is you’re investing or saving for, determine how much you need for those items, how long you have to come up with the money, and how much you want to put aside every month to get there. 

Fifth Step: Necessary Expenses

Necessary Expenses are all of the expenses we have no real choice but to pay. When it comes to getting your personal finances on track, a good rule of thumb is to use no more than 50% of your income for your necessary expenses. If you find this isn’t the case, find ways to cut your necessary expenses down. You might need to make a few sacrifices to do this. As you figure out how to do this, remember that nobody admires you for the car you drive or the house you live in. These things are interesting to look at, but the only person they really matter to is you. 

Possible Solutions to cut Necessary Expenses

  • Downgrade what you drive
  • Downgrade where you live
  • Downgrade or modify phone/TV/internet plans
  • Take 15 minutes to meal plan every weekend to avoid constant trips to the commissary or eating out too frequently throughout the week

Sixth Step: Discretionary Expenses

Discretionary Expenses are all the things we buy but don’t need. This is where a lot of us hurt ourselves. Badly. There is nothing wrong with going out to eat, going out for drinks, or funding your hobbies. However, these things combined with countless small but regular expenses like energy drinks, coffee, cigarettes, various subscriptions, new clothes, or a new pair of shoes can quickly consume a ton of our income. Again, there is nothing wrong with setting aside money for discretionary expenses. In fact, we highly recommend you do so, but remember that this is money that could have worked for you, but you choose to never see again. Try not to let it take up more than 25% of your monthly income at most.


Set aside at least 25% of your income every month to pay yourself first. This looks like building an emergency fund and then paying off your debts. Once that’s complete, use that 25% to save for your retirement and contribute to your other financial goals. If you can do more than 25%, even better. Take a look at your necessary expenses and make sure they don’t take up more than half of your income. Do the same with your discretionary expenses to make sure they don’t take up more than 25%. It sounds simple, and it really is, but it takes time and discipline to do well. Automate as much of this as possible, especially transfers to build your emergency fund, debt payments, and retirement contributions.

Final Note:

Understand that there are many services available out there on how to create and stick to a spending plan on a daily basis, and many are very helpful. USAA and Navy Federal both have decent tools that allow you to make a budget and track your spending. Most credit card companies have some type of application that allows you to see what different types of things you spend your money on as well.

If you don’t want to use one of those, there are plenty of templates out there in addition to the one we offer here (simply type ‘budget template’ into Google and look at the countless results) that are free and relatively easy to use. You might even create a budget from scratch for yourself. If you especially struggle with budgeting and don’t want to have to put any legwork in, there are plenty of budgeting services out there designed to simplify it for you. YNAB and MINT are two of our favorites. They are incredibly helpful but they do have a small cost associated with them. Again, if budgeting is something you struggle with, this might be a great idea for you. Bottom line is that you need to find a way to track your monthly spending, and pay yourself first. Every time. 

$58,125 Reasons to Buy A Car The Right Way

What if someone told you they had an investment that was going to lose 20-30% in one year with a guaranteed loss of 60% over the next five years? You’ll need to put up $30K to get in on it though. Don’t have $30K? Not a problem, they’ll loan you it and charge you interest so you can get in on the action.

What would your reaction be? I’d tell you to fly a kite.

Here’s the crazy thing… When you walk into a car dealership that’s exactly what they’re selling you.

Car culture is one of the most deeply ingrained parts of the military. We’ve all seen the parking lot full of expensive trucks and sports cars. Here at MoneyGouge we want to challenge you to not get lured into one of the worst financial decisions you can make just because everyone else is doing it.

I’ve made this mistake myself so I’m speaking from experience here.

 I loved this bad boy but I knew the car payments were directly inhibiting my financial life and adding years back to how long I would need to work. Although it was really hard to do, I am glad I was able to part with my Kia Stinger when I did. Not having car payments on deployment allowed me to save a ton of money. It also dramatically reduces insurance and maintenance.

And yes, sometimes I am driving on an empty highway and really miss that car. Supposedly you can set cruise control at 130. As fun as it was, here is the reality and lessons I learned from owning a nice car.

No One Cares What Car You Drive

 In case you didn’t realize, people only care about themselves. I promise you will buy a new car and in less than a week no one will care. Realizing this early on allows you to buy the simplest most fuel efficient car that you can. Going from a Kia Stinger to a base level Toyota Corolla changed nothing except that I didn’t have to be careful about where I parked.

Paying For A Car While On Deployment Is Really Dumb

You’re literally paying for a piece of metal that is sitting in a garage. I don’t know about you, but I don’t find deployments fun enough that it’s worth blowing my hard earned money on that. I’d much rather come back to a nice number in my bank account. You can come back with a lot more money by mimizing your car payment.

Money Gouge Tip

If your car will not be driven while you are away then reduce your insurance to the bare minimum before you go on deployment. This is easier than cancelling and will still save you hundreds of dollars. A lot of companies like USAA and Geico are very easy to do this with. For example, on the Geico app you can change your car insurance coverage in real time.

You’re Paying For Stuff You Don’t Need

Let’s be real, no one in their early 20’s needs a car that can do 0-60 in 3 seconds or easily hit three figure speeds. The temptation is going to be there and the arrest (or accident) that follows will torpedo your career. You also don’t need to pay top dollar for a Ford Raptor (I know they’re sweet). Literally any AWD or 4X4 vehicle will be able to go off road to the extent that you will actually need. But you will be the jackass paying more than $200 a month on insurance for the sports car or gas for that giant truck.

Get it When You’re Older

There’s a way to get everything you want. If you use your money to invest, build a TSP that’s at least one and a half years salary, buy a house and have rotated into a billet where you will not be deploying, then it might be time to enjoy a nicer car. There’s nothing wrong with this but you need to do everything in the right order. It’s like the order of operations (remember PEMDAS from math?).

The Total Costs

Factor in all of these to better estimate the costs to you:

  • Price of Car
  • Price of interest for loan (ask the dealer or use this calculator just put the car loan you want in for mortgage values)
  • Sales Tax: You can search state by state here.
  • Maintenance: often free for new cars for a limited amount of miles.
  • Costs of the tires: Sports cars and trucks will absolutely kill you here. The staggered Michelin Pilot 4S on my Kia Stinger cost $900 to replace, were summer only and almost no one carried them.
  • Dealer Fees: the money they make for selling you a car. Don’t worry you can finance it and pay interest on top of that.
  • Gas Costs: Premium or trucks will be a lot.
  • Insurance: Good luck if you’re under 25. This is probably the worst expense because even if you have a perfect driving record you will pay more for a nice car and/or because you are young. Shop around and don’t be afraid to change to a company that is offering you a lower rate.
  • Registration: Tags and title. Some states can be really high.

Don’t blow a lot of money on a car to learn these lessons. Follow the advice below and watch your Robinhood account grow, instead of paying $900 for a tire change.

Ideally, buy a simple used car from a reliable brand that is fuel efficient. I could run examples all day but the numbers don’t lie. Consider buying something at least 5 years old because most of the depreciation is gone (60%) and there’s not a major difference between 2016 and 2021 as far as technology and design. If you save up and buy a car like this in cash, that’s even better because you won’t be burdened by a car payment. Either way, the payment and insurance will be much lower than a brand new car and if it was well maintained there should not be any issues.

Interest rates are currently super low. However, this only applies to those with good credit. So you might find you can get a new base level car for less per month and with lower interest than a used car. Be careful to buy the absolute minimum car you need if you’re going this route. Advantages of a new car may be increased fuel efficiency and self driving highway cruise etc. If you have a decent amount of cash on hand, buy the used car and put all or alot down. No car payment is always better.

If you have bought a new car and want to lower your interest payment, Navy Federal will give you $200 to refinance and may lower your rate too. Only refinance if it lowers your rate!

And With The Money You Save….

Realize that you will be saving hundreds of dollars per month between the two decisions. Those are the types of numbers that will enable you to do what you want for a living instead of having to work.

When you consider the total cost of a new car verse a used one, the difference is easily hundreds of dollar a month.

Lets say it was $300. If you bought the used car, held it for 10 years and invested the difference ($300/ month) what would it be worth?

If you put $300 a month in the S &P 500 (10% annual return) for ten years it would be worth: $58,152.85.

By limiting how much money you sink monthly into your car and investing the difference you are able to build serious wealth.

Today, this is as simple as opening a Robin Hood account and using their buy over time feature to automate that whole process for you.

So which investment out of the two would you take? A money pit or a money multiplier? Walking away from the shiny new car is a conscious choice towards brightening your financial future and buying cooler things like houses or stocks. Things that get better with time, not worse.

Questions about buying a car? Contact us, we’re here to for you!

How to Invest Your Extra Money

TLDR Summary at End

Okay, so maybe you’ve come back from deployment or been stuck at the house because of COVID and you’ve been able to save a nice chunk of change. It’s sitting in your bank account, (maybe a high yield one like Marcus or Ally). You know that you want to grow it but you don’t know enough about investing to feel comfortable with such a large amount of money. Where do you start?

You start by making sure you have cleared the bar to invest. Generally, once you invest money you don’t want to touch it for at least five years. There are two considerations that will allow you to achieve this:

  • Do you have 3-6 months worth of emergency savings? This does not include money you intend to invest. Take an honest look at your expenses over the last few months and see if your savings is 3-6 times that. If you are moving or are going to be deployed, it is safer to be towards six months.
  • Do you have any high interest debt? At MoneyGouge we define high interest debt as 5% or greater interest rate. Paying that off early will earn you a 5% (or whatever the interest rate is) guaranteed return on your money. Unlike investing, the return is guaranteed because you will have paid that in interest if you don’t pay it early. Paying off debt will also dramatically increase your income. Eliminating a debt payment is essentially the same as getting a raise for that amount.

If you have achieved these milestones, then you are ready to make that money work for you. There are countless options out there.  We’ll walk you through some good ways to invest as well as some not so good ways.

Stock Market Investing

Nowadays, investing in the stock market is more accessible than ever. You can harness the growth of wall street without having to spend all your time studying stocks. Like all investments, there is a right and wrong way to invest in stocks.

The Right Way:

Open a brokerage account. The best companies are Vanguard, Fidelity and Robinhood. If you use this Robinhood link, you will get a free stock when you open your account. These companies are incredibly popular because they are commission free and easy to use. Commission free means they won’t charge you to buy stocks. Other brokerages will charge every time you buy or sell stocks.  There is no reason to pay for that when you have a cost free alternative. I have used all three for years and they are great platforms.


We are not financial advisors and this information is for educational purposes only.

After You’ve opened a brokerage account:

Once you have opened an account it’s time to invest. The right way to invest is in index funds. They allow you to own a basket of stocks. The reason index funds are so powerful is because you are not dependent on any single stock for your performance. Overall, the market tends to return about 10% a year. You will be able to capture these gains without being tied to the fortune of one company. For large amounts of money this is how you want to be invested because it is one of the best risk/reward profiles out there. In fact, Warren Buffet even recommends it.

“In my view, for most people, the best thing to do is owning the S&P 500 index fund.”



 Companies charge you a fee for building  baskets that you can invest in. High fee’s can act as a drag on your return because you pay fees regardless of the performance of the index fund. You want to keep fees as low as possible. The fees for all of the listed index funds are extremely low, which is part of the reason they are such great products.

The Best Index Funds For Your Money

S&P 500: The S&P 500 is often used to describe the whole stock market, but it’s actually just the top 500 companies in the US. You are getting the best of the best when you buy the S&P 500. Buying this will allow you to own companies like Apple, Microsoft, Pfizer and Tesla to name a few. This index has returned an average of 11.7% annually over the last five years. Currently, the S&P 500 has a dividend of 1.5%. Dividends will be discussed later in this article.

Two ways to buy the S&P 500 are:

  • SPY (expense ratio .09%)
  • VOO (expense ratio .03%)


These two are the same thing. They both are ways to buy the S&P 500. The only difference is the company that offers them (Sector Spider and Vanguard) and the expense ratio. They will have the same annual performance because they are the S&P 500. Vanguard’s expense ratio is slightly lower but these two have the lowest expense ratio by far.

Total Stock Market: The advantages of investing in the total stock market are two fold. You get more diversification because you are balanced between the whole stock market and not just the 500 largest companies. In theory, you also get more return because small cap stocks (small up and coming companies) tend to grow faster than the S&P 500 large companies. This is due to their size, it is easier for a $1 Billion company to double then a $1 Trillion company.

A good way to invest in the total stock market is VTI. It has a 5 year return of 13.68%, dividend of 1.42% and fee of .03%.

This is a great core holding in any stock portfolio because it is well diversified and performs well most years.

Dividends: A lot of investors buy dividend stocks. These are stocks generally older, more profitable companies that choose to share their profits with shareholders of the stock. Typically they pay a set amount annually and it is distributed quarterly. The price of the stock divided by the year’s dividend amount determines the dividend yield. This is what I am referring to with the dividend yields mentioned in this article.

Vanguard has built a basket (index) of companies that focus on paying dividends. The Vanguard High Dividend Yield ETF (VYM) has a five year annual return of 10.03%, dividend yield of 3.17% and expense ratio of .06%.

Money Gouge Tip

Most brokerage accounts have the option to reinvest the dividends automatically. That is, the money you receive in dividends will be used to buy you more stock. This is an incredibly powerful way to grow your money because you will be paid dividends every year regardless of the performance of a stock’s price.

Individual Stocks

If you have built up a large core holding of index funds it is okay to buy individual stocks. The order is very important, building large positions in a single company holds an enormous amount of risk compared to the whole stock market. Even very successful companies have low performing years. Meanwhile, the market continues to march upward without them. This is why you want to have a large amount of your money in index funds first.  Once you have a solid foundation, you should absolutely buy some individual stocks.

Do: Buy reputable companies you know, love or at least understand. Buy them in an amount that is still a minority of your portfolio.

Do Not:

  • Invest in a hot stock you do not understand or only know of because you read it somewhere. This is speculating (gambling) and not investing. There is no real end goal here and even if you make money it’s not repeatable. Speaking from experience, this type of activity ultimately wastes whatever money you put in.
  • Time the market. This is a classic beginners mistake. Nobody knows what the market will do today or tomorrow. Instead use dollar cost averaging.

Dollar Cost Averaging: Take the amount you want to invest and divide it into monthly amounts over the course of 3-6 months. Pick a day of the month or twice a month and invest it on that date. This will allow you to get an average price over that period as whatever you are buying moves up and down in price. It mitigates the chance of buying at a point where the price is high. This is the go to strategy for how professional money managers invest money. If you use Robinhood their buy over time feature will automate this entire process for you.

Real Estate Investing

Real Estate is a phenomenal investment if done right. It will allow you to have monthly cash flow, monthly increase in equity and lower taxes if done right. If you have low or no debt, 3-6 months of savings and a decent amount of money to be deployed. Real estate might make sense. Many people are hesitant to get started with real estate because it is a big endeavor. Fortunately, there are now ways to greatly reduce the workload and risk to you.

If you want to have an investment property that is already rented (or guaranteed to be rented in the first month) use RoofStock. They also do all the heavy lifting and inspect the house/ get all the paperwork ready for you. They really are professionals and have established a reputation for their services. You will even be able to get a highly rated property manager through them. RoofStock is so good that you will be able to buy an investment property online. Because it is professionally vetted, the property will likely perform better than one you attempt to find on your own. Also, a lot less of your time goes into the home buying process.

Money Gouge Tip

We recommend putting at least 20% down on a given real estate property. This allows you to have cash flow and equity and not be overleveraged with a large mortgage. 20% down strikes a good balance between risk and reward. You will get a good return on your money without relying too heavily on leverage.

If you don’t want to put a ton of money into a rental property but still seek cash flow from real estate there are a few options!

A more passive way to invest in real estate for income is through Fundrise. Think of Fundrise as an index fund of real estate instead of companies. You can invest as little as $1,000 into the various funds that Fundrise has and receive dividend income that is generated by the rent on those properties. These properties are professionally bought and well vetted. The values of your shares may also rise over time as the value of the properties increases.  If you choose to sell your shares you can do so once a quarter at the current value. This is a lot easier than trying to sell a house.

Similar to fundrise, you can buy the Vanguard Real Estate Index Fund ETF. This is an index of REIT’s. These are companies that own and operate real estate. An REIT is required by law to pay 90% of it’s taxable income as a dividend. VNQ has a five year return of 5.64% a dividend of 3.35% and expense ratio of .12%.

Bonus: The Best Certificate of Deposit

If you are a Navy Federal Member and receive direct deposits with them, you can get their Special EasyStart Certificate of deposit. This is a good way to earned a guaranteed 3% interest on money you will need earlier than in five years. Currently the certificate offers 3% for 12 months on up to $3000. The best part is that you can restart another one when the first ends.


Make sure you open a Special Easy Start certificate. There is a similarly named Easy Start that only offers .5% interest.

How Not To Invest

Avoid the latest fads and things you do not understand. Robinhood allows you to invest in crypto as well. I think of crypto as a risky individual stock. The same rules apply. If you really need to scratch the itch, put a few hundred bucks in and make your large investments elsewhere. There is no place for large amounts of money in hot stocks or crypto currency. This is your hard earned money and the risk of losing it outweighs the gain you may get from these things.

CrowdFunding: A few years ago, I thought Crowdfunding might be a fun way to augment my portfolio.Crowdfunding is essentially investing in private companies that are not on a stock exchange.  It ended up being a complete waste of time and money. I used WeFunder to invest in a few promising breweries. Some tanked before COVID and they all have tanked now. Regardless of industry you are basically just losing this money. The chance of any company succeeding is overwhelmingly low. 

Even when they do succeed it doesn’t mean you will make money. The shares that you own are essentially useless until the company gets listed on a public stock exchange. Very few companies make it far enough to do this. I learned the hard way that crowdfunding really has no place in any portfolio.


You can only invest $2200 annually unless you are a qualified investor. A qualified investor has a seven figure liquid net worth. All the other investments on this page will help you get there. Crowdfunding won’t, take that $2200 and use it for something more reliable.

TLDR Summary

  • First, ensure you have proper savings (3-6 months) and have paid off high interest debt (especially credit card).
  • To invest in the stock market open one of our recommended brokerage accounts to avoid unnecessary fees. Keep it simple and invest in index funds.
  • If you want to use the money to buy a rental property, use RoofStock. They do all the heavy lifting to mitigate the risk for you.
  • Other way to invest in real estate without buying a property are fundrise and VNQ.
  • If you are a Navy Federal Member, consider opening a SpecialEasyStart certificate. This will give you a guaranteed 3% return on up to $3000 over 12 months.
  • Avoid things you don’t understand, cryptocurrency and crowdfunding.

Free $400 With These New American Express Platinum Offers

Amex Platinum is notorious for being one of the most lucrative cards you can own.  Due to Covid-19, less people have been travelling, so Amex has been offering more deals in the everyday realm. If you are an Amex Platinum member then you may or may not have heard of the awesome deals they are currently running. To sign up for these deals open the Amex app>select the platinum as your card>offers. If you don’t currently have an Amex platinum check out our article on why you should get one.


These deals apply to online purchases. They cannot be redeemed in store.

Home Depot

Spend $50 and get $50 back. You can use this twice. Literally whatever you buy the first fifty dollars is free. There is no reason to miss out on this, we’re talking free money.  Home Depot offers free shipping on most items that are over $45.

Valid Until: June 30th 2021

Best Buy

Spend $50 or more and get $50 back. You can also use this twice. Those headphones you’ve been eyeing for a while? Totally free. When you make a Best Buy Account you get free shipping on orders of more than $35 or free next day shipping for a lot of items.

Valid Until: June 30th 2021

Wine Insider

Spend $30 or more and get $30 back. Up to two times. Free wine people! Shipping is $14.95 so keep that in mind when ordering

Home Chef

Spend $50 or more and get $50 back.You can use up to twice. I have been hemming and hawing with food subscriptions for a while. Although they can cost more than going to the grocery store they have two major benefits:

  • Keeps you from buying unnecessary shit at the grocery store. (I’m guilty as charged.)
  • The convenience of having pre built meals is huge when you come home from a long day. The meals are healthy,tasty and they are definitely easier than trying to piece together stuff from your fridge. This keeps me from ordering unhealthy  take out during the week.

HomeChef offers 50% off your first order and 10% off future orders for military, first responders etc. Combining this with the Amex offer gives you two weeks of basically free groceries.

Here’s how we played it: A meal kit for two people with six meals will cost $114.87 including shipping.

50% off with military discount= $57.44

$57.44-50.00 for Amex groceries= $7.44 for a weeks worth of convenient healthy food

You get 10% off your next order (military) and still have another $50 back from Amex.

Box for two people with three meals costs $60.93.

10% off: $54.84

$54.84- $50= $4.84 for another three meals.

Another way to sidestep the military discount is to use this link for $30 off your first two boxes. You cannot combine this with a military discount.


You can double dip with both the $30 off from the link and the military discount with the Amex discount. This is because the Amex discount is not applied as a voucher or discount code on the HomeChef website, it is a separate statement credit that is refunded to you by Amex.

Bonus: PayPal Monthly Credit

Amex is now offering up to $30 month in statement credit (through June 30th) for purchases using PayPal and your Amex Platinum. Simply enter your Platinum information into your PayPal account and then use your PayPal account for checkout. The only catch is you need to shop at a website that allows you to use PayPal to checkout. There is no single comprehensive list but you can find a list a lot of sites here.

The Amex Platinum is a useful tool for making your money go further. For military members and their spouses it is completely free. You can see a complete breakdown of all the perks and sign up bonuses here . At Money Gouge we’re always looking for the latest ways to make your money go further. Subscribing to our newsletter will allow you to get the latest gouge delivered directly to you. No spam ever. We hate that shit too.

Questions about the Platinum benefits? Contact us

What’s The Best Cash Back Credit Card?

The American Express Blue Cash Preferred and Navy Federal Cash Rewards are two of the best everyday use cash back credit cards. They can often be brushed aside in favor of their glitzy cousins such as the American Express Platinum or Chase Sapphire. Here’s a dirty little secret, these two everyday cards will make you more money than those other cards. That’s because these are the cards that will reward you for the activities you do the most, such as, grocery shopping, buying gas and eating out.

These two cards are also simple. That’s a major draw compared to having to constantly research the ever changing benefits of more involved travel cards. They don’t deal in points whose value you’ll have to figure out how to maximize. They deal in cash which is both simpler and more tangible than rewards points. Both of these cards are efficient, practical tools that should be part of your financial picture.

American Express Blue Cash Preferred Credit Card

The annual fee for this card is $95. For service members, their spouses or reservist on Title 10/32 AD orders this fee is waived. It is also structured as a regular credit card with APR between 14-24%. We recommend paying off your entire balance every month. The amount you spend in interest would negate any benefits of this card.

The Perks

  • Spend $1000 in first three months to earn $300 back in the form of a statement credit
  • 6% cash back on groceries (up to $6,000 annually then 1%
  • 6% cash back on streaming subscription
  • 3% cash back on transit (includes uber/lyft)
  • 3% cashback on gas stations
  • 1% cash back on other purchases

Navy Federal Cash Rewards Credit Card

This card is painfully simple. There is no annual fee but you do need to be a Navy Federal member to be eligible. A lot more people are eligible to be Navy Federal members than may be obvious. Membership can extend to civilians/contractors working on DoD installations or family members of a service member (including grandparents!) This card is just one of the many benefits of being part of that bank. Like the Amex Blue Cash Preferred, the Navy Federal Cash Rewards is a normal credit card. Again, We do not advise carrying credit card debt.

The Perks

  • $150 cash back when you spend $2000 in the first three months
  • Cash Back at 1.5% on all purchases
  • APR between 9.65-18%
  • 0% APR for first six months

Which Card is best?

When you look at the perks it is easy to draw the conclusion that the Amex Blue Cash Preferred is the better of the two cards. Looks can be deceiving, and when you actually dig down into the benefits it is a much closer call. First, the Amex Cash Blue Preferred offers 6% on groceries but only up to $6,000 annually. That breaks down to around $500/ month. Not a bad number for an individual, but a family will likely have a much higher monthly grocery bill. Anything past the $6000 mark is only 1% cash back.  The other benefits really highlight how practical this card can be. 6% cash back for streaming subscription is basically giving you cash back for your bills. That’s assuming you don’t just use your parents Netflix.

Cash Back Should Be Cash Back

There is one major difference between these cards. Dollars earned on the Amex are reward dollars. These are essentially redeemed for statement credits to reduce your current or future charges, buy gift cards, or spend on merchandise on the Amex website. These feel alot like Amex points (even though they are valued at $1 no matter what you spend them on.)

The Navy Federal Cash Rewards is actually cash. You can see the balance at any time by logging into the app and instantly deposit the amount into your bank account. For me, this is what I want when I think of a cash reward card. For all the hype around travel cards, I currently have $600 available through the Navy Federal Cash Rewards Card. This money was earned by using my card for everyday purchases. That amount can sponsor a decent weekend getaway a lot more easily than messing around with points. Or I can spend it on whatever I want. To me, that is the advantage of having a cash back card.

Both of these cards are simple (note how much shorter this article is than the travel card review). That is a strength. If you really want to maximize your cash back opportunity then the Amex Blue Preferred Card is probably the best move. It is going to give you hundreds of dollars back on the purchases you’re already making. As long as you are okay with them being reward dollars.

The Navy Federal Cash Rewards card is like the AK-47 of credit cards. No games, no gimmicks, all it does is convert the money you spend to cash. It doesn’t do it as quick as Amex at 1.5% but any and all cash back is actually cash. Including the $150 opening bonus.

Questions about these cards? Contact us.

What To Do With Your Stimulus Check

Whether you received $600 or more, I think we can all agree that stimulus checks are pretty sweet. The danger with stimulus checks is that it’s easy to spend money that’s not yours. Because you didn’t “earn” the money you are not attached to it. This is actually an emotional bias known as the windfall bias. Seeing an extra $600 in your account is a great feeling, how will you spend it?


If you’re stimulus check is MIA. You can get a status update here.

Before you take your Tinder Date out to Ruth Chris courtesy of Uncle Sam consider this:

Use that free money to help improve your finances. This will allow you to hang onto the money and even let it grow. Who knows if we’ll ever see a handout like this again?

  Don’t worry, you can still take that Tinder date on a much more affordable date.

Not sure of the best way to get that money working? Here are three great places to start:

  1. Pay Down Debt
  2. Use it to increase your savings
  3. Invest it and let it grow

Pay Down Debt

$600 can go a long way to decreasing most debts. Your focus should be on the interest rate. If you have credit card debt then this is a no brainer. Put your stimulus check towards it. This will save you a lot in interest payments. Your typical credit card interest rate is around 24.99%. If you had a $600 debt that you paid off with the stimulus money you would save $150 in interest payments.

Your stimulus check could also pay off other high interest debt. At Money Gouge we define high interest as >5% interest. An extra $600 payment towards debt with these interest rates will save you a lot in payments.

We would only recommend putting it towards low interest debt if the $600 will make a meaningful difference in the balance. For example, a car loan with a 2% interest rate with $3,000 left would be much more impacted by a $600 payment then one with $20,000 left.

We are not advocating for keeping debt, but at this point you need to consider if your money could be earning better returns elsewhere. Although using your stimulus check for debt repayment may not be as exciting, it will directly contribute to your long term happiness and financial health. Building healthy savings will contribute to your sense of security as well.

Save That Money

You should have 3-6 months of expenses in savings. Unfortunately, this year taught a lot of us why this matters. If you have no high interest debt then the next focus should be building your savings.  Your $600 stimulus check brings you that much closer to whatever your target savings is and helps build your personal balance sheet. In general, this money needs to be in a bank account. Not invested in the market. If you put it in a high interest rate account then the money will at least earn some interest. Our favorite high interest bank accounts are:


Both of these banks change their interest rates based on the federal reserve. In 2018, I was using both Marcus and Ally and earning 2.5% interest. Interest rates are at historic lows right now so it is reasonable to expect rates to increase in the future. High yield savings account keep your savings safe (FDIC insured) and accessible while allowing it to earn more interest than an ordinary checking account.

Invest Your Money

If you are fortunate enough to have no high interest debt and a solid savings account then you can put that money to work for you. Open a Robinhood account and receive a free stock or use another commission free company such as Vanguard. Your best bet is to play it safe, you can never go wrong with Vanguard Total Market Index (VTI) or the S&P 500 (SPY). Both allow you to own a piece of the best companies in America. In the last 5 years the return for S&P 500 has been 13%. $600 invested five years ago would be worth $1100 today!

If you’re feeling more risky than go ahead and buy the stock of a company you are interested in or know. This doesn’t mean buying a penny stock you’ve never heard of. Buy a company you know and love or have always been interested in. Don’t worry if the share prices are more than $600, most brokerages like Robinhood allow you to buy fractional shares in increments as small as a single dollar. Maybe you’ll buy a popular tech stock or dividend stock.

ATT (T) is a popular dividend stock that currently pays a 7% yield. If you bought $600 of ATT stock at the current price (around $29.00) you would own just over 20 shares. The dividend on each share is currently $2.08. So you would make an annual income of about $41. Nothing to write home about, but also really cool because you still have the original $600 and you make income every year regardless of your input. Most brokerage accounts will reinvest that to buy more stocks that will also pay a dividend every year. You can benefit from this snowball effect without using a single dollar you saved.

Easily the most fun way to use your stimulus check is investing it. But if the first two situations apply to your financial picture those are more important. Either way, it’s pretty cool to use a handout from the government to improve your long term financial picture rather than to spend it. Any money you save or make from your stimulus check literally costs you nothing. This should make a pretty good conversation starter (and first impression) on that Tinder date.

More questions about your Stimulus Check? Contact Us

Personal Cash Flow

When it comes to personal finances, it helps to think in terms of “Cash Flow”. Simply put, cash flow as it pertains to businesses refers to the total amount of money being transferred into and out of a business. Cash flow as it pertains to us is the total amount of money being transferred into and out of our personal accounts. Having an understanding of what your cash flow looks like is crucial to successfully managing your money and understanding:

  1. Where you’re making money
  2. Where you’re losing money
  3. What to do about it

You need a framework to understand your own cash flow. Think about your personal finances first in terms of Money In and Money Out

  1. Where You’re Making Money

As the names would imply, Money In refers to any money that comes into our accounts on a regular basis. Paychecks, Housing Allowance, Subsistence Allowance, and Uniform Allowance are all examples of Money In. It looks like this:

Money In, otherwise known as Income, comes typically in one of three varieties. The first type of income, which we’re all intimately familiar with, is Active IncomeActive Income is what you receive for doing your job. This looks like anything that comes from the Department of Defense or another employer in return for your time and effort, such as the examples in the graphic above. 

The second type of income is known as Passive IncomePassive income, simply stated, is money that comes in that requires little to no daily effort on your part. An investment property is the most common example of passive income. With an investment property, after doing the initial legwork required and occasional maintenance, you receive money on a regular basis with little to no effort. There are countless ideas out there on how to generate Passive Income, and we’ll push forward more material with effective ways to do it. For the purposes of understanding your own cash flow, just understand that Passive Income is a fantastic thing to learn how to create.

The third type of income is typically referred to as Portfolio Income. This is the money that you generate through buying and selling stocks, bonds, mutual funds, etc. This is a story of its own that can be both highly rewarding and highly dangerous at the same time. Before trying to generate your own portfolio income, you want to do a lot of homework prior to putting money into any single stock or even a specific mutual fund. However, for the purposes of understanding your own cash flow, it is important to understand that there is a huge potential to supplement your Active Income with Portfolio Income. Here’s the updated snapshot of our Money In.

  1. Where You’re Losing Money

Money Out refers to any money that regularly goes out of our accounts. Everything from an energy drink at a vending machine to a mortgage payment is Money Out. It can look and feel chaotic if we’re not on top of it:

Just like we broke Money In into three categories to better understand where our money comes from, let’s do the same with Money OutNecessary Expenses, Discretionary Expenses, and Assets.

Necessary Expenses are the expenses which we all have no real choice but to pay. Think taxes, mortgage or rent, car payments, car insurance, food, gas, phone bill, internet, etc. These are the types of things which are typically listed on a budget and which end up taking up a sizable chunk of our income. 

Everything we spend our money on that we don’t need is a Discretionary Expense. Think going out for dinner, alcohol, energy drinks, video games, suspension kit for a truck, etc. If it’s fun, chances are it’s a discretionary expense. Discretionary Expenses are not necessarily bad, but they can add up quickly if we don’t pay attention. 

Finally, and most rarely, our Money Out can go towards AssetsAssets are anything that we put our money into that makes us money in return. Examples include stocks, mutual funds, rental properties, side businesses, etc. 

Put concisely, we spend our Money In on things that we need (Necessary Expenses), things that we like but don’t need (Discretionary Expenses), and, if we’re smart, things that can make us more money (Assets). Here’s the updated snapshot:

3. What to do About It:

Money In comes from Active IncomePassive Income, and Portfolio Income. All of our Money Out goes towards a Necessary ExpenseDiscretionary Expense, or an Asset. Simple. Now what? Now we use this model to:

A. Minimize Expenses 

B. Maximize Assets

A. Minimizing Expenses

There are thousands of tips and tricks out there on how to save money on a day to day basis. We won’t add to that list in this article. That said, there are a couple key ideas to understand when it comes to your expenses. The first is that just because something is a Necessary Expense doesn’t mean that you have to pay a lot of money for it. For example, having a car is a necessary thing, and that might mean having to make a car payment every month. However, having a payment of $700 a month for a truck with a lift kit is not necessary, nor is the monthly insurance cost for that truck, nor is the gas that such a truck consumes. The same goes for the type of apartment or home you live in, the type of food you buy, clothes you wear, etc. Just because it is a Necessary Expense does not mean you have to spend a ton of money on it.

Secondly, Discretionary Expenses add up quickly and they are easy to lose track of. A few years ago, I ate either Chipotle or Chick-Fil-A nearly every day for dinner for a few months, costing about $15 each trip. Over the course of a month, that’s about $450. Over the course of a year, that’s a little over $5000. Again, there is nothing wrong with Discretionary Expenses, but be aware that they add up quickly, especially if it’s the type of thing you purchase on a daily basis.

B. Maximizing Assets

All of the money we put towards expenses goes to other people. We pay our phone carrier so that we can use a cell phone, the bank so we can drive our cars, the bartender for fixing our drink, the barista for our coffee, and so on. This is all fine, but understand that this money never comes back. Once you hand it over, it’s gone forever. However, if you put your money in Assets, you not only keep your money but use the money you have to make you more of it. It looks like this:

Wealthy people excel at this last part. They use their Assets to make money whether or not they go to work or stay in bed. If you can have your Assets create enough money to cover your Necessary Expenses, you have achieved what is known as financial freedom. You no longer need to work to provide income because your assets provide it for you. You will only achieve this if you deliberately and consistently save your money to buy Assets that will build wealth instead of spending it in ways where you will never see it again. 

Questions about your cash flow? Contact Us