Welcome to Working Capital!
A saving and investing framework developed by Gabriel Nardi-Huffman, CFA
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The Working Capital approach to personal finance is all about crafting a saving and investing strategy that takes the stress out of wealth creation. The new Working Capital book, combined with the tools and information on this website, are my contribution to the cause. Submit your e-mail below for a free financial toolkit developed alongside the book!
The new Working Capital book is live on Amazon!
Explore the Three Phases of Wealth Creation
Execute your capital allocation decisions
Working Capital
Working Capital is the first stop for money coming in the door. Most of the time it is your checking account. The purpose of having Working Capital is to have enough liquidity to cover day-to-day expenses. Too much cash here can hurt long-term wealth creation.
Know the Numbers
The first phase of wealth creation is to fully understand your financial profile by compiling your Income Statement and Balance Sheet. This is the snapshot of your finances that is used as the basis for saving and investing decisions going forward.
Supercharge Savings
In the second phase of wealth creation - Supercharge Savings - the goal is to create value by increasing revenue relative to expenses. This means thinking like the CEO of your personal financial enterprise. Importantly, this phase isn't just about cost cutting. Even though being thrifty is important for reaching financial goals, the ability to grow revenue through developing and capitalizing on your skillset is the key long-term opportunity.
Invest the Surplus
Investing the Surplus cash we generate is the rocket fuel of the wealth creation process. Those who can employ their hard-earned savings in investments with high risk-adjusted returns will get to see the benefit of their money going to work every day. Passive wealth creation through a strong investing program can take any number of paths, but all good investment strategies incorporate some element of diversification, optimizing risk/return, and rebalancing over time.
Flex Capital
Flex Capital plays both offense and defense. It is where we stash some cash for emergencies so that a one-time expense doesn't sink us. It also is a place to keep "war chest money," or cash that we don't want to invest unless there are exceptionally good opportunities available. A high-yield savings account is a sensible place to park Flex Capital.
Pure Investment Capital
Once the Working Capital and Flex Capital accounts have been funded, any extra savings goes straight into Pure Investment Capital. This is where regular brokerage accounts or retirement accounts (or even private investments in rental properties) come into play. Pure Investment Capital represents the dollars we've invested that are expected to earn strong risk-adjusted returns and underpin our passive wealth creation over time.