From 9 Side Hustles to 6 Figures

Interview with WTM Co-Author, Max Gerekht

This interview was originally published on the personal finance blog, Young, Not Broke, in September of 2020. Young, Not Broke, focused on sharing personal finance journeys of young professionals from all walks of backgrounds to increase transparency behind personal finance and help share strong financial habits. Young, Not Broke has since been decommissioned. The interview in its original form has been reposted on What the Market. Hope you enjoy the interview.

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This week we have Max Gerekht, who talks about how hustling to pay for college influenced his current financial system. Max shares his strategy to change spending behaviors and how he tackled lifestyle creep.

Interview

Kavya: Tell me a little bit about yourself? Where did you go to college and when did you graduate? 

I started out at Salem State University and then transferred to the University of Richmond. I studied business throughout my time at both colleges and that allowed me to join Deloitte after college.

I kicked off my career at Deloitte in federal consulting. I jumped around a bunch during my time there, eventually moved out to San Francisco to work at a think tank, and am currently in New York for my current role!

What was the first time you thought about personal finance for yourself?

I started thinking about money and finances when I was 12 years old. Money was tight growing up so if there was anything I wanted to do, even as simple as joining the soccer team, I had to fund it myself.

I started doing odd jobs to make some money here and there but I got really frustrated with the work I could find. The legal age to get an hourly job in Mass at the time was 15. When I was 14, I interviewed for a job at a local hardware store and when asked about my age I said I was 15 and ready to work.

That was my first source of income and by the end of high school, I had 3 different sources (Hardware store, ice cream shop, and caddying) of income.

What were finances like for you during college? Did you have to support yourself through college?

Things were tough since my parents both lost their jobs during the recession. At the time, my brother was in college so we had this conversation where they said there's not much we can afford to pay for without going into crazy debt. My parents had also stressed the importance of avoiding debt throughout my life.

My initial thought was, "I'm not going to college, I've got this job at the hardware store. I've been working here forever, maybe the owner will let me take over one day."

Ultimately, I decided to go to college but I had sacked my high school career, thinking I wasn't going to go. State school was my only choice as it was the cheapest place for me to go. Tuition was $7,000 a year with federal funding so I told myself I had to come up with 7 grand a year to make this work. I probably ended up having 9 different sources of income that I was managing during those first 2 years at Salem. 

That was the start of building my personal finance system in Excel that I still use today. I was juggling multiple streams of income while taking a ton of extra classes and being active on campus.

Managing 9 different sources of income is super impressive, what were some of them?

I helped people with interview prep and edited their resumes. My roommate and I started hosting a weekly poker game. We were good so one of us almost always won. 

I had an on-campus job through the federal work-study program at the fitness center. In the first week that I was there, my boss left for a couple weeks, so I ended up taking advantage of the situation. I told the people who started after me that I was their manager. So I trained them and taught them how to do everything and would check in on them. Even though I had an 8-hour shift, I didn’t have to stay the whole time and my boss was okay with it as well since he didn’t have to worry about things anymore.

I had an unpaid Marketing internship at a restaurant chain so I convinced the director to pay me with an occasional $100 gift card. I had a friend who worked within the dining services department which would regularly host raffles and sign-ups for different events. I worked with him to sell raffle tickets for my gift card with an 80/20 revenue share of tickets sold. At a 10,000 person school, the raffle actually made a good chunk of money.

I ran the Marketing Association on campus and since I had built it up from the beginning, I used the brand to give myself credibility with local businesses. I would pick up consulting gigs with local businesses that brought in $300-$500 per project.

How did you construct your Excel spreadsheet and what did it look like?

I was focused on understanding what my fixed expenses were and how much I could spend. In high school, I had an old gas-guzzling car that my grandfather gifted me. Gas was over $4/gallon and I remember thinking that I didn't want to think about whether or not I had enough gas money to be able to go hang out with my friends.

So I immediately started calculating how much I spent on food, gas, and any other necessities each week. I took that number and then just set aside that amount from each paycheck as soon as I got it. The rest I could do whatever I wanted to do with, whether that was saving or spending. That was really freeing.

The early stages of the spreadsheet back in college reflected that process. I was driven to understand my finances because I had to have enough for tuition and I needed to know how close I was, how much more money I needed to make, and where I could make that money. It was goal oriented - and I couldn't afford to spend anything that I needed towards my goals. But having it all planned out, I could plan over the long term and have monthly goals, which allowed me to have some free spending cash.

What does your system look like today? How did it evolve post-college?

Instead of just thinking about what I'm buying, I'm really focused on the behaviors. Why do I buy things? instead of, What did I buy?

In the tool I have today, I track my expenses but I added categories and subcategories for each purchase. The category is why I bought something and the subcategory is what I bought. Most tools, like Mint, only track what you bought and not why.

What’s been the value add of tracking why you buy something vs just what you buy?

Let's say you want to cut back on your food expenses and you decide that you'll cut back on ordering out and cook more at home. Currently, if you only track what you bought as "Food" or "Restaurant" it might say you spend 1,000 / month. So you cook for the month but notice you only saved $200 and you're still somehow spending $800 on food. You may get frustrated and give up.

What you're missing is why you ate at a restaurant, maybe you're going out to lots of dinners with your friends or maybe you didn't cook because you didn't have groceries and had to order take out. 

These are very different whys. One is a social behavior and the other is one of necessity. To save in these categories you'd need to either change your social habits or your lifestyle habits and routines to grocery shop and cook more.

A lot of people get frustrated by budgets when they feel like they have arbitrary limits. By figuring out the why, it's a lot more effective.

Lifestyle creep is something a lot of new grads deal with and it really impacts their finances. How did you handle the transition from hustling for money in college to bringing in an income?

When I started out at Deloitte, I had a good salary of $65,000 and after the money hustle for 9 years that was a huge relief. I had the vision of making a lot of money. 

The happy hour culture in DC was pretty strong and one of my biggest expenses was spending money at bars on alcohol and while I had some great memories, I would have been better off investing that money. So I started inviting friends over for pre-games. I saved hundreds of dollars by just spending less at bars and honestly - had a lot more fun.

I used my Excel tool to begin to understand my lifestyle and how much that lifestyle cost. I would make adjustments as needed and I lived comfortably within my lifestyle. Whenever I got a raise or promotion I didn't change my lifestyle, I just increased my savings.

If there was something I really wanted to do more of, I would calculate it into my lifestyle and the new cost of that lifestyle. (e.g., traveling more). The trade-off is accelerated financial goals vs. enjoying the lifestyle, and sometimes those were the same thing, which was the case with traveling.

What did you do with the money you saved?

I got really into investing right away. Maybe I was arrogant at the time, but I didn't trust mutual funds. I spent a lot of time researching them and believed I would be better off investing on my own. I spent a lot of time reading and learning about investing and different strategies. I also read a ton of different books and blogs about the subject as well.

I practiced investing on a simulator (MarketWatch - Virtual Stock Exchange) for about 6 months to train myself to not make emotional investing decisions. This helped me test out different strategies and principles for investing. Warren Buffet's principles heavily influenced my investing style and I still rely on this advice and principles today.

Looking back, I do regret not taking advantage of my employer's 401k match since that is 100% tax-free returns on that money. At the time I had the mentality of starting a company within 1-2 years so I wasn't super focused on saving for retirement. However, I did open up a Roth IRA pretty early on since it's post-tax and maxed out that every year.

What were some of the investing strategies you followed?

Early on I was hyper-focused on growth and making as much money as possible as quickly as possible. I looked at IPOs since they usually have a huge hype followed by a bubble and then they usually skyrocket. 

Shake Shack was one of the first IPOs I followed and started investing in. It was so volatile, the stock price went up and down almost every day. Wix is also another IPO that started in the $20s and they now trade in the 200s. Those were the kind of early companies I was going after.

I also, regrettably, invested in penny stocks. I wish somebody had slapped me in the face the second I said I was going to invest in penny stocks. Just imagine Leonardo DiCaprio from Wolf of Wall Street on the other end of the phone selling you these stocks, it's all fake.

How has your overall financial system evolved now that you're further into your career and making more money?

It's definitely evolved over the years and gotten more robust.  I've developed an emergency fund based on my total monthly needs. So I always have 6 months’ worth of expenses put away so that if anything happens, I can still sustain my exact lifestyle without changing anything.

I calculate numbers like my gross value and net value. Knowing my gross value, which is the amount, to the penny, of all the money I have to work with, is really liberating for me.

Since I have been tracking my expenses for so long I have really good data on how my behaviors and spending has changed over the years. I can track my savings rate and set goals really easily.

If I have a month where my average monthly expenses shoot up, I can jump into the data and figure out the exact cause of the jump. Was it intentional or was there a behavior change I didn't even realize?

Have there been any downsides of tracking your finances so diligently or has it worked really well for your needs?

For the most part, being hyper-aware of my finances has been really liberating as I needed that as someone who used to always be worried about having enough money. 

After leaving Deloitte, I was unemployed for a while before picking up consulting gigs. During that time I was hyper fixated on my runway and it caused me a lot of anxiety. “Oh no, I only have 5 months left, I only have 4 months” and it wasn't healthy at all. 

Thankfully I was able to shift my focus and start my consulting gig and start taking on clients and bringing in money again. Even though the money wasn't always enough, it did increase my runway and taught me that focusing on the money running out wasn't taking me anywhere. 

For a while, during the time I was unemployed, I was so paralyzed by just thinking about how many months I had left in my runway instead of working to find ways to make money. In summary, playing defense is great, but don’t let it distract you from playing offense.

When you started your consulting company, what were some of the tradeoffs you had to make in your spending?

I spent some time in Thailand which allowed me to not worry too much about my burn rate since Thailand is fortunately really cheap. When you go there with the US dollar, you feel extremely privileged since it can take you a long way.

However, when I got back home I moved back in with my family since I couldn't afford to pay rent without diving into savings or investments. I cut back on a lot of other want expenses such as nightlife, eating out, travel, etc. 

My expenses in general have always been on the lower end as a result of becoming a minimalist while I was a consultant. The job requires you to travel a lot and I realized I didn't like carrying around so much stuff all the time, both on me and in my apartment. This mentality of being a minimalist also carried into my finances.

What were some of the ways being a minimalist impacted your finances?

It translated into my finances by making my spending focus be on my happiness. Right out of college I was just around this culture of happy hours and going out a lot. I was spending so much money on things I didn't even want to really be doing. Years later I realized I didn't even like most of the drinks I was buying at bars.

What did I like? I loved outdoor adventures like hiking and camping, or going to events. I realized I could take the $500 I was spending a month at bars and just spend it on shows, events, and doing things outside. 

Being able to spend money on things that actually brought me happiness has made a huge difference for me on top of keeping my expenses low. Minimalism helped me be less wasteful and more intentional with my spending.

If you could give one piece of actionable advice for someone starting out on their financial journey what would it be?

One of the simplest and purest things that I find people falling into the trap of way too much is racking up debt (e.g., credit cards, loans). Get rid of any debts that you have, pay those off ASAP, whether it's student loan debt or personal debt. Don't get into credit card debt unless you're in excruciating circumstances.

I'm all for using credit cards but use your credit card like a debit card. Don't spend what you don't have. Take advantage of points, since that's free money you're getting back and pay off your credit cards every month. When you're worried about debt, it's a weight you're carrying on your shoulders and you'll find so much freedom in not having to deal with debt.

People are often worried about making the wrong financial decision, especially since the outcome could be losing money that you’ve worked really hard for. What is your response to the fear and anxiety dealing with money can create?

I think the answer here is two-fold, there's the personal finance side and the investing side.

On the personal finance side, everyone needs to find a system that works for them. Understand your habits and look at everything objectively. Keep it simple and start with an Excel spreadsheet or use the tools your bank offers. Understand your lifestyle and your average expenses. If you have a $3,000 a month lifestyle, you need to make sure you're bringing in the money each month to make that possible.

On the investing side, you need to take all emotion out of it. Any money that you're willing to invest, you have to be willing to lose. 

One of my early investments was in Wix, and I had spent months researching the company. I knew everything about them. I believed they were better than their competitors and truly thought they would crush it. I invested about $8K into the company and this was my first big splash. Within the first two months, Wix dropped from $22 a share to $14. My anxiety went up so high. However, when my mentor would ask me how I was feeling about things, I kept saying I trusted my analysis.

Looking back, maybe it was arrogant, but I am glad I held it in because I ended up making a 4-5x return on my investment. However, there was just so much anxiety that came with it because seeing your hard-earned money drop 40% is horrifying. Even after all those practice runs with the simulator, the emotions still came up. 

This experience taught me the hard way to plan how much I'm willing to risk, and setting safety measures such as stop-losses to protect against potential losses, though holding long here proved the profitable move. 

Rapid Fire

What credit cards do you have and why do you have those ones?

Chase Sapphire Reserve

Chase Freedom

I have a few others but I don't really use them that often.

The CSR and the Freedom, give me the best point structure for what I spend money on and have the best partners. With the Freedom card, you can get 1.5x on everything you spend on so for any purchases that aren't covered by the CSR, I can use the Freedom and you can combine the points to increase your purchasing power.

How much of your income do you save annually amongst different financial vehicles?

Pre-COVID I was saving anywhere between 38-45% of my income monthly and during COVID, I'm saving almost 60% of my income.

Almost all of that money goes into investments. About 88% of my total gross value is in my retirement and regular brokerage accounts.

What tools/apps/services do you use to manage your money?

My Excel spreadsheet continues to be the main tool I use to track my investments.

I use E-Trade for all my investing accounts and Coinbase for crypto-investing

Resources you would recommend?

Rich Dad, Poor Dad by Robert Kiyosaki is a must-read for anyone thinking about getting into a mindset around money.

For investing, I would recommend The Warren Buffet Way by Robert Hagstrom. It's a great, light book that you can skim to understand Buffet's principles.

What I Learned Losing a Million Dollars by Jim Paul and Brendan Moynihan. It's a contrarian investing book because you'll learn that there are 1000 different ways to make money and everyone has their own way but everyone loses their money in the same 5 ways and that's what this book focuses on