Knobby22
Mmmmmm 2nd breakfast
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- 13 October 2004
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I think the small business section of your post is important. I know of a few people who went into small business to be rich and lost heaps.Basilio is correct and this is the crux of my topic.
The question won't go away and it CAN be done.
I've let this thread run some course before putting in my 2 cents worth.
There have been some good responses but like most, they fall short on application.
Hindsight is brilliantly correct. Past case examples in both compounding and opportunity do nothing for Practical application that we can use NOW.
The following is my personal view. Like some others here am fortunate enough to have made the top 1% in this country but not without a great deal of Right Place Right time and a solid understanding and implementation of the following. I refer to myself in actual practical case examples not a look at me exercise.
You are just not going to be able to become financially independent on a wage even two wages. (P.A.Y.E) You need more –some ideas---
(1) Initially you need to understand Scalability. How can you multiply your hourly rate? As a PAYE you are a slave to what it is your employer is offering and what you think you are worth. You need to look at how you can value add to your employer. The first thing you need to do is find a job where you can value add AND find an employer that will reward you for value adding. Simply this means making more MEASURABLE profit for your employer. I did this in my first job at 17 by selling tires, Radiator Flushes, and services to customers when I was Pumping Gas!--- Later when training as a printing estimator I developed a scheduling system that saved 3 wages. I made more from commissions than my wage.
Later again I multiplied my clients in a lawn Round adding an employee so in the same hours I made around another Half of his wage--- PLUS each client was worth $150 in the dollar for re-sale.
Later again I was able to do the similar with a labor force, Earthmoving equipment, and property not to mention stock and index trading. You just need to get creative but------ you need Stage 2
My time and effort is scalable.
(2) Using Other people's Money (Leverage). Money makes money don't ever forget it. The more you can get the more opportunities will be available to you. Lenders want Asset backing and affordability this can be a longer process but with the addition of (1) you can build your way to a stronger position in (2) Eventually you will have lenders coming to YOU! See the beauty of these arrangements is that lenders only want their interest payments NOT your Capital gain you want that often. This leads to the question what first?
Buy a house, Car, Super, Short-term investments, cash at the bank, or Business!!
My goal was and if I did it again would still be freeing up as much as I could for liquidity -why will become clearer in the body of this post.
I wanted to build a capital base quickly and I couldn't do that without taking some risk and without readily available cash.
Young Families often mean one wage for a short term at least. Rent, Saving, or Paying off a home, Super? Time! Where do I get funds to start my Compounding journey. The issue is having enough to make any sort of investment meaningful. Finding an extra $10K-$50K a year is too many unthinkable.
To me cash (Liquidity) is king if you don’t have sizable amounts available then you WILL miss opportunities. I suggest any investment you make has the ability to return on your capital. Loans don’t tend to do that unless you are using them in Business, or you are savvy with leverage. In My case, I bought my first business allowing me to control my income and opening the door to earnings/Profit well above my PAYE hourly wage before a house. For those here on ASF short-term trading can return sizable sums with small amounts. I have turned 10K to $100K on many occasions over the last 30 Years. Right Place right Time and understanding RISK.
(3) Self-Employment or P.A.Y.E ?
Many go on the path of small business. It’s important to understand that in most conventional cases (Save Only Fans net-related businesses). Most only make a wage for themselves with increased working hours and Stress. In My opinion and experience with many in business Small business needs to turn over > $3,000,000 under that and you’re just making a wage for yourself perhaps a healthy wage but often not worth (Seemingly ) The effort. But get to the Breakeven point of Fixed and variable overheads quickly in any one month or quarter and the Profit rises exponentially.
A little more on Scalability.
Now do that with more than one arm of a business or buy multiple businesses---rinse and repeat! The same goes for your wife and or partner. ( take on a partner I had one for 10 years ).
(4) Risk
Preservation of capital TO ME is paramount. I’m happy to put it at risk but not to the point of ruin. In business, if I have a losing month I need to know why if I don’t have an answer then there is a problem. In trading long and in particular short term I have a stop in place. I can’t see the point
Of “Doing the same thing day in and day out and expecting a different result “ if having no plan is destroying my capital base in that allocated investment. Be decisive I’d rather make a hasty call on preserving my capital on multiple occasions than hope and pray on the one occasion I lost all my capital at RISK.
(5) Opportunities
They are around us all the time. Put your risk mitigation in place and take every opportunity you can identify. Just one can change your life. They come and go as quickly as they appear.
(6) Passive income.
Inflation is always a risk. Never more so than when retiring. $3 million Today won’t be as healthy in 20 years. This is why we need to make several investments in the development of passive income. I have quite a few.
Property Rental
Long term Stock investments
I am the equity partner in more than one business.
2 Air B&Bs
All of these established over many years remain in place and regardless of capital invested remain for the most part ahead of inflation and the erosion of capital not geared to combat it. I don't need a pension.
I do hope this is helpful no matter where you are on your journey toward financial independence for you and your family. It can be done ---My son is a Doctor of Physics and I never passed Year 11 (Leaving). Anything is possible all you need to do is MAKE IT HAPPEN.
Tech