This isn’t going to be a long post but let me be clear there is a lot of nuance that goes into starting a business. There are a couple of key components though that you will not get from places like fidelity, Forbes, your financial advisor etc. Now this may seem like common sense but you would be surprised at how many small businesses fail because people follow their passions and do not think deeply about the concept highlighted below.
Do things for people who no longer want to do those things and have the money to pay someone else to do it.
A very simple example of this is cleaning the house. When many people get older or get to a point where they have disposable income, they seek to purchase time. Purchasing time simply means you pay people to do things that you no longer want to do so you can do something else. These are not complex financial concepts here. This isn’t something you need to pay a finance professional for either. It’s rather simple really and if you can do this the likelihood of you having a successful business is high.
If what you are selling gives people more time to do what they want = income.
Can you provide a good or a service for someone that they would have to do themselves but they no longer want to do it?
That is the secret weapon. If you start a business with that premise, you will likely find yourself in a situation where you can derive a good income. The jobs won’t be glamourous of course, from landscaping to house cleaning to dog walking to grocery shopping. This is a luxury purchase really but it can be scaled. Think about the businesses in your area and the services they need that they may not want to do. As an example that small house washing business who is doing something the homeowner doesn’t want to do, might not want to do their own booking keeping.
This is different from the old concept of “solving a problem” for people or businesses which is a good way to start as business as well but relies completely on the notion that the entity you want to work for can’t do it themselves. The secret I am giving you now is very lucrative, it’s doing something for other people they do not want to do.
You can make a nice living doing this, because let’s face it everyone has something in their life they simply don’t want to do.
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Another financial tip post for the moderate to advanced investor. Normal disclaimer: This is my personal opinion based on decades of work in the finance industry. The intent of this post is to give you my opinions, observations and insights into my experiences to help you gather a more robust knowledge base to help you make good financial decisions.
We are in a hot real-estate market right now. Historically low interest rates that have been sustained for decades by the federal reserve have (IMHO) negatively impacted housing prices. That’s issue 1, issue 2 is Covid and the rental issues we saw over the last few years. Depending on where you lived there were eviction moratoriums, rent relief, on and on.
The long and short of it is, it’s a sellers’ market. Houses are going for premium prices and it’s likely that on the next down cycle those houses will decrease in value leaving many new home owners in an upside down equity position. We have seen this many times in the past, housing goes up and down but over a 30-year period you will likely make money on the investment. The other issue there is many people aren’t spending 30 years in a residence anymore.
As an investor real-estate is a great investment because the down turns normally don’t last too long and even when your equity position has down cycled the asset is still generating income via rent. Land is an entirely different discussion as the asset value is really predicated on the anticipation of are growth so I am not going into that here at all. Residential vs Commercial though is a very important discussion and when (and if) you are at the point in your investing life that you want to get into real-estate its crucial to decide which way you want to go.
In a market like the one we have now, if you had a portfolio of residential properties you could flip it and make a killing, again it’s a sellers’ market. The issue with residential properties is, and always will be the landlord tenant relationship. Flipping houses is one thing, that in my mind is a commercial endeavor you are never renting this space you are purchasing an asset and reselling the asset. Residential real estate is a headache because you have tenants.
The housing market is on fire, buy low, sell high….
Of course you have steady income via rent, assuming they pay of course. The downside is you are trusting your asset to people whom are using the space to live. Unlike a commercial property where your tenants are using the space to generate income.
I bolded the above because it is the lynch pin in the advice. How people live has so many variables we can’t discuss them all in one post. As a landlord you are beholden to their lifestyle, they could be wonderful and have the same moral compass you do, or they may not. The worst part of residential real estate is when you sell (if you do) the residential value isn’t simply the location of the asset but how the asset was maintained and other residential locations in that area.
Commercial property? Its highly likely that a commercial renter is going to do their best to maintain and in some cases upgrade the property to make sure they can generate income from their rental investment. The residential tenant has no income potential from your condo, sure their quality of home life is impacted but they go elsewhere to get money to live. The Commercial tenant relies on your property to generate income so they can live their life.
Its logical then to conclude your best possible income outcome is from commercial property. They are more expensive but you are renting (leasing) your asset to someone else who has in their best interest to maintain and maximize your property so they make money. The lease payments come in every month, the property is maintained, the tenant makes money. Everyone is happy and your asset is much more secure.
The residential property? Maybe you got lucky and got a renter who cares. Maybe you didn’t. Anytime something happens at the residential property you have to fix it. The commercial property? They will likely do it and ask for a credit. Residential, you have to take care of it and that time cost is immeasurable. At the end of the day, Commercial properties are less headache and higher income potential due to less time investment required by the landlord.
Today’s real-estate market is hot and residential properties are through the roof. That 3 store strip mall that services those residential properties? It’s always there, it’s always got traffic regardless of how much houses cost.
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Below are 3 things you can do right now to get more money. These will not be side hustles, or huge amounts of money but they will save you money over time and thus increase your income and allow you to become more financially solvent. As a reminder any finance advice you see on this blog is my opinion only, based on my decades of experience in the finance industry. Before making any financial decision always obtain as much information as you possibly can.
Consumption apps: What does this mean? Simple example the Starbucks app. If you consume coffee, food, gas and you frequent a particular place regularly you should see if that place has an app that offers discounts. So many of them do now, drug stores, grocery stores, fast food, sit down restaurants you name it. What many of them do is offer you discounts based on your purchases. If you are going anyway why not? Do not go out of your way to buy more, just keep your consumption at its normal level and take advantage of their promotions and you will over time save money.
Health plan reimbursements: Many health plans have an annual reimbursement for gym memberships, and working out. If as an example you walk regularly, you can have your doctor sign a letter stating you do so and submit it to your health plan. Many health plans give a % back to you of your cost (gym membership, shoes) or have a flat reimbursement annually $100-$1000 if you prove you were exercising preventatively. This can mean basketball league, after work softball, a gym membership, a martial arts class, yoga instruction. Even several state sponsored and federally sponsored health insurance plans have this kind of reimbursement.
Sell stuff you aren’t using: Old golf clubs, Clothes, kids toys, pets supplies as examples. There is an entire economy out there on EBay and craigslist (and others) of people buying and selling used items. It’s not hard to set up an eBay account and sell things, with the internet you can get a good idea of the value of items as well. It maybe that you have an old leather jacket in your closet you haven’t worn in years and don’t plan to. What if that sold for $75 on EBay?
Bonus Tip!
Look through your stuff and see if you can identify hidden gems. Have an old comic book collection? An antique watch? A vase from your great grandmother? Some of these items may be worth a lot of money. Ever see a show called the Antiques roadshow? Most of those people have no idea what they have, and who knows, maybe that random painting you have in storage is worth something….
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FIRE = Financial independence retire early. It is one of the newer concepts in the finance world and the practioner of it have some amazing stories, many are complete successes. Make no mistake about it, this is an extreme practice in the sense that your goal is to save as much as possible as fast as possible to achieve enough capital to generate income that enables you to retire early. Most of us have been trained by the media, government and financial professionals that you want to work until you’re in your 60’s then retire.
FIRE looks at those principals and proposes “Why not retire at 35 and take back 25 years of my time?” It’s a great concept and If done correctly is absolutely viable and something everyone should strive for. The issue is how do you come to a point where you are able to save 50-75% of your income? That’s essentially the range you’re going to have to hit to achieve this goal to retire in your 30’s, depending of course on your income year over year but that range is generally accepted in the FIRE movement.
What does that actually look like?
No vacations
Cheapest food possible
Second hand clothes
Used cars
Cheapest rent possible
Minimum utilities (no cable, no Wi-Fi)
I’m begging you, no more lists….
To list a few. See this is the hardest part and it’s something a lot of the FIRE sites don’t go into too much detail on. The fact is you have to have extreme discipline and sacrifice for a short to mid amount of time to achieve the long term goal. 10 years of living a minimalist life while accumulating as much income as possible while everyone else lives life? That takes a unique person to pull off but the payoff is what makes it all worth it. Imagine for a moment you have accumulated 400-800K thousand in savings via investments whatever by 35 and have no debt?
Could you live on that for 40 years? Yes, you probably could. You would not be leading an extravagant life style though. New Lexus? Nope. Vacation homes? Not likely. European trips once a year? Probably not. If you invested your money well and the markets return their historic averages which is between 8-10% on a 600K nest egg you would be generating between 45-60K a year (estimated).
That would all be passive income, you wouldn’t be working and you would have the benefit of being able to do whatever you want with your time. FIRE is a very unique nuanced movement it does work, you can do this, but it takes the right person to pull off. I admire the people that have done this, I didn’t I took a more traditional route and now in my 50’s I have a great financial situation but I’m 20 years removed from many of the FIRE practioner. I could probably retire now but that would mean my kids would have to pay their own educations which isn’t horrific, I mean I did it….
Maybe FIRE is right for you, I don’t know. If you really want to retire early you have to start working on it ASAP. Generally, the best way to accumulate wealth is to be debt free so all of your income you generate is not sent to someone else. Simply put, anything you can’t pay for outright you can’t afford and “payments” are giving someone else money so you can have something you can’t afford. You need to get out of that cycle ASAP and stop sending other people your income. Once that happens all your income can be used to generate more income and build your wealth profile. It piles up fast, but it remains stagnant if you do nothing.
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