Knobby22
Mmmmmm 2nd breakfast
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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.
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
But how many do you know that became rich on a wave...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.
but that has been a recurring theme over the decades i have been an adult , surviving the first three years has usually been a challengeI 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.
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.
The company returns well in excess returns on my capital v if I sold it and had a return on the funds received.
(16-25%) over the last 11 years.
I am fortunate enough to be the venture capitalist in My own and a few other smaller businesses.
What you are saying is 100% true but its a question of time-frame. With the simple approach you outline most people will be at least in their 60 if not older by the time they get wealthy. What if somebody wants to be wealthy in their 30s to better enjoy the prime years of their life?I disagree, even small savings from PAYE wages compounds into large amounts if you start early enough, and no need to do anything fancy, just dollar cost into the Asx300 index and you will do fine over time.
if you also end up owning your own home, even better.
i know multiple people that would have been better to stick with there employment rather than go down the self employed route.
as I have said before it’s not where you earn your money that matters it’s what you do with it.
its not hard, golden rule is just spend less than you earn, and invest the difference.
What you are saying is 100% true but its a question of time-frame. With the simple approach you outline most people will be at least in their 60 if not older by the time they get wealthy. What if somebody wants to be wealthy in their 30s to better enjoy the prime years of their life?
Sure if you start at age 18 and invest $1000 per month into an index fund (with dividends reinvested) by the time you are 60 you will be financially comfortable, but you had to work all the way until aged 60.
I am not disagreeing with what you are saying but its now a totally different story. The first scenario you and I discussed is an idiot proof plan that anybody with a modicum of discipline can follow and it requires no skill and very little luck. I picked a $1000 per month because that is doable to most people on low/modest wages. Higher monthly savings amounts either require high earnings or a large amount of discipline which a lot of people do not have either of those. As for earning higher returns you are outperforming the index funds as am I. However you are already aware that most people will not be able to outperform an index fund over the long-term.if you want to be wealthy sooner, you can two things.
1, increase your savings rate (eg save more per week out of your wages)
or
2, increase your investment returns (make better investments)
Both can be tricky, and have their own risk vs rewards but it‘s up to you. Also you don’t have to give up work completely, some people hit their mid 30’s with a moderate amount of wealth and take the opportunity to just scale back work, taking a less stressful part time job, that allows them to keep compounding a portion of their investments but freeing up a lot of time.
I did both 1 and 2 I saved roughly 50% of my wages at my peak savings, and I invested it well, and I “retired” at 36.
there is also a third option, which is lower your expectations of what you need to spend to live your personal best life. If you want to live like a Kardashian and have a private jet and a collection of Lambos, you might not be able to retire until you are 180.
but if you are happy with a simple life, you can retire early.
Agreed. In general on average a small business is riskier than a larger business. A typical business with $1 million in annual revenue is much riskier on average than a typical business with $100 million of annual revenue for a variety of reasons. Hence on average shares are less risky than a small business.same.
The way I look at small business is that it’s like a job, that you control, you need to think of the profits it generates as a vehicle to buy other investments, load up your super, and hopefully be work you enjoy with people you like.
some small business people fall into the trap of thinking they don’t need super or other investments, and then one day their business starts to shrivel up.
I ran a small business for 12 years it grew for the first 6 and slowly shriveled for the second 6, I ended up selling it for $5,000 I had originally bought it for $130,000.
It was great though, it taught me a lot about business and accounting, I lived in the 1 bedroom flat at the back for 12 years rent free, and it provided me a decent wage and a few years provided wind fall profits.
But technology meant it was destined to fail, luckily the whole time I owned it I was able to build up an external share portfolio, so was happy to walk away.
some others in my industry have lost close to everything, because they thought of their business as their super.
Happy New Year everyone
2024 opens with many challenges for most.
Following the discussion on one of the housing threads I feel that there is
a great deal more that needs to be considered by everyone who chooses to live
in western society. Getting a job is generally the first consideration after we finish
our education at what ever level we wish to or are able to attain.
Our aims are to live comfortably.
Own a home, have a family , enjoy the best quality of life we can including all
many of the toys — then retire comfortably enjoying the fruits of our endeavour.
But from experience most don’t consider what they need for retirement
Forced or chosen.
Further often they under estimate what they will need particularly a couple.
So very very few will attain all. Statistically under 5% ( depending on your
opinion of what financial independence is particularly after 10 or so years
of retirement)
These are questions which need serious consideration
Not just pontification but answers —- better still a blueprint.
So how much do we need and how do we get there ?
With housing being unobtainable to many disposable retirement income
is nothing but an impossibility.
To some it will prove to be correct.
But to others it will be possible in fact I believe most —- with a well thought out
blueprint —- you can have it all but not without effort And thinking well out of
your square.
I have a blueprint which I’ll present including the why and how (Many know
I have a lot of property BUT the blueprint goes well beyond that.)
I encourage those here who are living or organising their blueprint to take part
in this thread. You wouldn’t have found your way to ASF unless you wanted to
invest in your financial future! So let’s help build the future we all want our selves
and our families to live.
Let’s make 2024 the start for some and the continuation for others to financial
freedom .
tech
Superannuation’s valley of death needs good advice to get through
Superannuation is Australians’ best way to save money for retirement and save tax at the same time, but there remain some traps that can kill part of your finances.
Take, for example, what could be described as super’s valley of death. It spans about $400,000 and is the danger zone where having your super balance hit a certain level becomes financially pointless.
The valley opens at around $800,000 for a couple, and it can reduce age pension payments more than the extra money’s investment returns are likely to deliver.
Financial strategist Theo Marinis calls it “super’s dirty little secret”.
“The sad reality is there is very little benefit in retiring with a balance between $800,000 and $1.2 million,” he says.
Many people may think they will never have a nest egg that large, but we are talking about couples when looking at these numbers, and as compulsory superannuation heads towards 12 per cent of wages it will become more common to see individuals with $400,000 balances.
Centrelink’s age pension assets test starts reducing payments when a homeowner couple has $451,500 of assets excluding their family home, which is exempt from means testing.
That same couple can hold assets totalling $1.03m before age pension payments – and associated concessions – cut out completely.
Marinis says a couple with $1.5m will not significantly benefit from the pension system until their own money runs down to about $800,000, while a combined nest egg above $2m means they are unlikely to ever require a pension.
Figures from the Association of Superannuation Funds of Australia show average super balances for 60-64 year olds were $403,000 for men and $318,000 for women as of mid-2021.
A majority of people retire receiving age pension payments, often a part pension these days thanks to compulsory super existing since the early 1990s.
Despite the wackiness of the pension and super rules making things tricky for people with just over $800,000, there are plenty of strategies that can help savers and seniors navigate the system successfully.
Strategy number one is to build a bigger balance if you have enough years ahead of retirement. Salary sacrifice and other tax-deductible contributions, after-tax contributions, co-contributions, spouse contributions and downsizer contributions are among the incentives to help people build a big nest egg faster.
People can also turn some of their nest egg into exempt money by injecting it into their own home via renovations or buying a more expensive property, but there are hefty buying and selling costs so everything would have to be weighed up.
A legitimate strategy could be to feed your travel bug early in retirement, as money spent on those memorable life experiences will no longer be assessed by Centrelink.
Also, where one member of an older couple is significantly younger than the other and below the pension age of 67, extra money can be put into the younger partner’s super fund where it won’t be counted by Centrelink until they reach 67.
The complexity of our system means good financial planners are worth their weight in gold, as they can often save people tens of thousands of dollars simply by recommending tax-effective superannuation strategies.
Super’s valley of death lurks on the horizon for many, but the way that Australians approach and navigate it can result on only a small amount of money being killed off by crazy super, tax and pension rules.
Still less FMG returned over that time, as a simple buy and hold, while you could have played golf (hahaha sorry I had to say it)
——————
Out of all people here Tech, you confuse me the most, because you seem to be quite business like in all your dealings, but while it comes to buying little pieces of businesses, you throw your business cap out the window.
Have you ever tried looking at the businesses listed on the stock market as businesses, and tried to make business like assessments of them?
Interesting reading -
1. Yes, of course if you want to get rich in your 30’s by investing in the index you are going to have to do some things that are very different than the average Joe. This includes being more financially disciplined, being frugal etc to maximise the amount you can save, also maximising the amount you earn, eg working in a higher paying job, or working over time, or even working a second job etc.1. I am not disagreeing with what you are saying but it’s now a totally different story. The first scenario you and I discussed is an idiot proof plan that anybody with a modicum of discipline can follow and it requires no skill and very little luck. I picked a $1000 per month because that is doable to most people on low/modest wages. Higher monthly savings amounts either require high earnings or a large amount of discipline which a lot of people do not have either of those. As for earning higher returns you are outperforming the index funds as am I. However you are already aware that most people will not be able to outperform an index fund over the long-term.
2 . So we have gone from talking about a strategy that almost anyone in a first world country could do to a strategy that only some people would be able to follow.
So essentially you are saying you refuse to treat stocks as a business because you lack control and therefore counter-party risk is higher. I do understand you position especially given that most large corporations are poorly managed (especially the ones managed by professional/hired management). But I feel that the increased risk that comes from what you give up in terms of control (and sometimes quality of management) is counterbalanced by the robustness of the underlying business itself. As a small business owner you will likely never have a business that has the product and customer/market diversification of 3M or the brand loyalty and distribution of Coca-Cola or Apple or the cost advantage and scale (relative to industry average) of BHP or Fortescue metals.I do that without looking at the numbers every time I buy a stock. It's either s short-term purchase or part of a system purchase. In both cases, I don't need to analyze the businesses.
I have a rule which I've adhered to all my life.
If you can't manage it then don't do it.
I can manage my own company and have a controlling influence in others in which I am a venture capitalist.
In Trading, I can reverse my position with the click of a mouse or close it out.
I own my properties.
I won't buy into something controlled by someone else.
EG I won't buy property off plan.
I won't purchase recommendations from others (Stock, bitcoin etc)
VC you have a methodology that has worked well for you.
Me too.
Even though we have both presented some secret sauce others may not be able to follow no matter how closely they
implement similar stratagies.
You and I have been very fortunate Luck --- Right place right time right opportunity has come our way.
Indecision, ( Lost many an opportunity because I hesitated) Poor decision (Hindsite proved I was pretty crap with some decisions).
Not seeing the opportunity (Mountains of these---Gold from $250 Long Oil/Short Oil, Long DJIA the list is endless.)
So in direct answer is no
and at my age, I won't either. I know enough to know that you'll never know enough yet you will always know enough.
One size doesn't fit all.
TrueSo essentially you are saying you refuse to treat stocks as a business because you lack control and therefore counter-party risk is higher. I do understand you position especially given that most large corporations are poorly managed (especially the ones managed by professional/hired management). But I feel that the increased risk that comes from what you give up in terms of control (and sometimes quality of management) is counterbalanced by the robustness of the underlying business itself. As a small business owner you will likely never have a business that has the product and customer/market diversification of 3M or the brand loyalty and distribution of Coca-Cola or Apple or the cost advantage and scale (relative to industry average) of BHP or Fortescue metals.
Yes you are rightSo essentially you are saying you refuse to treat stocks as a business because you lack control and therefore counter-party risk is higher. I do understand you position especially given that most large corporations are poorly managed (especially the ones managed by professional/hired management). But I feel that the increased risk that comes from what you give up in terms of control (and sometimes quality of management) is counterbalanced by the robustness of the underlying business itself. As a small business owner you will likely never have a business that has the product and customer/market diversification of 3M or the brand loyalty and distribution of Coca-Cola or Apple or the cost advantage and scale (relative to industry average) of BHP or Fortescue metals.
Yes odds may be stacked against retail shareholders but they are even more stacked against small business owners (government regulation favours larger companies). The guy who invests his life's savings in buying or opening a local fish and chips shop is far more likely to lose his life savings then the guy who invests his life savings in BHP or Telstra shares.True
But the odds are so stacked against the retail shareholders that I think it is necessary to diversify to the hilt, so pay the index etfs extra..and get a self rebalance for free.
In any case, it is impossible to start getting meaningfull amounts in share for a long while.
For one VC, there are thousands of losers who so will not be discussing here ..wrong shares, wrong timing, call it luck or run over by a bus or a sick kid..actually having kids at all, not mentioning divorce if you believe in love and not cheap hookers.
Also, different times, places , countries and tax systems will greatly affect your results.
VC story ..I just take him as an example, would not be possible in socialist France but easier in the USA.
Whereas I believe @tech/a's approach can be emulated in France definitively or even a downtrodden refugee camp in the desert.
More or less easy: taxation, unions, paperwork, mafia payback you name it.
If you look at what the whole of market indexes have returned in both dividends and capital gains over the long term, I don’t think the odds are against retail investors, the tide is definitely in their favour. It’s only really people that try and jump in and out of the market that get hurt.True
But the odds are so stacked against the retail shareholders that I think it is necessary to diversify to the hilt, so pay the index etfs extra..and get a self rebalance for free.
In any case, it is impossible to start getting meaningfull amounts in share for a long while.
For one VC, there are thousands of losers who so will not be discussing here ..wrong shares, wrong timing, call it luck or run over by a bus or a sick kid..actually having kids at all, not mentioning divorce if you believe in love and not cheap hookers.
Also, different times, places , countries and tax systems will greatly affect your results.
VC story ..I just take him as an example, would not be possible in socialist France but easier in the USA.
Whereas I believe @tech/a's approach can be emulated in France definitively or even a downtrodden refugee camp in the desert.
More or less easy: taxation, unions, paperwork, mafia payback you name it.
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