Will stocks help you achieve your financial objectives? Consider bonds. A well-balanced portfolio?
Nowhere near. Your retirement planning is likely to be delayed, laborious, and disappointing if you don’t invest in some of the four assets that will make you wealthy. The game for your money and finances can alter, though, if you can grasp any one of these four items.
I can speak from experience since over the past 25 years, I’ve invested in a variety of things, including mutual funds, hard money lending, oil and gas, and car detailing. I once considered renting storage space. None of them was as significant as these four assets, so let’s dig in.
Table of Contents
1. Businesses
I’ll say right up front that I’m speaking about private companies. Walker Deibel discusses acquisition entrepreneurship, or buying an established company rather than creating one from scratch, in his book Buy Then Build. The justification is reasonable: most start-up enterprises that adopt the “Silicon Valley tech startup” strategy of raising money and spending it quickly fail before they ever turn a profit.
Entrepreneurship through acquisition improves your chances. When you purchase a company and adopt an entrepreneurial strategy to increase value, your cash flow soon improves or is present from the beginning. A small firm that combines a profitable, long-lasting infrastructure with fresh innovation and entrepreneurship makes a winning mix.
Existing businesses have all the things that startups lack, including customers, brand recognition, employees, and most significantly, revenue and profits. Instead of having to develop sales from scratch with a new product, you don’t need to go out and raise money for months or even years.
That is as a result of the fact that you have a successful foundation from which to start and an established market in which to operate. Being first to market, needing to build a market from scratch, or competing with other businesses for market share are not concerns for you.
Many of the risks associated with entrepreneurship are eliminated when you purchase a company, which normally has more than $1 million in annual revenue. Although brokers usually require a few hundred thousand dollars in current cash, purchasing an existing business makes it much simpler to obtain financing. Walker notes that banks will use the assets of the business as collateral to lend buyers money up to 90% of the purchase price.
These transactions are often funded entirely at once: you supply the down paystub or other kind of equity injection, and the bank covers the remaining balance. The benefit of choosing this course is that you will own the entire business.
If you want cash flow now rather than having to wait 30 years for retirement, look for businesses with recurring revenue. Target companies that can run without your everyday engagement as well.
Despite this, you still need to understand the key KPIs and how to manage them. Your ability to better monetize the company than the previous owners, whether by eliminating inefficiencies, utilizing technology to reduce expenses, or creating new product lines that draw in new clients, is what you can contribute as the secret sauce.
2. Property
Real estate is a resource that, depending on who you ask, may be both a good investment and a disastrous one. Everything hinges on you. After all, the investor bears the risk, not the investment.
These investments require more active management than many people feel confident doing. They would rather give their money to someone else and rely on that paystub, yet that model has failed so spectacularly because no one is really sure if it is effective or not. They simply have faith that everything will turn out for the best. That’s not actually how real estate operates.
Prioritize cash flow in order to be successful and reduce risk right now. The purchase is where the profit is. When real estate is handled properly, you gain money when you acquire rather than when you sell. Third, search for multi-unit buildings. With those, you complete a single financing agreement while acquiring many properties, and even if one is vacant, you can still generate cash flow.
Arrange your finances before making a purchase. Get pre-approved, schedule a meeting with the bankers and planners in advance, and ensure that you are aware of all the details of your loan.
Gather reliable information, establish criteria, educate yourself, and only make an investment after determining that it makes financial sense.
Consider adding team members who can help you keep your excitement in check when you put on your rose-colored glasses. In your analysis, exercise caution and rationality.
Your profit depends on the area, so wherever you want to buy, research market trends and find out where the bargains—and the demand—are. Find homes where you can invest sweat equity as your eighth step. Are there any older properties available that you might improve and raise in value?
Make wise renovation decisions. What is worthwhile spending money on and what is not? Limit your spending to 15% of the buying price in your budget. Tenth, make technological use. Rent collection methods, tenant screening, and emergency fund automation are all necessary. You need to have enough cash on hand to manage repairs since things will break down.
3. Intellectual property
Even if you are unaware of it, intellectual property is present everywhere. Consider the novels you read, the podcasts you listen to during your commute, and the stand-up comedies you enjoy watching on YouTube. Intellectual property is all of that. Where do you have expertise, you could ask?
You might be an excellent cook or enjoy doing crafts. Perhaps you are skilled with tools and can fix anything that is shown to you. Can you advance the sector you work in, whatever your area of expertise? Can you inform folks about a procedure or product that enhances someone’s life or solves a problem? If so, you can create a product using that intellectual property.
4. People
A solid tax team is one of the most crucial teams you can have because it determines so much of the outcome of the game. Why? Because the majority of people tip the government.
The government is your partner while you seek to increase your income, whether you like it or not. The good news is that, unlike other partners, you surely don’t want to pay them more than the minimal minimum. They may not be the most inviting partner. You need a strong tax staff on your side for that.
Because they are unaware of their alternatives, a large number of people pay more income tax than is necessary. Do you know about the Augusta rule, for instance? 14 days a year might be used to write off your house. What about credits for R&D? Choosing the appropriate corporation, maybe, to allow you to distinguish your paystub and evade the self-employment tax?
I mention these to highlight an important idea: you almost definitely pay more in taxes than you should.
Well-written by Pixar. A subpar team will sabotage a brilliant concept if you give it to them. If you give a brilliant team a subpar idea, they will either improve it or discard it and come up with something even better. On your path to financial freedom, you don’t have to travel alone. I advise you to draw on other people’s knowledge as you go.
Don’t Wait for Retirement
When it comes to financial independence, we have all been given a false sense of security. We’ve been advised to put money into securities like stocks and bonds in the hopes that they may one day lead us to the financial promised land. But why would you want to make those investments at such a risk? And why give someone else control of your hard-earned money to handle something you don’t comprehend?
Why wait till retirement, most importantly? Now is the time to embrace financial independence. If you use these four resources, you’ll get wealthy in much less time than 30 years.
