What is a good plan for eventually becoming financially independent?

[7thLetter]

My current plan is to work at my current job, live frugally to save up and build capital, learn some investing/business skills, wait for a recession or market downturn, then potentially get a loan to start up my own business or make some investments.

Any suggestions?

[Identity]

Thats all nice, but the core would be to develop some kind of skill or product that offers tons of value.

You need a financial plan to support your business plan, not the other way around.

Edited October 9, 2019 by Identity

[flowboy]

You need to read The Millionaire Fastlane by MJ DeMarco. Or Unscripted. Total paradigm blaster. I'm reading it right now.

My plan was also to save up, invest and then start a business. Until I read that.

[7thLetter]

@flowboy Honestly I have a ton of books I have yet to read but I’m thinking of buying that one to give it a read.

Care to share a bit of tips you found helpful from the book?

[flowboy]

@7thLetter  I'd like to, but I will not do that because that wouldn't do it justice.

[crab12]

On 10/9/2019 at 6:56 AM, 7thLetter said:

wait for a recession or market downturn, then potentially get a loan

Not that easy. During a downturn is the most difficult time to get a loan because everyone is short of cash. Everyone wants a loan during the crash. Banks will be getting massive amounts of defaults and are very wary of giving out new loans. If you think you can time the market crash then you should be taking out a loan before the crash. The central banks could easily postpone the downturn by another 5 - 10 years with additional QE. Who knows? And by the looks of it so far they will postpone it at the cost of high inflation. Realistically, you won't be able to time the market downturn. And you wont be able to time the bottom. You might buy, then everything drops another 50% in value, you panic sell, then it starts rallying and you just lost half of your equity. Then you panic buy, it starts dropping again, you panic sell again. Then it does a double bottom and rallies for real and without you. And now you have lost 80% of your initial equity. Shit like this sometimes happens to even veteran investors. Do you have at least 5 years of experience operating in the markets?

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live frugally to save up and build capital

You will never save up enough capital for starting a business with a 9-5 job. You need to raise cash from venture capitalists / private investors / take out loans for your company / start-up. Assuming you are not a millionaire already.

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learn some investing/business skills

If you are an amazing investor (that is the timeframe of your trades is at least a year) you might pull 20% per year (before taxes and inflation). But that takes YEARS of experience and a good education to be able to pull 20% per year consistently. Whatever you can save away with a 9-5 job is probably not going to be enough to live off your investment portfolio.

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start up my own business

Start NOW. You are not going to get financed during a market crash / recession and there is less demand for whatever you are selling. Whats the product? Who's the target demographic? How is it going to work? What's your exit? Etc. You can start prototyping and testing out potential ideas immediately.

Edited October 10, 2019 by crab12

[Moreira]

Investing is rigged by bears, bulls and the elites. Very risky and can lose it all, very bad idea. Even cryptos are risky.

[flowboy]

1 hour ago, crab12 said:

Not that easy. During a downturn is the most difficult time to get a loan because everyone is short of cash. Everyone wants a loan during the crash. Banks will be getting massive amounts of defaults and are very wary of giving out new loans. If you think you can time the market crash then you should be taking out a loan before the crash. The central banks could easily postpone the downturn by another 5 - 10 years with additional QE. Who knows? And by the looks of it so far they will postpone it at the cost of high inflation. Realistically, you won't be able to time the market downturn. And you wont be able to time the bottom. You might buy, then everything drops another 50% in value, you panic sell, then it starts rallying and you just lost half of your equity. Then you panic buy, it starts dropping again, you panic sell again. Then it does a double bottom and rallies for real and without you. And now you have lost 80% of your initial equity. Shit like this happens to even veteran investors. Do you have at least 5 years of experience operating in the markets?

You will never save up enough capital for starting a business with a 9-5 job. You need to raise cash from venture capitalists / private investors / take out loans for your company / start-up. Assuming you are not a millionaire already.

If you are an amazing investor (that is the timeframe of your trades is at least a month) you might pull 20% per year (before taxes and inflation). But that takes YEARS of experience and a good education to be able to pull 20% per year consistently. Whatever you can save with a 9-5 job is probably not going to be enough to live off your investment portfolio.

Start NOW. You are not going to get financed during a market crash / recession and there is less demand for whatever you are selling. Whats the product? Who's the target demographic? How is it going to work? What's your exit? Etc. You can start prototyping and testing out potential ideas immediately.

I second this.

[universe]

On 9.10.2019 at 5:56 AM, 7thLetter said:

My current plan is to work at my current job, live frugally to save up and build capital, learn some investing/business skills, wait for a recession or market downturn, then potentially get a loan to start up my own business or make some investments.

Any suggestions?

Sounds about right. Depending on how much you put away every month and how old you are you will become financially independent.

Be wary of lifestyle inflation and trying to "time" the market. Usually its best to just buy and hold.

 

If you want the safe route I would only invest. Starting a business is the risky route but sounds more fulfilling

[flowboy]

You will never become financially independent from living frugally and saving and investing. It's simply a myth. How many people do you know who did that successfully, and were independent before they were old?

Right

And how many people have you heard of that are financially independent now, before their 70th birthday, because they started a business?

Indeed, they're everywhere.

The real risky route, is keeping a job and hoping the market will make you rich. It won't. It's a scam, purported to earn stock commissions.

Read TMF. Read Unscripted. Thank me later

Edited October 19, 2019 by flowboy

[Arthur]

I don't agree with what was said above. When markets are down the Fed stimulate the economy by lowering interest rates. They will give you an easy loan because that will result in more spending, growth, jobs etc.

Getting a loan for a business is not a bad idea, but I don't think it's wise to speculate on the market. There have been tons of research and is a well-known fact that you can't predict the market or a stock. One research showed that even portfolio managers in big mutual funds failed to get market returns, and those guys do this for a living.

I think you still can become wealthy from investing, just have to do it patiently. Invest in diversified assets, don't expect above-market returns and grow your portfolio diligently every month. With 10% returns, and 400$ a month contribution, you can have close to 200k in 15 yrs. In the meantime, you can work on your LP and provide value.

[flowboy]

23 hours ago, Arthur said:

I think you still can become wealthy from investing, just have to do it patiently. Invest in diversified assets, don't expect above-market returns and grow your portfolio diligently every month. With 10% returns, and 400$ a month contribution, you can have close to 200k in 15 yrs. In the meantime, you can work on your LP and provide value.

Except that no investment strategy ever returned 10% consistently for 15 years. Except the one by Madoff.

5% is more realistic, IF there is no crash in those 15 years. (so it's still a big gamble. Don't call it 'safe')

400$ a month is an insanely high contribution, I'm not saying you can't do it, but most people don't have the discipline to.

But let's go with it.

So after 15 years of having the discipline of stashing away and never touching 400$ a month (again, unless you make ten times that, do you have the willpower to do that without exception, even when the fridge breaks in the same month as your car?)

You will have about 109.000 after 15 years.

Oh, but wait: Inflation enters the party.

The average rate of inflation has been 3.22% for the past century. (source)

That means, the value of money is multiplied by (1 - .0322 = .9678) each year.

For 15 years later, the value multiplier is (0.9678) ^ 15 = 0.612

So your 109.000 will have the same buying power as (109.000 * .612 = 66,713) does now.

And that's after 15 years of saving and investing 400 a month, which is 4800 a year, WHICH IS 4800 * 15 years = 72,000 total taken out of your paycheck.

You'll have lived frugally for 15 years, denying your kids toys and singing lessons, only to lose 72,000 - 66,713 = 5287 dollars.

And that's a BEST case scenario - assuming there is no market crash, and you never lose your job or have any other kind of financial emergency (medical bills?)

 

There is no safe strategy for wealth (How would that even make sense?)

I once believed in these fairytales too. Until I read The Millionaire Fastlane and Unscripted. Highly recommend it.

 

23 hours ago, Arthur said:

work on your LP and provide value.

This is the real strategy. Want wealth? Gotta provide massive value.

Edited October 21, 2019 by flowboy

[Aeris]

@flowboy Define properly 'value' in context though ! What is of value ?

[Knock]

12 minutes ago, Aeris said:

@flowboy Define properly 'value' in context though ! What is of value ?

Value is the degree of perceived benefit.

In this context, you must provide massive amounts of benefit to others, and in return, they will give you lots of money.

Edited October 22, 2019 by Knock

[universe]

Value is the thing that you want to become really good at. And then make it visible to the public.

Could be a skill. Could be a product. 

A lot of jobs are created by just providing value and then *poof* you got a job. For example the early youtubers. Be creative.

 

@flowboy Even though I dont believe the inflation rates will be that high in the upcoming years you still got a good point.

Its also true that money has the potential to generate a lot of money. Thats how it works.

[crab12]

On 10/20/2019 at 4:37 PM, Arthur said:

When markets are down the Fed stimulate the economy by lowering interest rates. They will give you an easy loan because that will result in more spending, growth, jobs etc.

They started cutting the rates in the U.S and the recession hasn't even started yet (it's 2% right now down from 2.5%). And in the EU the rates are already negative. There's not much room to go lower. They probably wouldn't dare -5%. The U.S has never had negative rates. I wouldn't bet on an easy loan as I see no way how central banks could significantly stimulate loan taking via rates cut. Personally, I don't anticipate another 2008 style crash.

[hamedsf]

@flowboy your calculations seems as cool as your profile picture 

[Heaven]

@flowboy I’m not sure where u from but today in modern countries things are different..If u are an employee(lawyer/doctor/high tech..Etc) You have the potential to get to half mil a year. If u don’t become financial free after ten years doing that u have some other problems..I’m 24 years old and I’m very close to get to my first mil. I started investing since I was 15 and saving every dollar I earned. I was an employee all my life.
I’m not saying it to show off but to inspire people to live below their means and to save to invest. U don’t know how much your life can change with persistency and consistency. 
Btw spirituality will really help u with that cuz u will find that u don’t really need too much to be happy. Good luck

[StarStruck]

You need a mentor and finding a good one is hard. And why would they help you? You need to develop some skills that are useful. You can go lone wolf too but the chances that you are going belly up will be higher.

Edited July 17, 2020 by StarStruck

[Posterson]

Nice topic with good advice!