Tuesday, October 20, 2009

A Couple Thoughts On Getting Out of The Rat Race

I recently had lunch with a new friend and the conversation quickly turned to one of my favorite topics: getting out of the rat race. I love talking about why people want to get out and then sharing ideas on how they're doing it. I've learned a lot from reading and talking with people and thought I'd share just a little bit.

The Why
Despite everyone having seemingly different reasons (travel more, sleep in, be with children, etc.), I've found that it always boils down to one thing: they're seeking some sort of control in their life. Once I realized this, it opened me up to even more possibilities. What I am looking to control? Can I achieve it without getting out of the rat race? For example, if all I wanted was to be able to sleep until 8am, I could simply change jobs and reach my goal.

The How-To
Just as much fun to talk about are ways to create passive income which frees up your time to do other things. Note: passive income does not mean you never have to touch it. You will have to check in and do stuff, it just doesn't require 40 hours every week. Now we all know of the classic businesses like real estate and laundry mats which take a significant amount of capital to get started. Instead, I wanted to share a couple smaller ideas I've heard.
  • Own and rent pinball machines to other businesses. This is exactly what Warren Buffet did when he was a kid.
  • Own and rent candy/soda machines to other businesses. Jessi knew some family friends who did this with each of their kids to teach them about passive income.
  • Raise animals for later sale. My friend bought some cows, is raising them, and will sell them in a couple years. His kids help him feed and take care of them. If you already have the land, this could work well.
  • Grow plants. Another friend grows hay. It's relatively low maintenance, you earn some money, and the tax advantages are nice.
  • Create a website selling drop-shipped items. You sell it, another company makes and delivers if for you. Being an amazon affiliate is another type of example.

There are tons of ideas out there. Each idea I just mentioned could potentially get you out of the rat race, plus they're great learning tools for kids. You start small and continue to reinvest to grow your business. Eventually, you reach a large enough scale that you can hire someone to help with the day-to-day operations (Raising 12 cows is do-able. A couple hundred requires help). For example, we own a duplex now which we manage. We will buy and manage more property in the future. Eventually we'll own enough that we can trade them in for a larger complex and hire a management company to run it for us. Remember: owning a business, not managing it, is what you want if you're looking to get out of the rat race.

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