Monday, September 05, 2022

Invest In What You Love

I recently heard 
a quote by Robert Kiyosaki that resonated with me. I usually harp on the benefits of pursuing assets instead of pursuing a higher-paying job. We've tried to spend our job income on buying assets, and then we used the income from our assets for spending. It didn't happen instantly, but it was a multi-year transition. For example, we only got a dog after our rental income increased enough to support one. Same with vacations and a bigger house. Eventually, all of our living expenses were paid for by our assets. At that point, my job became optional. I could have kept working if I wanted, but I had the option to quit.

(Side note: if you can get a higher-paying job without giving up too much time if your life, go for it. But, lock in your living expenses and use the surplus to buy cash-flowing assets.)

But that's focusing on assets to pay for your living expenses. This new-to-me quote looks at assets from the lens of work. Here it is:

"Invest in what you love rather than do what you love."

This quote is a little different than the classic platitudes:

  • "Choose a job you love, and you will never have to work a day in your life."
  • "Do what you love, and the money will follow."

So, how do you invest in what you love? You buy assets that let you do that thing. For example: 

  • Do you love teeth? Don't just study to become a dentist. Start a dentist's practice where you hire other dentists. You can also do dentistry, but you don't have to. And when you retire, you can also sell the business.
  • Are you into data science? Don't just work for a large tech firm; start a consulting firm side hustle. The tools you build are assets, and so is your client list. Or, as I did, use your skills to identify hidden gems. I focused on real estate, but you can do the same with businesses, paper, or commodities.
  • Do you love art? Don't just throw pots; buy a share of an art studio co-op. (OK. This may not actually be an asset, which I define as something that puts money in your pocket, but still.)

So, you might start by working a job doing what your love, but that's just the beginning of the journey. Use that job for discovery, development, and saving capital to invest. And then, as that passion deepens and your wealth grows, invest in what you love by buying/creating related assets. Not only does it let you go deeper on that thing you love, but if it's a cash-flowing asset, it might make the job optional in the future.

And yes, that might mean investing in specialized education to go even deeper. For example, I just signed up for a 6-month intense mentor program to teach me how to syndicate apartment buildings. The education itself isn't an asset, but the skill I learn and the network I build will be an asset if I use them.

What I'm suggesting is more complicated than only practicing your craft in a job, but I think the long-term rewards are worth it.

Real Life Example

I listened to a BiggerPockets podcast with Tim Delany, where instead of taking another job, he invested in a liquor store with almost zero technological improvements: no point of sale system, no running inventory, and a cash register that was appropriate for the 1950s, not the 2020s. With the right upgrades, he turned it into a full-fledged business with multiple employees and hundreds of thousands in profit.

It let him do the things he loved: run a social media channel, figure out how to optimize inventory, experiment with new technology, and eventually set his own hours.

One thing I find fascinating is that he made the same amount of money as his old job for a while. But, he was also building an asset. So today, he makes more than his old job while working far fewer hours. That feed him up to pursue additional passions.

It turns out that many small businesses are coming up for sale as Baby Boomers retire. And many of them have similar opportunities to improve sales and operations. Furthermore, Tim Delany pointed out that buying a business doesn't take as much capital as you think because you can also get seller and/or SBA financing. He purchased his business for ~$350K but only put in $50K cash. He received a note from the seller for $50K and an SBA loan for $250K. In the first year, the business did $600K in sales with a little under $80K profit.

And I know some people who buy businesses and partner with smart people to run them. They're still involved - because they love it - but not in the daily operations. To make it work, they usually split some of the equity with the people actively managing the business, which keeps both of their goals aligned.

So that's how you invest in what you love. Again, it's not as easy as only focusing on your craft, but there are tremendous benefits. Mostly, investing in assets gives you options in the future.