Why investing in yourself is so important
For those of you who don't know me very well or my background, I started by first business in real estate. I began looking to buy and hold and quickly realized that I didn't have the cash to pick up the cash-flow properties. So I decided to look into wholesaling and started a business around it. Wholesaling is when you get the right to sell a property for a certain amount of time for a certain amount of money. So if Joe agrees to sell me his house for $5k and puts that in a contract that's good for 30 days, that means I can legally go sell that piece of paper to Sam for $10k and keep the $5k profit. That's where I started off, the reason being that it allowed me to make money without actually having any. I was selling without realizing it.
And although wholesaling as a business model is not something I particularly enjoy, investing is. I started this journey with a bad taste in my mouth from having worked at the State Department and after having read Rich Dad Poor Dad by Robert Kiyosaki, a spark lit within me, one that has burned strong ever since.
Say what you will about the Rich Dad Poor Dad real estate courses (I'll tell you now: I wouldn't spend a dime on them), but the truth of the matter is that this book holds some very simple gems of wisdom. It has acted as my elementary foundation for business.
Robert talks about investing in yourself, a lot. His ideas are entrepreneurial in nature meaning, by my definition, that you are always building things around you that lead to income. But one of his main tenents is to always pay yourself first.
But what does that mean?
Paying yourself means:
Setting aside money before all other bills and responsibilities, money that you will use towards savings, investing and tithing.
All three are extremely important.
So let's say that I make $1000 a month. Each month, before all expenses, I would put aside $300 that would be divided amongst my savings goals, my tithing goals and my investing goals.
The idea is that with the money you save for investing, you will put back into assets. Assets are things that put money into your pocket. When you develop enough of them, you will have passive income that you can live off of. This will also significantly increase your net worth, which is a good thing too if you care about that.
Now, can you live off of $700 a month? Probably not very comfortably.
So let's say at my current job I make $1k, but that I really need about $4k to make it work. What that means is that after setting aside the $300, I need to hustle. I need to teach myself how to make $3k more this month.
Maybe this means I consult for a bit on marketing, selling or entrepreneurship.
Maybe I go and sell pizzas door to door.
Whatever the case may be, I am teaching myself to always pay myself first, to depend on myself for income and as a result, I am significantly increasing my financial IQ. I will be better prepared to handle financial complications in the future because of my "training". And I have greater freedom! I answer to no one but myself and I don't fear down or up economies because I don't depend on anyone for a job. That's a scary thing for a lot of people, but I cannot tell you how liberating it is.
I have friends that tell me how horrible the economy is and that there aren't any jobs. But the absolute and honest to God truth is that I don't have that same view. From where I'm standing there are a lot of jobs and an amazing amount of opportunity. But I wouldn't have seen this same opinion if I didn't begin to teach myself how to make more money, budget and invest for the long-term... if I didn't train my eyes to see what I was blind to before.
Moving along, let's say that after 12 months of doing this I have saved $10k (keep in mind that I also put away 30% of any EXTRA income I receive too) for investments. I might use this as a down payment on a rental property that will produce passive income each month. The idea, though, isn't to stop at a single house that produces $100 a month in income. It's to build a portfolio of houses that other people manage, that are bought at a discount and that have improvements made to increase their value. Over time, you may have $100k in passive income each month from real estate. And if you buy right (at a discount), your net worth will reflect this. It tells you when you've made good investments.
I also have money saved up for those rainy days, unexpected bills and medical costs. In fact, I'm saving to have a year's worth of expenses sitting in a bank in case I need it.
The truth of the matter is that after a certain amount of money, you don't really need much more. For those of who you don't want to be millionaires, that's ok. But paying yourself first will prevent a lot of discomfort in the long run. It will help you afford increased medical costs as you get older as well pay for unexpected emergencies. It's a no worry fund. A place where you know you'll have enough money to live when you decide not to work or are no longer able to. And that counts for something.
For the more entrepreneurial minded or for the people who like investing and who enjoy the art of building wealth, there's a seat at the table for you too.
The point is this: you put a little pressure on yourself to always, always, always pay yourself first. Paying everyone else first is a bad habit.
You're the most important person in your life. Spend your money there first, build up your cash reserves and plan on investing in assets (things that will put money into your pocket).
This is very much so an entrepreneurial, work-for-no-man type mentality. It proposes spending and investing your money wisely over time, investing in yourself first and making more money to cover the rest, learning how to manage your finances and to build assets so you can live the life you'd like.
It doesn't propose trying to live off $1k a month and never learning how to make any more money. I find it more valuable and enjoyable to spend time actively learning (a.k.a by doing) how to make more money so I can invest it and pay off my student loans all while making a positive impact in the world around me. For people like me it isn't about the actual money. I could hustle and live on $1k a month (I'm a bootstrapper all the way). It's the thrill of building and learning!
Because the better you get at making money, the more leverage you have to do what you want, make an impact on the world and do all of this on your terms. What amount you want to make is up to you but it starts with paying yourself first and learning how to make more money.
Ramit Sethi has a program to teach you about how to earn money on the side. For anyone starting off, it has some great techniques to get you headed in the right direction and start earning your first $1k on the side. I make no money off telling you this, I just think it would be worth checking out. Go here to learn more.
This lifestyle works for me. I like the thrill, I love the skill set and I love the rush. And this has been 3 years in the making.
So while I'm not trying to tell you that you need to do exactly as I do, I am saying is that there is immense value and freedom in learning how to make more money without a "9-5 job" and learning how to save, invest and budget. It's so, so important and it can be fun!
If you're interested in reading up on this stuff, here are some good reads to learn the basics about business and investing. They helped me understand business from a very practical point of view as well as the importance of investing. Enjoy! Let me know how they work out for you. :)