Paying yourself first

Discussion in 'Investor Psychology' started by Xenia IM, 14th Mar, 2015.

  1. pursefattener

    pursefattener Member

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    I agree to some of this . The old fashioned way of saving via a direct debit to a bank account these days is under some pressure . Get 2-3% on you money at the bank ? The principle is good but doing what our parents did in the 70s and 80s just might not work so well .

    Good post Mr F .
     
  2. Richard Feynman

    Richard Feynman Mortgage Broker

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    In 2013, 71.2% of my after tax income went to investment/savings.

    (I literally tracked every cent I spent that year)

    My income has risen since but the percentage is very similar, however more is going towards self education and business--investments of a different kind.
     
  3. Ace in the Hole

    Ace in the Hole Don't compete, Dominate !

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    At a guess, 10% of our total income affords us a comfortable lifestyle.
    The rest all goes towards our investment funds.
     
  4. Biz

    Biz $17 DOLLAS YO!

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    Define business success for me.

    Anyone else feel free to offer their opinion too.
     
  5. D.T.

    D.T. Property Lookerafterer

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    Making 3x what you would if you were in a job.
    This allows 1x for being in a normal job, 1x to cover the risk factor of business and 1x for saving/investing
     
  6. Biz

    Biz $17 DOLLAS YO!

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    Have you ever run a business?
     
  7. D.T.

    D.T. Property Lookerafterer

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    yes, have you?
     
  8. Biz

    Biz $17 DOLLAS YO!

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    Yes, for the past 10 years.

    100% generate everything i earn. Not just something on the side.

    By your definition though i would be unsuccessful. :(

    Edit: To clarify, I make about 1.5-2x what i would get if i were employed by someone full time. I have no definable skills. But i do less than 10 hours actual work a week and have very little stress/pressure. So with that i feel comfortable and successful in business. I guess in outright dollars though my results are only average but with the free time i have available im able to concentrate on building my investments more.
     
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  9. Ace in the Hole

    Ace in the Hole Don't compete, Dominate !

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    I believe business success is a combination of profits earned vs time/capital invested.
    Everybody will have their own acceptable levels based on their own situations.

    e.g. If your business required your own time, would you rather work 80hrs a week and earn 1 million dollars, or work 40hrs a week and earn 1/2 mil?
     
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  10. Rixter

    Rixter $uper Investor (Retired)

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    When you can walk away from the business and it carries on a profitable venture without you.
     
  11. Ace in the Hole

    Ace in the Hole Don't compete, Dominate !

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    Real life example please, as these are quite rare in the true form.
     
  12. Deltaberry

    Deltaberry Member

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    Property investing can be a form of business. So is generating income from it.

    Otherwise what would we consider Warren Buffett?
     
  13. Biz

    Biz $17 DOLLAS YO!

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    I don't consider property or shares a business. If you are generating enough from them that you are living off it that is excellent but it is still investing. For example i would consider what Meriton does to be a business because they are producing a product to sell. What he keeps would fall into the investment side.
     
  14. Ace in the Hole

    Ace in the Hole Don't compete, Dominate !

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    I agree with this.
    The type of property investments I'd consider a business would be if you were to buy a hotel/motel and have it operate as a business with all relevant running costs, such as ongoing supplies, marketing and admin costs, etc.
    Or, developing property, etc.
    But simple buy and hold, would agree are investments, regardless of the associated costs, unless on a very large scale.
     
  15. sanj

    sanj Member

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    I personally disagree with this, find it a bit simplistic. it is definitely a bit of an ideal and does occur sometimes but there are plenty of extremely successful businesses with the owners still playing a significant part.

    Business success is a tough one to define but ultimately I guess it's maybe a business that is providing the owner with whatever it is they set out to do.

    If all someone really wanted to was not have to work for someone else and to have more flexible hours then even if he/she isn't earning more than in a previous job they would consider themselves to be successful
     
  16. Mr. Fabulous

    Mr. Fabulous Thought Criminal

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    Thanks dude! I'm glad you got something out of it.
     
  17. Mr. Fabulous

    Mr. Fabulous Thought Criminal

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    Achieving the goals you've set for the business, whatever they may be.
     
  18. MIW

    MIW Member

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    Spot on, RK communicated this to me. Some confuse self-employed with business. I often use this example with my friends.
    Lets say you are a doctor, so as RK said you could be in 4 quadrants.
    1. Employee - Registrar at the hospital, you need to turn up to work, to have contact with patients.
    2. Self-employed - You open your own GP practice, you need to turn up to work since you work for yourself, to have contact with patients.
    3. Business owner - The GP hires other doctors to run the business, may lease or purchase a building, has a business processes in place, no need to turn up to work, just to manage or have others to manage, no need to have contact with patients.
    4. Investor - the GP decides to offset his income (however derived), buys a complex of units, receives rent or invests in other businesses or ventures, no need to turn up to work, to have contact with patients.
    So same occupation but will do different work and be subject to different tax laws....
    I suppose that's why most businesses fail they think they can use the skills they perfected from their job thinking that is what it takes to set up and run a successful business. Instead they become self-employed, unaware that they now require different skills set (administration, cash-flow, negotiation or hiring skills, etc... I could go on an on).

    Investing into RE can also be running a business, if done properly! Food for thought.:)
     
  19. MIW

    MIW Member

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    Disagree, it is not just having properties....
    Imagine spouse and I travel for 12 months overseas, yet the business generates income for us to live off, or even increases the income upon our return, and all the proceeds are from investments into residential properties???
    If you can afford or accumulate enough, you can hire a bookkeeper, managers, and a person in charge to manage these affairs, basically you run a business where you have processes in place to take care of those things for you! Property investment can be run as a business!
    You on the other hand are currently self-employed, where you have to physically do some work to generate your income? Can you tell me you don't need to turn up for work in your business or spend any hours at all to generate the income???? This comment is not to offend but rather to illustrate the difference between being self-employed and having a proper business.
    Also, spouse and I are self-employed, although have travelled overseas and generated similar or more income in one month (Haven't tried for a year) so we may be progressing to a business, yet we do not produce a product. Businesses can produce services too!
    Hopefully this helps some.... because it took us years to understand and yes, we have made many mistakes along the way, thankfully we learned from them, so hopefully I can help others not to make the same by understanding these concepts!:) I hope this example helps you....
     
  20. Biz

    Biz $17 DOLLAS YO!

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    I get what you're saying. I agree that I am self employed but it is still a business.

    What your describing where someone can just walk away from the entity and it runs itself is nice but a little idealistic. There are businesses where you can leave them for a week, a month maybe even 3 months but then the person signing the cheques needs to get involved to keep the ship on coarse. If it was so simple that people could just walk away and everything runs itself why don't more people do it? I have got to know a lot of business people over the years and none of them can just walk away and say she'll be right.

    Again, I don't believe property investment or shares is a business. They are investments. Appointing a property manager to handle a tenant is hardly a business system. The main difference is that if chosen correctly they will grow over time without any input. That is where the real value is. A business doesn't do that. Business is like sex, you have to get involved.