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I’m a Business Man!

I have a good friend that for many years has had a undeniable urge to be an entrepreneur. All he wanted to do was to quit the rat race, start his own company and get rich. For years he was talking about it yet nothing really happened until the day he was made redundant. After resisting the strong lure of getting another 8-6 job sales job in Finance he finally became a self declared ‘entrepreneur’.

Unfortunately my friend just couldn’t find the idea or opportunity that’s prospects matched his enthusiasm. Fast forward two years and he’s currently working for another entrepreneur in someone else’s start up, earning a fraction of what he did before. Knowing that his earnings took a massive hit I recently asked him if he had any equity in this new venture. When the answer came back negative I proceeded to ask if he’d buy equity in the company given the chance. Surprisingly the answer also came back as ‘probably not’.

So my friend is finally touting his ‘entrepreneur’ status but as far as I can tell he doesn’t have the main things that I consider a successful entrepreneur or business owner needs:

  • 100% belief in the business
  • A significant financial commitment or interest in the business
  • The possibility for the business to bring large long term financial gains if successful

While he’s undeniably happy not to be trapped in an 8-6 any more, he’s also been forced to scale back his once lavish lifestyle in order to stay afloat. Entrepreneurialism hasn’t really worked out too well for him so far.

I’m a Wage Slave

I too have always fancied myself as being the next Richard Branson. However like several of my friends that ended up working in Finance, I’m become trapped by the pay check. Granted there are the odd moments or periods of time when I find my work interesting, stimulating or challenging. However the vast majority of my long hours in the office are spent dealing with:

  • Incompetents (who are usually good B-Day Game players)
  • Hopelessly poor IT infrastructure
  • Inconsistent, ineffective and unnecessarily complex regulations/regulators
  • Big company bureaucracy

If it weren’t for the pay cheque I’d be long gone by now.The monthly inflow into my current account is enabling me to build the Money Tree and put in place future income streams that will enable me to retire early.

Like my friend, if I were laid off tomorrow I think I’d probably not look to get another job in Finance but would instead see it as a signal to take the plunge out of the rat race.

Unfortunately like my friend I have no clear conviction of what I would prefer to do instead. Sure I can think of lots of jobs that would enable me to work less hours, commute less etc  however they would all come with a pay cut significant enough to negate the other benefits.

My entrepreneurial days will have to wait for for a few more years yet  it seems.

Hold Up What’s That Jay?

While reading this article on the FT (the top one in the search result) about rich rappers and Apple Inc’s purchase of Beats headphones, I was reminded of Jay Z famous line:

“I’m not a businessman, I’m a business man!”

Well, when he’s got his whistle on and is sat a leather chair next to Wazza-B he certainly looks like a businessman. But I guess the point he’s making is that he isn’t just a rapper. He’s diversified his income streams, treated his earning power as a business and focussed on the bottom line. The boy doesn’t just rap he also sells fragrances, owns sports bars, has his own clothing brand and owns a hotel chain amongst other things.

Wazza G & Jay Z

 

UTMT Inc.

This got me thinking about how I am approaching the task of trying to build our future income streams so I can get out of this rat race as soon as possible.

1. Investment Funds. I’ve got a growing stock portfolio. I’ve been building it for several years, investing spare income and capital whenever possible into ISAs, taxable trading accounts and SIPPs. It might not be quite enough to retire on [yet] but the portfolio provides me with a material amount of income each month that could be used if required.

2. Property Company. I’m running a rental property portfolio of three properties. While this portfolio turns a profit each month I currently keep it relatively low to minimise my income tax. I’ve used leverage sparingly and have benefited [to date] from the fair winds of the property market over the last 10 years or so. Once the mortgages are paid off I could live off the income this portfolio produces alone if I kept my expenditure in check.

3. Other Income. I have various side hustles that produce a steady flow of income into the money tree. I run a small internet marketing company in my spare time that receives a modest amount of advertising income & commissions from a variety of sources. In addition I make the odd bit of cash from one of my hobbies, photography. Through luck or chance I pick up a few jobs/commissions here and there and I receive a small amount of $ each month from stock photography.

4. The day job. Urrghh. It ain’t fun…it really ain’t. It swallows my time like nothing else. It’s definitely bad for my soul. However I can stick it for a few more years thanks to the income it produces. Just as Warren-B has his float, my pay check is my float that I put to work in long term investments (namely the investment fund and property company mentioned above).

5. Management reporting. All successful businesses are run using management and financial accounts. I obsessively track all my expenditure and income on a monthly basis. I have spreadsheets to track my net worth, complete my tax return, categorise my expenditure and much more. I’m constantly tweaking and improving these logs and analysing my income/expenditure ratio, investment returns and capital growth. I even try to hold informal ‘shareholder meetings’ where I generally bore my wife to tears with the latest set of reports on a Saturday evening!

 6. Efficiency Programs. I’m always seeking to keep costs down and coming up with new ways to cut expenses. The more you analyses your finances the more you can get your money working harder for you. This might be as simple as ensuring you’re using the highest paying savings accounts, moving your mortgage or switching energy providers. The more you look the more ways to improve the efficiency of your money. A extra few basis points earned here, a few pounds saved a month there soon adds up.

7. Cash Flow King. I regularly track the balances of our numerous bank accounts. Any surplus cash each month is moved to the the most efficient place. Where possible monthly bills are paid for on a credit card (with rewards) and paid off at the last possible moment before attracting any interest. Things like season ticket loans from work, credit cards, bank account sweep facilities, introductory savings rates and standing orders are all utilised to ensure I get the maximum benefit from the money that flows in and out of our lives.

8. Constant Improvement. Money management should not be a one off exercise or brief annual activity. It should be a continual process. I’m constantly looking at all of the above areas and trying to improve performance.

9. Setting goals. My ultimate goal is to retire early1, hopefully at around the age of 40 and pursue other interests. In order to ensure I’ll get there I continually set myself smaller micro goals. This might be to save a certain amount each month or to over pay x amount of mortgage by a certain date. By setting goals I break the task down into smaller achievable steps that will provide satisfaction and motivation to continue towards the ultimate goal.

So what?

Looking at all of the above it’s pretty clear that I am approaching the Money Tree in much the same way as one might approach and develop a business. While I have no master plan to create a funky web 2.0 start up, create the next Angry Birds or launch a budget airline I am using any entrepreneurial skills I have to increase/maximise my various non pay cheque income streams.

Even though I don’t currently have a specific plan for my post rat race business, by treating my current finances like an investment company I’m able to lay some pretty strong foundations that should hopefully provide for my future. If things progress as planned, I wont need to start a new company post rat race….I’ll just be tending to Money Tree Inc. I’ll be sure to let you now how it works out.

Notes:
1By retire I mean be financially comfortable enough to quite the rat race.

{ 8 comments… add one }
  • Nibbler July 4, 2014, 12:26 pm

    I follow a very similar plan for tracking the current state of my finances. Probably the most effective for me has been to start tracking expenditure in detail. This involves methodically logging spending down to penses each month. It’s tedious but highlighted where those small direct debits have been gradually leeching away my capital.

    Since starting this regime three years ago, in February I hit the magic 50% net income saved each month (as endorsed by MMM) which seemed impossible just a few months ago. The impact on our lifestyle has been negligable and it just requires discipline to continue the plan (and the occasional fancy meal out to keep the OH on track 🙂

    • Under The Money Tree July 7, 2014, 10:00 am

      Nibbler,
      Nice work. 50% of net income is a great rate at which to save/invest. As you’ve suggested indulging the OH now and again is crucial to making this sort of thing work!

      • Jon July 7, 2014, 4:12 pm

        Hi MT,
        If you don’t consider it confidential, how much per month are you looking at generating passively to retire, £2k, £3k …..

        • Under The Money Tree July 8, 2014, 3:28 pm

          Jon,

          Great question and one with no easy answer. Much will depend on circumstances at the time of retirement. The main variables that will decide the final amount are:

          1) Housing. We’re likely to move house within the next 5 years.
          2) Family. Any baby MTs in the next 5 years will no doubt impact future expenditure.
          3) Earnings between now and retirement.

          For now I’m aiming for a pretty aggressive 4k.

          Ultimately I’m aiming to pull the plug aged 40 so my progress at that point will dictate what ultimately happens. I’ll have to adjust my expenses accordingly as I’m adamant I don’t want to be sucked in to the ‘one more year’ syndrome.

  • Huw July 11, 2014, 6:49 am

    Hi UTMT,

    I just wanted to thank you for the post, it was an enjoyable read!

    I’d like to think “I’m a Business Man!” too. Admittedly, a very small business with very few streams of income (which are fairly low)….. but nevertheless, I’m moving in the right direction. I’m gradually earning more and more each month, and you’ve helped to provide me with a few ideas of how I try some other avenues as well as remind me that I’m doing some really helpful things as well.

    Thank you!
    Huw

    • Under The Money Tree July 11, 2014, 8:38 am

      Huw,

      Glad you liked the post. No matter where you’re at now with the journey I think the important thing is to be consistent in your search for improvement. Successful businesses stay successful by constantly innovating, reviewing progress, seeking efficiencies and implementing new plans/ideas.

      In this time of instant gratification it’s all to easy to get dis-heartened and distracted by the progress/fortune/skill of others.

      Good luck!

  • Eli Inkrot August 5, 2014, 1:27 pm

    Hi UTMT,

    Great post. I really liked the opening story. Incidentally, I recently took “the plunge” myself – quitting a VP position to pursue writing full time. It looks like you have a solid plan in place, keep at it!

    • Under The Money Tree August 5, 2014, 2:04 pm

      Hi Eli,

      Thanks for stopping by. Congratulations on taking the plunge and I look forward to enjoy some of your writing in the future.

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