Unpopular opinion: even if your business isn’t making money you can afford to invest.
Entrepreneurs play a lot of mind games. I know because I did it too. When you’re starting up in business and bootstrapping, you are stretching every dollar, often living in the red hoping things will turn around and that you’ll end up finally bringing in more revenue than expenses. As you start making money, there seem to be more and more expenses. You’re getting told to delegate, hire people, etc, etc. But you’re afraid to put yourself on payroll because you still can’t even figure out how you would actually consistently pay yourself.
I get it. I was there.
But I also know that during the time I was building my business, I’d go out to lunch with friends, and I’d go on trips, and I’d splurge at the grocery store. And I know I’m not alone there. Yes, I know you’re going to make all the excuses about why and how and how little you spend. We all do it. I’ve seen it time and time again with small business clients and prospects. We say we’re reinvesting every dollar into our businesses, that we’re not paying ourselves, but it’s a rare case to find someone who is literally sleeping on family’s couches and eating ramen noodles truly strategically funneling every spare dollar into their businesses critically for growth. And that’s a good thing. All work and no play, you know the rest.
Here’s the thing, if you’re spending money on leisure as you’re growing your business you can certainly invest too. One less lunch a month. $7.50 less on groceries a week. That’s $30 per month you can invest. $30 invested over 20 years is $7,200 of your money potentially turned into $17,250 you can spend. While you’re working your ass off building your business, your money can work its ass off for your future vacation to reward yourself for all your hard work. Start making money and can invest $300 per month? Add a zero. This shit is powerful. And it doesn’t matter if you invest that money in a retirement account or not, but it does matter that you pretend it doesn’t exist and don’t touch it so it can actually work hard for you. Just like you spent it on lunch, it should be gone. Not cashed out for a coach or a photo shoot or whatever.
So many entrepreneurs have nothing to show for all of our hard work 3, 5, 10 years into business. And that sucks. Furthermore, it frankly makes no sense. Even if you’re in early stages of your business you should have something to show on your balance sheet.
One of the biggest mistakes I consistently see entrepreneurs making is delaying investing in the stock market. They often find a way to invest in real estate. And to invest in their businesses. But time and time again, nothing in investments. The reality? Investing in the stock market is the only truly passive investment opportunity that has a proven long term track record if you’re diversified.
The second biggest mistake related to that is not investing at regular intervals. It’s rare that I see an entrepreneur investing a set amount or percentage every week or month into a stock market based portfolio. Which is insane because this is the #1 way the average person builds significant wealth. An employee making $60k per year enrolled in their 401k at 3% is investing about $35 per week and after 35 years at 8% would have close to $500k in their investment account… from just $63,000 invested. This is how people with average incomes build significant wealth- slowly and passively over time. With the rules of their retirement plan preventing them from cashing out. The average entrepreneur has nowhere near this amount typically invested at the same contribution rate even with much higher cashflows. One of the things I think contributes to this lack of consistent and truly passive investment wealth building among entrepreneurs is the tendency to make investment contributions based on taxes due at tax time and IRA contribution limits and suggestions by their CPAs and accountants. My opinion is that many entrepreneurs could invest $35 per week or even per month AND still make year end contributions no problem. They just aren’t encouraged to. Part of that, I think, is because of a fear that they’ll be worse off if they invest and then “need” to cash out at a loss. It’s insane. More people need to be talking about investing in the stock market ALONGSIDE real estate and business investments. Yes, invest in your business to grow it. But invest in the market too. And in real estate if that’s your jam. There’e enough money for all of it- and really, that’s true diversification and how to build real wealth.
You work too hard for your money. Don’t wait another week to set your money up to work hard for you.