[joncnca]

so what do you think is the best way to financial freedom? i don't think there's necessarily a 'right' answer, but i'd be interested to know some of your considerations?

i had thought that i would become an entrepreneur once i've decided on a business and acquired some capital. but since i recently started investing, i've realized that a lot of the research into an company, market, etc, that you would do before you invest, is much like the kind of market research you should do before starting a business. there're key differences, but what do you think would be best for reaching the ultimate goal of being financially independent (e.g. being able to retire early)

 

[ssimps]

I's say entrepreneur assuming you have a good product or service idea. That's probably a big assumption though.

 

[HaroldCrump]

Best way - not sure
Fastest way - entrepreneur

 

[ssimps]

Best way - not sure
Fastest way - entrepreneur

Splitting it like that, I'd suggest:

Best way - not sure
Fastest way - not sure

Being an entrepreneur and reaching financial independence (FI) can be a LONG road and could result in you having 0 or less. All depends on the person, the idea, and the timing.

Getting a good high paying job in a small company near the beginning (so you can get profit sharing for example) can reduce much risk and saving most of your pay, investing it without too much gambling, will likely result in FI, it just is a question of when. You also get to participate in the companies growth and get many of the advantages and excitement of being a starter entrepreneur with less risk. My experience at least; not saying it is easy to find though. If you have a good skill set, when you look for a job you should think of it as how many suggest you look for a good stock, in the sense of not just 'buying' because they are a well known company but you are entering a dead end position. If you are a go getter, part of your interview should include you being honest about your expectations and ensure that once you have proven yourself that the owner is willing to meet them. This could include you becoming part owner if that is important to you.

Either way I guess there is an element of luck or fortune involved and timing (I don't mean market timing here) can be everything.

 

[ldk]

I think ideally a combination of the two is both the 'best' and the 'fastest'...
as an entrepreneur you are able to utilize tax strategies (incorporation, dividend sprinkling, etc.) that those "employed in high paying jobs" are unable to, but unless you invest some of those business profits/proceeds you will ultimately end up no further ahead than anyone else.

 

[Rickson9]

so what do you think is the best way to financial freedom? i don't think there's necessarily a 'right' answer, but i'd be interested to know some of your considerations?

i had thought that i would become an entrepreneur once i've decided on a business and acquired some capital. but since i recently started investing, i've realized that a lot of the research into an company, market, etc, that you would do before you invest, is much like the kind of market research you should do before starting a business. there're key differences, but what do you think would be best for reaching the ultimate goal of being financially independent (e.g. being able to retire early)

There is a 'right' way.

The right way is to learn how to read and interpret financial statements. When you do this, you start to recognize the financial attributes of successful businesses. Most people can't tell the difference between a company on the brink of bankruptcy, a slow grower, a fast grower, cheap or expensive.

Once you are able to do this fairly well, you can then decide if you can create a business with the characteristics of fast grower (ie. financially efficient).

Most people just decide that they want to start a business or invest, borrow or save up some cash, and then jump into the deep end to see if they can sink or swim. This has never made sense to me.

If you don't know what success looks like, how can you create one?

 

[ssimps]

Thinking more about this over the night, I think a fair answer is why not be both? If you can be successful at one you may have what is needed to be successful at both.

 

[FrugalTrader]

I would have to say that a combination of the two is best. Be an entrepreneur for the extra income, and be an investor to use that extra income to generate the nest egg to replace your income when you don't want to work anymore.

 

[Berubeland]

I am an entrepreneur myself and I can tell you people don't become "entrepreneurs" It is a mindset. It is very difficult to build a company from the ground and you need to be very tough mentally to believe in yourself and your service when business is slow and you are broke and need to cash in RRSP's because the world does not support your idea. So far I have had 2 businesses and earned a living with both.

After being your own boss for so long it becomes very difficult to work for someone else. You become unable to suck in the crap that you have to digest in a lot of jobs especially low level ones. Being self employed looks very bad on your resume as well.

The best combination is a combination of both as in the "millionaire next door" one part of the couple works and the other is self employed. This smooths out the financial ups and downs and you also benefit from things like pension plans.

An alternative to this is to buy into a franchise. You have some of the advantages of self employment without the hard lonely slog of building a business from the ground up. This is better for "employee" type people who want security and a steady paycheck. But buyer beware not all franchises are created equal.

Anyways I know which side of the fence I am. I like working with others not for them. And even with the periodic financial droughts I love that I hang out with my son as much as I have.

 

[OptsyEagle]

The question is best answered with more questions:

How many people do you know that got rich investing in the stock market? Almost none, I bet. I have heard of Warren Buffet and maybe one other.

How many people do you know that got rich owning their own business? Here the list is endless.

How many people do you know that went broke investing in the stock market? Not many.

How many people do you know that went broke owning a business? Unfortuneately quite a few and of course they usually do not get head lines so you know there are a lot more. I think 80% of business owners fall into this category. That 80% go away so quickly or never really get started so that you don't even really get to hear about them.

The last question is more important. How much money do the people that have not done well in the stock market have, compared to the people who have failed at business, have. I am talking about the entrepreneurs that really gave it a try, not just the person thinking about useful products, eating cheetos on the couch.

You will find that when business owners fail, they really fail. Stock market unsuccess is usually not quite as damaging depending on how intellegent you are. If you use it like a casino, then they both end up the same.

Anyways:

Entrepreneur = 20% chance of being well off in 5 years.
Investor = 85% chance of being well off in 25 years.

 

[Y&T2010]

The question is best answered with more questions:

How many people do you know that got rich investing in the stock market? Almost none, I bet. I have heard of Warren Buffet and maybe one other.

How many people do you know that got rich owning their own business? Here the list is endless.

How many people do you know that went broke investing in the stock market? Not many.

How many people do you know that went broke owning a business? Unfortuneately quite a few and of course they usually do not get head lines so you know there are a lot more. I think 80% of business owners fall into this category. That 80% go away so quickly or never really get started so that you don't even really get to hear about them.

The last question is more important. How much money do the people that have not done well in the stock market have, compared to the people who have failed at business, have. I am talking about the entrepreneurs that really gave it a try, not just the person thinking about useful products, eating cheetos on the couch.

You will find that when business owners fail, they really fail. Stock market unsuccess is usually not quite as damaging depending on how intellegent you are. If you use it like a casino, then they both end up the same.

Anyways:

Entrepreneur = 20% chance of being well off in 5 years.
Investor = 85% chance of being well off in 25 years.

Wow good analysis! I second everything you said.
Being an entrepreneur has it's tax advantages though!

You can deduct so many things. Canada is pretty good to entrepreneurs.

 

[Rickson9]

How many people do you know that got rich investing in the stock market? Almost none, I bet. I have heard of Warren Buffet and maybe one other.

You need to get out more.

How many people do you know that got rich owning their own business? Here the list is endless.

I know a lot of people who went broke owning their own business.

To me the list seems endless in both categories. I'm not sure your post has any merit unless you can cite a source for your seemingly anecdotal information?

 

[ssimps]

I know a lot of people who went broke owning their own business.To me the list seems endless in both categories.

I would agree with you on this; endless failures in both camps likely.

What about successes though; I would say that it 'seems' that more people become a millionaire being in business than just playing the stock market when they do make it; or it is a combo. I don't see that many people making a $M from JUST investing, unless they have received a big inheritance or something so they somehow have $ to invest without having to work.

Maybe it is just that the successful business people make the news and the pure investors do not. Maybe it is just 'where you get out too'.

I still stick to the idea that if you want to maximize your chances of making a M (if that is how you define success), then get a good job and make sure your employer sees that you can not be replaced. This gives you good $ and spend as little of it as you can, so you save. Use your extra time being an entrepreneur AND moderate investor. Generally, a good pay from a respected job position in a company comes in very month no matter what the markets do or whether your self funded idea fails or not.

I'm not sure your post has any merit unless you can cite a source for your seemingly anecdotal information?

Now this is just funny; thank you for making me laugh, I needed a good one. I also need to get out more.

 

[HaroldCrump]

How many people do you know that went broke investing in the stock market? Not many.

This is not true either, esp. after last year.

 

[hboy43]

Hi:

Well, if we bandy about $1M as financial success, my family has about 1.2. It also recently had 0.6 (circa March).

I am 47, retired about 10 years ago. Wife is 44 and a teacher. Married 12 years. She still works and likes her job, and is out of my hair in the daytime - win, win , win!

How did we get here? No one thing really. Just find ways to generate surpluses, and then invest them.

A surplus can come from growing the income number, or shrinking the cost number. My highest earning year was about $70K, 2nd maybe $65K and all others < $50K. Clearly wasn't growing the income number, our success came from shrinking the cost number.

Factor number one in shrinking the cost number would be the fact that I never owned a car until marriage. That is 19 years after age 16 of not having an annual expense of what is it these days about $9000. These kinds of numbers easily paid for my first house and then some. I think I was 28 when my net worth exceeded the value of the house and about 32 or 34 when I actually paid off the mortgage (or parents, don't remember the order any more).

Factor two, what did I do with the house? I had roommates for about 12 years, so my personal housing costs were equivalent to a single bedroom apartment or thereabouts. Traded personal space for more surplus. As many or most won't have the disposition to have roommates into their 30s, the equivalent would pretty much be live in a single BR apartment and invest all that surplus that would instead be going into a mortgage.

Factor three would be not buying many disposibles: Books, magazines, restaurant meals, beer etc. To many, this sounds like depravity, but I did occasionally spend. $2000 on a custom made bicycle, $4000 on a nice pool table. The reality is that the everyday **** that people buy over years exceeds in dollar terms the occasional big capital good.

Factor four is I did most of my own home maintenance. Wiring, plumbing, new bathrooms, finished basements, I've done it all. All this stuff would average about the equivalent of $5000 to $10,000 a year at a guess.

Factor five would be to let the stock market do it's magic. I (or we) pretty much buy and hold, and adapt to changing circumstances as required. Last year was different as there were plenty of changing circumstances that needed adapting to, but I'd say that over a 30 year investing history, I average under 6 trades a year. I'd say that we have only ever owned 60 or thereabouts distinct securities. I have all the trading slips ever received on my accounts in 30 years in one file that is about 3/4 inch thick. We currently own 21 distinct securities.

I'd say that my personal accreditive characteristics for my financial position would be brutal frugality, rational thought, and a lack of fear of poverty. The bad points would be that I have not been a particularly good investor, I've watched 5 or 6 positions go to zero over the years, though the blunders have tapered off of late. Still, we have unrealized gains of over $200,000 currently and since I stopped working, I have engaged in "tax gain selling" to get enough income to use up my dividend tax credits and make me slightly taxable, say $1000 to $2000 per annum.

In conclusion, I would say that one does not have to the things I did, as I was pretty extreme. Making more money, or working more years, or being a better investor will all get you there without resorting to my more extreme measures.

YMMV

hboy43

 

[ssimps]

Hi:

Well, if we bandy about $1M as financial success, my family has about 1.2. It also recently had 0.6 (circa March).
...
How did we get here? No one thing really. Just find ways to generate surpluses, and then invest them.
...
Clearly wasn't growing the income number, our success came from shrinking the cost number.

Very nice! Great job; nice example of how starting saving early and being debt adverse can do do much.

Really really nice finding a companion that goes to work and lets you stay at home.

 

[canadianbanks]

I would pick entrepreneur any day. I also invest in the stock market, but this is just to hedge my bets.

 

[joncnca]

Hi:

Well, if we bandy about $1M as financial success, my family has about 1.2. It also recently had 0.6 (circa March).

I am 47, retired about 10 years ago. Wife is 44 and a teacher. Married 12 years. She still works and likes her job, and is out of my hair in the daytime - win, win , win!

How did we get here? No one thing really. Just find ways to generate surpluses, and then invest them.

A surplus can come from growing the income number, or shrinking the cost number. My highest earning year was about $70K, 2nd maybe $65K and all others < $50K. Clearly wasn't growing the income number, our success came from shrinking the cost number.

Factor number one in shrinking the cost number would be the fact that I never owned a car until marriage. That is 19 years after age 16 of not having an annual expense of what is it these days about $9000. These kinds of numbers easily paid for my first house and then some. I think I was 28 when my net worth exceeded the value of the house and about 32 or 34 when I actually paid off the mortgage (or parents, don't remember the order any more).

Factor two, what did I do with the house? I had roommates for about 12 years, so my personal housing costs were equivalent to a single bedroom apartment or thereabouts. Traded personal space for more surplus. As many or most won't have the disposition to have roommates into their 30s, the equivalent would pretty much be live in a single BR apartment and invest all that surplus that would instead be going into a mortgage.

Factor three would be not buying many disposibles: Books, magazines, restaurant meals, beer etc. To many, this sounds like depravity, but I did occasionally spend. $2000 on a custom made bicycle, $4000 on a nice pool table. The reality is that the everyday **** that people buy over years exceeds in dollar terms the occasional big capital good.

Factor four is I did most of my own home maintenance. Wiring, plumbing, new bathrooms, finished basements, I've done it all. All this stuff would average about the equivalent of $5000 to $10,000 a year at a guess.

Factor five would be to let the stock market do it's magic. I (or we) pretty much buy and hold, and adapt to changing circumstances as required. Last year was different as there were plenty of changing circumstances that needed adapting to, but I'd say that over a 30 year investing history, I average under 6 trades a year. I'd say that we have only ever owned 60 or thereabouts distinct securities. I have all the trading slips ever received on my accounts in 30 years in one file that is about 3/4 inch thick. We currently own 21 distinct securities.

I'd say that my personal accreditive characteristics for my financial position would be brutal frugality, rational thought, and a lack of fear of poverty. The bad points would be that I have not been a particularly good investor, I've watched 5 or 6 positions go to zero over the years, though the blunders have tapered off of late. Still, we have unrealized gains of over $200,000 currently and since I stopped working, I have engaged in "tax gain selling" to get enough income to use up my dividend tax credits and make me slightly taxable, say $1000 to $2000 per annum.

In conclusion, I would say that one does not have to the things I did, as I was pretty extreme. Making more money, or working more years, or being a better investor will all get you there without resorting to my more extreme measures.

YMMV

hboy43

wow that's a great story. i've been pretty frugal with myself and i would take it to more of an extreme if i were alone, but my girlfriend has much more affinity for the little materials things, which you mentioned, over years exceeds the occasional capital good. i'd have no trouble having roommates into my 30's. i insisted on buying a reliable used car (which i need for work), to make sure there're finance payments. i see you got married at 35...that was my plan, but the way it's looking, i don't think i'll be able to delay it enough to even hit 30, haha, but i'm sure there's a positive trade off there somewhere. i think my biggest drain right now is housing...probably.