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New Expense Category ‘Entrepreneurship’

Spending On ‘Entrepreneurship’ – Investment Or Expense?

In order to reach financial independence I have successfully minimized my monthly expenses to a point that’s comfortable, yet efficient. After FI comes being able to retire early. This latter step has a bit more to do with my psyche and is less of a financial decision. Pulling the trigger isn’t easy.

Generating passive income has become a recent topic of interest of mine. I am looking to see what specific category can capture my attention, researching realistic ways of generating passive income. I need to write more on this topic… defining passive income isn’t necessarily straight forward. There are numerous online resources talking about how great such-and-such passive income strategy is… but, as an example, I’m having a hard time thinking of real estate as passive income, either because I have an unrealistic bias or because I don’t have enough knowledge on this topic – and this is exactly the platform that I will use to find that out.

Even though I may be able to do this without spending money it’s more efficient to throw a little money at potentially¬†establishing a low-effort, income-generating business venture. Buying books, subscribing to certain websites/podcasts and renting myself an office in order to reach my financial goals are part of that.

When I started developing an interest in cars I bought a 1973 Ford Maverick… didn’t know diddly about cars then. I remember taking the car apart in a friend’s carport over a few months in hopes of rebuilding it. Those of you who are wrench monkeys know exactly what happened next – so, the next Maverick I bought, I decided to keep it derivable and still learn on. I gained basic engine repair knowledge, breaks repair, drive-train and some light body massaging.

I sold that 1972 Maverick and bought my ‘final’ Maverick. Oh my beautiful 1971 baby… I miss you so much. I learned a ton on that car, rebuilding the engine, finally building an engine from scratch for it, racing it, breaking it, rebuilding a transmission, rebuilding the rear end, welding, body work, electrical work (and then having my friend fix my electrical work). I spent a lot of money to obtain those skills, a LOT of money. I can safely say I spent $60k on that car, +/-$20k. A hobby, yes. An investment, maybe. I did move on to open my own auto-mechanic shop which taught me so much about a brick & mortar business.

In my upcoming ‘Expense’ posts, I will add Entrepreneurship to one of my expense categories. I believe that one should spend money on themselves first before paying that money out to another person.¬†Trying to rebuild your break caliper before you go buy a new one is such an example. If you can learn to grow fruits/veggies then you can sustain yourself – potentially indefinitely. If you can learn a skill then you can either barter that for something else that you need or you can use it to generate income. My skills as a physician are valuable in 2 ways; I can trade the knowledge for income or I can do the physical work by seeing patients in an urgent care. This website, though not income-generating as of this writing, will eventually help me complete the former so I can do less of the latter.

More examples, you ready? I pay Vanguard $1,500 to buy certain funds in hopes that it will generate income in the future, perhaps go up in value or at the very least maintain my asset value by keeping up with inflation. Based on current research that $1,500 could grow to $9k in 30 years. Or it could generate a passive income of $60/yr.

If I spent that $1,500 on learning how to invest my own money then I could get rid of my financial adviser whom I pay exactly $1,500 every year. Or, I could learn how to do electrical work, which would save me probably several hundred every year maintaining my condo. I then can trade that skill in for something else I might need.

I know this topic is getting a bit theoretical and for some physicians it might be a bit of a ‘reach’, spending time learning skills when time is exactly what we need more of. Maybe I’ll throw this at you now… time is exactly what you will buy if you can reach financial independence sooner.

So back to the topic, is money spent learning a valuable skill an expense or an investment? I vote it’s an investment. Theoretically, I wouldn’t include such money spent in my ‘Expense’ category… though realistically, it will show up there, so I probably will report it out, to all 3 of my readers!

 

What investments have you made in yourself recently?

What is more valuable? Spending 10 hours working and making $1,000 or spending 10 hours learning how to set up your own website?

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