Assets vs Jobs

Posted by in Finances

Since I’ve come across the idea of being financially free about a year or so ago, thanks to Nassim Taleb’s idea of “F U Money” and Mr. Money Mustache’s writing on how much easier it actually is, I have been reading a ton about investing right now.

Which is kind of funny, because I don’t have a ton of extra capitol at this point. Between reinvesting in businesses and paying off my student loans, there’s not a lot to do besides working to max out my Roth IRA.

I know I should probably wait to pay off my loans since I have a decent rate there, but as Taleb says in Anti-Fragile, debt is one of the most fragile things you can have. Especially if I am not ending up with anything in the end, when comparing to say a business loan or a mortgage.

Defining my North Star

What this reading and research on investing has done was help define my North Star. By North Star, I am talking about the guiding principals I use to make decisions in my life.

While I feel like a 5 year or 10 year plan is a waste to have, I believe in having a North Star of principals that help me make shorter term decisions that are apart of the bigger picture.

The way investing has helped me define my North Star and see a path towards it was through the teachings in Rich Dad, Poor Dad by Robert Kawasaki. It was the idea of acquiring assets that cover your living expenses, which opens up freedom; and freedom is my North Star.

Freedom is My North Star

Freedom of finances, time and location. Basically Tim Ferriss’ triangle of what currency actually means in the age of the internet.

However, I should have seen this path years ago when I read the 4 Hour Work Week. Build a business, that is an asset, and have it cover my living expenses.

But this is only half the North Star. I can’t live the 4 Hour Work Week. I have the desire to build an actual business, one that solves a much needed problem in society.

However, with this idea of acquiring assets to cover my living expenses, I feel like there is a smarter way than the all or nothing mentality of building a big business. It could take out a lot of the mental struggle of needing the business to make money earlier.

If I build up and acquire assets enough to give me the freedom I need, I am then free to give a ton of effort into the business I would like to be my “Job”… the work that I trade my time for.

Assets vs Jobs

To me, the distinction between what an asset is and what a job is has been the slight turning point that I needed to start seeing this path. I believe there is a gray scale, between an asset and a job.

At one end, you have an asset, that completely makes you money without you ever having to touch it. I don’t think anything is or should be, a 100% asset. That would mean you don’t monitor, research, or put anything thinking into it, which is basically impossible, or if it is possible, then I don’t think it’s smart.

The only thing that comes to mind for that is if someone had a trust fund from their parents or an advisor monitored and dolled out.

At the other end of the scale is a job. This is something that has a money to time return of 1:1 (or worse I guess if you are underpaid).

For every 1 unit of your freedom, you only earn 1 unit of currency or less. This is not an asset. It doesn’t mean you couldn’t turn it into an asset and is actually where most assets start. It is the scale that is important though.

I am now starting to look at projects in front of me and wondering:

1) Do I want this to be a job or asset?

2) If it were an asset, what would that look like?

How I Evaluate my Opportunities with these Questions

These questions have shifted my thinking on business ventures that I look at. For example, I am building some authority websites. Are these my jobs? No. I wouldn’t want them to be. I wouldn’t enjoy myself if they were.

So the next question is, how would these look like as fully built out assets.

Well, I am making my base income with them as Amazon Affiliates and info products. So the sites would need content fully automated and optimized, along with the intricacies of creating and launching products. For this I am working on hiring people to research, write, format and publish our articles on that site.

The goal is to have consistent articles coming out that will make money based on of SEO. I’ve also started creating SOP’s for content distribution and link building (white hat).

The ratio of these niche sites right now is actually 1:-1 for time and money. These aren’t assets.

But when they start ranking for the keywords we are optimizing for, along with our contractors working more without our input or tweaking of SOP’s, this ratio will start to change. And soon, we’ll have sites that bring in income without us working on them.

I will simply be checking in with our project manager for updates and to give them new projects that will grow the assets. I see this being a couple calls.

That is an asset. And to me, an asset that makes more sense than me investing in the stock market.

I know SEO, content marketing, sales funnels, and website monetization. I understand the stock market, and think I could actually do well in it (or am just ignorant). What I do know though is I’m better off building business assets than even investing that money into index funds.

What This Asset Thinking Looks Like Long Term

So as I build these assets, I should get to a point where the income from these outgrows my expenses. It wouldn’t take much now, as a 24-year-old who doesn’t own much and dislikes shopping. But I think at the height of my spending, say with a family to provide for, I think $4K would be a very high bar of my spending.

With a merging of Mr. Money Mustache and Ramit Sethi’s philosophies, I see it being about there.

Which is not much for financial freedom from a 1-dimensional asset standpoint. But that seems fragile to me, especially if it’s based on websites mostly relying on SEO, which I don’t plan it being.

I want multiple businesses, index funds, possibly individual stocks (buy and hold), and maybe even real estate.

That’s my idea of diversification and working to mitigate downsides and take advantage of upsides. If one thing crashes, I’m fine.

What all This Means for My Job

While this sounds like the talk of someone who’d like to just create passive income and so I can retire, this is actually my plan of opening me up to work even harder and longer at my “job”.

I can’t imagine not working on something. A project that would help solve something big. The way it’s looking now, it’ll probably be a software company with my friend. He’s a great programmer and I’m a marketer. We have similar visions on this.

Acquiring and growing my assets allows me to dive in further into whatever my “job” is, but also gives me the freedom to control my “job” more.

While I may be trading my time for it, it’s voluntary. Financially, I’ll be free due to my assets, and I picture my business being location independent.

That way, I still get my North Star principals.

Let me know what you think of this whole philosophy. I’m interested to get it critiqued, and for it to become more solid along the way.