The 23 year old window washer … making $165k a year

Today I want to talk to you about what I genuinely believe is the opportunity of a lifetime.
 
No, it’s not becoming an AI expert.
 
The cyborgs are getting exponentially smarter and will soon view us as golden retrievers (and leave us to sniff each other’s butts while they do the heavy analytical and computational work. Good boy!).
 
Nor is it earning your living as a YouTuber, or, god forbid, as an influencer. No matter how much you hustle, for most people being an influencer is a low-paid sales grind flogging teeth-whitening paste and vibrators.
 
Instead, the opportunity of a lifetime that I’m talking about is a lot more practical … and profitable.
 
Like what?
 
Like window washing.
 
Seriously, here’s a question I got this week:
 
Mr Pape,
 
I am 23 years old. Three years ago I started a very unsexy business: cleaning windows. Last year I netted $160k working, on average, 35–40 hours a week. I went into business as I didn’t want to be a slave, and I like the freedom that comes with money. I currently have $300k invested in the stock market and $90k in cash. My question is, what else should I do with it?
 
Sam
 
Sam is my new hero.
 
He’s not repaying HECS. He’s earning great coin. And he’s not only working far less than most of us, you can bet when he knocks off he might stare out a window, but he certainly ain’t thinking about them. That’s because Sam has what he calls an ‘unsexy business’.
 
Speaking of unsexy stuff, let’s talk about Baby Boomers – and the opportunity of a lifetime:
 
There are 2.6 million small businesses in Australia.
 
And almost half of the owners of these businesses are run by people over the age of 50. (In contrast, only 8% of small business owners are aged under 30 …   down more than 50% since the 1970s).
 
In other words, they’re all getting older, and they’ll increasingly be looking to retire.
 
Who is going to buy them?
 
Young(er) people of course.

And here’s the kicker: many of these businesses are being sold for a song, or even closed when the owner retires. And these are the types of businesses that you want to buy. After all, they’re established, having made it through the ‘kill zone’ of the first five years. They have regular clients, reliable streams of revenue, and trained staff and systems in place.
 
So what’s not to like?
 
Well, how about not having enough money to take advantage of this ‘opportunity of a lifetime’?
 
Fair point.
 
Which brings me to my first question …
 
Tread Your Own Path!

My Business Banking Set-up

I’ve spoken a lot about how I manage my money … you know, the Barefoot Buckets, the orange cards, and the super-cheap index funds.
 
However, I don’t think I’ve ever discussed my money set-up for how I run my business. And I don’t think I ever would have, except for the fact that I was roped into doing a talk for small businesses in my hometown this week.
 
Here’s what I told them:
 
Some people get excited about designing their logos, websites and socials. Yet when I started my business I looked at the most common ways small business owners go broke, and set out to avoid them.
 
I call them the ‘three Bs of business’ … bastards, bust-ups, and borrowing too much.

Firstly, the bastards (the Australian Taxation Office).
 
It’s true, the biggest killer of small businesses – at least early on – is none other than the ATO.
 
My golden rule:
 
Thirty-five percent of every dollar I earn gets transferred immediately into that online savings account, which I’ve nicknamed ‘tax man’. (Side note: When I was setting everything up, I went with a totally different bank for my business – actually a credit union – to keep things separate from my personal stuff. I have a basic business transaction account, and an online saver, which currently pays 4.6% p.a.)
 
Why 35%?
 
Well, it accounts for my company tax and my GST (which many small business people forget about).
 
It’s a conservative number – too conservative – because I always have extra money sitting in that account after paying my tax. And when I’ve paid my taxes I take that surplus and invest it into the business to make more money.
 
My accountant, ‘Old Stubby Fingers’, tells me I should be more ‘sophisticated’ and use the tax savings to manage my cashflow.
 
He’s right, of course.
 
But I don’t like doing budgets, much less trying to stick to them. And I hate having heart palpitations when my BAS is due. (So stick that in your spreadsheet and smoke it, Stubby Fingers!)
 
Secondly, bust-ups.
 
I can count on one hand the number of business partnerships that have lasted the distance. Most don’t, because relationships are tricky … especially when there’s no sex, and there’s money on the line.
 
So early on I decided to not take on any business partners. Never. Ever.
 
And, thirdly, borrowing too much.
 
This is why I run my business without debt.
 
The upside is I don’t have to hock my home for a business loan (the banks almost always want a personal guarantee).
 
The downside is that it’s my back up against the wall, and the buck stops with me.
 
And that’s why I have a fourth ‘B’ – burn money.
 
When I first met my wife, she was slightly petrified that I ran a small business. (Her parents were academics, so she had no concept of ‘you only get to eat what you kill’). So each month I work out my ‘monthly burn number’, which is all the fixed expenses of the business that I have to pay to keep things running, including paying myself a basic wage plus super.
 
My aim is to have three months of burn money sitting in my business transaction account, and I try not to let it dip below that amount on a month-to-month basis. Having an accurate burn number burned into my brain keeps me both hungry (at the start of the month) and humble (when I have a good month).
 
Then, anything left over and above my three-month burn figure goes into blasting through the Barefoot Steps … and these days into shares.
 
 Yes, it’s simple. But it needs to be, because being in business is bloody hard!
 
 Tread Your Own Path!

Our Friends Are Rich from Online Marketing

Scott,

What are your thoughts on online marketing? A friend has introduced me to what is called ‘high ticket affiliate marketing’. She and her husband have quit their 9 to 5 jobs to spend more quality time with their children while working at their own pace, and have travelled extensively. This has got me thinking — should I take a leap of faith and sign up?

Gemma

Hi Gemma,

So this sounds a little like … a pyramid scheme.

Now, affiliate marketing is selling other people’s products to your customers and getting paid a commission.

And do you know what some of the most lucrative ‘high ticket’ affiliate marketing products are?

Expensive courses on ‘how to make millions doing affiliate marketing!’

My tip: buy a $30 book, not a $3,000 course, and go from there.

My view?

Trying your hand at this is a little like buying a pair of Air Jordans then sauntering up to the Chicago Bulls and saying “I hear you guys make a lot of dough doing this dribbling thing. I think I’ll give it a go.”

If you do, prepare to be dunked!

Help! My Mother-in-law Breeds Siamese Fighting Fish

Hi Scott,

I get along well with my mother-in-law — it’s her business ideas that drive me nuts. One day she discovered the marvellous world of pet breeding, specifically high-end ragdoll cats. Quite good money for cute little kittens. She took a loan — from my wife — and off she went. But the kittens turned into old cats, with no buyers. That was 10 years ago, and it almost bankrupted my wife. Lesson learnt? No! She switched to great blue mastiffs (very Instagram worthy), but still no buyers. Lesson learnt? No! Next came Siamese fighting fish!

And that brings us to today. She holds to the idea of entrepreneurship like a lottery ticket, thinking her luck will change overnight. We have shown her that if she had taken the dole and saved it, instead of buying animals, she would be in a better position. Even those poor creatures would be better off anywhere but where she has them. But she doesn’t want help. How do you make someone so delusional see the red numbers?

Craig

Hi Craig,

She sure sounds like she’s having lots of fun!

You? Not so much.

To you, the answer to her problems is so simple it’s like shooting Siamese fighting fish in a barrel: “Stop doing this, you’re going broke!”

Yet she seems purr-fectly happy with her monetary menagerie, mate!

So let me give you the same advice I give any family member who writes to me:

Never, ever ‘lend’ money to your family or friends.

Give it to them instead.

Mentally, get to a point where you’re giving away the money: surrender any thought of it ever being repaid. Which is a decent strategy if you know she’s using it to breed pets she’ll struggle to later give up.

So on this Mother’s Day I want you to stop off at the butcher and get as many bones and offcuts as you can carry.

Then tell her the debt is forgiven!

(And never lend her money for ragdoll cats again.)

Scott.

The Friendliest Store In Town

Hi Scott,

Last week’s column about the Small Business Debt Helpline was the best one you have ever done! I will be sure to pass this information on to anyone out here in the Kilkivan district who needs it. We need to start looking after small business owners, because no one looks after them, and (as you say) they are our country’s biggest employer. I know — I am one of them. And the constant stress and worry that your family home is directly linked to how many coffees and burgers you sell each day can be crippling.

Katy


Hi Katy

Thanks for writing.

Let me give two plugs:

First, for you: Katy runs the Kilkivan General Store, which she reckons is ‘The Friendliest Store in Town’.

Second, for the Small Business Debt Helpline, who do a bloody good job looking after small business owners doing it tough. They’re independent. They’re free. And they’ll fight for you. Call them on 1800 413 828.

Scott.

How to help out a mate

“It’s over ... it has to be.”

I just can’t do this anymore. I’ve carried the stress for far too long.”

On the other end of the line was Steve, the owner of a struggling retail shop.

Steve had finally cracked.

And from experience I can say it often takes a small business owner years to reach this point.

Yet in truth I was the wrong person to call: financial counsellors generally don’t advise on business-related debts.

Well, until recently.

In the wake of last year’s tragic bushfires, the Government set up the Small Business Debt Helpline, which is run by Financial Counselling Australia.

It’s long overdue.

After all, Treasurer Josh Frydenberg has said that “small businesses are the backbone of our economy, and they’re going to be a key part of the recovery”.

He’s right:

When you think of businesses, you probably think of the big boys: Woolies, Coles, Telstra, BHP.

Yet only 3% of Aussie businesses employ more than 20 people.

The other 97% are small family operations, and they collectively employ 4.7 million people.

That makes them Australia’s largest employer.

And yet when things get tough they don’t have access to the same funding options that big businesses do.

The truth is that our banks would rather lend money to buy an (inflated) property than chance it on a small business owner. All too often the banks look for reasons not to lend.

So business owners end up getting hit with complex personal guarantees and convoluted legal contracts they don’t understand … or worse, getting bitten by a loan shark.

And that’s where the trouble really begins.

As Steve will tell you, owning a struggling small business can be a lonely, isolating experience.

You wrap up your very identity in the business … and often your family home, and your family’s future.

Could the stakes be any higher?

So I need you to do me a favour:

If you know someone who’s struggling in their own small business — and there are plenty of them right now — let them know they’re not alone.

Get them to call the Small Business Debt Helpline on 1800 413 828.

It could be the lifeline they need.

Tread Your Own Path!

Are We Insane?

Hi Scott,

My partner and I have $30,000 saved up. I have come across a promising opportunity to buy a juice and coffee trailer with an exclusive trade permit in a popular hiking and tourist spot. Is it insane to relocate and spend the majority of our savings on a business instead of a home? I always wanted to work for myself, and it would be a great opportunity for my unemployed partner to run it. And I would still keep my current part-time job for financial security at the start.

Tab

Hi Tab,

Is it insane to spend the majority of your savings on a business instead of a home?

Well, I don’t think I’d do it, even though I do officially make ‘the world’s best smoothie’.

(Seriously, you can ask my kids. Every dad needs to be the world’s best at something, so I claimed it early on.)

Okay, so what’s your worst-case scenario?

Well, that you end up buying yourself a hospitality job with no access to super or guaranteed minimum wage.
And the best-case scenario?

That you’ve stumbled on a gold mine where hungry and thirsty hikers line up all day, and you earn a good return on the money you put into it.

So, is it a good deal?

Well, I can’t imagine that a coffee trailer would be very expensive, so it’s likely you’re paying a premium for the ‘exclusive trade permit’.
So the first question I’d ask the seller would be: “How did you come up with your selling price?”

Then zip it, and listen to what they say.

Unless they can provide a track record of audited figures, they’re probably delivering you a sales spiel.

And if that’s the case, it’s time to wake up and smell the coffee.

Hell’s Kitchen

Hi Scott,

My wife and I are in our early 30s and are both nurses. She has decided she wants to put our money into starting a restaurant. I think it is a terrible idea, considering our lack of experience and the low success rate of restaurants. Please help me change her mind!

Gary

Hi Gary,

Order up!

I suppose your wife could argue that she’s being “greedy when other people are fearful”, as Warren Buffett says.

Though I couldn’t see Buffett investing his money into a start-up restaurant right now.

After all, figures from Treasury estimate that 441,000 jobs will be lost in the hospitality sector, and the industry’s peak body is warning that 20% of restaurants could go down the gurgler.

In reality, the industry was already struggling before the pandemic, as a result of fair work compliance off the back of high-profile wage theft cases. Most small business people buy themselves a job. Many restaurateurs discover they’ve been served up a shank sandwich.

My thoughts?

You’re both in one of the few pandemic-proof positions — nursing — so I wouldn’t be leaving it.

However, if she’s determined, why not suggest she work evenings in a restaurant for the next 12 months? She can think of it as a paid internship. It’ll give her an entree to the industry, and she’ll get to see just how hot it is in the kitchen. I’d say it’s the best way to work in a restaurant and come out ahead over the next 12 months.

Scott

Use Your In-Tuition

Dear Scott

You believe in people following their intuition (‘in-tuition’ or ‘inner teacher’), right? Well, I made the move from charity work to psychic work in 2011, and I keep having the same dilemma. People think it is greedy (if not evil) to charge for what I do! This has made me terrified to become successful, as I feel like I am wearing a bullseye on my chest. I can hardly sleep. What advice do you have for those who want to be spiritually AND financially rich?

Mandy

Hi Mandy,

(I’m channelling my readers here and they’re like: “Bulldust, you made this up, Barefoot!” But, truthfully, there is no way I could concoct a question like this.)

All I can say, Mandy, is that you should be an Australian fund manager: they believe they are psychics (who can pick winning stocks and outperform the market, even though the evidence overwhelmingly suggests they cannot). Yet they have no problem charging people for their psychic stock-picking (even though their crystal balls are very cloudy).

All jokes aside, if you believe in your business, and people are prepared to pay you for your services, I don’t see a problem. Focus on the people who pay you, not the people who don’t. The idea that you have to choose between being spiritual and being rich is a concoction brought about by tightwads who just want something for nothing. It’s what you do with the money that counts.

Scott

Am I a Financial Drug Dealer?

Hi Scott,

I run a small online business with my wife. While I do not use Afterpay myself, we do offer it as a payment option for our customers. Does this make us financial ‘drug dealers’? I admit it makes me uneasy, but it has boosted our sales and I am afraid customers would turn to a competitor if we did not offer it. What would you say to merchants like us who feel stuck in the middle?

Pete

Hi Pete,

You’re right, there is a financial drug dealer here ‒ but it’s not you ‒ it’s Afterpay.

Founder Anthony Eisen told me over lunch that, after Google, Afterpay is now the biggest referrer of leads to retailers in Australia. And as a result they’ve now got a lot of retailers hooked on their drug: millions of shopping-happy millennials.

You’re currently paying Afterpay a percentage of each sale. Well, tech companies have learned a trick from drug dealers, and they have a track record of jacking up their prices once the addiction takes hold, to capture more of your margin. Google did it. Facebook did it.

Will Afterpay do it? Time will tell.

Yet one thing you should be very clear on: they are not your friend.

Scott

The Business of Buckets

Hi Scott,

I love your book and love passing it on to other people. But what comes back to me from some of my self-employed friends is that do not have a steady income. What is your recommendation for these people in setting up their buckets?

Deb

Hi Deb,

My book sets out how I manage my own money: I’m self-employed, and it works!

When small business owners tell me that the buckets strategy doesn’t work for them, it’s nearly always because their business isn’t making enough dough.

And it’s also because they don’t keep their business and personal finances totally separate. It’s all mashed together.

So, the key for small business owners is to ‘know your numbers’ -- that is, the absolute minimum you need to earn in your business to keep the doors open and the absolute minimum you need each month to live on personally.

Then you set up your personal buckets up accordingly.But I also have some business buckets:

I transfer 40% of whatever the business earns into a seperate business savings account to meet my tax obligations. (Yes, it can sit there for months … but I’m conservative. I’m simply the bagman for the taxman.) In addition, I have a business Mojo account (for emergencies) and I keep a very close eye on our working capital, so I can always meet my obligations.

If you think this sounds difficult, try running a business without it.

Scott

Should I Buy a Pizza Hut Franchise?

Dear Scott,

My partner is considering buying a Pizza Hut franchise. He knows that most franchisees have had a hard time, but he is going into business with a friend, and both have previous fast food management experience. Also they will be working as managers, so will get a salary as well as profits. He thinks they can make it work. He has had a hard time finding a job since he left his last job (he was not happy there), so he thinks this will be the best option at his age (40). Should he do it?

Linda

Hi Linda,

Personally, I wouldn’t buy a food franchise for all the pizza in Penrith.

However, I’m biased by what I’ve seen over the years, namely, decent hardworking people getting financial food poisoning from the likes of Pie Face, Donut King and Michel’s Patisserie. Many of them invested their life savings into buying an 80-hour a week job, and were left broken and broke.

It could be different for Pizza Hut, though a quick Google served up a 2015 class action that “alleges Pizza Hut parent company Yum Brands breached its duties to its franchisees by denying them the chance to make a profit”.

I don’t know how much profit there is in $6 takeaway pizzas, but I think it’d be hard to make a crust. Maybe suggest he calls up any of the dozens of Pizza Hut franchisees who are currently offering their business for sale, and ask them.

Scott

The Financial Dominatrix

Hi Scott,

I am 24 and do financial domination on the side, out of my normal working hours. Income goes into my account for this, which is mostly gifts, the rest as payment for videos. I am doing pretty well — by the end of this financial year I think I will have doubled my income. But I am scared no one will talk to me seriously about this, as sex work is gasped at everywhere I look. My real question is, should I have an ABN set up, or continue as normal and add it to my tax return? 

Barbara

Hi Barbara,

First, yours is easily the wildest question I’ve had in 2018.Well done.

Second, I’ll admit that I actually had to google ‘financial domination’.

Here’s how the interwebs describe it:

“The fetish of financial domination basically entails men (or ‘pay pigs’ as they’re known within the fi-dom world) transferring large sums of money to women over the internet. The nuances vary, but a relationship can stretch anywhere from a pay pig sending his dominatrix $30 a week to donating the vast majority of his earnings and having his dom take full control of all his finances.”

Third, any men who get their rocks off this way, please email me!Finally, let me answer your question. You say that “no one will talk to me seriously”, but I can assure you the Tax Office most certainly will. One way to become more legit is to go to the Australian Business Register (abr.gov.au) and apply for an Australian Business Number (ABN). It doesn’t cost anything, and you’ll get it immediately.

It’ll also help should you want to register your business name (my suggestion: Financial Domination R Us), help you with the ID to get a bank account, and if you ever want to issue an invoice (which may well be a trophy for a submissive client), you’ll be able to quote your ABN number and not get hit with withholding tax.

Still, you don’t need to worry about GST until you’re turning over at least $75,000 a year. Until that point you can run the business as a sole trader and simply report the income in your individual tax return, using the section for ‘business items’ to show your income and expenses.

Scott

Spill the Beans

Hi Scott,

I am a 32-year-old tax accountant earning $100,000 a year -- and I am facing a dilemma. I could (for $300,000) buy in as a partner in the accounting firm where I currently work, replacing a partner who is soon to retire. But I am not happy at this place and have always wanted to start my own accounting business. I already have some clients on the side, worth about 20% of my salary. Would quitting my job and going it alone be the right move?

Ben

Hi Ben

You haven’t said how much partners get paid at your firm, and therefore how long it would take to earn back your investment. But I don’t think it really matters. If you’re not happy there, why would you sink $300k into it?

Personally, I think being in a traditional suburban accounting firm is a really tough business, and it’s only getting tougher.

In the coming years technological advancements like ‘blockchain’ and artificial intelligence will revolutionise the industry. Even now, the bread-and-butter business of tax preparation and compliance is dwindling -- and if Labor gets in they’ve promised to limit deductions for tax advice to $3,000 a year. (Okay, so that last one doesn’t have legs -- I’m sure it just means that accountants will charge clients ‘financial strategy’ fees instead.)

Still, there’s no doubt in my mind that accounting is going to look very different 20 years from now. To succeed you’ll need to be a truly trusted financial advisor to businesses, rather than a suburban cardigan-wearer doing tax prep.

If I were in your shoes I’d do what I call ‘swinging on the trapeze’ -- that is, keep your $100k-a-year job (holding onto the trapeze bar) while you invest time and money into building up your side hustle, then move to it full time when you’re ready (landing on the other side of the trapeze). That way you might just create a business you’ll want to spend the next 30 years in.

Scott

Should I Buy an F45 Fitness Franchise?

Hi Scott,

I’m a 26-year-old woman working full time in a job I hate. Quite frankly, I am sick of working for the man! Now, I have never had my own business before, and I am a little apprehensive, but I love fitness, and I also love F45 (a new high-intensity interval training fitness franchise). It is rapidly growing on a global scale, with 750 studios around the world already. The cost to open a franchise is $150,000, plus $1,700 a month in fees (plus rent, wages, taxes, etc). I do not have the capital, so I would also need to apply for a business loan. Do you think this is a good idea?

Mandy

Hi Mandy,

A mate of mine does F45 -- short for ‘Functional 45-minute’ training -- and fair dinkum he never shuts up about it.

But let’s get one thing straight: if you buy a franchise you’ll still be working for the man -- but in this case it’ll be the ex-finance dude who dreamed up the F45 franchise model. I imagine he’s currently lifting gold-plated barbells from all the money he’s making … and good on him too! All I’m saying is that in this equation he’s the entrepreneur -- and you’re the worker.So, would I buy an F45 franchise?

No, I wouldn’t.

And it’s not because I could risk having a cardiac arrest if I actually did F45 -- it’s because I’ve put the franchise through its paces, just like I would with any investment.

So let’s you and I do a money workout:

First, let’s look at the sector. Australia’s gym market is one of the most competitive and saturated in the world, according to IBISWorld. (Why are we so fat, then? Is it the chicken or the egg? Or maybe it’s the chicken and egg sandwiches.) Simply put, there are a lot of businesses fighting it out for our fitness dollars.

Second, one of the key selling propositions of the F45 franchise is that there’s not a lot to it -- two trainers, four walls, and a bit of equipment. Easy to start … and easy for potential competitors to start too. And what about when ‘F6’ comes out? (Seriously, I could totally blitz 6 minutes of training.)

Third, while F45 is going bananas right now -- the business is just five years old. What will it look like 10 years from now? Fitness is a faddish industry (hello Zumba, Tae Bo, and pole dancing fitness). Heck, F45 is itself a gentler version of CrossFit, which is now reportedly starting to run out of puff.

So, here are a couple of questions you need to ask yourself:

How quickly could you earn back your upfront costs (a $150,000 loan plus $1,700 a month)?

Even better, could you avoid borrowing (which always ramps up the risk and makes life more complicated) and instead -- as we Barefooters call it -- ‘swing on the trapeze’. That is, keep your day job, start a morning and weekend fitness bootcamp, and make a go of it for the next 12 months to test it out. If it’s a winner, quit your job and go for it!

Scott

Amazon wants the keys to your house.

Oh, and the retail giant also wants to install a camera at your front door to track people coming in and out.

Seriously.

‘Amazon Key’ is a security camera and locking system that lets you get deliveries inside your home when you’re not there.

Here’s how it works:

When the Amazon delivery driver arrives at your front door, he (or she) scans your package. If the package is approved, the door unlocks, and the camera starts recording. Now here’s the cool part: you can watch the delivery driver from your phone … and apparently even talk to them:

“Put the ice-cream in the fridge please cobber.”

After the driver has dropped off the package, the door automatically locks behind him. (And if you’re busy working you’ll get an email with a recorded video of the drop-off.)

Amazon Key costs $249 and is currently available in 37 cities across the US — but if it’s successful you can be sure it’ll be quickly rolled out here in Australia.

Righty-o. So what does this all mean?

First point: this is just another reason that Amazon is fast becoming the ‘everything store’.

In the coming months Amazon Home Services is rolling out 1,200 different services — from cleaners to dog walkers — who will all sync into the Amazon Key system.

The bottom line for Aussie businesses is brutal: if you don’t have the chops to compete globally, then the best companies in the world will eventually come Down Under and cut your lunch (and most likely deliver it by drone).

Second point: is this ‘1984’?

Are consumers seriously going to allow a conglomerate to set up a camera in the privacy of their homes?

Sure!

In fact, Amazon Key perfectly complements Amazon Alexa, the voice-activated speaker that is constantly listening in to your conversations (and awaiting your Amazon orders), and the cute-looking Alexa Alarm Clock, which has an in-built camera and microphone (in your bedroom!).

Yeah, but what about letting strangers into your home?

Well, think about the intricate security system most of us have now: you keep a spare key under the doormat so that Sally (surname unknown) — the cleaner you met for 10 minutes as you showed her through your pigsty of a home — can get in. Good old Sally wouldn’t use your toothbrush to clean the toilets, right?

… Hang on, give me that security camera!

Tread Your Own Path!

Am I Making a Big Mistake?

Morning Scott,

When reading the section of your book where you talk about starting a business, I remember thinking, “I can’t see that happening to me”. What would make me leave my secure, well-paying job ($100,000 plus)? Well, an opportunity has presented itself. I have been offered a contract by my current company (construction) that is open ended -- if I am happy to do it, they will pass on client work. I figure it will cost about $80,000 to set up the business, and I can earn $150,000 p.a. plus. I am 75% convinced this is the right thing, but my wife is not -- her parents lost everything in a failed retail business. I see this as a potentially life-changing decision for our young family ... but only if I get it right. Any help would be appreciated.

Jim

Hi Jim,

My first question is this: would you be running a genuine business, or is your boss just parlaying some of his risk?

There are rules against ‘sham contracting’ which you should look into -- make sure it’s a genuine opportunity for you … and not your boss!Now, your wife is right to be wary: right now you’re earning $100k plus.And in this case the plus really is a plus. As an employee, your boss shells out for your superannuation, you get four weeks paid holidays, and you get paid time off for sick leave, carer’s leave, long-service leave, and public holidays. And unless you go loco and bring a gun to work and start waving it around, it’s actually quite difficult for your boss to sack you.

Best of all?When you get home, you can kick the footy with your kids and not have to think about work or where your next pay cheque is coming from.

However, if you start your own business, you’ll have, as Jay-Z says, 99 problems: you get to spend your nights doing bookwork, stressing about where you’ll find new, profitable customers, and possibly dealing with employees and paying their entitlements. Oh, and your worried wife will be riding you harder than your current boss.

Bottom line?

If I were in your shoes, to go it alone I’d want to be earning (eventually) AT LEAST double what you’re currently earning as an employee, especially if you’ve got to stump up $80,000 of your own dough, bro!

Scott

What Would ‘Rich Dad Poor Dad’ Do?

Hi Scott

My husband and I (in our late 30s, two kids) both run our own small businesses. We work part time and are not earning steady money, about $60,000 combined per year. Our incomes never meet our expenses -- NEVER -- and now we have stopped paying our mortgage because we are so tired of ‘the game’, as I call it. My question is this: is it really worth all the effort to own your own home? ‘Rich Dad Poor Dad’ author Robert Kiyosaki calls a home your biggest liability -- not an asset! Do you agree with him?

Katie

Hi Katie,

Please insert your thumb into your mouth and begin sucking it while I pat your head and gently whisper: “Being a grown-up totally sucks, doesn’t it?”

The ‘game’ you say you’ve opted out of is called ‘being an adult and facing up to your responsibilities’. You made the decision to buy a house and take out the mortgage … so you either sell your home and rent, or you continue honouring your commitment.

It sounds like you’re not earning enough money in either of the business (presumably because you’re both only working part time?). If they aren’t making you enough money, and you see little prospect of improvement, by all means get out of that game. Either way, my advice is simple but brutal: one or both of you need to get a job so you can put food on the table for your kids, and avoid losing your home.

Now to your actual question: Is it really worth all the effort to own your own home?

Well, I agree that maintaining a home is expensive, and at times it can be a huge drain on your cash. But I still think it’s worth it.

Yes, creating your own castle involves sacrifice, hard work and a commitment to providing stability for your family. Yet that’s what being a parent is all about, right?

Finally, what would ‘Rich Dad’ do? I have no idea, though I do know he filed for bankruptcy in 2012.

Scott

Heartbreak Motel

Dear Scott,

My husband and I are in our thirties, have two kids, have a $70,000-a-year household income, and owe $190,000 on our home ($240,000 value, we live in Tassie!), with $80,000 in an offset account. We now have an opportunity to invest in a business as 25 per cent owners in an accommodation/wedding venue. The asking price is $1.5 million-plus, with four partners putting in 25 per cent ($500,000 each) and an additional $500,000 for improvements. The profit from previous years is around $200,000 per annum, with future bookings into 2019. We are unsure if we should take this opportunity (as silent partners) or just continue to pay off our mortgage. Please help.

Tash and Simon

Hi guys,

This sounds like a real stinker of an idea.

In fact, let me count the whiffs:

Whiff one, you can’t afford it. You’re simply not earning enough to take on more debt. (Though that’s my opinion ... not the opinion of a bank that wants to flog you more debt.)

Whiff two, you’re getting into bed with not one, not two, but three partners!? You may start out wanting to be a silent partner, but trust me you’ll eventually have to raise your voice.

Whiff three, if the business has a downturn you may have to put your hand in your pockets, or reduce your dividends. And this is at a time when you’re still repaying your debt. And you can’t afford it in the first place.

Look guys, this venture smells worse than my son’s teething nappy (and the end result will be just as messy).

Life is difficult when you’re raising young kids, and living off one income. To quote Jon Bon Jovi, “You’ve got to hold on to what you’ve got”. Keep your life simple. Pay off your mortgage. Take time to smell the roses.

Scott

No Such Thing as a Silly Question

Hi Scott,

I am loving your book and have one (probably silly) question. My husband and I, both 40, are tackling a $45,000 credit card debt on $70,000 a year combined income. Most of it is business credit card expenses -- his small business has had a very quiet start to the year. Do we redraw this amount from our mortgage (we have $300,000 in equity), pay off the credit card and start again, or keep chipping away?

Kelly

Hi Kelly,

Yes, you can refinance the debt onto your mortgage to get a lower rate.But there are a few things to remember:

First, it’s no magic wand. You’re eating into your family home, and there are only so many times you can do this.

Second, you’re turning a short-term debt into a long-term debt.

Third, you’re putting a bandaid on a deep gushing wound.

The wound was caused by your husband’s flailing business. Paper-shuffling your debts doesn’t mean it won’t happen again. So I’d sit down with your husband and have what comedian Tom Gleeson calls a ‘hard chat’. If the business doesn’t improve by Christmas, it’s time for hubby to get a job.

Scott