Your retirement is approaching soon. Even if you are 25 years old, you could be less than ten years away from retirement- if done correctly. To become financially independent and retire early (F.I.R.E.), you will have to use the four pillars of the 4-50 Retirement plan- retirement income, investment income, rental income, and business income. On top of these four pillars, the most crucial aspect of a healthy, financially viable retirement is your mindset.
Today, I want to focus on the business pillar and the mindset to go along with it. Before you start a home business, you will want to take an overall glimpse of your retirement system. Everything works together and viewing it all as one big puzzle can alleviate a lot of stress in the future.
Mindset. For example, if you want to earn a total of $8,000/month during retirement, you can divide it up via your four pillars. When you start your business, you may only need to bring in $1,000/month. Instead of thinking that you will need a large company, you can focus on building a small, tight business that works around your retirement schedule.
Create.
Two Types of Business Income. We want to achieve $8,000/month- how do you get there? The two types of business income I focus on are royalties and automation. I wrote an article about them called “Passive Income: Royalties vs. Automation.” I recommend everyone start with creating royalties first. Here is why.
Start with Royalties. Most people do not want to start with royalties because it takes some time to generate income. Royalties come from creating art, music, videos, or books. To make any money via these forms of media, you will need to build an audience around your content. The idea of growing an audience is what throws most people off. However, an audience is also a base of customers. All businesses need customers or clients.
Growing an audience will be necessary no matter what form of business you start. Therefore, royalties are more effective at gaining momentum for your business. By creating free content about a topic, you are adding value to your audience. They begin to know, like, and trust you. When it is time to launch a product, of course, you have the audience ready for the purchase. They like to call these “warm leads.”
I also like royalties because you can monetize your content in hundreds of different ways. For instance, I write books for Amazon Kindle. Most of my readers use the Kindle Unlimited program to read my books; therefore, I can use affiliate marketing to sell other products such as courses, writing seminars, and merchandise. I can combine my books and sell the more oversized book for a higher profit. I can translate my text or convert it to audiobooks- for more sales. The possibilities are endless.
Nobody Owes You Anything
Royalties are passive. Once I get everything set up correctly, royalties come in passively. I am doing the work on the front-end. You have to find a way to keep them advertised, but other than that, you can move to the beach. I am building a base of books that will fund a small part of my lifestyle for the rest of my life. Again, that is why I love royalties- you can spend a couple of years building up your base of royalty income, then wholly move on to something else. I like to remind people that the first time I bought “Rich Dad Poor Dad” was in 2020. The book was released in 1997. When you earn money 23 years later, that is what I call passive income.
Automation can be equally significant. Just because I am a fan of royalties doesn’t mean that automation doesn’t have a place in my heart. Before you jump into starting a home business, I want you to picture yourself on a beach. You are sipping on a margarita, and you get a text alert from your bank- $2,000 had just been deposited from your business. You should love the idea of earning passive income. Creating passive income is why I started writing and blogging- everyone should know what passive income is and how to build it.
Think beach, start a business. Yes, before you start a business, think about being on the beach. If you don’t think of your business as a source of passive income, you will end up creating a job for yourself. What do I mean by “creating a job.” When you do a business where you are the sole source of income, you just created a job. If you stop working and the money stops coming in, you built yourself a job. Sadly, most people create themselves jobs.
Dividends vs Royalties
Growing up, parents teach us that hard work pays off in the long run. To some extent, this is true. However, there is a difference between working to build systems and train employees; and hard work doing everything yourself. I like to divide automation into three separate categories- automated, out-sourced, or manager.
Example. Let’s take an example of a food truck. Most people will grab a food truck and start driving it around themselves. I think this is a good idea for everyone to start out doing. Understanding your business is key to success. However, most people will stay at this level for the entirety of their careers. It is mentally comfortable. “Thinking is hard; that is why most people chose not to do it.”
Using our automation template, we can take a step back and think of ways to remove ourselves from the equation of making money through our food truck. We can hire people to run the truck for us. Our profits will decrease however our available time will increase. Now we have the time to manage two to three trucks. If we can create systems that smart people easily digest, can we remove ourselves even further?
Now that we are running two to three trucks, we can create reliable operating procedures. Once those are in place, we can hire a manager to run our food business. Of course, our profits would decrease because of the manager’s cost; however, our time will increase. Time is the most valuable resource on Earth. Buying your time should always be your top priority. You can use this time to spend with spouses, children, family, and friends.
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So I implore you to take a step back before you start any home business. Put yourself on the beach, make time (not money) your top priority, and take steps to automate your business- you should plan your business’s outcome from the start.
As you can see, starting a business will take some thought. Do not take the easy money upfront. Easy money usually calls for you exchanging time for money. “The rich do not work for money.” What this means is that they do not trade time for money directly. They spend time creating royalties or building business systems, but then they remove themselves from the equation of making money.
If you spend 50 hours writing a book, you probably didn’t make any money per hour. Once you release the book, it is out on its own, making you money. After a year, if you make $5,000 from your book, you made $100/hr. Two years $10,000 is $200/hr etc. Each year, your payment per hour increases. You did all the work upfront and are reaping the benefits. Most people would rather take $50/hr for those 50 hours on the front-end. The problem is that now you will need to keep finding work after those 50 hours.
Before you start a home business, there are a couple of books I would recommend reading. These will prepare your mindset for creating great systems that will set you free. They are “Company of One” and “The 4-Hour Work Week.” With that, I am signing off. I hope I gave you a little pause before you jump into your business. Taking a step back, reflecting on time, and dreaming about the beach is just what the doctor ordered.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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