risk in finance

[LivingAlmostLarge]

Did you guys ever do anything risky financially or personally? Did you ever do something outside the box? Did you ever decide to take a chance? Did you regret it? Did it succeed? Would you do anything different? Risk can also be getting married or divorced and changing something big.

Right after I invested yesterday a big chunk of our EF, my DH starts talking about changing jobs. We'e done risk, we changed careers, moved cities, no jobs, everything. I like to think we've always been maverick risk takers trying something different. We do things most people wouldn't do I can say since I've never met anyone who says that sounds great and normal

But now we are looking at something different and I'm all for it. DH I think is nervous for once, but I want to step back and think what will the risks be? It's a serious paycut. It's an opportunity though I think long term will pay off and while we aren't as young as we were. If it fails then we'll have lost only a couple of years right? What are we risking? Working longer than 15 more years?

We are not quite FI but we do live pretty "modestly" for our income. We are very close to FI, but this could set us back a few years. For sure if we play it safe DH would be able to "fire" in say 3-5 years. But the plan never was. The plan is to FIRE in 2034. Of course if things work out with this new career venture FIRE could happen in 2-3 years anyway.

How would you weigh starting your own business?

[Singuy]

Encouraged my wife to start her own lease as an optometrist which requires us to start a small business vs getting a W2. The risk was very low as I surveyed the area when it comes to housing developments and such. My wife was skeptical and really didn't want to do it. I pushed her anyways because the opportunity was pretty risk free in my opinion.

And as predicted, her practice became the fastest growing in our district. Her income went from 120k/year W2 + benefits to a 400k/year, and the growth is still possible of maxing out at 600k/year (if she choose to work all of it).

I love it because I am super interested in the entire business aspect of the opportunity. Gathered a free mentor to learn the ropes of payroll/taxes/distribution/solo 401ks/tax loopholes..love it all.

So if you want to start a business I say go for it. However you have to do a lot of surveying and understand the total addressable market. My good friend wanted me to go in on a comic book/geek shop with him and I refused as I didn't believe the TAM justify the risk when Marvel/DC were going digital. He and another guy did open it and after 6 years of headache with nothing to show for, he finally got rid of it.

A lot of the time just because you have a passion for X, Y, and Z doesn't mean the general public does, so do the due diligence before venturing in.

[Like2Plan]

How would you weigh starting your own business?

Is that what your DH is planning to do? I would say that if your DH (or you) have business know-how and a solid business plan, then it might be worth taking a chance. Based on what you have shared about your DH, it seems like he has skills that are in high demand and he would have a soft landing if this didn't work out.

For DH and I--DH had some thoughts about starting his own consulting business a few years ago. But, his plan relied heavily on me being the CFO. I can't emphasize what a disaster that would be. I am retired and it would take a lot of training for me to get up to speed for a role like that. (And, I am retired--did I mention that?) And, in DH's case- at the time he was considering it-- it would have been 3-5 years max. because he is retirement age. I might have felt differently if we were younger.

[Fishindude77]

Did you guys ever do anything risky financially or personally? Did you ever do something outside the box? Did you ever decide to take a chance? Did you regret it? Did it succeed? Would you do anything different? Risk can also be getting married or divorced and changing something big.

Right after I invested yesterday a big chunk of our EF, my DH starts talking about changing jobs. We'e done risk, we changed careers, moved cities, no jobs, everything. I like to think we've always been maverick risk takers trying something different. We do things most people wouldn't do I can say since I've never met anyone who says that sounds great and normal

But now we are looking at something different and I'm all for it. DH I think is nervous for once, but I want to step back and think what will the risks be? It's a serious paycut. It's an opportunity though I think long term will pay off and while we aren't as young as we were. If it fails then we'll have lost only a couple of years right? What are we risking? Working longer than 15 more years?

We are not quite FI but we do live pretty "modestly" for our income. We are very close to FI, but this could set us back a few years. For sure if we play it safe DH would be able to "fire" in say 3-5 years. But the plan never was. The plan is to FIRE in 2034. Of course if things work out with this new career venture FIRE could happen in 2-3 years anyway.

How would you weigh starting your own business?

Nothing ventured, nothing gained.
If you do everything mainstream society does, then expect routine mainstream results. If you want a shot at serious wealth, as well as great personal satisfaction, self employment is the way to go.
Other than when very young, I've been self employed my entire life. Could not imagine going to work for the other guy at this point.
Best of luck !

[~bs]

just curious why you chose yesterday to invest a lump sum amount of your ef. The market is getting extremely toppy nowadays, especially with the election coming up.

[riverwed070707]

Certainly doesn't apply to everyone but I don't have aspirations to be wildly successful in my career. For me, its a means to an end and I'd take work-life balance over running my own business any day. Same reason I've turned down management opportunities. I have some long weeks, and I will put in extra hours when a project or event requires me to because I care about my job but 80% of the time I work an 8 hour day and then shut it off. No desire whatsoever to run my own business as a primary source of income - I take on side projects/gigs now and then but I turn down more than I accept.

[disneysteve]

Certainly doesn't apply to everyone but I don't have aspirations to be wildly successful in my career. For me, its a means to an end and I'd take work-life balance over running my own business any day.

Same here. People often asked me why I didn't open my own practice. I don't want the hassles or the responsibility, even if it would mean more money. I want to go to work every day, do my job, and go home, and get a paycheck every 2 weeks. And when we've socked away enough money for me to stop, I will walk away clean and clear.

[ua_guy]

Certainly doesn't apply to everyone but I don't have aspirations to be wildly successful in my career. For me, its a means to an end and I'd take work-life balance over running my own business any day. Same reason I've turned down management opportunities. I have some long weeks, and I will put in extra hours when a project or event requires me to because I care about my job but 80% of the time I work an 8 hour day and then shut it off. No desire whatsoever to run my own business as a primary source of income - I take on side projects/gigs now and then but I turn down more than I accept.

I've arrived at the same perspective over the last 10 years. It has nothing to do with mediocrity or work ethic, and everything to do with where we spend our energy and the things in life we allow to define us. I am paid to do a job, and I make an effort to do it well. But it's not my life, and the fewest hours and energy I can spend doing it "well enough", the better. This is work-life balance.

[LivingAlmostLarge]

Certainly doesn't apply to everyone but I don't have aspirations to be wildly successful in my career. For me, its a means to an end and I'd take work-life balance over running my own business any day. Same reason I've turned down management opportunities. I have some long weeks, and I will put in extra hours when a project or event requires me to because I care about my job but 80% of the time I work an 8 hour day and then shut it off. No desire whatsoever to run my own business as a primary source of income - I take on side projects/gigs now and then but I turn down more than I accept.

Just got tired of holding cash Market might be toppy but i predicted wrong for two quarters and I dumped in money in January/Feb and April. I am starting to think the recession isn't stopping this bull market the fed is just pumping money into it and inflating asset prices. So I'm going to hold stuff long term. The financial advisor said as much it's a long time 15 years. . I'm not sure why my DH wants to do this. I think he wants the challenge. I as am obviously among others who like work life balance. I have no desire to work harder for more money. I have no desire as I get older to run my own business.

I'm not sure why but maybe he just wants to be "successful". I don't know. I have enough trouble as he told the financial advisor we chatted with (did not go with) that his plan is to never stop working. My plan is for him to quit at age 55 in 14 years. 2034 we are done the kids should be done with college. That's it finito.

What happens if things go well and he could retire early? Would he? I don't know. People like warren buffet who could have retired years ago still chooses not too. Obviously it's not money that motivates him. But I suspect for some people it's just something they love. Just many of us on here love to do other things.

[Singuy]

Just got tired of holding cash Market might be toppy but i predicted wrong for two quarters and I dumped in money in January/Feb and April. I am starting to think the recession isn't stopping this bull market the fed is just pumping money into it and inflating asset prices. So I'm going to hold stuff long term. The financial advisor said as much it's a long time 15 years. . I'm not sure why my DH wants to do this. I think he wants the challenge. I as am obviously among others who like work life balance. I have no desire to work harder for more money. I have no desire as I get older to run my own business.

I'm not sure why but maybe he just wants to be "successful". I don't know. I have enough trouble as he told the financial advisor we chatted with (did not go with) that his plan is to never stop working. My plan is for him to quit at age 55 in 14 years. 2034 we are done the kids should be done with college. That's it finito.

What happens if things go well and he could retire early? Would he? I don't know. People like warren buffet who could have retired years ago still chooses not too. Obviously it's not money that motivates him. But I suspect for some people it's just something they love. Just many of us on here love to do other things.

Who knows, maybe your DH just want more control in life. It's very satisfying to hold power, implement ideas and changes, and see the direct results right afterwards. Also working hard and smart yields you the most reward in a business, while the opposite is true for most jobs as they cater to the lowest common denominator.

[riverwed070707]

I've arrived at the same perspective over the last 10 years. It has nothing to do with mediocrity or work ethic, and everything to do with where we spend our energy and the things in life we allow to define us. I am paid to do a job, and I make an effort to do it well. But it's not my life, and the fewest hours and energy I can spend doing it "well enough", the better. This is work-life balance.

Funny how its a bit of a societal stigma that you should strive to climb the ladder or that being "successful" in your career somehow defines your character. I'm paid well, I live comfortably, I'm on track to retire early. Directors/VPs in our company are not only expected to work a substantial number of hours and are often understaffed, some even have mandatory in-office saturday hours for work that could easily be done from home. Instead of more freedom, they get less. For lack of a more eloquent way to word my feelings, F that. I have a few groups I'm part of for real estate investing and so many people are always talking about scaling and buying their 50th property or picking up another 30 doors, and I feel the same about it in that situation - real estate is a big part of my early retirement plans but I have 5 doors now, might pick up another 5 or so over the next 8 years but once I've hit the amount of cash flow I need to replace my current income, I don't want any more! Give me more free time, not more responsibility.

[riverwed070707]

What happens if things go well and he could retire early? Would he? I don't know. People like warren buffet who could have retired years ago still chooses not too. Obviously it's not money that motivates him. But I suspect for some people it's just something they love. Just many of us on here love to do other things.

Good point. Never understood that either. The world has been speculating about a successor for 20 years haha - half the people who were at some point thought to potentially take his place are now in their 80s, retired or dead

[~bs]

To each their own. Retirement isn't for everyone. I think if I retired early, I might end up self destructing somehow. lol

[scfr]

I could probably write a book (well, maybe not a book, but at least a magazine article) on this topic but can't/won't do that right now. But yes, we've taken exactly the kinds of risks you are talking about. A few things that come to mind about starting a business:
1. Figure out why your DH wants to do this. Is it a burning need, a passing fancy, a midlife crisis, a long-kept-secret goal? Is he entrepreneurial? Is he used to having other people do little things for him (keeping office supplies stocked, making travel plans, etc) and if so is he willing to do those things for himself? Is he expecting you to help out? My DH from his mid-20's knew he wanted to own his own company and so that is what we worked towards from very early on in our marriage.
2. What are all of the risks? How will you mitigate them? Loss of income? Loss of benefits? Loss of investment / startup costs? Loss of personal/family time? (FWIW, my DH gained more personal time but less control over when he could take it or for how long. Overall it has been great for him & us but he doesn't have the ability to be out of pocket for stretches of time, and since we don't have kids we don't need to plan things around school schedules.) Loss of structure? Inability to get back in to the work place if the business doesn't work out? If the business fails, what might that do to your marriage? What might it mean to your marriage and family if he's serious about this and you don't support him? When DH started his business we were at a disadvantage because we didn't have much of a financial cushion at all. But on the other hand we were at an advantage because I had a FT job with benefits, we didn't have children to support, we were living really lean, we both knew the business inside out and backwards, and I had knowledge of the "businessy" side of things and was able & willing to help.
3. What are the possible gains? Challenge of learning new things (regulatory and accounting aspects of running a business, self-employed taxes & retirement plans, figuring out how to get health insurance)? Satisfaction? Flexibility? Control? Financial payoff? It comes down to weighing the risks vs potential gains, obviously.
4. Seriously, figure out the health insurance thing now if your job doesn't provide it.
5. Would you reconfigure your personal investments to balance the risks of business ownership? (This is not something you need to figure out right now, but just be aware that you would be making a major "stock" investment in his business and you may want to adjust your personal investments accordingly. Lots of the personal finance "rules" are written with wage earners in mind.)
6. I recommend reading "The Millionaire Mind" --- It's by the author of The Millionaire Next Door but geared towards entrepreneurial folks.

For us, it's all been worth it.

[LivingAlmostLarge]

I could probably write a book (well, maybe not a book, but at least a magazine article) on this topic but can't/won't do that right now. But yes, we've taken exactly the kinds of risks you are talking about. A few things that come to mind about starting a business:
1. Figure out why your DH wants to do this. Is it a burning need, a passing fancy, a midlife crisis, a long-kept-secret goal? Is he entrepreneurial? Is he used to having other people do little things for him (keeping office supplies stocked, making travel plans, etc) and if so is he willing to do those things for himself? Is he expecting you to help out? My DH from his mid-20's knew he wanted to own his own company and so that is what we worked towards from very early on in our marriage.
2. What are all of the risks? How will you mitigate them? Loss of income? Loss of benefits? Loss of investment / startup costs? Loss of personal/family time? (FWIW, my DH gained more personal time but less control over when he could take it or for how long. Overall it has been great for him & us but he doesn't have the ability to be out of pocket for stretches of time, and since we don't have kids we don't need to plan things around school schedules.) Loss of structure? Inability to get back in to the work place if the business doesn't work out? If the business fails, what might that do to your marriage? What might it mean to your marriage and family if he's serious about this and you don't support him? When DH started his business we were at a disadvantage because we didn't have much of a financial cushion at all. But on the other hand we were at an advantage because I had a FT job with benefits, we didn't have children to support, we were living really lean, we both knew the business inside out and backwards, and I had knowledge of the "businessy" side of things and was able & willing to help.
3. What are the possible gains? Challenge of learning new things (regulatory and accounting aspects of running a business, self-employed taxes & retirement plans, figuring out how to get health insurance)? Satisfaction? Flexibility? Control? Financial payoff? It comes down to weighing the risks vs potential gains, obviously.
4. Seriously, figure out the health insurance thing now if your job doesn't provide it.
5. Would you reconfigure your personal investments to balance the risks of business ownership? (This is not something you need to figure out right now, but just be aware that you would be making a major "stock" investment in his business and you may want to adjust your personal investments accordingly. Lots of the personal finance "rules" are written with wage earners in mind.)
6. I recommend reading "The Millionaire Mind" --- It's by the author of The Millionaire Next Door but geared towards entrepreneurial folks.

For us, it's all been worth it.

Good point about health insurance. i need to make sure everything is done by March 2021.