Afford Anything - Ask Paula - The Side Hustle Episode

Episode Date: October 9, 2017

#98: How much money should you invest in a side hustle or side business? How do you know if your side hustle idea is viable? What if you want to start 5 or 6 side businesses? Should you lump these together under a common business umbrella? Or should you separate them out? These are the questions about side hustles -- asked by listeners Adalia and Brionna -- that I answer in today's episode. My friend Joe Saul-Sehy from the Stacking Benjamins podcast joins me to chime in with his views on building side businesses, as well. Joe and I also answer two non-side-business-related questions, as well. Skye asks: -- You talk about saving 50 percent of your income. What exactly does this mean? Steph asks: -- I have $10,000 in credit card debt and $48,000 in student loans at a 5 percent interest rate. I have a $1,000 emergency fund and $32,000 in retirement funds. My dad is willing to give me money to repay my student loans; should I accept this? And if so, should I put this money towards student loans or retirement? We tackle these questions on today's episode. Enjoy! Links and more resources can be found in the show notes at http://podcast.affordanything.com/episode98 Learn more about your ad choices. Visit podcastchoices.com/adchoices

Hey, this is Paula. Before we get to today's show, I wanted to let you know that we have set up a link called afford anything.com slash help Vegas. This redirects to a GoFundMe page for the Las Vegas Victims Fund, all of the money raised on that page. We'll go towards the victims of the Las Vegas Massacre. Please help in any way that you can. Affordanithing.com slash help Vegas. Thank you so much. Now on to today's show. You can afford anything but not everything. Every decision that you make is a tradeoff against something else. So what's most important to you?

And how do you align your day-to-day choices with those values and priorities? Answering this is a lifetime practice. And that's what this podcast is here to help you achieve. My name's Paula Pant, host of the Afford Anything podcast. And every other week, I answer questions that come from you, the listeners. This week I've invited my friend Joe Saul See-high, host of the staff. Thanking Benjamin's podcast and Recovering Financial Planner to join me in answering these listener-submitted questions, community-submitted questions. Here's Joe. Hey, Joe.

Paula, we're back. We're back on the air. We're doing this. We're going to tell people stuff about money, things about money. I can't wait. Maybe if they're lucky, we will. Actually, I'm really excited because what I like about your show is that we get to dive in a lot more than we do on my show, which is awesome. Cool. Let's start with our first caller. Her name is Sky. Hi, Paula. My name is Sky. I've been listening to your podcast for about two months. I'm super new to thinking about and working on my financial future. I have kind of a stupid question. You talk about saving 50% of your income, but I don't really understand what that means or how that applies to your costs of living and payments and all those things. Like when you say you save 50% does that mean everything including your overhead for your mortgages for yourself and all your rental properties

or your 401k contributions and your IRA and then your emergency funds saving for travel, whatever, whatever, whatever, whatever. And then is the other 50% that you use for your anti-budget just disposable spending or is that the money that you're using to pay your mortgage and all those kinds of things. I would love more information about what it means to save 50% or 30% or 20% or whatever it is, but what that means when you say you save 50% of your income, how that gets handled because I don't really fully understand that concept. Thanks so much. Love your podcast. Sky, that's a fantastic question. So here is what I mean by save 50% or 20 or 30 or 60 or whatever percentage you want. First of all, I use the word savings as a catch-all term to refer to anything

that improves your net worth. So, for example, making additional payments on a debt that is above and beyond the minimum that you have to make, making additional principal payments to a mortgage, for example, that I would consider savings, retirement contributions, I would consider savings, HSA contributions. Anything that improves your net worth is what I mean when I say the word savings. Now, in terms of if you run a business, that's where it gets a little bit trickier. So if you are self-employed, or if you're an entrepreneur, then you sort of have two different forms of income, right? You've got the revenue that your business collects and then you have what you pay yourself. And so I try to reinvest as much money as possible back into my business, partially because it's, you know,

a good tax planning, but of course never let the tax tail wag the dog, but also partially because I run a business. I want it to grow. And so it's in my best interest to reinvest back into the business in order to get it to expand. However, there is some portion of what my business earns that I pay myself. So mentally, I conceptualize myself as an employee of the business and I take payment, I take an income from that business and then I save 50% of that income. So I think that answers your question. Now, to the other side of your question, which is what happens with the other 50% of the money, the stuff that I spend, that goes to everything. including groceries, gas, car insurance, mortgage payment, nail clippers, tweezers, nail polish

remover. I mean, literally everything. Nail polish remover, a big part of mine. It's a huge line item in my budget. So that goes to both necessities as well as discretionary spending. And for me, my necessities are not very high. I tend to, my baseline cost of living is pretty low, pretty reasonable. And so a lot of it ends up, I probably have more discretionary spending than the average finance expert would advise, largely because I travel a lot. But hey, as long as I'm saving at least 50% of my income, I'm cool at that.

But you know why that is? It's because, Paula, you don't go crazy with those nail clippers. You keep the cost of your nail clippers low. And that's... Yeah, exactly. sit there biting off a nail rather than using a clipper. Yeah. Saves me like 50 cents a year.

Which is the key 50 cents though. I mean, that is the key 50 cents. You know, I love about this question is if somebody's trying to save half their income and they fail and they only save 40% of their income, like how bad does that stink, right? Exactly. It's fantastic. Set the goal high and almost reach it. You know, we have a course stacking Benjamins, which is save 50.

So I have very little to add, except for the fact that the way we think about it when Paula talks about anything that improves your net worth. So as an example, your mortgage payment, just the principal portion of that. Any interest doesn't count, but anything that's principal payment actually counts toward saving 50% of your income. And for a lot of us, that means we're a lot closer to saving than we think we are if we have a mortgage or if we have debt that we're paying down. If we have credit card debt, we're paying down, as long as we don't, you know, As long as we don't take out that debt again next month, as long as it's principal repayment that we never, ever, ever renege on, then I think it counts.

And a key, one key, Paula, that I'll give people, I like the idea of saving into a savings account, direct deposit into your savings account. So if you work for somebody else, direct deposit to a savings account,

and then disassociate the amount of money that you bring in from the amount of money you spend. Because most of us, what we do is, we're like, oh, I got a pay raise. And that means that, means that I get to spend more money. The money you make should have nothing to do with the money

you spend. Those can be two totally different line items. And yet, you know, in our head, we put those two together. And by direct depositing someplace other than the checking that we spend money out of, I think we do a better job. So interesting. So just as a note, so Joe, you and I, in terms of the way that we consider the principal repayment on the mortgage, you and I do it differently. So I don't consider. Oh, my way's right. And actually, it's funny that you bring that up. So I don't consider the principal repayment on a mortgage to be savings. I consider that to be spending insofar as it's my baseline cost of living. It's a bill that I have to pay every month. If I make an additional principal payment beyond what's required, then that I would consider to be savings. Although, I mean, I think that does bring up kind of an interesting, in terms of the theory of finance, that does bring up an interesting point. Because, you know, One of my mortgages, I refied into a 15 year. So could you argue that the additional principal payment that I'm making due to the fact that I have voluntarily chosen a 15 over a 30 is, you know, should.

I mean, yeah, no, we, but at that point, you're getting, you're sort of getting into finance theory a little bit. Like, you're sort of getting into how do I want to conceptualize this? You can spend all day in coffee shops, like philosophizing over that. But I think at the end of the day, you just pick a definition and then lead with it. So for me, my definition is if a bill is required, then it's spending. And if it is not required, but it is a net worth improvement, then that is savings. But again, that's not to say it's the right, quote unquote, the right definition. Joe, you've got a different one. I think that's just to say that you should have a definition, a metric and run with it. Sky, my way's better, but I've learned to let it go.

Cool. All right. Thanks, Sky, for asking that question. I love the topic of saving 50%. save half. I do too. Yeah. I do too. And even, you know, and seriously, the difference between your definition and my definition, like what's, okay, that's not a big deal. Yeah, exactly. At the end of the day, we're more similar than we are different. Well, you say that. All right. Our next question comes from Brianna. Hello. So this is Brianna James. I love your podcast, by the way. So I have a question about investing. Can you do like a podcast slash YouTube video on investing into a side business? Because I see different things like, you know, Shark Tank and I see people like having all their ideas presenting to those investors. And I'm wondering, hmm, would that be something

worthwhile? Because, you know, businesses can go up and down. It can be like, you know, a money hole where you lose all your money or can be very successful and you're doing very well. So can you do a video weighing out the pros and cons and like give your advice and expertise and maybe have, you know, other people comment on about it and like, you know, bringing a guest speaker about it because I'm a young professional. I'm actually 22 and I'm working in, you know, corporate world and I love it so far. But I also like, you know, I like to keep in mind side hustles. And so, you know, because I do, I watch some of your videos like, you know, becoming a millionaire on a teacher's salary. And so that definitely, like, you know, sparked interest and got me thinking, like, hey, I think I want to retire at 35 or 45.

So what are some things that I can get there to be financially free, financially independent, and everything else that you talk about on your podcast? So I would love for you to do a podcast on, you know, investing into a side business, side hustle. And, um, the pros and cons of that. Thank you for everything and continue your great work on afford everything. Have a great day. Sounds like another episode idea. Joe, so this is a great question because you and I both have personally had to deal with exactly this question. How much money do we invest in our side businesses? So, Joe, let me ask you, how did you make the decision?

Well, I think that rather than what I did, because I think I messed a lot of this up when I started with my business initially, I've learned a lot since then. And with, you know, business number three, business number four, like I get better at it every time. So I think we should define the battlefield, which is that most businesses fail because they don't have enough capital at the beginning of the business. They also don't realize that the runway to profitability usually is about doubly as long as the original business plan or thinks it's going to be. So if you think it's going to take you six months, probably going to take a year. I think it's going to take a year, probably going to take two years. So because there's lots of bumps in the road, because unless you're already an expert in that field completely, you don't know what's coming. A bunch of capital is important, and the second thing is the runway.

Now, there also is another problem, which is a lot of people create businesses, not thinking, Paula, about selling the business. And I think if you start off from the beginning of how do I get out, even if you have no plan ever to get out, right? I think then you're much more likely to build a business that has structure and has systems, and that's what ends up winning in the business ultimately. Listen, if you're going to start with the business, I think I think I would have not that complete, you know, boring old 500 page business plan they tell you to do, but I would answer those things. How am I going to make money? How much is it going to cost to operate? Double those numbers. What's my cell condition and what are the systems I'm going to use inside my business?

And at that point, then decide to go. I would still, though, Paula, I would tell Brianna, still have your plan B. You keep putting money away toward retirement, keep an emergency fund. You know, you see these people that sink their entire life into their business, and when it doesn't go the way they expected because they miss something or because all of a sudden the economy changed, they end up in a real war of the hurt. You don't want that to happen. Okay, but, so what I hear you say within that answer is have sufficient capital, have a long runway, and have an exit plan. Her question was, how do you know how much is sufficient capital? And let's walk through an example, just to make it a little bit more concrete.

let's say that you decide that you want to start selling car windshield repair kits on Amazon. So your plan is to buy a significant amount of all of the components of a car windshield repair kit wholesale, assemble these kits, and then brand them, put a logo on them, and start selling them on Amazon. In order to do this, you need upfront capital of X thousands of dollars in order to buy all of those individual components wholesale from, let's say, a site like Alibaba. how do you know if that's a good idea or not? You know, if you need to spend $5,000 doing this, how do you have proof of concept that this is a good way to spend $5,000? Are you asking me that question? Yeah, I know how I would answer it. But yeah, I want to hear how you would answer it first.

Yeah, testing. Testing. And how would you do that? I would test with a smaller amount and see how quickly they go. Full well knowing that hopefully if things go right, you're not going to be able to fulfill demand. So I would test the demand at a low level, see how that works, and then I would scale up from there. That's exactly what I would do. That's precisely what I would do. So what I would do in that example is I would sell, even if I had to sell them at cost, you know, even if I couldn't get the big wholesale discounts and I just assembled a few of those windshield repair kits and sold them completely at cost or even sold them at a minor, minor loss. Like, you know, if you sell 20 kits at a loss of a dollar a kit, you know, you're out 20 bucks. So that's what I would do.

I would assemble those kits. I would sell them on Amazon. I would see if I could sell the first 20. And if I could, if I could sell them and if there was high demand for them, then I would know that there's demand in the market for this. And then I would proceed forward. Yeah. And I would start off at the price point that you want first before you took the loss like this. So you can determine the price point first as well.

Oh, yeah, yeah. I would keep it at the price point that I would be offering it. but I'm just saying if you couldn't get the bulk deals, if you couldn't get the wholesale deals. Because you're only ordering five instead of 100. Exactly. Exactly. So you don't have economies of scale on your side yet, which means that it might not be profitable yet. But that's fine. If you can just get proof of concept, even if that's at cost or even if that's at a minor loss, that proof of concept will be worth it in order to validate the idea. There's a in today's speedy economy, you know, what used to happen is that people would, get all kinds of data, make sure they have everything ready. There's this great concept now that

you need to be familiar with Biana, which is, which is called minimum viable product. And that is get your product to the very, very, what Paul and I are discussing is getting the product to the very, very minimum just ready to go so you can be faster, right? It's all about speed today because the second that you're on Amazon, if you studied Amazon, somebody's going to come out and mimic you. The second that you're there, so you need to be quick. So minimum viable product is something I would look into even more. Well, yeah, and I think another part of the concept of creating minimum viable product is that before you invest a lot of resources in making something perfect and better and awesome, like before you

optimize it, just create it, sell it, and see what the demand is, and also see what your customer response is, because oftentimes the way that you want to improve something or the way that you want to optimize something is not necessarily what your customer wants. I'm seeing this with the beta testers in my course, as I release lessons to them, there are aspects of the lesson that I don't like that I'm unhappy with and that I would want to change. But when I release the lesson to them, the feedback that I get, the questions, the suggestions are about things that are completely different. So that, in other words, the stuff of the lesson that I dislike is stuff that doesn't bother them at all. And the stuff that they want to see changed is stuff that I didn't even notice.

And that's why having that beta group is so helpful. Brianna, also to answer your question, because I think the kernel of your question is, how do I decide how much money to put into a side hustle? And there are sort of two approaches to answering that. There is the viability of the side hustle itself. And then there is also your individual capacity to put that money in. And so I think we've answered this question in terms of addressing the viability of the business idea itself. But in terms of your individual capacity, it boils down to personal finance basics. Don't go into debt in order to fund this business, spend less than you earn, and fund it from the gap between your spending and your income.

Yeah. Really, I think that's the key, you know, more than anything. Because if you do that, then if the business doesn't work out, worst case scenario is that you lived more frugally than you otherwise would have needed to. you know, but you're still not going to be in the hole. You're still not going to be in any debt. And I think that's important. Yeah, that's a great lesson without a hangover. Yeah, exactly.

Yeah. Exactly. And it's fine. You know what? If you lose money on a business, that's totally cool. That's tuition. That is the cost of learning. Because at the end of the day, in terms of a person's lifetime, you don't need to win

every single game. You just need a win more than you lose or you need a win bigger than you lose. But it's okay to have a series of a series of, losses and failures because that's just part of the process. So cool. Thank you so much for asking that. Our next question comes from Steph. Hi, Paula. I'm currently in the throes of paying off $10,000 in credit card debt and $48,000 in student loans, which have an interest rate of 5%. I'm 32 and have about $32,000 in retirement accounts. I'm contributing only 5% a year, though. and I only have a $1,000 emergency fund while I work to pay the credit card debt off.

I'll definitely up those once the credit card debt is gone this winter. Meanwhile, my dad is fairly well off and has offered money out of my eventual inheritance to pay off some of my student loans. We've done this before, so I know that it won't be awkward, although I don't really enjoy doing it. I'm wondering if it would be better to take that money and put it towards my retirement rather than the student loans given the low interest rate. Can you walk me through how to figure out which I should apply any money towards

or if it even matters if I choose the loans over my retirement savings? Thanks so much. Bye. What a great question. Awesome. Yeah. It is so difficult when you deal with family members. And I know exactly how she feels because this question when I was a financial planner, I'd have clients that would worry about this.

So I don't know anything about the family dynamic, Paula. So I think I have to punt on that piece and take Steph's word for it, that it's not going to be awkward and assume that she should probably go ahead and do it because they always say that a family member loan, if it isn't awkward, is at much better terms because they know you and they love you. And if things go differently, it's not going to affect your overall credit. Well, it sounds like this isn't a loan. It sounds like this is a gift. Well, yeah, yeah, yeah. Gift against inheritance, it sounds like. Yeah, exactly. And generally speaking, gifts, I mean, gifts are better than loans. Because with a loan, there's the expectation of getting paid back with a gift. There is no expectation of reciprocity. Even if it were a loan, I still like loans from family members if it's not awkward. You can create a ton of awkward. And for that reason, I usually tell people.

people when family members come to them and I'm the advisor of the person on the other side saying, hey, my brother-in-law wants to borrow money from me, I say no, you shouldn't do that. That's a bad thing. But if you can get somebody to do it, I really like the terms and the credit there. But if she's going to do it, you know, there's two things I look at. I look at cash flow, number one. And then after cash flow, you look at interest rate. So if paying off that student loan at 5% creates so much better cash flow that now you can take that money to build your net worth more quickly, then it's not about the interest rate. But if the cash flow is, you know, minimal or is okay isn't a big deal, then I go for an interest rate decision, which is student

loans at 5% versus having retirement, which over long periods of time, you know, if we're modeling, we'll use eight, but historically over lots of periods of time has been even 10, well, certainly then putting the money toward the retirement so that you don't have to worry about that and can focus on the student loans is a better idea. Those are the conditions I use when I'm making that decision. The way that I would answer this, first of all, I hear two components to your question. Part of it is, should I accept this offer? And the other part is, if I accept it, how should I direct this money? As far as the should I accept the offer, unlike Joe, I'm very much against

both giving and receiving loans from family, simply because it has the potential to destroy relationships, regardless of which end you're on. But again, to me, it sounds like this is not a loan. It's a gift. So assuming that I'm understanding that correctly and assuming that both of you also share that same understanding, then gifts are different than loans. Yeah. And the big key for me there, Paula, with my answer was when she said, this has happened before and it's not awkward, right? As to the other side of the question, the thing that I tend to key in on is the interest rate. And so the interest rate on your student loans is 5%.

If you were to invest it in a broad market index fund through a retirement account, we're talking around 8%-ish over a long-term aggregate average. Now, the spread there, the risk premium, is not very large. So if you were to pay the student loans off, you would have a, guaranteed 5% return, so to speak, because you are guaranteed to be saving that in interest. If you were to invest it, you would historically over a long-term aggregate average receive around 8%, but there's a little bit of risk there. The difference between 5% and 8% is not that great, which means to me it's a toss-up. I don't think you would really go wrong either way.

If your student loan interest rate was 3%, my answer would be very. very different. But at five, I don't see a slam dunk argument in either direction. I think you would be just as good going either way. Now, that being said, of course, the first thing I would do with any money that you got is pay off the credit card. But it sounds like you already know that. And it also sounds like your plan is, number one, pay off the credit card. Number two, beef up the emergency fund and number three pay off the student loan. So I'm assuming that within your question, what you're asking is, should the number three position be? pay off student loan versus save more for retirement. Because the number one and number two positions

in terms of priorities are certainly pay off the credit card and beef up that emergency fund a bit so that you can avoid future credit card debt. Amen. Preach. Hey, hey, we'll be back to the show in a second, but first, I want to give a shout out to Fresh Books. They have signed on as one of our main sponsors in 2017, and they have an awesome product. It's meant for freelancers, soulopreneurs, small business owners, if you have a side hustle or if you're self-employed and you need to send invoices to your clients, yeah, it's necessary. You've got to send invoices to get paid, but it's also annoying and it's time-consuming and nobody really likes doing it. It's just one of those costs of doing the job. Inter Fresh Books. They automate the invoicing system. You type in some basic

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Shipstation.com. Make ship happen. All right. Our final question comes from Adalia. Hi, Paula. I have another question for you. And this one deals with side hustles. I'm finally getting to the that I'm ready to get off the ground with several side hustle ideas I have like five or six. My question is, should I have a separate bank account for each one of those? Or could I just have a generic side hustle bank account where all of that money goes? I'm hoping that eventually each of these business ideas could generate significant income and, you know, eventually grow into something more formal. but I'm just wondering what would be my best plan of action for right now.

That's an excellent question. So the specific question that you asked is should you have a separate bank account? But I want to zoom out for a minute and talk about having five to six different ideas. It's awesome that you have so many ideas. I am going to assume that what you mean is I've got a bunch of different ideas. I'm going to test each one of them and see how they fly. And then whichever one is the best is the one that I'm going to focus on. Give it a gardening analogy.

You plant a whole bunch of seeds. You see which one is growing the fastest or is growing the strongest. And then that is the plant that you actually nurture. Yeah, maybe they'll run themselves. And I'd love to hear more about what these side hustles are because that was my first reaction to Paula, is that we are not multitask. We're not built to multitask. All this research we've seen lately about people in multitasking, it doesn't work.

And I often think that sometimes people want to make money at a side hustle when they haven't even tried to make more money at their primary place of business. You see those studies where your boss would give you raise if you just ask for it and we haven't asked for it and we're out doing other things. So the second I hear side hustle, my first reaction always is, tell me more about your main job. And then when I hear six side hustles, my brain explodes. Because I think, who can do that? I can't do that.

So my reaction was very similar to yours. Tell me more about that, Joe, because I knew you had a, a bit of a visceral reaction when you first heard the question. Well, that was it. It was it was how do I focus and make sure one of these is the quality business? You know, and I'm sure Adalia wants what every entrepreneur wants, which is to be associated with things that are awesome, right? And how can I pour enough awesome into my idea when it's competing with five other ideas

and it's also competing with my main job? Because if she calls it a side hustle, I'm assuming she also has a full-time job on top that or has some other career going on. So I can't, I just can't be awesome. And maybe, maybe they do run themselves, but even then I would do one. And like you said, Paul, I would do one. I would test it. I would get it where it's running itself. Then set that one aside on autopilot as much as I can. And then go to the next one. So I have a launch schedule of these ideas over maybe a 12 month period or two years. I need to know more about what these ideas are. When it comes to the second part of this question, which is separate bank accounts. Let's assume that it is something,

Paula, that she can do all of them. Not only does she want to have them have separate bank accounts, but she talks about them having significant revenue. If they're going to have significant revenue, I always, as a financial planner, I worry about a lawsuit. I worry about exposure to, you know, whatever the customer might bring at me that will go after the assets of that company. And if that's the case, I don't only want them to have a separate checking account. I want them to be in a separate entity. And that doesn't give me complete protection. But it's at least the first wall that separates one company from another so that I don't have a mistake in business number four of six that destroys all six of these ideas.

Yeah, exactly. But the thing is, I think it's premature to be talking about having separate bank accounts or separate entities for all of these. because right now these are purely in the idea stage, if I'm understanding correctly. I think what you will quickly find is that you can try all of these. You can test all of these. Some of them will do well and some of them. Some will completely flop. I have started multiple websites and most of them died a quiet death in obscurity.

So if I had gone to the trouble of setting up a separate bank account for each of these nascent sites, it would have just been a huge waste of time and effort. I started a whole bunch of sites, and if it flopped, which most of them did, then it flopped. The one that took off is the one that I poured everything into and everything else I just let wither on the vine. Yeah, and then you set it up as a, yeah, it's business. Nason, I'm still stuck, Paula, on the word nason. That's a phenomenal use of vocabulary right there. Oh, I thank you.

Thank you. Yes. And by the way, everybody, a couple of Paula's. businesses that didn't make it afford most everything that didn't go well. Affordssomestuff.com. That one, not that good either. Afford, afford. Yeah, whole different, whole different thing.

But you got to try. So, yeah, I totally agree. In the idea stage, it is a little premature. But she makes it so that those all do have significant income. Make sure you build walls. Build walls, Adelia. Yeah, absolutely. All right. So that's our show for today.

Already? Did we do it? That was a short one. It was side hustle day on the show. Yeah. It was cool. I'm glad to hear all of these questions coming in about side hustles because that is one of the best ways. I suppose you're never supposed to say the word best in the world of finance. But there's only so much that you can save. You know, certainly if you are spending, if you have a spending problem, then sure, saving is the most immediate fix. But if you're already living a reasonable life, there's a. only so much frugling down that you can do. And if you're trying to make more money at work, it depends on your job and it depends on your industry, you may or may not be able to make more

at work. So if you've done those two things and you're trying to get more control over your financial future, man, entrepreneurship is the way to go. Like there's an unlimited ceiling. I'll even broaden that out a little bit, Paula, which is there's only two sides of the equation, income and expenses. And on the income side, it's blue sky. I mean, it really is blue sky. You can find different ways to make more income, but on the expense size, you will never shrink your way to greatness. And I think, I think so focusing on income is really exciting. So love this episode. Yeah, absolutely. Joe, how did you, since we're both entrepreneurs, how did you figure out that you wanted to be an entrepreneur? And then how did you find an idea? Well, my story's interesting because I

wanted to be an entrepreneur from the age of 16 where I and I started a disc jockey business and it was only because I thought playing records would be cool and I could meet girls. What's a record? Yeah, half the audience I lost on records. But I wanted to play music and I really like music and had appreciation for that. What I didn't realize was, you know, the whole thing about creating a business. So when I said my first business was a train wreck, it was because I just took my passion and went after it without thinking at all about how I was going to make money, how I would repay debt.

I went into debt. I didn't think about money. I just thought about cool factor of playing music for crowds. That was it. You went into debt at the age of 16? I did. It was debt to my dad, though. My dad made my brother and I create a business plan and about how we were going to do things.

And my dad, a blessing, I mean, fantastic lesson there. But my dad also didn't know about business. and before I knew it, I was up into my armpits in Hock with my dad for money because he helped my brother and I start our first business. But it was alone and my brother and I just had to keep extending it and extending it and extending it because, you know, because like I said earlier in the show, the ramp was much longer than I thought it was. And we didn't do a good enough job.

We should have went out and talked to other people in that business about, you know, what are some of the pitfalls and what happens. you do a dance and you know back then I'm going to be old guy hour people would write me a check and I wouldn't know the check was going to bounce until I got home and then I have to chase them after that check and I don't get paid so what do you do then so that was my entrepreneurship later on when I started working for the man I was always frustrated by the fact that my customer would love me but my boss might or might not but those two things didn't necessarily correlate you know what I mean I had two games I had to play I had to play the game of

my customer loving me and my boss loving me. And I fell in love very early, maybe because I was an entrepreneur at 16, of getting rid of the two master thing. I really like the fact that my income is specifically affected by whether my customer loves me or not. And if I can, if I can make my customer love me enough that they want to pay me more money, then that's great. But if my customer wants to pay the business more money and my boss doesn't like me, I could still get fired, even though my customer thinks I'm awesome. So that was when I knew entrepreneurship was for me. That reminds me of a line in office space where the guys like, I have six bosses.

My favorite office baseline has nothing to do with this, but it's the one where they say, hey, we see you've been missing a lot of work lately. He's like, I wouldn't say I've been missing it, Bob. Yeah, I love that line. Yeah, great. How about you? I was not a born entrepreneur. I was not one of those kids with an entrepreneurial spirit.

When I graduated from college, I imagined that I would have a career as a traditional journalist for the rest of my life. So ideally, at the time, I figured I would work for newspapers for my entire life. But it quickly became apparent. I graduated college in 2005. And it very quickly became apparent that newspapers were not a – certainly not a growing industry. You know, every paper had hiring freezes. Salaries were already low and shrinking. It very quickly became apparent that there was not going to be good prospects for me in that arena.

A lot of people were resistant to that. You know, I'd go to these journalism conferences and everyone was like, oh, the Internet killed all the jobs. And there was this huge spirit of pessimism around that field. And I took the opposite approach. I thought, you know what, the internet hasn't killed all of the jobs. The jobs are just different and we need to adapt. And so I started, I realized that the future was going to be online and independent. So I started freelancing. I started freelance writing. And even at that time, I didn't really think of myself as an entrepreneur. I thought of myself as somebody who would be self-employed, but I never imagined running a scalable business. I just figured that I could work for myself writing articles online. And so, So that was the beginning of my entrepreneurial journey was transitioning from the mindset of a W2 employee to the mindset of somebody who was self-employed. And once I did that for a while and I had really firmly adopted the self-employment mindset, then the next step was my discovery of the fact that there's a difference between self-employment versus entrepreneurship. And that was when I figured out, wait a minute, rather than only working for myself, I could build something that's more skisket.

But so that took years for me to make those mental leaps. Yeah. Yeah. Well, and I like, you know, obviously, people listen to your show so they can make that leap faster than you and I did. But I would also say that don't be afraid, because I love in your story, the underlying unsaid piece that you probably got beat up a little bit. And I definitely got beat up. And I wouldn't be afraid of that, you know? I think that the faster you realize that you are going to get beat up, it's like a friend of mine who rides bicycles. And I said to him, I said, aren't you afraid that someday you're going to get hit by a car? And he said, when you ride bicycles as much as I do, it isn't if it's when. It's not whether I'm going to get hit by a car.

It's when am I going to get hit by a car and how bad is that going to be? And I think that when you go into entrepreneurship, it's much the same. Yeah, one of my favorite, there's just concept in poker. We did this interview with professional poker player Billy Murphy on a previous episode. And he talks about two concepts. One is variance. So on any given bet, you know that you may win or you may lose that hand. And that's okay as long as your decisions give you the statistical likelihood of winning over the long term.

So if you play like 100 hands, you just need to win more than you lose. You can't focus on the fact that you've lost 30 or 40 hands so long as you win more than you lose, and also so long as you can withstand what's known as the risk of ruin. So as long as none of your losses are so severe that they pull you out of the game entirely. That is such a longer conversation. Because it's fantastic. It's right on. And I do think to some degree, even though the creatives are the backbone of what you and I do, if you fail to apply science like that to your creative activity, you're bound to fail.

Yeah. And conversely, if you think of it in terms of, hey, I'm playing the long game, if you always think of it in terms of the long game, you're far more likely to succeed. Yeah, agreed. Awesome. Well, thank you, Joe, for joining us. Where can people find you? Awesome. You can find us and find Paula every Friday on our show at stackybenjamins.com. We just, and this is, by the way, Paula, I owe you a huge thank you because there is a big statue that is on my desk in the basement here. because you are a part of our show. We actually won the Academy of Podcasters Award for Best Business Podcasts in Anaheim a few weeks ago. And that's, you know, partly because we have the awesome pull of pant on the show.

So I was very surprised. I didn't think we were going to win. We sat in the back row. We were going to go grab beers the second we snapped the picture of us on the screen because we're up against like Planet Money and how I built this. and Pat Flynn and Michael Stelzner on the business side. I'm like, we're the show that promises to teach you about nothing. But anyway, thank you very much, Paula, because obviously it's the great team there of you, Len Penzo, Greg McFarland and, you know, OG, everybody else on the show that makes it such a success.

No, well, thank you. Thank you. And congrats to you. Apparently we owe some judge 20 bucks now, but I'm not sure of it. So I got to figure that out. Awesome. Well, thank you, everyone for listening. Coming up next week, we've got an interview with Joshua Dorkin from Bigger Pockets in which we do not talk about real estate.

And after that, we've got our special episode 100 celebration. So tune in for both of those. My name is Paula Pant. This is the Afford Anything podcast. Thanks for tuning in. And I'll catch you next week.