This is where you really have an opportunity to generate cash doing something you love. When adding these other operating businesses, you should strive to find things that make you “tap dance” to work, to borrow a phrase from Buffett. Let’s say you are 25 years old and manage to sell paintings or perform magic at birthday parties and weddings, generating an extra $96 per week (roughly $5,000 per year). That might not seem like a lot but it’s going to add up to $9,266,500+ by the time you are Warren Buffett’s age if you park it in a Roth IRA and manage to generate the historical 11% rate of return the S&P has brought in for its owners over the long-haul. That’s not a joke. By doing something you love, and putting that money into cash generating assets, you can retire rich. As for the bigger house, car, X-Box, and other stuff you want along the way, that’s why you work your primary job and keep investing in your skills. (If you don’t have time for a second job or activity, remember our homemaker who saved more than $110 a week on groceries? That would be more than enough to achieve the same results.)
As you generate cash, you are going to want to have it invested in the most tax-efficient manner possible. That means taking advantage of your 401k, and an individual retirement account such as a Traditional IRA, Roth IRA, or SEP-IRA just to name a few. Here, if wisely and prudently invested, those funds can blossom into a torrent of capital gains, dividends, and interest, all of which is plowed back in to generate even more profits. If the stock market falls, you can take advantage of your operating businesses to dollar cost average your positions, thus taking advantage of the basic principles of value investing.
