Where do you put your money?

pluto

pluto

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Feb 16, 2019
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Some context:

I'm grinding away on a main site that is generating some revenue but still very much in the early stages. Also have 2 clients that I'm working with on a monthly contract that are paying the bills. It's not a lot, but I make enough.

I'm 22. I live a very simple lifestyle in a burb near NYC. I buy food in bulk and keep it cheap. Eat at home when I can. No Netflix or TV or car or expenses like that. I take public transportation when I need to get out. As a result, even though I make fairly little right now while I'm grinding, I get to tuck some money away

What I Want:

While I spend 75% of my waking hours on my main site and 15% consulting, I want to put my money in places where I can maximize its value.
  • I'm not looking for "side-hustles", I'm grinding and don't want more mental tax or time. That means no house flipping, starting a new site, etc.
  • I'm okay with long term payouts where my money sits for awhile
  • I'm okay having a small portion in high risk, high reward bets with positive EV
  • I want the most bang for my buck -- if every $1 I spend can equal $1.02, I'll take it.
  • I have an excellent assistant, so if it requires some really really simple tedious stuff, the assistant can take care of it too

My Money:

  • 6 months of savings tucked away in a high-interest savings account giving 1.8% APY. This is for if something happens to my clients or something crazy happens.
  • Maxing out a Roth IRA every year
  • 2% Cash Back credit card on all purchases + another credit card with a rotating 5% on certain bonus categories + 5 apps that give additional cash-back on top of those
  • Every purchase I make, I first take a quick glance at gift card marketplaces to see if I can get a major discount. I'm buying it anyway, might as well get a discount
  • Small fraction in crypto
  • The rest in an investing robo-advisor where I have fees waived for awhile -- most of this is in US and Foreign stocks
For all investment related ones, I'm in it for the long haul. If I really need to money, I generally draw from the savings account.

I built these habits mostly through friend recommendations. Saw they were good with their money and just copied them and got back to work.

Why I'm Doing This

I love the grind. This won't be my last site and that might mean I might be grinding on a small budget for a while before it all pays off. But even in the depth of grinding, it doesn't mean I want to go out on dates every now and then. Or upgrade my laptop. Or live in a slightly nicer apartment.

Maybe I'm doing all I can and should already, but figure there are a lot of smart optimizing-oriented minds here so thought maybe you'all would have thoughts.
 
Why don't you invest it in your main project? Outsource the work and really put the pedal to the metal on the growth? Or in getting more clients for the consulting biz and hire people to work on that?

With investing the returns are proportional to the risk. Diversified stuff like REITs and index funds are good for preserving capital, but they won't make you rich. A bigger return means that you're taking on more risk, which means that you can lose your capital if something goes wrong.

You should run the numbers on in Excel how much your investments are making you, and whether you're satisfied with that kind of return. And then compare that to how much you'd estimate you could make from an extra client or three in the consulting biz. Or the income that some additional 5 articles ranking on the first page of Google would generate you.

I ran the numbers myself, and with the limited capital that I have, I decided that I'm better off investing it into my own projects.
 
I agree with keeping capital liquid so it can be used for growth and increased revenue. It's also smart to do things like maxing out a Roth IRA while you're young to get in on the compounding interest and ensure some financial security in your old age.

pluto said:
I want the most bang for my buck -- if every $1 I spend can equal $1.02, I'll take it.
Click to expand...

You can do far better than this, and far better than nearly any reality based interest rate by investing your money.

When I was around 26, I emptied my Roth IRA, paid the penality, and within a year multiplied the amount of money I had by 10. Zero exaggerations. I used the capital to build an asset that could then be used as a service-based source of revenue. Maybe if it sat in the account I'd be happy come 60 years old or whatever, too.

At the time though, I couldn't both max it out and start that project. I made a choice, one that had a huge ROI.

pluto said:
6 months of savings tucked away in a high-interest savings account giving 1.8% APY.
Click to expand...

They aren't great, but a C.O.D. is going to get you a better interest rate than a savings account, even with short term deposits like 12 months. The only problem is it's no longer liquid.
 
Poplanu said:
Why don't you invest it in your main project? Outsource the work and really put the pedal to the metal on the growth? Or in getting more clients for the consulting biz and hire people to work on that?
Click to expand...

This is very true. I should probably re-read Ryuzaki's "scared money doesn't make money" post. The truth about the reason why I don't do this right now is that I like the safety net. I have an LLC with its own bank account. I funded it with most of my early savings and now a % of it what it earns goes directly back to the company for scaling and growth and outsourcing, and a % into savings because....well I guess I was always taught to save. And probably more importantly, I don't want to be in a position where I end up with absolutely nothing. Where I don't have a big enough safety net to catch me or to be able to walk away if things don't go well and say "at least I also got cash out of it/have enough cash to build my next thing/can buy a site to scale up with all the things I learned/won't be homeless/still on pace to retire at 50". Thinking more deeply about it, I may also be scared to put everything into it because it's my riskiest asset.

Ryuzaki said:
They aren't great, but a C.O.D. is going to get you a better interest rate than a savings account, even with short term deposits like 12 months. The only problem is it's no longer liquid.
Click to expand...

CDs these days are only 2-2.3% ish from what I've found. Better than 1.8% but I think it's an okay trade for liquidity
 
mikeb23 said:
You mentioned you're maxing your Roth IRA, but no mention of a 401k. I don't have this (yet) but many banks offer "Solo 401k" plans for people who are self-employed. This account would allow you to invest much more in a tax-advantaged account.

https://www.nerdwallet.com/blog/investing/what-is-a-solo-401k/

Looks like Schwab offers one with zero fees.
Click to expand...

I have a solo 401k for my business. I can only do employer-side contributions since I max my personal contributions through my 9-5 employer.

One thing to note to people who do solo 401k employer side contributions - if you overcontribute, you have to pay a 10% excess penalty every year until you've earned enough to have legitimately contributed that amount. It's very, very annoying. I recommend not doing employer-side contributions until the start of the next year when you've sat down with your accountant. You can contribute to the prior year up until tax day.
 
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