Three Ways to Enjoy the Summer of your Dreams

Just came home from a mini summer vacation with my two most favourite people in the world. As a solopreneur whose spent the last 13 years self-employed, I find it always a challenge to go on vacation. We solopreneurs eat what we kill. Hence, if we don’t work, we don’t eat. Obviously the wise thing to do is to have a financial buffer for those periods where we have a dry spell. This is what every entrepreneur faces in the beginning.

 

Unless you have multiple streams of income going (which is something that I urgently recommend), working to eat is risky. Don’t get me wrong, it’s still not as risky as trading your time for money in someone else’s company. As an employee, you have to ultimately understand that your company has accounted for source deductions and vacation time when they offered you what they did. So yes, you’re worth a lot more than what you’re paid. In your offered salary, they have already set aside some money – your money to pay for yours, and everyone else’s vacation. But that money, instead of being set aside to pay for your two-week vacation could have better gone into your pocket. In turn, if you plugged that money into an investment, the ultimate result of your money could have been much more than that required to foot your salary for a couple weeks while you gallivant in the South Pacific.

 

 

When I first entered the world of solopreneurship, I always calculated my opportunity cost when using my billable hours for something else… other than being billable. I know I’m not alone on this. Here’s how I know. As a employee, I remember each year, I would call in sick at least a couple times. No biggie. I’ve got sick pay. If I don’t use it, I lose it. It’s a benefit for being an employee. But in the last thirteen years, I can count on one hand how many times I’ve actually gotten sick and missed work. No.. missed billing hours. Suddenly, instead of calling in sick and sleeping, I would be working from home. In bed. Taking little catnaps every-so-often as I succumbed to the flu while putting together a Stakeholders’ Analysis. It’s amazing what you can put yourself through when you know that you reap the direct benefit of your effort.

 

Back to my vacation. Lawrence and I had achieved some personal goals we had set this year, and chose to take a mini ’reward’ trip to celebrate. Plus, it was his birthday.

 

 

So we went to Cabo. It hasn’t been the first time we went on vacation in the past thirteen years. I’ve been to Hong Kong, Thailand, Beijing, Paris, Iceland, Mexico multiple times, US more times that I can remember… All of these trips were excellent. But they all had one thing that weighed me down. I always had a sinking feeling that I was missing out on making money. I was always felt that I was missing out on trading my time for money. Whenever I calculated the cost of my vacation, like a good (albeit non-practicing) accountant, I always factored in the opportunity cost of my taking vacation. I was always worried for the uncertainty at the end of my contract, whether or not I’ll get another. I always questioned whether or not it was a good idea to spend a bunch of money and escape to paradise.

 

This is a terrible way to live. The best things in life are things that you can’t associate to a price. You’re probably nodding your head right now in agreement. Most importantly, the important things in life are only around for a season, never to return. Watching my soon-to-be kindergartner splash around in the pool as he teaches me how to tread water is one of them. My kid being 5 and that he enjoys being with mama and daddy more than anything else in the world will only last for a season. Not a season as in how the earth revolves around the sun. But he’s only this small now. I can’t put off spending time with him in favour of finishing off my project or putting in billable hours. It’s time with my child that I won’t ever get back. Yes of course, I know what you’re thinking. You can’t just quit your job and stay home with your kids. You’d probably pull out your hair. Most of the time, you’re probably trying to get away from them. All joking aside, deep down, I know you know what I’m talking about. If you don’t, I truly think you have your priorities mixed up. Or, you haven’t experienced the voluntary, unconditional love that parents have for their children. My sincere hope is that you one day have the privilege of tasting it. It’ll drive you like nothing else ever has.

 

 

Ok. Now that we’ve established the problem, what can we do?

 

Factor it into your Bill Rate

A while ago, I challenged our Facebook group members to calculate their burn rate. A burn rate is the amount of money in which you need to live, including savings, before tax. In my post “What’s your Burn Rate and Why You Should Care” I discuss this intimately. This is the absolute floor rate that you can charge. Part of that deal, however, is to factor the time taken for your vacation as well. Average in your vacation as part of your bill rate and you can rest at ease that your billable hours are covering the few weeks that you take off to Hawaii with the family.

 

Comfortable Around People

Put Aside a Portion of your Earnings in a Vacation Fund

In the last few years, Lawrence and I have started something really awesome in our lives. In an effort to constantly declutter, we sell off our old stuff. Anything that is just sitting around, that we don’t use anymore, we sell on Kijiji. It’s a better designed Craigslist, if you’ve never heard of it. We don’t expect to run it as a business. We just want to recover part of our cost, and keep the energy flow in our home by adopting a philosophy of constantly decluttering. It’s good for the soul. Whatever money we have made, we put it in small, sealed cardboard box in which I cut a slit at the top. It’s our vacation fund. You’d be surprised how much stuff you can get rid of, and how quickly it adds up. We went to Paris last year, and it funded our spending money comfortably.

 

Establish Multiple Streams of Income

If you still rely on solely your paycheque to fund your life, you’re putting yourself in the riskiest positions on the planet. This applies regardless your employment status. Whether or not you’re an employee, or self-employed, it’s damn risky to put all of your eggs in one basket. But Cat, no worries! I’ve got a pension and retirement fund! Nope. That’s not what I’m talking about. Putting eggs aside for retirement is a given. No one can work forever. The way things are working out, we generally live longer than we expect, which is good news. The bad news is that no one knows how long they’ll be kicking around. If you run out of money when you’re 80 with a good 15 years left on you, well… sorry to say… you’re screwed.

 

 

Why do you think I started this blog? Why do you think I have so many projects on the go? Yes, ambition is one. I love executing. I love doing a ton of things. But ultimately, I know for certain I can’t be on this consulting train forever. Even if you can, you’re still putting all of your eggs in one basket: the solopreneur basket of consulting. Yes, it’s a sweet gig. Yes, your earning potential skyrockets in relation to being an employee. Yes, you have more control of your time.

 

But mark my word: the sun doesn’t shine on you forever.

 

For one thing, you can’t really handle more than one, maybe two clients at a time. Trust me, balancing two clients is hard. First, it’s hard to score more than one client at once. As long as project resources are planned by number of hours worked, most contract requests are for full-time consulting expertise for a given period of time. Most clients need you to be on site. Sure telecommute is getting more common-place, but clients always try to bargain down your rate. They think that you don’t have as much travel expense to incur. That’s BS. To counter this, I always remind them travel expenses are negotiated separately. You’re paying for my expertise. And I don’t suddenly get dumber if I’m working remotely. My rate is my rate. I digress.

 

 

Balancing two clients required me to work on average 60 – 90 hours a week. It was hard. I won’t ever do it again. Hence, I’m back to putting all of my eggs into one contract at a time.

 

This leads to the importance of establishing multiple streams of income. I’m not in the position to advise you how to do that, or what financial instruments to put your money. That’s up to you, your creativity and your experts. What I will tell you, however, is that it needs to satisfy a few conditions:

 

1. It must be Liquid.

I’ve been investments where I committed an exorbitant amount of money and have yet to see a penny of it come back to me. I have no reason to doubt that I eventually receive a healthy return. It just takes time. Here is one thing that I have learned. Whatever your investment is, if you’re going to use it as a source of income, liquidity is of utmost importance. Remember, we’re talking income streams here, not necessarily wealth building strategies. They’re two different things. Sometimes they amount to the same thing, but not always. Wealth building strategies are vehicles that add to your asset list. (And no, your primary residence is not an asset. Unless you’ve paid it off, it’s a liability. It’s the largest, heaviest liability you’ll likely ever have).

Income streams can also add to your asset list eventually, but not right away. For example, if you buy a house that you intend on renting out, you need the time to build up that equity. But in a quick cash flow calculation, if you rent it out for, on average, more than it costs you, you have an income stream.

 

2. It must have Good Earning Potential

Ain’t no one got time for anything that makes you diddly-squat. I remember the first time I had a bunch of money saved up. My banker called me up, and advised me to put it somewhere to get my money working for me. I thought, “oh, that’s kind.” She then proceeded to offer me her GIC at 3%/year. I asked her if it made a difference whether or not I had it in for 1 year or 30 years. She paused and said, “Nope.” (face palm)

 

You guys, there are good investments out there. They’re just not offered to everyone. You have to go looking for them. Yes, there is a risk associated with it. There is risk associated with anything you do with money. There is risk associated with anything you do with your life, including doing nothing with your life and money. In the wise words of Jim Rohn, “If you want to get something you’ve never got, you have to do something you’ve never done.”

 

3. The Best Ones Are Passive

The final defining attribute to a good income stream is that it needs to be passive. Each of us has only 24 hours in a day. There are only 24 hours in which we can trade time for money. Sure we can up our rate, but there is a cap. You can get another gig. But as long as it takes up time, it doesn’t count as an additional income stream. You still have to spend the time to earn the money. Yes, I get that when you start a business, you have to expect to front-end load time and effort into building up that business. But there needs to be a light at the end of the tunnel. There needs to be a day where you can take your foot off the gas pedal and have that business run itself. This goes for entrepreneurship and investments alike.

 

A lot of people trade stocks or day-trade. That’s not really passive. Unless you have a person doing all the research for you, you still need to put in the time and effort into looking for winners. That’s not passive. Looking for multiple streams of income means that those streams of income work concurrently for you, with as little input from you as possible.

 

It’s high summer. My wish is that you would take the time to enjoy your present moments with those you hold close to heart. Regardless of what you have going on in your life, the only time you have is now. Have an amazing remaining summer.


Also published on Medium.

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