Building Wealth vs. Building a Business

My wife and I are 30 and have nearly $500,000 between our retirement and brokerage accounts. Doing really well. I want to buy a small business to operate in three to five years. Can I pull back on 401k contributions to fund the acquisition? And also, I think for most of the MoneyGuy audience, like knowing when it's time to take that next step into other investment projects. How do you know that you're ready? To answer this question, the second rush, we've got to go back to the very base fundamental of a belief that we have. Our belief is that money is nothing more than a tool that allows you to accomplish the goals that you have. And so for a lot of people, one of their goals is financial independence. I want to be able to retire. I want to be able to live off my money. I want to be able to work because I want to, not because I have to. But for some other people, one of their goals might be entrepreneurship. And it might be being able to be your own boss and do your own thing. And you and your spouse, what you have to do is you have to sit down. You have to list out, hey, these are our goals. We have a goal of financial independence and a goal of entrepreneurship and a goal of starting a family and a goal of buying a house and a goal of fill in the blank. And then you have to prioritize those goals. And as you prioritize the goals, you would begin to develop some clarity around, okay, what goals does it make sense to pursue and on what timeline? Because obviously at 30 years old with $500,000 of investments currently invested, if you went to moneyguy.com slash resources, you checked out our wealth multiplier tool and you just put that $500,000 into the wealth multiplier to see what it could turn into. By the time you get to 65, I want to say the wealth multiplier for a 30-year-old is like 23, right? So we're talking about 500,000 times 23. It's a really, really big number. So obviously you've done some great work. Is it okay for you to back down your 401k contributions and think about buying a small business and moving into an entrepreneurial endeavor? That's less of a financial planning dollars and cents question. And it's more of a, what are your life goals question? What are your life goals question and what steps are we going to take to ultimately move towards those life goals? Well, I love this question because it allows me, because the easy answer is like, oh no, just keep saving and investing in your portfolio. You get wealthy over time because we all know this is the journey that works. But I have a no hypocrite policy here. And I would be a hypocrite if I told you, gave you that advice when myself started my first venture when I was in my late 20s. And I've, I've told the story many times is that I, you know, we quit saving and invest. We quit investing, I should say for a period of time. So we boosted up our cash to make it through the starting of the business. And mine was after the clarity I got from the passing of my father. And I knew I needed to change the way I was living my life. But here's the thing is that cash, I think you're thinking about this. The way you ask the question is, can you quit saving? I mean, quit investing. I'm making a mistake over here. Can I back down my 401k so I can start save building up cash for the acquisition? I'm going to tell you, it goes beyond just the acquisition. You have to have also enough cash to make it through the success period that even if you're buying a pretty good business, it's still going to potentially take two to three years for you to get traction for that business, just because you've got to figure out how to do it, put the hours in, develop some type of mastery of the skill set. So don't skip out on the step. We always call put on your 3D glasses of make sure you run a business plan and a cash flow summary of the dream plan. This is, oh my gosh, this is going to turn out so swimmingly great. We're going to feel good that we did this. There's also the down to earth plan, which is the reality of what you think will happen is a lot of good, but also some pretty bad things coming your way and you're balanced it out, and then don't skip out on that doo-doo plan. That's when, oh my gosh, we're 30 years old, way ahead of schedule, but because we did this business, man, we've really screwed things up. Are we going to be able to address this and still recover? I think if you do the 3D plan, put on your 3D glasses and do that plan, I still don't want you to skip the homework, and Beau hit on this. Go to moneyguy.com slash resources. We have our wealth multiplier, so you know what every dollar for a 30-year-old, and we know it, it's 23 times multiplier, but then also don't sleep on the fact that you could go to learn.moneyguy.com and we have your know your number course, because I don't hate the idea of you kind of figuring out how much money you need to save up, but then almost how much money you need to put a moat around and protect for the future, so you can kind of play this out as you're doing your 3D glasses plan. You know what's still working, your army of dollars that are working in the background that are separate from this new business venture, but you just don't skip out on those steps, because I've used this analogy a few times now, is that you're digging for a pot of gold, and it very well could be eight feet down, but if you only dig six feet, you're not going to reach your goal, and that cash is going to be the shovel that gets you to that point. Also, I don't know what type of business you're starting. I got fortunate that I started this business for the right reasons, and then it's a contraction, and then it succeeded my wildest expectations on income, on happiness, and all the other things, but there are a lot of businesses, especially when you're buying somebody else's business, maybe this is just a lifestyle business that you're buying, maybe you're going from, because we've seen people do this, where they're working in the high-tech industry, where they're making really huge incomes, because to have $500,000 at age 30 means you've got a big shovel. That's why I was going to throw a little, I don't want to say cold water, but I was going to throw a little bit of cold water on that. But I imagine, because like I said, it could be a lifestyle business, because that's a big thing on social media right now, is get wealthy, get off the grid, and go buy a business where you're washing windows, or doing something, or pressure washing driveways. I don't know what the business acquisition is, but be realistic on what this will do, and make sure, once again, do the 3D glasses, where you're taking into account all these scenarios. I'm curious, because have you ever seen someone do this? And by the way, we love entrepreneurship. We love small business ownership. But have you ever seen someone go into it with this rosy idea of how amazing and how wonderful it's going to be? And when I hear that you have two 30-year-olds here that are able to amass half a million dollars by the age of 30, whatever you have been doing thus far must have been pretty good, or pretty effective, or pretty productive. I would ask the question, man, okay, measure two, three, four times, is the thing that I'm walking away from, the gig that I have been doing, does it make sense to walk away from that? Because I think a lot of people believe that entrepreneurship may be this wonderful, amazing thing. And while it can be, it's not a given. And oftentimes, we find ourselves thinking that the grass is always greener somewhere else. And we don't recognize, hey, the grass is actually pretty stinking green right where I am. Agree? Disagree? I mean, I do. I would just encourage, I think part of what you're hitting on, Bo, is make sure you're more doer than dreamer. There's a lot of businesses out there. I've sat in conferences where they're telling people how to be great entrepreneurs and starters. And it feels like the curriculum is written for the dreamers, and keep signing up for the coaching and all these other things. And then I find myself, I classify myself as a doer because I have multiple seven-figure businesses, is that sometimes I'm like, I don't know that these people have graduated from dreamer to the doer. And that's why I like putting on your 3D glasses, is because it's going to let you actually create the business plan for all situations that are coming your way. And if you find out that this is just too much risk, or here's something, we had an early retiree in the past where there's nothing that says that you don't expand this out five years, go ahead and lock down both goals a little bit. But I also want to, it's a cautionary tale, is because I don't want you deferring too much of your life. Because it's the same thing, you could make the same argument about having kids and other things. I feel like sometimes as financial mutants, we're so good at doing things sometimes that that deferred gratification and discipline muscle is so strong that we can push things off too long. And then you've bought the farm, you've got the house, you've got the mortgage, you've got the kids, and then it's much harder to start a business once you've got all those things in your corner. So it's a balancing act.