Is it worth starting your own business? Scott Pape outlines challenges entrepreneurs should consider

STARTING your own business means less family time, spending nights doing bookwork and stressing about customers. So a spouse is right to be concerned, writes Barefoot Investor.

You need to consider carefully about starting your own business.

STARTING your own business means less family time, spending nights doing bookwork and stressing about finding profitable customers. So a spouse is right to be concerned.

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JIM ASKS: When reading the section of your book where you talk about starting a business, I remember thinking, “I can’t see that happening to me”. What would make me leave my secure, well-paying job ($100,000 plus)? Well, an opportunity has presented itself. I have been offered a contract by my company (construction) that is open-ended — if I am happy to do it, they will pass on client work. I figure it will cost about $80,000 to set up the business, and I can earn $150,000 p.a. plus. I am 75 per cent convinced this is the right thing, but my wife is not — her parents lost everything in a failed retail business. I see this as a potentially life-changing decision for our young family ... but only if I get it right. Any help would be appreciated.

BAREFOOT REPLIES: My first question is this: would you be running a genuine business, or is your boss just parlaying some of his risk? There are rules against “sham contracting” which you should look into — make sure it’s a genuine opportunity for you … and not your boss! Now, your wife is right to be wary: right now you’re earning $100k plus. And in this case, the plus really is a plus. As an employee, your boss shells out for your superannuation, you get four weeks’ paid holidays, and you get paid time off for sick leave, carer’s leave, long service leave and public holidays. And unless you go loco and bring a gun to work and start waving it around, it’s actually quite difficult for your boss to sack you. Best of all? When you get home, you can kick the footy with your kids and not have to think about work or where your next pay cheque is coming from. However, if you start your own business, you’ll have, as Jay-Z says, 99 problems: you get to spend your nights doing bookwork, stressing about where you’ll find new profitable customers, and possibly dealing with employees and paying their entitlements. Oh, and your worried wife will be riding you harder than your current boss. Bottom line? If I were in your shoes, to go it alone I’d want to be earning (eventually) AT LEAST double what you’re currently earning as an employee, especially if you’ve got to stump up $80,000 of your own dough, bro!

YOU’RE A TEAM NOW

NICK ASKS: I am a 32-year-old soon-to-be father (with my beautiful fiancee). In the past, my spending was out of control, causing me to rack up $55,000 in credit card debt and a huge car loan. Now all of that bad debt is history and we will soon be settling the purchase of our first house in the suburbs. But I feel that the ghost of reckless consumerism still lingers in my past. How do I stop this poltergeist from infecting my children and plunging them into a life of bad debt?

BAREFOOT REPLIES: You’re not the first bloke who was a little loose when he was younger. And you’re also not the first bloke who has cleaned his act up in the face of the impending Triple Ms (marriage, mortgage and midgets). My view? You’ve clawed your way out of a heap of debt and got yourself in a position where you and your fiancee are buying a home for your family. There’s nothing loose about any of that, mate. Besides, the fact that you’re admitting you’re packing your dacks about the awesome responsibility (and privilege!) of providing for your family tells me you’re up to the challenge. Finally, remember it’s not your money anymore. It’s your family’s. You’re not a single bloke, you’re a team! So, do the date nights I speak about in my book — once a month get a babysitter (or grandparents), take your wife out and, over a glass of wine, make joint decisions about your finances. It’s one of the best things you can do for your marriage — and your stress level!

THE VALUE OF VALUES

TIM ASKS: As a dad, how do I best set up my son financially? He’s four, and I’m planning ahead! I am 42, separated and renting. I have no debt other than a mortgage. My total assets are $20,000. I am on a low training wage now (midlife change of career) but if I pass I will be earning up to $100,000. So, do you suggest saving or investing for him in his name? Or building up my assets so I can provide a home?

BAREFOOT REPLIES: You’re already making the right long-term investment for your son — by lifting your income to six figures, you’re going to be able to buy yourself long-term financial security. When you have your money sorted, you’re free to focus on the things that really matter. Your son doesn’t care about what car you drive, whether you own or rent your home, or how much money you have in your bank account — all he really cares about is spending time with you. What more status do you need? You’re the man! Finally, I’ll tell you this: handing a kid a huge cheque on their 21st birthday sometimes does them more harm than good. If you really want to build your son up, invest the time you have with him right now. Do “jobs” with him, and pay him in gold coins into three jam jars (save, spend and give). That’ll do more to shape his values than almost anything else you could do.

IT PAYS TO CHIP IN

FRANK ASKS: I would just like to say a massive thank you. I have just had the best holiday in Exmouth (WA) with my kids and it was all paid for from our “smile” account! While we were treating ourselves to a fancy fish ’n’ chips dinner, the bloke behind the bar commented on the word “smile” written on my card. He said it was the second one he had seen in a week. He thought it was something ING did until I explained about your book. So thanks again!

BAREFOOT REPLIES: That brought a smile to my face! For readers wondering what the hell Frank is on about, let me explain. In the Barefoot world, you allocate your pay into separate (zero-fee) accounts: 60 per cent for daily stuff (expenses), 20 per cent to put out financial fires (fire extinguisher), 10 per cent for fun (splurge) and 10 per cent to save up and spend on longer-term things (smile) … like a good old-fashioned family holiday where you have fish ’n’ chips with your kids. Who needs New York or Paris, when you’ve got fish ’n’ chips with dad on the beach!

TREASURING MEMORIES

HAPPY Father’s Day! Today, I am going to give you something that you’ll really treasure (one day). You see, my wife’s father died a few years before I met her. When our house burned to the ground, in 2014, we lost some of the last remaining photos of him, the letters he’d written, and the paintings he cherished. How does my wife explain to me who her father was? How does she explain to our sons who Grandpa was? Her physical reminders are now lost in the ashes. So, I made a pact with her that each year I’d share with you, my readers, the ultimate Father’s Day present.

 

THE ULTIMATE FATHER’S DAY PRESENT

If you’re lucky enough to have your father still with you, here’s how you can give him the ultimate Father’s Day present. Go and see him, whip out your phone, hit “record”, and ask him the following questions:

1. How did you meet Mum?

2. What advice can you share with me about money, life and happiness?

3. What does being a dad mean to you?

4. What are you most proud of?

5. How would you like to be remembered?

 

This is not for Facebook or Snapchat. It’s for you and your family’s legacy. One day, it’s all you’ll have left of him. And you’ll treasure it. To celebrate Father’s Day, this week’s questions are dedicated to dads.

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The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice

Originally published as Is it worth starting your own business? Scott Pape outlines challenges entrepreneurs should consider