What’s Better? A Service Business or Product Business?

Assuming you have a job right now and you want to generate another stream of income, you might be looking to start a side business.  The first question you will want to ask yourself is “should I start a service-based business or should I sell a product?”  While both can be lucrative, there are major differences to both approaches.

Service Based Businesses

This is the cheapest service to start.  If you have a skill like accounting, marketing or consulting, you can easily start a side business and work nights or weekends for extra income.  The key here is to come up with a service that requires a monthly fee so you can bring on clients and compound those clients with new clients and generate a steady flow of income that is consistent.  This is key because you will know exactly how much consistent revenue you can generate each month to put into different passive income investments.

My web site design business normally just includes me creating web sites for other people.  They are typically one-off projects that start and end.  Once a web site is up, most people don’t change their sites very often.  So, how did I turn that business into something that could generate monthly income?  I added three services:

  1. Web site hosting
  2. Web site maintenance
  3. Web site marketing

Every single web site has to be hosted on a computer somewhere and the service requires that the computer host be connected to the internet 24/7.  When someone types in the web site name, a signal goes to the hosting computer and tells it to show the web site to that person.  Well, if the hosting computer goes down, guess what?  The site goes down. I outsource the hosting service and purchase servers from companies who have 24/7 tech support and who have servers all over the United States and where the computers are connected 24/7.  I then resell that service to my clients.  A typical server will cost me $85-$100/month.  My clients pay between $30-$40/month and I can get about 40 clients on one server.  So, 40 clients x $40/month is $1600/month and my cost is approximately $100/month.  As long as the server is running, I have passive cashflow from that one server of $1500/month.  Is this completely passive?  No.  Every once in a while a server might not work for a period of time or we have a web site that gets hacked in which case we restore a backup and make updates and monitor it so it doesn’t have issues.  While it’s not completely passive, I would estimate about 5-7 hours a week for over 300 sites.

When I started the business, I was charging $20/month for hosting and have since doubled this rate.  In addition, I added a new service called hosting + 1 hour of changes to web sites per month.  This means we will make text changes (like new staff or adding new projects to a site) and we will manage their web site every month.  This service includes hosting and costs $75/month.  You would be surprised at how many people sign up for this service and do not make changes to their site.  I would estimate about 70% never make changes to their sites.  So, the added benefit to the clients and on demand changes added another 80% to the monthly fees and requires little to no work.

If you are starting a service business (like accounting), you can get 2-3 clients per month and possibly generate an extra $500/month just by doing company’s accounting.  For other services like marketing, you can charge more and bring on less clients.  The beauty of service-based businesses is that your overhead is next to nothing and you are simply spending more time to do it.  When you put all of that extra money into passive income investments, you can start replacing your income from your job and business.

What you need to get started:

  • Company name
  • Company bank account
  • Basic web site for marketing
  • Accounting software (like Quickbooks online) to track your income and expenses


The following are pros and cons of a service business:


  • Easy to start
  • Easy to scale
  • No overhead needed (just a home office)


  • Time intensive – you will need to find the extra time to do the work
  • Value of the company is low since the value is solely based on you.  You could sell the client list to another company but it would be low value
  • If something happens to you, the revenue could go to zero (unless you have passive services like above

Product Based Businesses

This one is a little more complicated because you need more overhead to start. Your first question would be whether or not you have a product that everyone “needs” vs. what everyone “wants.”  There are quite a few options when it comes to selling products.  Are you selling a product that is unique?  Are you targeting a specific market?  If you are selling a product, my suggestion is to find a product that ONLY appeals to a specific audience.  What does that mean?  If you are selling ladders or jewelry, there are already hundreds of companies that sell generic items like that.  It will be very hard to compete.  However, if you are selling leather jackets for bikers or comfy mats for yoga studios, it’s easier to find groups that you can market to and you can charge more for your product.

For example, if there is a huge yoga institution and your company becomes the “preferred comfy mats product for the Yoga Institution,” people will go to you for their yoga mats.  There are hundreds of Yoga groups on Facebook you can target as well as other magazines, conventions and marketing methods you can use to target that group.  The more targeted your group, the easier it is to find those people to sell to.

What You Need to Start a Product-Based Business

You need to come up with:

  • A brand for your company (you will want a professional logo)
  • Determine who your target market is going to be
  • What’s your background story?  More people will buy your product if they can buy into an interesting story
  • An E-commerce web site to sell your product online
  • How are you going to produce your product?
  • How are you going to store inventory?
  • How are you going to ship and fulfill orders?


The following are pros and cons of a service business:


  • If the product in its category is heavily needed, there will be higher demand
  • The value of a product that creates a brand can be extremely valuable
  • A subscription based model can create recurring revenue
  • It’s easier to market to a large audience of people in your target market (vs. Business to Business where there is a much smaller client base)


  • There is much higher start up costs required
  • Ongoing costs include: shipping, inventory, staff and more
  • Creating a brand that sticks with consumers can take a lot of investment capital

Tax Advantages of Owning a Business

One of the biggest reasons to start a business is due to the number to tax advantages you receive as a business owner.  When you have a job, your taxes are taken out of your check immediately and, at the end of the year, you have to scramble to try and get some of that money back in your returns.  Businesses take their gross income and then deduct all expenses and then you pay taxes on the profit afterwards.   The key phrase here is “deduct all expenses” BEFORE you pay taxes.  Your expenses in a business can include items that you would normally pay for after your W-2 earnings such as gas for your car, cell phone, meals or housing expenses.


When you work for a company, that company gives you a W-2 worksheet that deducts upwards of 30% of your income from your check along with Social security and other expenses.  The following is an example of someone in California making $100,000 per year and the typical deductions.

In this example, someone making $100,000/year only takes home $70,000 after taxes are taken out ($5800/month).  Now, out of that $70,000, this person needs to pay for all of their personal expenses:

  • Home – mortgage or rent ($2000/month)
  • Car expenses – $500/month
  • Cell Phone – $150/month
  • Internet – $75/month
  • Travel – $300/month
  • Food – $1000/month
  • Child care: $500/month
  • Shopping: $500/month
  • Total: $5025

This leaves about $800 left over.  When you own a business, the government allows you to write off expenses for business after the income and THEN you pay taxes on your profit left over.  So, in the example above, you are losing $30,000 immediately.  That money is gone and goes right to the government.  You’re left with 70% of what you earned and then you have to pay your expenses after that.  How does this scenario work if you have a business.

Your business generates $100,000 a year in revenue.  You pay $25,000 in expenses and marketing to run your business (assuming you are a web designer and you do all of the work).  So that leaves $75,000 left over.  Then, you use your phone for work, you pay for the car out of the company revenue as well as childcare and travel and food for clients.   You can’t write off everything to the business, but let’s run some numbers:

  • $75,000 left over after marketing costs for the business and outsourcing = $6250/month
  • Travel (for work): $500/month
  • Car paid for by company: $500/month
  • Cell phone paid for by company: $150/month
  • Meals paid for by company: $500/month (not all food can be written off)
  • Child care: $500/month
  • Shopping (you need outfits to meet clients): $300/month
  • Total: $2450/month
  • Balance: $3800/month

So, after you deduct all of your work related expenses, you are really only making $3800/month.  If you multiply that by 12, you are making $45,600 taxable income to the government.  In addition, you are able to deduct part of our house expenses where you work so let’s say 10% of house = $200 month tax write off from that expense and it lowers your yearly income to $43,200/year.  In this example, you would probably drop to a lower tax bracket than the person making $100,000 year, but at 30% tax rate, you would owe the government $12,960/year.

So, your company generated $100,000 per year.  Many expenses were paid by the company, your tax rate has been cut by more than half and the best part?

Why Start a Business?

The United States of America has been a world leader for decades because, from the beginning, it has encouraged free enterprise and entrepreneurship.  This encouragement has led to thousands of technological breakthroughs and has allowed people to be more successful than they ever could be in their wildest dreams.  By creating programs to encourage business owners, the United States provides opportunities that you might not get in other countries around the world.


Today, you have a great job.  Today, you are being paid well and life is easy.  If you are following some of the guidelines in this blog, you are saving money for retirement, you have an emergency fund and maybe you are able to travel and spend time with your family.  If you are satisfied with your life, maybe you don’t need to read this blog or start a business.  However, if you are interested in a challenge and you are ready to get out of our comfort zone to really get to the next level in your financial life, this is what you need to read.  A job can come and go.  You have no control if a company keeps you or fires you. You have no control over the direction of the company and the decisions that are made at the top.  Unless you are in upper management, you are simply a cog that makes the wheel go round.  You are replaceable at any time and you are expendable if the company starts to go through a rough patch.  The only control you will ever have in your life of your financial situation is if you own a business.   Technically, your family finances is a business and you control how much you spend, what you invest in and how you monitor your personal finances.  This is different.

A business allows you to do the following:

  • Create another source of income (you don’t even have to quit your job)
  • Create something of value that you could sell at a later time
  • Create a stream of income that allows you to write off expenses from the business income so you don’t have to pay after tax money
  • Control your own schedule to work on your own hours without having to report to someone else
  • Control your own destiny by making business decisions that could infinitely grow your income


This is one of the biggest advantages.  If you are happy with your job, you can still start a business on the side.  This depends on a few factors, but really, life comes down to what you’re good at and what skills you have to offer if you want to start a service-based business on the side (like social media marketing, consulting, accounting, etc).  If you want to start a product-based business, what products can you sell, who is the market you’re selling to and how expensive will it be to manufacture your products.



It is true that businesses fail.  If a person doesn’t understand the basics of business, then their odds of success start to drop very quickly.  That’s a fact.  If you are selling a product that costs $10 to make and you are selling it for $13, there is not a lot of money left for expenses like staff, office, utilities and marketing.  In my experience, people who start businesses always have an initial blast of energy to get started.   They get their business cards and web sites set up and start talking to people about how they own their own business and they get really excited about the “IDEA” of owning a business.  The hard part comes next.  Is there business dealing in something that’s desirable?  Is their product worth the cost or is it even hip enough or useful enough to be sold?  Is their service something people want and how good are they at that service?  Is their restaurant location in a desirable location?  There are many reasons why businesses fail, but success or failure comes down to the owner and how confident they are in their product or service and how quickly they can adapt to market conditions.



My Journey in my 20s

My 20s are admittedly mostly a blur.  I graduated college at 21 and lived in Newport Beach.  After college, I traveled through Europe for 6 weeks and went to 9 countries and 13 cities with a backpack and my buddy Will from high school.  It was a pretty epic trip.  If you ever have a transition in your life and you have time to take a trip, get a backpack and a Eurorail pass and just go.  You won’t regret it.


After I returned, I started my job at an engineering consulting firm.  Our company’s largest client was Chevron and we basically ran permits and pre-construction tasks for gas stations and conversions from the old service/oil bays to the new Foodmarts they have today.  I started off just running to building departments and planning departments dealing with permits for project managers, but pretty soon I was running projects.  I got promoted a few times over the first few years and the people at the company were hilarious and fun.  It was still a job, but at least it was fun.  Money-wise I did okay, but the real benefit I received was running multiple projects and multiple tasks at once.  This was a huge skill when I started my web design company and had to deal with numerous clients and projects at once.

The one thing I can say today is that through all of the years and jobs and companies, I was always able to learn at something new.  My first paper route (when people actually read newspapers) taught me how to run my own little business.  I had to collect money for the paper and pay the newspaper company and make sure everyone got their papers on time.  I had to deal with customer service (when a paper landed in some bushes). I had to learn responsibility and get my arse out of bed every day at the crack of dawn to get those papers out and on the weekends when everyone else could relax.  The engineering company taught me how to prioritize projects and tasks and work with multiple people over different companies and agencies.


The time I spent working at the engineering company coincided with the rise of the internet, around the mid 90’s.  The more I learned about the web, the more I realized that it was going to change lives and provide an opportunity for me to create something.  My buddy from college wanted to start an online magazine for colleges and neither of us knew anything about the web, but we started ZERO Magazine anyway.  To be clear, I knew nothing about the internet, how to design in it, nor how to code in it.  So, I started researching and figured it out.  I self taught myself how to build web sites, how to host them and then learned Photoshop to create the graphics I needed to add to the sites.  Admittedly, my first web sites were not amazing, but it didn’t matter.  People were paying $100,000 for crappy web sites at the time.


We worked on the magazine web site for a little while, but it never gained a lot of traction.  As I kept learning how to design, I decided to start building web sites for companies.  My friend decided to sell web sites and I quit my job at the engineering company to work full time on web sites.  There was only one problem.  My buddy wasn’t very good at selling web sites.  He must have told me 10 times that he was ready to sign some deals and they were closing.  Then, days went by and weeks and months and we barely had a few projects; definitely not enough to squeeze out a meager living.  So, with no money and rent due, I had to figure something out quick.  I lived in Orange County and ended up getting a job with another friend all of the way up in Glendale (about an hour and a half away with no traffic) for IHOP corporate.  I got $15/hour to create marketing materials and graphics and worked on employee manuals.  It was a big step back in earnings from the engineering company, but I learned more and more about web design and graphic design and picked up how to design using software for laying out print materials.  I never took classes.  I was self taught.

After IHOP, I still didn’t have enough web business to make a living so while I worked on my business, I got another job at a company that competed with TicketMaster and sold tickets for sporting events and concerts.  I ran an affiliate program and tried to get web sites to add links to concerts and events we had tickets for in exchange for commissions on sales that came from their web sites.  That company paid me a salary and commission on deals I brought to the table.  If I was more of a hustler, I probably would have done a lot more sales on my own for my web business and made enough money to live without working for the man.   I continued to get better at web design and continued to bring in small clients while I worked for the ticketing company.  Well, that is until they found out I was doing projects at work and I got fired.


The internet was blowing up after I lost that job and was unceremoniously walked out the door.  For the simple reason I had “entertainment” and “internet” listed somewhere in my resume, I received a call from Warner Bros.  They wanted me back up in Glendale to work on an internet division called Entertaindom.  They thought I would be a perfect candidate to manage a division for double my previous salary, LOL.  Obviously, companies were pretty desperate for internet “experience” and were paying a lot for anyone who had any experience.  How could I pass up working for Warner Bros?  Again, I was commuting every day, but they let me come in at 10am and leave later so I didn’t sit in traffic.

At that job, I started meeting other industry people and wound up with a deal with Warner Music through my side web design business.  I designed web sites for Enya, Stevie Nicks and Reprise Records along with some smaller musicians.  I got paid a lot to do those projects and with my salary from Entertaindom, I had enough to buy my first real estate property, a condo in Orange County.


I started to get tired of the drive to Los Angeles and I wasn’t going to move there.  On top of that, as I discussed the entire business model behind Entertaindom with other people who worked there, I realized it wasn’t going to take long before their model was going to fail.  As it turned out, I left that company right before the dotcom crash in 2000 and Warner Bros folded that division soon after.  At Entertaindom, I picked up a new skill; managing people and a lot of drama between said people.

After leaving Warner Bros, I took a job managing the web division of a software company called Sage Software.  Well, I thought I was managing the division.  It turns out, all of the decisions were made in the UK and I was just an order taker and more of a production guy brought in to make web site changes.  That was boring so while I got paid a really good salary, I kept the job and worked on my side projects while I waited for directions from the UK.  After a year, the company found my side project files on a drive and, again, I was unceremoniously walked out the door.  By this time, my web business was starting to make some money.  I was averaging about $3,000/month in revenue.  It was good enough to pay my bills, but not enough to retire from the workforce.


By this time, I had been trying to get my web business going for about 4 years.  It was making good side money, but I had to keep going back to work while I grew my revenues.  My last job was working for a company called Fancy Publications, the largest pet magazine publisher in the US.  They published Dog Fancy, Cat Fancy, Horse Illustrated and about 10 other magazines.  I handled all of the web sites for the company.  I worked there for about 2 years until a college friend showed me how to market my web business on Craigslist.  Two things happened for me, 1) I found a way to generate really cheap leads and grow my web business to about $4,500/month, 2) I discovered I could make passive cashflow from hosting web sites and charging $20/month and only paying about $2/month for each account.

When I left Fancy Publications, I was officially done with the corporate world!

I had enough money from my web business and from cashflow to never have to work for anyone again.  I had roommates to share expenses and the money from my business covered my car payments, my rent and utilities and food.  I didn’t have a family to support, but I was officially free from having a boss forever.  I was 28 years old.


By the end of my 20s, I learned the following:

  • Companies gave me free money if I contributed to my 401(k).
  • You get fired from companies if they catch you doing side jobs while on their dime
  • I could buy a property and pay less money than rent if I had roommates and low monthly payments
    • I also learned a valuable lesson in real estate – if you have the money and you can make it work, buy a property.  Just make sure to buy a property you can afford and that will allow you to also save and invest
  • I learned about passive cashflow with my hosting fees


College Education not Necessary, but Education Is

If you have been reading these blogs, there might something you’ve noticed.  I haven’t talked about education or college or how smart you need to be to succeed.  The fact is, in order to be successful, you need:

  • To have a goal
  • To have a job or income
  • To change your habits and choices to save and invest
  • Persevere when times are difficult and stick to your plan

I am proud to say that I have a college degree in Civil Engineering for which I used that degree for about three years before discovering the internet.  Then, the degree and all of the classes I took went out the window while I self taught myself how to build web sites and a friend helped me with understanding how to use graphic design software to create images.  I self taught myself how to do “some” programming, but mostly I outsource programmers to do the hard stuff.   I figured out how to sell, how to create passive income with my business (although I didn’t even know what that was until later) and then how to do marketing.

The title of this blog should tell you a lot about what I am about to say.  You don’t have to go to college to be successful, but I can tell you right now that you won’t be successful if you are not educated.  You need to understand what is happening in the world around you to make good decisions.  As the popularity of iPhones started growing and the introduction of cameras on the phones started getting better and better, would you want to be stuck owning a company that developed camera film?  As video streaming became more and more popular, would you want to be the one trying to sell DVD players?  Being educated means you are in touch with the world and how it’s constantly changing and jumping into an industry that could be the future.  It requires you to read the news daily and business news to see what industries are coming up and which ones are failing.

Why do you think I left civil engineering to get started in the internet industry back in the late 90s?  It was obvious to me that the internet would change our lives.  Another reckoning is starting now in the crypto blockchain space and I am moving to that industry next.


So, the question on your mind, “what do I need college for?”  This is a great question and college is great for a lot of things:

  1. It provides a transition for most people living at home into the real world – if you have some financial support from your family, it eases you into real life unlike getting kicked to the curb at 18
  2. It provides your first steps in being self sufficient
  3. It allows you time to reflect on what you really want to do in life
  4. It provides an experience in social skills that you didn’t have growing up
  5. Depending on your major, it provides case studies and a guide in your industry for being successful. From a business aspect. some courses are invaluable if you are looking to start a company:
    1. Business Majors
    2. Economics Majors
    3. Marketing Majors
    4. Law School
  6.   Other areas of expertise could help in starting a business that could change the world:
    1. Technology
    2. Bio – Technology
  7. Getting your foot in the door at a company.  Unfortunately, the minimum requirement to get most jobs is a college degree.  If you are looking for a really good salary while you figure out a business to start, you will need a degree to get a job.

Now, many of the people I knew went into Social Studies, Fine Arts, History or History of Dance.  In the real world, I am not sure how many opportunities are out there for those people, but a degree is helpful.  What do you get after you’re done?

Many companies require a minimum of a college degree to even get in the door.  No matter how smart or driven you are, if you are looking to land a job in an industry you’re interested in, you won’t be able to compete with other young applicants who have college degrees.  Having a college degree gets you in the door.


There are many industries that don’t require a college degree where you can make a lot of money.  However, this is where being educated is vital.  Think really hard about industries that are up and coming and, more importantly, recession proof.  A few of these industries include:

  • Nursing
  • Home care or Healthcare
  • Computer Programming
  • Accounting
  • Legal

These are industries that will always be around regardless of how the economy is doing.  The baby boomer generation is getting older and there will be a greater need for health care providers than ever before.  If you don’t go to college, there are many vocational schools where you can get degrees or certificates and introduce you to real world cases so you will already be familiar with jobs when you get your certificates.  Also, many of the teachers in these schools work in these industries and if you network right, you can land a high paying job in any one of those industries.  These vocational schools tend to be far less expensive than 4 year colleges also.

Overall, in order to be successful, you do need to start working in a field and generating as much knowledge and education as you can.  It doesn’t mean you need a college degree, but you need to start somewhere and getting a steady income is vital as you look to expand your horizons and goals.


Being educated and well-spoken will help you in all areas of your life.  If you currently have a job, being educated about different topics will help you communicate with higher management and will help you to move up in your company faster.  If you are able to relate to people on topics such as sports, news, politics (although I recommend staying away from this one), world events or even entertainment, the more you know, the more chances you have to connect to people.   Those people can, in turn, help you in your career or provide business opportunities you might not have otherwise gotten.

You don’t have to be an expert in any one field.  However, you should know a little bit about as much as you can so you can carry a conversation on almost any topic with anyone.  By reading the news and knowing about the things going on, your conversations and your knowledge will help you succeed.


You Don’t Have to be Cheap, but Always Look Out For Deals

Do you remember when newspapers were mainstream and they had TV shows about people who would spend hours cutting coupons and walk into a store and buy $1,500 worth of cat food and detergent and Ritz crackers and pork rinds and then use all of those coupons and then only pay $4.50 for all of their shopping?  Yea, that was cool.  The show was so popular that people were stealing other people’s newspapers and mail to get more coupons.  Oh man.  Good times.

Well, I am not here to tell you that you are going to be wealthy by cutting coupons every day. First off, it’s a waste of time unless you’re not working and you have the time to find coupons for $0.25 off a can of tuna.  While many newspapers are going the way of the dinosaur, there is a new discount game in town called “the internet” or “the interweb” as some folks call it.  The internet is full of thousands of dollars of discounts on products and services and you should take advantage of it.

Due to Covid and the nation shutting down, some very large habits exploded over the year proceeding the national shutdown and one habit was online shopping.  Retail shopping was already having a lot of issues, but Covid put the nail in the coffin for hundreds of brick and mortar retail stores.  Now that online shopping has exploded, here are some things you can do to save some cash.


As I am buying items from online shops I am always looking to save some money here and there.  It takes about 5 minutes to do a search for a web site name + discount code.  The easiest example is Snapfish where I create and purchase photo books.  For a 30 page photo book, the typical rate is about $75. A quick search of “snapfish discount code” usually brings up codes that offer up to 70% off the books.   This isn’t like saving $5 or $10.  This is saving like $45.  Another example was a summer camp I was signing my kids up for.  It was really random but I put in “blah summer camp discount code” and lo and behold, there was a code there for 20% for new attendees.  One code saved me about $200 off a sports registration for both of my kids.

Some sites that provide discount codes for thousands of retail web sites include:

Like I said, I don’t hunt around every day, but if you are buying something and it costs over $50 or $100, I recommend that you look for online codes.  It’s fast and could save you some money.


If you are shopping a lot online, you should take advantage of a ton of cashback offers you get through Google extensions.  Browser extensions are plug-ins you can download on web browsers like Chrome or Safari, and some of these tools can do your bargain-hunting homework for you.  How does it work?  If you are browsing a product on Amazon for example, a plugin like HONEY will see the product page you’re on and go out into the web site and compare prices with other sites immediately and tell you if you are able to purchase the product on another web site.

The following are 5 browser extensions you can use on Google to save you money:

    Honey is a browser extension that promises to help you find and automatically apply the best coupon codes at checkout before you complete an online order.
    Giving Assistant is a shopping website that helps people locate deals and donates a portion of eligible purchases to the shopper’s nonprofit of choice.
    Rakuten is a cash-back website that calls its browser extension the Cash Back Button. After download the extension, you can use the button to activate cash back directly at store sites and automatically apply coupon codes at checkout.  Basically you get paid cash back for shopping you are already doing.  You will get notified by email of your savings and a check every few months.

    Save money, earn up to 5x more cash back and get paid faster with CouponCabin’s free, easy-to-use money-saving app! No matter what you’re shopping for, we can find a discount.

How do you get these apps?  Simply click here and go to the Google Apps store and search for the apps above.  Once you find an app you want, simply install in your chrome browser and you will see the icons at the top right of your browser.



Stop Keeping Up with Joneses

If you are truly going to change your habits and your spending, the first thing you need to do is get rid of any idea that you have to somehow keep up with your neighbors’ spending or their habits.  This is going to be hard.  I know when you see your neighbor drive up in a new BMW and you look at your 6 year old car, your first thought is, “wow. I could get a new car like that too.”  JUST STOP HERE!

I can tell you right now that I have had neighbors who bought it all.  New cars, boats, ATVs, trailers, RVs, you name it.  They made close to $500,000/year and saved none of it.  If you really want to be wealthy or you want to be financially free, you cannot start your journey with the idea that you need to buy everything your neighbor has.  It just doesn’t work in this plan.

If you have a nice car and you pay off the loan, there is no need to run out and buy another car.  You are most likely saving $400 – $500/month.  Do you honestly think anyone you know is thinking “Damn, my buddy Bob has a 5 year old car.  He needs to upgrade. He needs a nice new car because if he doesn’t get one I am going to think less of him.”  Now, if you have a 15 year old car with 200,000 miles on it, it might be time to look for something newer as you don’t want to deal with the unexpected repairs.  I had a paid off Jeep Cherokee that I owned from college for about 9 years.  I think it finally kicked it at 175,000 miles.

Speaking of cars, there is no way that you should ever purchase a brand new car.  First off, no car increases in value over time.  The minute you drive that shiny new car off the lot, you are losing 10% or more of its value.  From that day on, the more you drive and the older the car gets, the lower in value it becomes.  In other words, cards are a money suck.  They are a liability and high car payments prevent you from using your money to invest.  I bought an SUV used.  Brand new, it had a sticker price of just over $65,000.  With just over 35,000 miles and 2 years old, I was able to buy the car for $37,000.  This is a 43% savings!  Just because someone else drove it a couple of years.  When you factor in taxes, it’s closer to a 45% savings.  For me, this was an expensive buy, but I love my truck.  If you are starting out, I recommend finding as inexpensive car as possible and getting your car payment down as low as possible or even buy a used car for cash so you don’t have a car payment.  Every extra dime you have can be used for savings and investments that will grow over time.

On top of cars, there are trips or clothes you can buy, home renovations and other things constantly popping up.   You have to realize one thing.  If you invest money today into something like real estate and you invest $10,000 at 7% per year, that comes out to $58 in free money every month.  Remember that internet subscription you had at $60/month.  If you paid that with your interest gained, that internet subscription would be FREE!  If you invest $100.000, you could generate $580/month at 7%.  So, that money could cover:  a car payment, internet service, cell phone service, nails and probably hair every month.  All FREE and paid for with interest from money you SAVED.

All you have to do is ignore the feeling that you have to keep up with everyone else.  Focus on your own finances, your own savings, your own investments and the money will come.  For all of those people making $500,000 a year and saving nothing, the minute something happens and they lose it all, they will wish they had read this blog and put that money into passive income investments instead of wasting it all.

Power of Goal Setting

One of the most powerful tools you have in your arsenal is the power of thought and focus and drive.  If you truly want to change your circumstances and you want a better life for yourself and your family, you really can make a change by simply creating goals and figuring out ways to achieve those goals.

I lost a ton of money in the stock market trading on margin (borrowing money I didn’t have to invest in stocks) and the one stock I had (not diversified) went into the toilet one day.  Right before they were going to announce earnings, they announced the CEO was doing shady deals and was fired. The visionary of the business was leaving the company.

I lost over $80,000 in a few hours and $100,000 overall.  We were renting a house at the time and looking to buy a home for the family.  I had a wife and two kids to support and pretty much lost almost all of the money we needed to put down on a house down payment.  I sat in the kitchen that morning with my head in my hands and dreaded that call to my wife.  What came out of that day was a spreadsheet with a monthly goal for each month to save money and cut spending.  My goal was to get it all back in one year.  My wife and I went through our expenses, cut the shopping and eating out and I busted my tail on my business.  I was able to see each month the amount of money I lost coming back.  I almost got it all back by the end of the year and took another two months to get back to even.  We were able to buy the house we wanted by the end of that year.  I hadn’t saved that much money in a year I don’t think at any other time in my life.  I followed up on more leads, got more business from existing clients and made sure we didn’t spend on things we didn’t need.  We still went on vacations, but they weren’t to exotic places and we achieved our goal.

What can you take from this example?  What are the things I learned during this time?

  1. How to create a simple plan using a spreadsheet and create a goal
  2. Work with my partner to review our expenses, cut back on what we didn’t need and only focus on the necessities
  3. Get creative with how to increase revenues for my business – increase prices, market to existing clients, follow up on every single lead
  4. Continue to focus on my family with events that allowed us to be together, but maybe not trips to Hawaii

When I was done with the exercise, I maintained increased business revenues, bought a house, spent less and had more money to save.  You can do the same if you put your mind to it.

Every single person has a different circumstance and some are in better financial situations than others, but at the end of the day, it’s up to each individual person as to how determined they are to reach their goals.  People who have had a more difficult upbringing have dealt with the pains of poverty and might persevere harder than someone who grew up in the middle class neighborhood and didn’t face as many harsh realities.  No matter what your circumstance, if you want something, you just need to be determined to get it.

The power of setting a goal will start you on your trek.  Maybe your goal is to buy a new house or create enough passive income to retire early.  Whatever your goal is, make it specific.  If you are trying to buy a new house, how much do you need?  If you want to generate passive income, how much do you need on a monthly basis and then how much would you need to do everything you ever wanted to do in life? Having a specific number is important because the tools and resources in this blog will track those numbers every month and year.  And as you see your numbers increasing, you will change your habits and your spending and your saving to increase the numbers faster.

Most important, make the goal ATTAINABLE.  Don’t start with a goal of passive income of $100,000/month.  If you get to $500/month, you might start to get overwhelmed with the feeling you are never going to hit your goal.  If your goal is to buy a house and you’re starting at $1 million, you might want to temper your expectations.

On a daily and weekly basis, you will start to think differently.  At some point, as you follow this blog, your money will be automatically moved to investments and your spending will stabilize so the one thing that you can do is to look for more opportunities to generate more money in your job or through side gigs or by starting a company.  As you generate more income, you will automatically save more or put more aside for investments.  Just remember, NEW MONEY IS NOT “FREE TO SPEND” MONEY.  You were doing just fine with the old money so just wasting the new money on spending instead of investing will stop your journey up.  You’ll just move sideways.

When you reach your goal, there will be a sense of accomplishment that is unparalleled.  Trust me.  I’ve been there and it’s amazing.



Step Ten – Start a Company

This is the last step in the Basics section.  You should have enough knowledge at this point of the blog to get started on your journey to financial freedom.  Starting a business is a way to catapult you into wealth faster than anything else (outside of winning the lottery).  


Running your own company allows you to have something you will never have at a job: FREEDOM.  Owning your own business company allows you the freedom to not have to report to someone, to not have to rely to someone for your financial needs, to schedule your time with your family and friends however you want.

For me, my freedom from the corporate world started when I was 29.  I had been working on my side web design company already for about 4 years and started making enough money to pay my bills.  To be clear, the money I was making from my business was not even close to as much as I would make at a job, but it didn’t matter to me.  I was making enough to pay my bills and become FREE of the corporate world.  This is not to be confused with financial freedom that would allow me to stop working all together, but a freedom from working for a-holes who fired me or yelled at me for taking long lunches.

Is starting a company scary?  Well, if you leave your job and put all of your life savings into a company then I would say “shit. that’s pretty scary!”  Unless you have something that’s going to change the world, putting all of your eggs in one basket is pretty freaky and I hope you know what you’re doing.  I had to work full time jobs for years until I built up my company to a point where I could leave my job.

So why should you give up the relative security of a job to start a company?  Not only can you build something that could be valuable and you could sell at a later time for your retirement, but there are tons of other benefits to owning a company.


As I mentioned very early on, the United States was created to allow for entrepreneurs to come to a place where smart and hard work would lead to the American Dream.  America has rewarded innovation more than any other country in the world and the smartest and most innovative people have flocked to America for decades.  Anyone can succeed in America if they work hard and work smart.  The best part of America is that it rewards people who start businesses.  Why is that?  Well, when people start companies, they put other people to work.  The companies and the employees generate tax revenue to local, state and federal governments and the more companies that are started, the more tax revenue they get.

The financial benefits that the government give to entrepreneurs are enormous and incentivize people to start their own businesses.  The following are some of the benefits of owning a company:

  • After profit taxes
  • Tax write offs
  • Tax deductions
  • Depreciation

 The government allows you to write off expenses for a business and you don’t pay taxes on those expenses.  You only pay taxes on what the business earns AFTER expenses are paid.  For example, your business generates $100,000 per year in gross revenue (the amount that you collect from all of your clients).  Then you have expenses:

  • $300/month – Gas to drive around for clients
  • $200/month – cell phone needed to talk to clients
  • $100/month – internet connection to run invoices, etc
  • $50/month – lease a computer to do all accounting and quotes
  • $1000/month – staff to help with the business
  • $500/month – eating out/entertaining clients
  • $500/month – portion of your mortgage or rent for a room in the house used to do work (for example, if you pay $2500/month in rent and you use one room for work, that sq. ft. of the room can be a business write off)
  • $200/month – office supplies
  • $100/month – utilities

Add it all up and the above equals $2950/month or $34,500 per year.  After subtracting the yearly expenses from your $100,000 of gross income this leaves a profit of $65,500 that you would pay taxes on.  There are many other expenses like child care or health insurance that you can add to the above to lower your profit after expenses even more.   Ideally, you would have enough expenses to lower your taxable profit as low as possible.  I am not an accountant or CPA and you can’t get crazy with deductions (like deducting an entire mortgage payment for your business) because the IRS will come calling. 

The main point of the above exercise is that there are many financial incentives to starting your own business and many ways to write off expenses from your business so you are paying less in taxes.  

If you had a job that paid you $100,000 in California, approximately 30% of your salary goes to the government immediately.   So, you are left with $70,000 in after tax money.  THEN, you are paying for a cell phone, gas, entertainment, utilities etc.  You are left with money that can be used for entertainment and travel and investments.  In my example above, many of your every day expenses can be written off to your business and then you are paying taxes on $65,000 (30% = $19,500 in taxes vs. $30,000 in taxes at your job).  Since you have already written off many of your normal expenses to your business, you have more after tax money to invest. 

This is the biggest financial benefit of owning a business. 

Step Nine – Multiple Streams of Income

In order to become wealthy, you will need to have more than one stream of income.  If you have a job, that is one stream of income.  If your spouse has a job, that would be a 2nd source of income.  However, the entire point of this blog is to get you out of work and living a financially free life where other things are creating income for you.  As those other income streams grow and cover the cost of your living expenses, you can rely on your personal income streams less.


By this time, you should have determined what your goal is for passive income.  How much money do you need on a monthly basis to be able to cover all of your necessities?  For me, I would like to have $20,000 per month in passive income.  If I didn’t have kids in the house, I figure I could live on passive income of $20,000.  

We have discussed how investing money into different things can generate interest and that interest can be reinvested to create more money for you, but all of those examples really imply that you are working and money is being pulled from your paycheck each month and reinvested and you really aren’t going to see that money until you retire.  So how can you get more money today??  How can you supplement the money you earn at your job with extra cash now?  Here are some ways to create more streams of income:

  • Real Estate investment
  • Side gigs
  • Start a company


Real estate investment provides the ultimate in passive income. Everyone needs a place to live and everyone who doesn’t own a house, pays rent somewhere.  There are different kinds of real estate investment, but we can start with residential real estate.  

Real Estate Investment for The Youngsters

If you are in your 20s and you can put together enough money for a rental property, you can rent rooms to roommates or friends to help carry the debt burden.  If you play your cards right, your expenses after renting out rooms could be far less than what you were paying for rent before you bought the property.

Here’s an example.  Let’s say you live in Pittsburgh, an up and coming investment real estate area.  You were living in an apartment and paying $800/month in rent.  I was able to find a number of homes that cost about $250,000 and are 3 bed, 3 bath homes.  If you are able to put down $25,000 for the home, you would have a loan balance of $225,000 and at 3.5% interest, this would cost $1,010 per month in mortgage payments. There are going to be some other fees including:

  • Mortgage: $1,010
  • Insurance: $150/month
  • Property Taxes: $210 (1% of the purchase price divided by 12 months)
  • PMI: $187/month (based on 1% of the loan amount per year)
  • HOA: $100/month
  • TOTAL: $1657/month

Since you only put down 10% of the purchase price, you are stuck with the monthly PMI (Private Mortgage Insurance).  Private Mortgage Insurance is a separate fee the bank wants you to pay because you don’t have enough skin in the game when you only own 10% of the property.  Almost every loan requires PMI unless you put down 20% or more. The average cost of private mortgage insurance, or PMI, for a conventional home loan ranges from 0.58% to 1.86% of the original loan amount per year, according to Genworth Mortgage Insurance.  In this case, we estimated your PMI at 1% which is a pretty big number each month.

These are just random estimates and homes there might not have HOA.  After you review the property and the fees above, you will have a solid idea as to your real costs.  The next step is to go to Zillow or other RENTAL web sites and determine what the fair market rent is for houses like this.  If the rents are around $1900/month, you’re looking good.  $1900 – $1660 in costs is $240/month in positive cashflow.   Now, let’s assume you were paying rent of $800/month and now you move into the property and charge $600 to your friends for rent for the other two rooms.  1) BONUS – you get to live with some friends, and 2) they would pay $1200 of your mortgage and you would be paying $457/month to own the home.  You actually saved money by purchasing the home.

Once you move into the property, you need to start watching the housing market.  If the housing market increases, you can try to refinance and get a lower mortgage rate and, if the property has increased 10% in value, you would then own over 20%, you would get out of the PMI payment which would provide even more profit.  If you have a good payment history and interest rates are lower, you should be able to get a deal.  In this scenario, purchasing a house that needs some work done is also a great idea.  If you are handy at all, you can move into a fixer and add some paint and redo the floors and get the value up so you can get rid of the PMI.  Maybe one of your friends can help out with the renovations.

While you are living at your new house, you can put away any extra savings you gained by having roommates and start looking at buying another property.  Let’s assume you were able to refinance the first house and lower your payments AND remove the PMI.  How would that look now:

  • Mortgage: $950
  • Insurance: $150/month
  • Property Taxes: $210
  • HOA: $100/month
  • TOTAL: $1410/month

If you could increase the rent by $100 to $2000, now you’re looking at a monthly passive income cashflow of $590/month.  What?  Passive income of almost $600/month?  Remember that not only are you getting passive cashflow, but two other things are happening: 1) someone else is paying off the monthly debt for that property and 2) the value of the property is going up.  If you did any fixes at all, that property is already worth more than what you paid for it.

If you take that $600/month and save it for two years, you will have $14,400.  All you need is another $10,000 to buy your next house at $250,000 and do it all over again.  If you really put your mind to it, you can probably generate the cash to buy another house within a year.

Real Estate Investment for the Family Folk

If you are older and have a family, let’s look at how you can do this.   If you have been following all of the steps outlined in the beginning of this blog, you should be putting away some money into investment accounts that are now compounding interest. You should also have an emergency fund to cover your family’s expenses in case of an emergency.  

Now, let’s assume you or your wife get a raise or get a bonus.  One of the goals you can create might include buying an investment property.  In many cases, you need at least 10% of the purchase price to put down on that property.  One option is to find a house that needs some work.  You can move your family into the house and start fixing it up.  Your goal should be to move in with the idea of renting it as soon as it’s fixed.  If this is your plan, you need to look at what your payments are and expenses and what you can get for rent.  

Every single time I have purchased a property for my family to live in, I run the numbers to see if I can make money if I move out and rent the house.  Why go through this exercise?  What happens if I run into an emergency and I have to downsize?  Wouldn’t it be great to move my family into a lower cost situation while I rent the house I live in for a positive cashflow?  In this scenario, I am not forced to sell the house, I make a little bit of money each month, the tenant is paying off the loan on the house AND I have time to figure out my emergency situation.   If I run the numbers and find that the house will be a negative cashflow if I rent, I would either look for a different property or figure out a way to improve the house for higher rent down the road.  In my current home, I was sitting at a breakeven point for rent the day I moved in.  Then, two things happened 1) interest rates dropped from 4.25% to 3.6% to 2.875%.  In addition, rents in our area went way up.  So, I refinanced twice and if I moved out today, I would go from break even on rent to a positive cashflow of almost $900/month. 

There are many ways to do real estate investment and generate revenue.  So, if you have maxed out your salary and you are comfortable with your savings, but you don’t have a lot of extra cash, how can you come up with a down payment on a house?  One way is to start a side gig.


Side gigs are jobs that you take outside of your normal 9 to 5 day job.  Some examples can include Uber driver or services for people like painting, landscaping or marketing.  Side gigs are not passive since you are doing more work, but they do provide another source of income to save toward your goals.

If you are an expert at something like marketing, why not offer that service to other companies?  If you are really good at customer service and you’re a stay at home mom, there are many jobs for customer service reps that allow you to work at home and have flexible schedules.  If you are good at accounting, EVERYONE needs an accountant.  Post your services on Craigslist and grow a small clientele.  

A journey up a high mountain is not an easy task.  Many people start the journey and turn back because they can’t handle the terrain or they didn’t prepare.  Maybe they were satisfied with climbing halfway up the mountain.  If you are “comfortable” saving money in your 401(k) and you have a plan to work for 30 years and retire on the money that has been compounding, that’s not a bad plan.  You can live comfortably each day knowing that you have a plan and your nest egg is growing and you will be taken care when you are ready. 

This is the part of the journey where you will make some time sacrifices to make some extra money so you can put towards cashflow investments that will allow you to retire earlier, that will generate passive income so you can do more in retirement and maybe even have more time to do more with your family SOONER than in your 60s. 

If you are serious about investing and really getting to the top of the mountain, you will need to take on extra work with a goal of putting all of your extra money into passive income investments.