I’m Investing 100 Percent of My 2012 Income

what is business and how does it compare to self-employmentI’m changing careers. Well, sort of.

About two years ago I became a full-time freelance writer. At the time, I thought life couldn’t get any better: I make my own hours, I never sit in traffic, I award myself exorbitant vacation time, and I spend almost every day in my pajamas.

But I’m troubled by one little fact: I’m trading my time for money.

I may “work from home,” but I’m still a glorified employee.

In fact, I might even say that I’ve been selfish. I’ve created a job for myself, but I haven’t created jobs for other people.

I work alone, rather than with a team of talented people. My impact is limited by my time and skill, instead of being multiplied by the talent of my team.

“Great things in business are never done by one person; they are done by a team of people.” – Steve Jobs

So here’s my career goal for 2012:  I want to stop being “self-employed” and start being an “employer.”

The old stereotype says that immigrants (like me) come to America to steal jobs. Well, I’m going to turn that around: I want to CREATE jobs.

I’m Investing 100 Percent of My Income

How can I afford this? (I can afford anything!)

I’ll continue my current freelance writing work. I’ll earn a little money from that.

Since I believe in being frugal with my time, rather than my money, I’m investing every penny I earn in 2012 into my website and real estate ventures.

That’s right: I’m investing 100 percent of my 2012 income.

Will and I have agreed that we’ll live on his (modest) salary and invest all of my income. It’s our ultimate “couple money” strategy – live on one income and invest the other.

If you’re misled into assuming Will earns a big salary – I assure you, he does not. He’s a 32-year-old who lives with roommates. One of our roommates – a middle-school teacher – earns more than he does.

Will also doesn’t receive any benefits – no 401k, no health insurance.

It’s a stretch to support two people on his income. But it’s important to us to invest every penny into building assets.

I’m splitting our investments three ways:

  • I’ll invest the first $10,000 into our Roth IRAs ($5,000 per person).
  • I’ll use the rest to hire people on Elance who can help with behind-the-scenes website tasks. This will support both Afford Anything and several smaller websites I’m developing.
  • I’ll buy and repair more rental homes in Atlanta.

Why Am I Doing This?

The best path to wealth is through owning the means of production. That’s Economics 101.

There are four ways to own the means of production:

  • You can own stocks, which create income by dividends and capital gains.
  • You can own houses, which create income though rental payments.
  • You can give out loans, which create income through the interest you receive.
  • You can own businesses, which create income by selling a product or service.

Stocks and real estate are “slow growers” of wealth. They’re good for the long run.

Owning a business provides you with the best chance to rapidly grow your wealth. But my business is also slow-growing. It’s limited by one major bottleneck: me.

To grow my small business, I need time and money. My time is limited, but I can amplify it by converting my money into more time.

What’s the Worst-Case Scenario?

Before I make just about any decision, I ask myself: what’s the worst that can happen?

In this case, the worst that can happen is that I “lose” every penny I earn next year. My return-on-investment will be zero.

But I won’t be in any debt.

In other words, the worst-case scenario is that Will and I will live more frugally than we need to.

Given the potential upside, that’s not so bad.

UPDATE: The year 2012 is over!! Check out the results.

Thanks to The Cleveland Kid for the photo.


  1. says

    Fantastic goal Paula! That takes guts, and like you said, worst case, you lose it all, but don’t go in debt.

    I think I’ll set a goal to invest more money in my online endeavors as well. How much do you think you will actually invest?

    Thx, Sam

    • says

      @Sam – Since I’m self-employed, it’s hard to say with certainty how much I’ll earn next year. My income is directly tied to two things — #1: the number of articles I write (multiplied by the rate I get paid per article), and #2: the net income I can produce through this website and a few small other sites that I’m just getting started. Right now the bulk of my income comes from #1, and I want to transition it to #2.

      As a rough estimate, I’d say that I’ll probably earn, roughly, what a schoolteacher in the Midwest might earn. :-) It all hinges on the web revenue, really. The number of articles I can write is limited by my time and energy, but website revenue is potentially limitless.

  2. says

    Pretty solid goal – we do something similar with my wife’s income (save it). She expects to make a lot more next year than this one, so I’m hoping we ‘save way too much’, so to speak. A pretty good problem to have…

    • says

      @PKamp3 — I hope you “save too much,” too! … it’s funny, ever since I set this goal, I’m motivated to earn MORE, because I know that every $1 that I earn is going to (hopefully) turn into more than $1.

  3. says

    I really like this concept! It’s simple although probably not easy.

    I’ve been going back and forth on what it means to “invest.” For example, I want to invest in building my own business as much as possible in 2012. But should I scale back investing in the stock market to do this? We can at least estimate ROIs on the stock market, but it seems much harder to do building a business.

    There are pros and cons to both, although in my mind, traditional advice says to never sacrifice investments for retirement savings. Seems like this is a blog post coming for me!

    • says

      @Jeffrey — My handle on it is to figure out the minimum that Will and I need to save in order to have an acceptable retirement. I put this into a retirement account. Then I pour everything else into a business.

      This strategy is reminiscent of my “what’s the worst-case scenario?” method.

      Will is 32; I’m 28. Let’s assume we retire in 35 years, when I’m 65 and he’s 69. (I’m sure he’d prefer to retire earlier, but we’re going for an “acceptable” worst-case scenario here.) We’re saving $10,000 per year jointly towards retirement – that’s roughly $832 per month.

      According to fidelity.com/myplan, if a 30-year old with $0 in retirement savings thusfar starts socking away $800 per month toward retirement, and they have a “growth” investing strategy of 70 percent stocks, 30 percent bonds/cash, they’ll have $2.7 million in 35 years if the market performs on average. If the market performs below average, they’ll have $1.4 million.

      Fidelity doesn’t state how they define “average” or “below average,” so that’s anyone’s guess. But $1.4 million as a worst-case-scenario doesn’t sound so bad, especially when you consider that #1: our house will be fully paid off (and generating rental income), and #2: if my business falls flat on its face, I can always ratchet the retirement savings up. And realistically, in about 2 years from today, I’ll know whether or not my business is worth pursuing. That’s not a huge time-loss when it comes to a retirement 30 or 35 years away.

  4. says

    Wow, this is an awesome goal Paula! I wish you all the best, and I will follow your journey towards financial freedom. I recently watched a talk by a millionaire and he basically said in order to be wealthy you must:

    1. Own stocks
    2. Own real estate
    3. Own a business

    I think you are on the right track. And like you said the downside is minimal.

  5. says

    It’s going to be a challenge but, I admit that it’s a great goal.
    My goal for 2012 is to generate 2 x incomes by different projects that I’m working on.
    Happy holidays from Hawaii!

  6. says

    Wow Paula. Takes a lot of courage to do what you want to do. Go for it. I did a play in NYC where I had to play a gay character that had to make out with his co star. I had never kissed a guy in my life (not even in college) and fear was eating at me. I threw everything I had in the role and from that I got 7 wonderful write ups, and a woman who fell in love with me faster than you can blink. So much has come out of that moment of throwing myself 100 percent in the ring that I wanted to applaud you for doing so too. Good luck. And Happy New Year.

    • says

      @Jai – I can’t imagine how intimidating that must have been — especially on stage in front of hundreds of people. But as I’m sure you discovered, the more you push the envelope — and do things in spite of your fears — the more your courage seeps into other areas of your life.

  7. says

    I think it is a great plan. I am betting that you won’t be missing out on much by spending less because you know you are trying to accomplish an awesome goal. Sounds like your expenses are pretty low, and what a great time to try such an endeavor.

    Best of luck!!

  8. says

    I’m following along Paula and your feet are gonna get darned hot if you do not follow through on this…haha!

    Seriously though we are in similar boats, although you have been freelancing longer than I. Adding some employees into the mix should help you grow those sites much faster than you could do on your own, as there are only so many hours in the day for you to do the work yourself.

    • says

      @Money Infant — How funny that your name is money “infant” and you post a comment talking about how you’re new to the game! Haha — what a fitting name! Yep, please hold my feet to the fire on this one. I’m going to post a nice monthly report that shows where my dough is going.

  9. says

    Paula, it’s commendable that you have this goal and that you are willing to share it with all of us.

    If I may ask, how are you planning on purchasing properties. If you are self employed and your husbands income is not that high will you be using mortgages?

    I assume you are talking about rentals not short term, rehab and resell.

    • says

      @Luis — Thanks! I’ll be posting my progress every month, so check back to see how I’m doing!

      That’s correct; I’m talking about long-term rentals, rather than short-term “flipping.” Flipping houses is too risky for my taste. I prefer buy-and-hold strategies.

      I buy houses in two ways: either by paying cash (stay tuned for an upcoming post about that — I hope!) or by borrowing against the equity of the houses that we already own.

  10. says

    This is an interesting concept- I invested about 75% of my post-tax income last year but doing 100% would really be nice :) The other reason I’m being so aggressive with investing right now is not necessarily because I think the timing is best, but rather now is the time to pursue more speculative opportunities (rather than if I was older, had a family, etc).

    Keep us updated on how it goes!!

  11. says

    Honestly those are awesome news, I know I sound a bit weird but you must hit the “bottom” to succeed. People who don’t take risk doesn’t accomplish anything, and remember that you must be afraid to NOT DO anything instead of being afraid to fail ! Best of luck in 2012 to you and Will !

    • says

      @Michelle — I agree, sometimes hitting “bottom” is exactly the impetus you need to succeed. I’m not saying you should aim for hitting bottom … I’m just saying that if you happen to find yourself at bottom, you should be hopeful that this is the turning point towards a brighter future.

  12. says

    Cool idea, its ballsy but will be interesting to observe.

    My 2 cents on the matter is that you are thinking small when you say you are bottlenecked by being the only person that can actually cause the income from your site. Your a writer and on top of that, your an internet writer. You must have friends (or @handles you know) (professionally and personally) that write. Ask them if they have some free time to contribute to your site. This month I have had 3 stories written by guests on my site. Im generating continuous traffic with a simple conversation and I have the freedom of writing less with no loss to my site.

    Think about it….you quoted it yourself (in case you forgot, heres a reminder- “Great things in business are never done by one person; they are done by a team of people.” – Steve Jobs)

    Team work is the access to your year.


    • says

      @Brit — I’d like to outsource the other aspect of my site (the back-end technical support, finding advertisers, etc.) so that I can focus on the part that I enjoy most, the writing. However, I need to pay people to handle my tech support and other types of services. (I could also barter or exchange with people, but the bottom line is that I need to offer something in return.)

  13. says

    I really like your considerations. I’m still working on creating an income I can live from in the first place but I usually invest a part of my money directly into my business: For example into better equipment so I can create higher quality work (and earn more).

  14. says

    Afford Anything,

    I am a high school student studying Personal Finance in Singapore (I grew up and lived in Atlanta for 14 years). I really liked when you said “The best path to wealth is through owning the means of production”. That is really smart! I like that your blog is not about living the penny-pinching lifestyle but about living the lifestyle you want with the money you have. It is interesting that you don’t consider owning property as part of your “job”. My family owns rental property in Atlanta and it take up a lot of time! Also, you are already helping employ people. Gardeners, contractors, roofers – you should be counting the work you give them as part of your “employment bubble” you are creating. Great blog and I can’t wait to keep reading!

    Oscar A.

    • says

      @Oscar – Hi there! Small world … I spent a couple weeks in Singapore in 2010, and loved it. My view is that penny-pinching creates a mindset of scarcity and deprivation, while pursuing wealth creates a mindset of abundance. (I’m a “recovering” penny-pincher myself.) :-)

      I guess I view owning property as my “side gig” in addition to my full-time writing job. (Although my boyfriend Will says that I don’t have a “full-time” job, I just have many side gigs that add up to more-than-full-time. I’m beginning to suspect that he’s right.)

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