Jay Leno method: don’t quit your day job when you have a side business

[BakerStreet]

https://www.cnbc.com/amp/2017/03/16...ing-strategy-is-something-anyone-can-try.html

I saw this on another forum and thought it was interesting so I’ll post it here.

Jay Leno advocates to have two income stream, one for saving and one for spending. The smaller one is the one you spend. He followed this practical advice even when he was host of the tonight show, earning 30 million a year. He’s still have 150 standup gigs a year then so that he’d save all earnings from the tonight show.

This is in stark contrast to what many people on online entrepreneurship forums wish for, which is to quit their job as soon as they get any sign of success with their business. I too want to quit my jobs if my business goes off but I know deep down that jays advice is good. This is because business is turbulent and you just don’t want all your eggs in one basket. It’ll make you sleep a lot better at night and you will make a lot better decisions.

To do this, your side businesses must be lifestyle businesses. Or if they do scale, you need to hire people and make it possible to have multiple jobs. Sucks but it’s a lot better than being dependent on a new business and then facing the crunch when things go down. That’s even worsts.

What’s your opinion of jay’s advice?

 

[illmasterj]

I have times where "I want to only think about one thing" by burning the ships, but the truth is that I sleep better at night when I have multiple sources of income.

I've always saved half of my total income (best advice my parents could give me) and never felt poor because I did it from day one (every time I got a new job, I felt "rich"). Then later in life a post from @eliquid got me into the train of thought where you build income streams to cover certain expenses.

Back when I needed that advice, I built rank and rent websites which bankrolled my life expenses (housing, food, bills, travel, etc), and then consulting/SEO services were the cream on top.

In hindsight it would have been easier to have a day job instead of consulting, as the sales calls/proposals are really disruptive and time consuming.

It all depends on the phase of life that you're in but if you have to provide for others (family), a stable income is helpful for lowering any financial anxiety, allowing you to go "all in" on your business. But you also need to be weary of using it as validation for "I'm going to build 5 businesses at once". Unless you're a unicorn, that never seems to work as planned.

 

[BakerStreet]

I have times where "I want to only think about one thing" by burning the ships, but the truth is that I sleep better at night then I have multiple sources of income.

I've always saved half of my total income (best advice my parents could give me) and never felt poor because I did it from day one (every time I got a new job, I felt "rich"). Then later in life a post from @eliquid got me into the train of thought where you build income streams to cover certain expenses.

Back when I needed that advice, I built rank and rent websites which bankrolled my life expenses (housing, food, bills, travel, etc), and then consulting/SEO services were the cream on top.

In hindsight it would have been easier to have a day job instead of consulting, as the sales calls/proposals are really disruptive and time consuming.

It all depends on the phase of life that you're in but if you have to provide for others (family), a stable income is helpful for lowering any financial anxiety, allowing you to go "all in" on your business. But you also need to be weary of using it as validation for "I'm going to build 5 businesses at once". Unless you're a unicorn, that never seems to work as planned.

How long have you been saving 50% of your income? I think you've been around for quite awhile. What's your net worth right now, if you're willing to share. Also, how are you saving 50% of your income? Are you using tax advantage accounts like solo 401k, IRAs, 401ks, etc? With a 50% savings rate, optimizing for taxes would take your savings even further. IIRC Solo 401k maxes at about 50k, 401k at 22k and Roth IRA at 7k. So that's 79k a year in tax advantaged accounts.

Yeah, I agree. With my experience, business never goes as planned. It really takes a stupid fool to start a business. I get why rich people tell their kids to be white collar professionals like doctors or lawyers, its because there's guaranteed success there and they get a good lifestyle w/o any risks. But, hey, I'm here now and I'm 8 years into the travel industry so there's no going back lol. I hope it pays off for me, and I'm keeping my day jobs. Not just for me but my wife wants a kid and I want the security now.

From my experience, having jobs is a great way to have security and you need a side hustle business with equity for a shot at getting rich. You can't get rich with a paycheck. You need equity to get rich.

 

[illmasterj]

How long have you been saving 50% of your income?

Since I was delivering newspapers around 12 years old. Keep in mind, my lesson stopped there. I'd have a lot more if I made that money work harder for me from a young age.

Nobody ever taught me to invest that money, that was something I taught myself much later in life after learning about risk and mindset.

Also, how are you saving 50% of your income?

Conceptually, being modest and earning well. Keep in mind that this is not "frugal". Lots of people I know try so hard to save a dollar and it hurts them.

One needs to know what their time is worth and pay if it means saving that time (for example, I used to shop around for a better price on clothing, which is dumb, because it would take hours and I'd save maybe $20. My time is worth much more than that!). Spend the money and get back to earning (or enjoying life).

With a 50% savings rate, optimizing for taxes would take your savings even further.

I left my home country and reduced my income tax bill by ~65%.

Comparatively, when living off of capital gains (like many "retired" people), my effective tax rate will be 0%, whereas back in my home country that would be around 15%. It's a difference, but it's not as profound.

Once you have assets and retire this matters less, but when accumulating assets, this is huge. I'm not a doctor, I haven't always earned a lot, but keeping 90% of my income has allowed me to continue saving a decent amount year after year.

From my experience, having jobs is a great way to have security and you need a side hustle business with equity for a shot at getting rich. You can't get rich with a paycheck. You need equity to get rich.

Sizeable riches, yes. But "wealthy", not necessarily. There's more than one way to skin a cat.

I know a lot of HNWIs and most are still paid for their time (consultants, sales hustlers, athletes, etc). Earn $500k+ annually for a decade and be modest about how you live. You might not be Lambo rich (could probably get a Gallardo though) but you can probably retire early.

 

[BakerStreet]

Since I was delivering newspapers around 12 years old. Keep in mind, my lesson stopped there. I'd have a lot more if I made that money work harder for me from a young age.

Nobody ever taught me to invest that money, that was something I taught myself much later in life after learning about risk and mindset.

Conceptually, being modest and earning well. Keep in mind that this is not "frugal". Lots of people I know try so hard to save a dollar and it hurts them.

One needs to know what their time is worth and pay if it means saving that time (for example, I used to shop around for a better price on clothing, which is dumb, because it would take hours and I'd save maybe $20. My time is worth much more than that!). Spend the money and get back to earning (or enjoying life).

I left my home country and reduced my income tax bill by ~65%.

Comparatively, when living off of capital gains (like many "retired" people), my effective tax rate will be 0%, whereas back in my home country that would be around 15%. It's a difference, but it's not as profound.

Once you have and retire this matters less, but when accumulating assets, this is huge. I'm not a doctor, I haven't always earned a lot, but keeping 90% of my income has allowed me to continue saving a decent amount year after year.

Sizeable riches, yes. But "wealthy", not necessarily. There's more than one way to skin a cat.

I know a lot of HNWIs and most are still paid for their time (consultants, sales hustlers, athletes, etc). Earn $500k+ annually for a decade and be modest about how you live. You might not be Lambo rich (could probably get a Gallardo though) but you can probably retire early.

… I think I’m richer than you. I’m a millionaire and can retire in 2035. My rental income is 3,000$, cost of living is 2,000$ and mortgages on rental property is 3,00$. In 2035 when my rental mortgages are paid off, I can retire if I want to.

 

[illmasterj]

I think I’m richer than you.

Congratulations, but I'm competing against myself in this game.

 

[eliquid]

… I think I’m richer than you. I’m a millionaire and can retire in 2035. My rental income is 3,000$, cost of living is 2,000$ and mortgages on rental property is 3,00$. In 2035 when my rental mortgages are paid off, I can retire if I want to.

What was the point of posting this line here?

 

[Jesse]

Snort.

Potential autism aside, I saw a lot of people quit their jobs during the first online poker boom and wish they hadn't, largely because they felt like they couldn't save anything on that single (and volatile) income, and that really stuck with me.

 

[eliquid]

Just to add,

I've lived this concept my whole life, no joke. But I didn't learn this from Jay Leno.

I had my first job at 15, seen how much I made and what that amount bought me, and immediately thought I needed a 2nd job.

However, I couldn't really do that when I was 15 since school was an issue in me getting a 2nd job.

When I was 18, I was on my third "main" job ( job jumped to higher pay ) and landed my first 2nd job.

I've kept that mentality up, to this very day, as of this writing for almost 30 years.

Sometimes I had 2 full-time jobs PLUS a part-time job ( 3 total jobs ).....

Sometimes I had 1 full-time job and 1/2/3 side gigs as self employment....

Sometimes I had a job or self employment, and passive income coming in....

The main thing I learned from all of this was:

Always having a 2nd or 3rd source of income, and always job jumping ( or leveling up ) on BOTH, lead me to having any thing I wanted at any time.

And this isn't about material obsessions. Many times I got the carpet pulled out from under me in some fashion in a job or side gig and I would have been flat on my ass if the other income sources were not there.

And many times stuff stagnates or is not improvable, so job jumping affords me a way to make sure things keep moving up in the right direction.

 

[BakerStreet]

What was the point of posting this line here?

You don't need to earn 500,000$ for several years to retire early like what @illmasterj said. I'm doing it with $400,000 lump sum and 15 years of patience.

That, and I'm proud that I can retire in 11 years.

It isn't hard at all. You can find our how to do it on FIRE or Mr. Money Mustasch. If you have any intelligence and make it your goal, you can achieve early retirement if you work towards it. 100% achievable.

On your thing about having multiple income streams and how one can be pulled out right under you, I totally concur. I'm over employed with 2 jobs and do consulting on the side while running a business. With all this, I feel secure.

 

[harrytwatter]

I never take advice from celebrities but yeah, mo money is generally mo betterer.