I intentionally choose not to invest but want put money into developing my own business. Am I wrong?

Submitted by Awkward_Coat6622 t3_ygjs2m in personalfinance

Hi r/personalfinance! This is just a post to get a general opinion because I'm not sure where else to turn to since my friends and family think differently.

Background
I (25) am a working professional since I was 19 years old. I intentionally did not go to university to not get into debt, I lived with my neglectful parents (was paying them allowance / rent) till I couldn't take it anymore, and moved out at 21. I have a bit of savings from work and some investing and I recently moved to Europe for work.

I've tried investing; I dabbled in forex trading, then settled onto ETFs only to cash it all out pre-covid because I needed the money to settle some family debt. Tried crypto, and while it can be good money at times, I don't find it appealing to HODL onto coins or stake money in other people's projects.

Situation
I decided earlier this year to start my own business (I'm still employed with a salary). I have a design background so I wanted to put in some money developing new products to bring into the market. I have allocated $5000 to the project, but I have some friends telling me that I should just put the money into investments again because the market is good for certain assets if I actively trade.

But I don't want to do that. I fell out of love for investing. I don't believe that investing little bits of money is going to really help me out long term, especially when I come from a lower-middle income and I know my money needs to be liquid to help family out when needed. Starting my own business, however, can have a much higher upside, it is just going to take a lot more effort on my side to get stuff done and I believe it will pay off.

I don't know if I'm being stupid because I don't have a finance background, but I just want to give this business project a try since I am young with $5000 to spare. Is it really a better idea to put that $5k somewhere else?

The $5K is spare savings, so literally extra money floating around. I have 6 months of living expenses locked away already for rainy days.

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Comments

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nkyguy1988 t1_iu92vlx wrote

People have never made more than 50k per year retire multi millionaires. Do you think they have big deposits or money to make investing worth it? Time has this magical power to multiply returns, doubling the amount every 7-10 years on average.

Good investing is boring investing. All of your "investing" things you have been are trading or gambling. Investing and trading are not the same thing.

Also nothing wrong with pursuing a side hustle after everything is taken care of. The biggest mistake you could make would be not putting money into a broad market fund and literally not looking at it for 30 years other than when you make your annual contributions.

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Awkward_Coat6622 OP t1_iu9z0en wrote

Thanks for the advice. I'm going to take it! I've been putting a lot of my efforts in getting my base salary up (so focusing on my job), and now I'm finally in this new, unfamiliar territory of actually having a comfortable amount of money leftover every month. I still want to do a business, but I guess now it makes more sense to split the capital and to allocate the monthly contributions wisely.

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Ihaveamodel3 t1_iu92zt6 wrote

Good to hear that you have six months of expenses locked up.

Do you have any retirement funds at all?

Is 5k enough capital to start your business?

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No_Tension_280 t1_iu9ceai wrote

'I know my money needs to be liquid to help family out when needed'. Do you mean like wife and kids, or are you supporting extended family, like your parents?

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Awkward_Coat6622 OP t1_iu9xftn wrote

Supporting extended family like aunts and uncles. I'm the only young person that's working currently so when medical expenses come up I try to pitch in as much as possible. My aunt and uncles were really close to me, and I like to help them out.

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KReddit934 t1_iu98fln wrote

Check out the book by JL Collins, A Simple Path to Wealth. (Or his blog https://jlcollinsnh.com/stock-series/)

Nothing stopping you from doing the simple path to secure your future, and working on your business. A business can be great, but it's a "many-will-play-few-will-win" path, so plan for success and failure.

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Awkward-Ad708 t1_iu9a9zx wrote

What is your business? How passionate are you? Is $5,000 a reasonable cost for start up?

Time is on your side and it’s much better to put money in your 401k with a company match NOW vs starting when your 35. Think of investing as long term not short term like you have done previously

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Awkward_Coat6622 OP t1_iu9xkuj wrote

I'm not American ! I'm from Asia and I moved to EU for work. My country doesn't really have 401k or anything sorta close to that.

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grokfinance t1_iua0ggj wrote

Sounds like you weren't "investing" you were "trading". Investing should mean you put money into something like a total stock market index fund on a regular basis and forget about it for about 30 years. Over time compounding growth means that every $1 you invest today should grow to something like $15-20 by the time you reach retirement. Put another way, every $1 you aren't investing for your future today is costing you $15-20 in lost opportunity that you will never be able to recover.

So the question you should ask yourself is should you spend $5k to go start this business project (not sure what type of business you have in mind, but 5k isn't very much) or would you rather have $75-100k in the future if you invested the money instead?

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LillyJones0 t1_iubf4y5 wrote

From your post it sounds like you’ve made up your mind already. You can make money both ways (business or investing) so why not follow your passion and try your business idea first? If it doesn’t work out then you have your job to fall back on and you save save up again and try investing next time. If you fell out of love with investing but are excited by your business then the choice is clear.

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