Question
For those of you lucky enough to do well in the industry, at what age did you become well off and stop worrying about making it? I am 30 and feel as though I should have a lot more than I do.
Forum Responses
(Business and Management Forum)
From contributor A:
58.
I really like what I do, and if I have to do it in some form into my seventies, so be it. If you get caught up in the trap of measuring success by what you have accumulated, you may be disappointed. I am 55 and comfortable, but in this business things change quickly, so you have to always be on your toes just in case.
I expect there is a point for most who are successful that we stop and think "this is great, not much to worry about now." No payments, enough cash to live off of for X number of years, home paid for, nice vehicles if desired, well known businessman in your community, etc.
If your definition of wealth includes boats, BMWs, giant TVs and fancy shoes, cabinetmaking is the wrong gig. Try working in the financial sector where you can make money even while others lose theirs.
You need to look deep inside and figure out what makes you happy. If it's money in and of itself, there's a good chance you'd be happier as an investment banker or something. Before Social Security, people just assumed you'd be working until you died, more or less. My grandfather recalls working for the railroad, looking at the employee bulletin board. It explained that your retirement started at 65, how much money you'd get then, etc. Right next to it was a bulletin showing average life expectancy for a male at the time - 65 years, 3 months. That was the day he quit.
This could go on, but you probably get my point - too often we let money define who we are. I am actually thinking of adding another line of work as I type this, a framing shop. I have a 5:00 appointment this afternoon. I do not actually have the money for this purchase, but I believe I can work this out. If I get the order I am waiting on, take a small percentage from the deposit, take the balance from the job we are fixing to install, take a portion of the future sales and reapply to the new business.
Stop worrying will likely never happen until you make a simple attitude adjustment and determine your good fortune today is far more valuable than some undetermined gain in the future.
If money is success, and success is that important, you need to consider parasitic industries like banking, politics, preaching or pimping. These industries do not produce a product, yet they easily take from the customers at every chance, and customers are very willing. Often customers will line up, nice and orderly. The margins are almost unlimited when there is no product, unlike woodwork.
The success I am looking for would be making enough to eat out in restaurants, drive a low-end luxury vehicle, live in a 3500 sqft home that is paid for, and not worry about my retirement or maintaining that lifestyle. What I am looking for isn't anything out of the way, and is definitively obtainable.
At the end of the day you should be able to meet all of your bills, take 5 weeks (4 weeks of holidays + 1 week of sick/BS) off per year, and put away a minimum of 15% of your income per year into savings or retirement. Most people are content with how much income they have.
My wife works and will have a nice pension and retirement plan. Between mine and her savings, we should be able to retire and relax. I don't see us having an exciting retirement. But I do expect to live modestly and enjoy the end. It takes a while and you have to save instead of buy.
"Furniture" is out, "Design" is in. My clients routinely spend hundreds at Ikea at the same time they're spending thousands with me. Never mind it's all still the same old custom furniture industry - sell the design aspect, not the furniture (or cabinetry aspect). That's my trajectory to attain similar goals to yours.
I am not complaining about how much money I am making. This is more about how long it takes to make it. I have had my fair share of toys and have had nice vehicles in the past, but I am focusing on making money now, not payments. If I want a fifty thousand dollar vehicle, I want to sign a check, not sign a lease. I make enough I could buy anything I want, but I need to make payments and that is no longer the road for me.
Honestly look at savings. When you are dropping in 2K a month, you are making some headway. When you do, don't brag and don't drive it or live in it. Work to save and be ready for anything life throws at you. I have three kids and can write a check for the oldest's college and will be ready when the next two are ready. No, I don't live like a pauper, I just had a plan, stuck to it, and made adjustments along the way.
I stopped worrying about success and what others had when I watched the growth of saving 10% of everything we make and then some in savings each and every time I get some money, including mowing a neighbor's yard for 20 bucks or cutting a counter down for a quick 50.
It sounds like you need about a 120K yearly income, give or take. You're not going to make that as an employee in this industry (I'm guessing you're an employee). You can, however, make that as a business owner. So if you choose to stay in this industry you need to figure out how you're going to start your business. Are you going to save up and buy someone out? Are you going to start your own and eat macaroni for two years until your biz is up and running? There is no easy/fast answer, but you're never going to get where you want to be unless you start planning now.
My former career was in finance and trading. I was a millionaire at 32. I never felt secure… full of horrible, backstabbing people that will throw you under a bus to take credit/bonus for what you accomplished. I left that industry in my late thirties and bought a cabinet shop someone else had shut down. I work just as hard these days but am much happier even though I make a lot less. My retirement/house is pretty much paid for and my kids 529's are fully funded. I make enough to fund my current lifestyle but not enough to add to savings. I still cannot stop worrying about it. If my business fails, I will be out of luck. Strangely enough, you have to consider that if I didn't have to worry about it, my business probably would fail. We worry, therefore we produce, the economy grows, and people have jobs.
It is not how much you make, but how much you keep, although the more you make, the more you keep if you don't get caught up in the financing trap. I could give you countless examples of people who make half as much, who retire with no mortgage and money in the bank.
At 30 years of age, it is very easy to retire a millionaire. But is that what you mean by well-off? With 30 years to invest, saving only $500/month and averaging a 10% ROI, you will retire a millionaire. If you had started 10 years earlier, you would have had to save half that amount each month. Tell the average 20-year-old that they could retire a millionaire by saving as little as $180/month and (just as with the general population), they will all want to know how, but about 10-15% will follow through on it (I was one of those who didn't follow through). They are sold on newer cars, credit cards, vacations - things that have very little long-term value (except to the bank that is collecting the interest).
The main reason to accumulate assets is for future sale. Don't own your shop? Something to think of if you plan on selling a business at the end of a career versus piece-by-piece. Do you want cash reserves for your business so you can make better decisions or weather a financial crisis like the one we are in now?
"Well off" means different things to different people. But it all comes down to lifestyle. Do you want to live a lifestyle that has you paying other people (banks, etc.) for the things you want, making you beholden to them monthly for the rest of your life (borrower is slave to the lender) or do you want to be able to buy what you want for cash (and usually at a better price because it is cash)?
My biggest change was when my mindset went from what everyone else was doing and to the opposite. This meant saving for things instead of borrowing, owning instead of renting/leasing, etc. Delaying gratification until we could afford it. Funny thing is, that's the way it used to be. If you couldn't afford it, you saved for it. It is much more liberating knowing that the only reason you use a credit card is to collect the miles or other rewards, knowing you will be paying the bill in full at the end of the month.
Get rid of your debt, then throw that money at your mortgage to pay it off early, then start making that money work for you, not the banks. Your life decisions will be more based on what's best for you and your family and not so much the financial pressure.
In business, the first time you buy that expensive piece of equipment with cash, knowing you will not have any monthly payments to follow, and that means your ROI begins immediately, you will start to understand this. In your personal life, buying that car with cash works the same. You'll begin to ask yourself, why did I give so much money to the banks?
Instead of veging in front of the next episode of your favorite TV show, use an investment calculator to play around with the numbers. Put the amount you spend on your mortgage each month into the investment calculator and see how much you are giving away to the bank and hopefully it will light a fire under you.
What lifestyle could you and your family enjoy if you had no debt? What price are you willing to pay to get there? Once you are on the right track, train your kids on this and change their life and future generations. Get them in the habit of saving versus spending and teaching them how to make money off their money and they will be asking much different questions at age 30.
The most important thing you can do at age 30 is save money and make moderate, low risk investments. Your current business is only a means to an end. You'll never build enough cabinets to be rich. Real financial security comes from having investments that pay you just for owning them.
You also have to have a life plan as well as a business plan. Don't live beyond your means. Pay cash. A typical $25K car will cost you almost 40K by the time you pay the last payment. A 20 ft boat on payments cost the same as a 40 ft yacht paid for in cash.
Plan for how long you will build your business (meaning putting almost all money into better and more efficient equipment); and when to switch to sucking every cent out of the company for investments.
Buy a building for your business. My building cost me $365 in 1987. Now someone pays me $50K a year to use it. Imagine that, $50K and all I have to do is deposit the check every month. It's not impossible to do, but you do have to give up $5 cups of coffee at Starbucks. A $30K pickup will get you to the jobsite just as well as a $60K 4x4 with tons of chrome. You have to make choices. That $30K difference on the truck alone, properly invested, will be over $100K by the time you retire.
I'm not sure about the peace of mind, but you can have all the toys and financial security if you plan for it. You will find that as you get older and more financially set, customers won't mess with you as much, which makes life a lot easier.
