EMPLOYEE OR SELF-EMPLOYED: WEALTH BUILDING REQUIRES YOU TO STAY FOCUSED ON BUILDING A SOLID INVESTMENT PORTFOLIO

CONVERSATION WITH MY BILLIONAIRE FRIEND

(SESSION 13)

All dreams are within reach. All you have to do is keep moving towards them. – Viola Davis

Hustle beats talent when talent doesn’t hustle – Ross Simmonds

My Billionaire Friend was at his best element this particular evening during our usual weekly conversation. Our discussion paddled around his comfort zone: how an individual in paid employment can build wealth legitimately without compromising his privileges at work. While still in paid employment, my Friend had, through meticulous planning, built a solid base of investment portfolios. He  also parcelled his portfolios into several income streams from which he could create a comfortable lifestyle and a couple of legacy projects before stepping out of paid employment.

My conversation with him was centred on whether he could share the model he used and if it is replicable. I also wanted to find out why he chose that particular model and not the other options available to him, especially as explained in Robert Kiyosaki’s classics: The Cashflow Quadrant.

After exchanging initial pleasantries, my Friend led the conversation:

“My Boss, I won’t call it a template as such; it was something I figured out over a while after I had, fortunately, and early enough in my career, read two books: The Richest Man In Babylon and Rich Dad, Poor Dad by Robert Kiyosaki. Following the suggestions and recommendations from those two books and my permutations, I created something that worked out very well.

So based on the path I took, I could offer tips that would be helpful to any wealth builder who desires to follow the same pathway. The tips are also applicable to individuals who want to build wealth from the self-employed status”.

“First off, my key advice for anyone who wants to build wealth from any of those two positions, whether employee or self-employed, is to stay focused on building a solid investment portfolio to ensure their sustainability in their years of sunset. These two positions in Robert Kiyosaki’s four quadrants are the riskiest, tasking and vulnerable to dependency than others. For instance, an employee, in some cases, whether he is of good performance and commitment to his job, may still find his stay on his job greatly dependent on the pleasure of his employer. An employee could be very committed, meticulous and diligent but could still be fired by his/her employer for good reasons, bad reasons, or no reason at all, once this can be justified legally”.

How is the scenario different from a self-employed status, I asked.

My Friend: “With self-employment, this risk can also be enormous since every decision and business risks rest squarely with the self-employed. They take all decisions and carry all business risks. They carry all business burdens that are not usually shared and they bear all the risk of business continuity. Therefore, from the overconcentration of such high burdens comes the high risk of sustainability of the businesses of self-employed wealth builders. Hence, it is advised that in such circumstances, the self-employed must always focus on building solid investment portfolios on the side of their wealth-building drives”. 

“It is because of the inherent high risk of the uncertainties of his employment status, and the risk of sustainability of the business by the self-employed that I counsel, as Robert Kiyosaki suggests in his book, that; those who want to build wealth from both must remain focused on gradually building solid investments for themselves by always eyeing and closely associating with Robert Kiyosaki’s fourth quadrant”.

“This approach may not be critical for business system owners. A business system owner is assumed to have run his corporate entity in such a way that, even where he completely disengages from the daily operations of the business for over a year – it would be found that on his return, the business would be found to have performed even better than when the business system owner was personally involved in the operations of the business. Building a solid investment portfolio is less important to the owner of a business system than to the self-employed and, more particularly, to the employee”. 

HIS OWN PATH.

“As I said, I was fortunate to have read those two books I mentioned early in my career, especially George Clason’s book. Both books gave me very good insights, and I saw the need to always build an investment portfolio by being prudent, frugal, saving consistently and applying my savings in investment areas that I could afford at my different levels of employment. These various investment instruments, which I used, have been discussed extensively in our previous series. I suggest readers refer to our previous series to see all the solid investment vehicles. Such include putting aside 20% of my salary income not only in ordinary savings, which attracted very poor returns, but later in fixed deposits, commercial papers, bankers’ acceptances, treasury bills, and so on. It was a gradual process until I built my investment portfolio in high investment value content instruments and assets as I progressed on my ladder of employment”. 

“I found myself combining my employee situation with some self-employment initiatives at different times. This again re-emphasises the need for an employee not to relax and be dependent on the salaries alone”.

SKILLS ACQUISITION IS KEY

“I have always advised that every employee, apart from his academic or professional background, ought to acquire some skills on which he can rely to generate self-employed incomes on the side to support his employee status. The same goes for self-employment. Such wealth builders must always build solid investment portfolios as they sustain their self-employment status. All these can be done outside official working hours”. 

“A typical example is for employees to learn skills on the side at weekends and in their spare holidays. Skills such as making shoes, belts, fashion design, fish, snail, pig farming, trading ventures, etc. These are areas in which an employee can be both employed and self-employed and, in the process, build savings towards acquiring solid investment portfolios along the line”. 

“Knowledge is key to wealth building, especially for employees and self-employed folks, who want to gradually build investment portfolios on the side. Even with business system owners, the continued acquisition of knowledge is important to ensure their business systems’ continued sustainability. Very importantly, wealth-builders with investment portfolios must constantly acquire knowledge to sustain their investment portfolios and protect their investment from the possibility of insolvency in the long run”. 

CHOOSE A PATHWAY THAT FITS YOUR TEMPERAMENT

“There is one common mistake I see people in paid employment make. Without evaluating whether they have the qualities and temperament required to build a business, some employees often resign prematurely to start their things, as they normally call it and in most cases they end in embarrassing situations”.

 “You don’t have to own a business if you don’t have the temperament to run one. The truth is that generally, wealth-builders must always avoid copying and pasting what others do. Copying others is not the way to success in life. Humans must identify their innate traits, strengths, and weaknesses before deciding to remain employees, self-employed, or business system owners. This is because these three elements in the Robert Kiyosaki quadrants require different inherent natures and talents to help navigate the pathways to the success of wealth builders. An employee should better be advised to remain an employee if he is someone who cannot very well withstand strong business risks. In such a circumstance, an employee should remain employed and have their money work by gradually building a solid investment portfolio from his salaried savings. A naturally trusting employee would discover going into self-employment or business systems that he would eventually have himself to blame. I knew from the start that I was too trusting. I rely on people a lot and delegate with less than necessary monitoring. Sadly, with these attributes, it is better to remain an employee in the Nigerian environment, where trust and integrity are not very common. I knew from my early beginning that I would have my fingers burnt if I left my employee quadrant for self-employment or the business system fully. Even as an employee, I tried to restrict myself to remaining an employee but performed to some extent in self-employment in Robert Kiyosaki’s second quadrant. At those few times when I mistakenly ventured out of my best employee quadrant, I had my fingers burnt by Nigeria’s large number of deceitful, low integrity and low reputation people, who are always out as predators to hurt employees who delve into entrepreneurship and self-employment. This is why I prefer to remain an employee and technocrat. 

Decidedly, I was conscious of my weakness of over-trusting and reliance on people and therefore chose that part to keep myself safe from Nigeria’s growing reputational predators. Notwithstanding all my attempts to avoid the predators, I still had my fingers burnt many times”. 

Reason for his decision to stay on the employee path

“It is critical for success that a wealth builder knows and appropriately identifies his strengths and weaknesses. In my case, since I have a weakness of over-trusting people, cannot take too much risk, can be easily affected by the tensions involved in personally running a business, I took the route of being in paid employment for a long time, and this has paid off for me. I have succeeded in meeting my aspirations and needs and playing my philanthropic roles, both in Nigeria and outside Nigeria. I am also fulfilled in having built my aspired referential legacies, which will outlive me many years after I must have departed this world”. 

I decided to majorly play in the employee quadrant after my first few failed attempts at entrepreneurship. For instance, as an employee, I invested in a finance house and badly got my fingers burnt. Even my personal life was endangered by the person who collected my money to run a finance company. He made me a non-executive chairman of the finance house in which I thought I was investing for my future. He defrauded the company and its depositors and ran out of Nigeria while leaving me to carry the brunt of his fraud. The same applies to my attempt to invest in a proposed bank while I remained an employee. The chief promoter of the bank had approached me to invest in the proposed bank, with me as a non-executive director, only for me to discover he had personally converted and defrauded us of the funds borrowed from parties meant for deposit to obtain a banking licence. Some of these life lessons made me decide to remain in a comfortable quadrant as an employee. I, however, took advantage of my strengths to invest and build investment portfolios while remaining in my comfortable employee quadrant in my long career life. In doing this, I concentrated on investing in viable and good investment portfolios that were within my control and avoided the risk of being further defrauded”. 

“My advice to employees, therefore, is to carry out a self-reflection to determine whether they have similar weaknesses as I have. My strengths are my ability to gather knowledge and identify and gradually but continuously make and build solid investments while remaining employed. With this process, I built solid investment portfolios that have become very fruitful”. 

TIPS FOR BUILDING WEALTH AS AN EMPLOYEE OR SELF EMPLOYED

“There must be a consistent drive to acquire knowledge in virtually all areas in which a wealth builder chooses to engage for his wealth-building goal. The identifiable success factors are hard work, diligence, integrity, reputation and continued focus on acquiring knowledge and using such knowledge daily for investing in areas in which the employee can effectively control investment outcomes. Control is very important for an employee engaged in this way, an employee who invests in portfolios”.

I did a bit of that, and I got my fingers burnt in all instances I veered from this rule. But that is not to state that one should not try. In my case, I overcame one or two of them by refocusing and re-strategising to ensure that I was less exposed to investment in portfolios that are outside my effective control, and also by consistently building my professional base and financial/economic literacy, gathering knowledge, monitoring macroeconomic developments, environmental developments, socio-economic developments around me, around the world and taking good advantage of investing in portfolios that are within and outside Nigeria that I could effectively control their outcomes”. 

HIS WEALTH-BUILDING STRATEGIES?

“I have mentioned this earlier elsewhere in this series, but I can summarise them as looking for investment portfolios that compensate each other in terms of risk. I built my strategies to balance the various high-risk elements of each investment instrument with that of another investment instrument of low same risk exposure. This ensures, for instance, that while a particular investment instrument may have very high liquidity risk, I would invest in another instrument with low compensation liquidity risk to keep my investment portfolio well-managed against various risks with optimum returns for my total investment portfolio. This strategy is used to optimise the returns of my investment portfolio against each of the operational, foreign exchange, market, economic, systems and interest rate risks of the contents of my investment portfolios. The general strategy is to look for investment portfolios that ensure that you are regularly kept immune as much as possible from the various risks to which investments are subject. Each of those risks has its different levels. For each instrument of investment that a wealth builder chooses, he must be well knowledgeable and aware that every form of investment has one form of risk. 

In balancing one’s investment portfolio, one must therefore ensure that he regularly picks investment instruments with different compensating factors over the risk of their other investments”. 

PREPARING FOR LIFE AFTER WORK

“The Golden rule is that one must begin to prepare for his years after work from the first day one begins employment. As an example in our previous series, I mentioned a man in his early thirties who hosted a man who was sixty and was not thinking about how he was going to live in the years after his employment. He ended up dying in employment and left his family poor. As a rule, therefore, employees must prepare for their years after work because they would have become much weaker (both mentally and physically). In years after work, there will still be living burdens that employees would inevitably continue to carry. Employees, therefore, must prepare for multiple income flows of incomes to overcome these burdens, which will arise until their last day on earth. So they must start such preparations from the very first day they begin employment”.

“Whether or not employees are working in Nigeria, they would still be expected to pay taxes, medical bills, transportation, food, and so on. Where employees plan to depend on their children, they may be in for some very big disappointment”. 

The golden rule is for employees and the self-employed to start preparing for the years after employment, the very day of their start of work and use many of the tips that have been given in this conversation series for their benefit in doing so”

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At that point, we both decided it was enough for the day. We bade each other bye and I hit the road running, waiting for the next conversation.

Can’t wait to catch up with you next week.

Yours Money-wisely

Email:ayo.arowolo@thisdaylive.com

Tel: 08086447494

QUOTE 1

“First off, my key advice for anyone who wants to build wealth from any of those two positions, whether employee or self-employed, is to stay focused on building a solid investment portfolio to ensure their sustainability in their years of sunset. These two positions in Robert Kiyosaki’s four quadrants are the riskiest, tasking and vulnerable to dependency than others.

QUOTE 2

“There is one common mistake I see people in paid employment make. Without evaluating whether they have the qualities and temperament required to build a business, some employees often resign prematurely to start their things, as they normally call it and in most cases they end in embarrassing situations”.