Financial Samurai

Interesting dilemma, Sam!

I would go for the option 1, considering that even your estimated money income for maximum happiness is $200.000 , and $30.000 a month is more than that $200.000 a year, as you wrote in your post http://www.financialsamurai.com/2010/09/20/the-magical-income-number-level-for-maximum-happiness/ .
If we consider that with working only 2 hours a day, I will have enough time for living with maximum happiness level and enjoy the things I want. Why would I sweat and handle all that stress, if I am happy and can do anything I want? Why would I spend so many hours working? It makes no sense then.

[Reply]

Financial Samurai Reply:
October 29th, 2010 at 5:16 pm

It’s true, after $200,000, you really aren’t much happier. You save more, but other than that, it’s all about the same.

Beyond $200,000… or $360,000 for this matter…. it’s about creation and a challenge b/c you’ve discovered that making money is pretty easy.

[Reply]

Interesting. Because of your sample set though, they were probably already making close to that so the prospect of making $360K per year isn’t that appealling. I think most of your readers would take option 1. Here’s why. Option 1 is guaranteed and you could always turn some of that money into a big biz sale anyway. Option 2 is a “chance” and we all have that chance now, but those chances are 1 in a million even if you call it 1/4 here. You’re talking about a disruptive new biz like Digg or something. Not many of us will create anything like that realistically.

But I’ll take either one :>

[Reply]

Financial Samurai Reply:
October 27th, 2010 at 5:39 pm

I would say half make over 360k and half make much less like 125k or less.

25% is 25% chance for $100 mil sale as like u said, it’s probably closer to a 0.1% chance for any entrepreneur to get to that level of success!

[Reply]

$690 loss!!! That’s what i earn some months. I’m a $5 pot poker player (although not played for a few years).

Well I always say it’s the journey not the destination but I can’t actually answer this Q. $30k a month would be more than adequate for what I want out of life and I don’t mind working.

[Reply]

Financial Samurai Reply:
October 27th, 2010 at 5:40 pm

Lol. Come on mate, u and I know from the private forums u are doing great!

[Reply]

Forest Reply:
October 28th, 2010 at 4:37 am

OK I earn a little more than that most months but I would still cry my eyes out at losing that amount! I’m sure you have had bigger wins though!

[Reply]

I’d go with option 1 for sure. I’m going to be working on *something* anyway, just because I always have a zillion ideas to try out. I may as well make $30K per month while I’m at it, and have a life in the process!

[Reply]

I would go with path #1 and learn to save/invest as much of that money as possible. Working only a few hours a day would also improve my quality of life because I would have more time for the activities that I enjoy. A potential ridiculous payout after working so hard for no money doesn’t seem worth it.

[Reply]

I would definitely take option #1 and then build a business with all the extra money and free time I have. And if that’s “against the rules” then that’s fine. I would be making over $300k a year and could invest that money wisely and essentially afford everything I would ever want, including funding a business for personal reasons (even if I’m not “allowed” to make money off selling it).

[Reply]

Financial Samurai Reply:
October 29th, 2010 at 5:16 pm

Sounds good man, but you’re right, that’s against the rules to do both! :)

[Reply]

I’d go with option 1, simply because it would make such a huge and immediate difference to my life and allow me to get out of the rat race, irregardless if the second option has a mathematically higher numerical value. People’s subjective value scales aren’t linear; I know that mine isn’t. I would be very happy already with just $30k a month for 2 hours of work a day, if I knew that it was fairly sustainable. In that sense, my life EV would be higher by going with option 1.

[Reply]

Dave Reply:
October 27th, 2010 at 4:43 pm

It seems like most of the audience would choose option 1 . I would like to hear some arguments why would the option 2 be better choice, because $30.000 a month with 2 hours of work … wow that is amazing

[Reply]

Option 1 popped into my head immediately. I don’t even know what I would do with $100,000,000, and working 2-4 hours a day for decent cash isn’t bad at all. I could save so much of it and guarantee (pretty much) a nice retirement. Maybe I would get a ‘second job’ and double my monthly income to 60k!

[Reply]

My gut say option 2 while I’m young.
If you are young, there is no contest. I know people who choose option 1 and some who choose option 2 when they got out of college, not to the extreme in your example of course. People with option 2 grew a lot more. Those option 2 people can always go back to option 1 or more often they go on to another option 2.

[Reply]

Easy #1 because it’s sustainable and you can use the other time to invest in other ideas. Everyone may not be equal but we are all equal in available time. So that is time used wisely.

This is similar to my post “The Secret To Building Wealth”

http://investorjunkie.com/3932/secret-building-wealth/

That lots of small risks.

[Reply]

Financial Samurai Reply:
October 27th, 2010 at 11:16 am

$30k is the upper limit. What if u only earn 15k?

I’ll check out ur secret later.

[Reply]

Investor Junkie Reply:
October 28th, 2010 at 5:54 am

I shoot for $30k I’m not looking at $15k :-) Still for 2-4 hours daily that’s not bad.

That’s at minimum $125/hour.

That’s much higher than the approx $20/hour the average person white collar
worker makes (I always use that
number as a method to determine if a project is worth taking on)

[Reply]

I’d roll with option #1… The idea of $30,000 a month and only working 2-4 hours a day would leave me a lot of free time to start other ventures.

With that $30,000 a month I might even be lucky enough to start a business where I work long hours but after a few years I’ll be able to sell my side business for $100 million dollars and net myself a cool $25 million.

Just an idea though ;)

[Reply]

It’s an interesting dilemma, if you think that choosing between a Maybach and a BMW is a “dilemma.”

I gotta say, Sam, I don’t play many poker games with my friends with a $2400 pot, nor do I hang out with any high-tech lawyers. If anything, your article is a beautiful illustration of the perspective of money and wealth. Personally, I wouldn’t know how to spend $15,000 a month, let alone $25 million.

How much money does a person really need, anyway? After all, anyone who washes their car with drinking water is already “rich” when it comes to the global standard of living. Even if the car you’re washing isn’t a BMW.

[Reply]

Financial Samurai Reply:
October 27th, 2010 at 11:13 am

Yep, but we are not all rich as some may expect. Some prob are worth several mil, but others like he startup guys are just everyday guys who love to play poker.

This blog really is about providing perspective. Hopefully a different one from others. At some point, it’s not about the money, but about the challenge of creationand competition. Cheers

[Reply]

Nick Sweeney Reply:
October 27th, 2010 at 12:32 pm

Your post started a lively conversation here in the CoupSmart office, Sam, so thanks! :)

Just to be clear, the question is a fascinating one and I think the answers you received shows the true entrepreneurial spirit of your friends. There certainly is a lot of merit with toughing it out for the big pay, but as you probably know, the best (and most successful) entrepreneurs are the ones who put their sweat, tears and passion into their business regardless of that “transparent, dangling carrot.”

Of course, the payoff always helps, too. ;)

Keep up the great posts!

[Reply]

Financial Samurai Reply:
October 27th, 2010 at 5:30 pm

It’s great that you are working at a startup as well. I’ve always wanted to see what it was like ever since the dotcom boom days in 1999. Alas, it l took the traditional route but with this site and things we have planned for Yakezie.com, I’m goig your route and t sure is a lot of fun!

You guys having fun or what?

The 25% probability is just too low. If it was 50% then I would do it. Give me the $15,000 to $30,000 for 2 to 4 hours a day. I would use the rest of the.day to build my fortune!

P.S. How do I get a seat at the poker table with all of you multimillionaires? LOL.

[Reply]

Financial Samurai Reply:
October 27th, 2010 at 11:08 am

Who says we are all Multi millionaires? The two guys at startups are probably only makig 70-100k/yr and busting their balls to try and make it big! They all are going with option # 2, but are making morethan min wage. One probably makes nothing and is just living off savings or funding and not drawing much.

[Reply]

Financial Samurai Reply:
October 27th, 2010 at 11:08 am

Who says we are all Multi millionaires? The two guys at startups are probably only making 70-100k/yr and busting their balls to try and make it big! They all are going with option # 2, but are making morethan min wage. One probably makes nothing and is just living off savings or funding and not drawing much.

[Reply]

Mark Reply:
October 27th, 2010 at 3:28 pm

Correction….future multimillionaires! Getting in on the ground floor of a startup can be a pretty sweet deal.

[Reply]

Investor Junkie Reply:
October 28th, 2010 at 6:04 am

As someone who’s worked for 2 major startups, it’s not always all it’s cracked
up to be. During the dot.bomb boom most companies went public and
had outrageous valuations. Besides going public the only other option is
getting acquired. Otherwise you can try (like some Facebook employees have
done) sell their options in a secondary market. Otherwise you have for the most
part worthless options in your hand.

Sam mentions 25% chance to hit the big time. At least from my experience
that number is MUCH lower more like 1-2% range. IMHO it is much more like
hitting the lottery than anything else.

Mark Reply:
October 28th, 2010 at 12:38 pm

I never understood why people at startups didn’t sell their shares after a few years when the valuations were so high. How many years was the holding period at each startup?

Investor Junkie Reply:
October 28th, 2010 at 12:54 pm

I don’t remember the specifics as this going back 10+ years now.

One was very short and happened to go public. I happened to no longer
work for the company and my options were fully vested.

The other was long holding and they never went public. My options were
worthless.

I’d take the lifestyle business all day, every day. I’m not willing to work 15 hour days for any amount of money – much less minimum wage with a chance at a lot of money.

[Reply]

Dave Reply:
October 27th, 2010 at 4:40 pm

Absolutely true! We have only limited and unique amount of time on this planet, why in the world would I waste it working ?

[Reply]

Financial Samurai Reply:
October 27th, 2010 at 5:31 pm

I’m disappointed more aren’t willing to work harder for glory. But, if you are satisfied with what you have now, that’s all that matters.

[Reply]

Dave Reply:
October 27th, 2010 at 11:59 pm

It sounds selfish, I know, but I guess this is how are we programmed, to survive. Working for glory is a virtue on its own.

[Reply]

Without a doubt, I’d take the $30,000 per month. 2-4 hours a day?? This is clearly my dream job. What are you trying to get super rich for? So you can work less than 2 hours a day??

[Reply]

Dave Reply:
October 27th, 2010 at 4:39 pm

Completely agreed :-) What else could you ask for. I wish I could get a good job with only 2 hours a day of work

[Reply]

Financial Samurai Reply:
October 27th, 2010 at 5:33 pm

The piece of the puzzle it seems many commenters are missing is not about getting mega rich as the sole purpose of option 2, buy creating something for the world.

[Reply]

Dave Reply:
October 28th, 2010 at 12:03 am

Maybe monetary economy changed the way of how people think. If money wasn’t everyones obsession, then maybe there would have been more individuals trying to do something for the world

[Reply]

Investor Junkie Reply:
October 28th, 2010 at 6:05 am

Sam who says #1 doesn’t create value for the world???? If you are making money
in MOST cases you are adding value.

[Reply]

Just going on gut feeling it is that 30K/month + the freedom associated with that choice. The other time could be used to pursue another income stream , vacation, or a smaller company (lets say in the range of $20mil lol).

I wonder what people would say if you made the numbers a little bit less extreme. Make 10K/month for 20 hour/week work vs working for 5K/month for 80hours/week with a chance of pay out of 3 mil….

[Reply]

Financial Samurai Reply:
October 27th, 2010 at 3:12 pm

Feel free to highlight those new numbers in a post! Will be interesting to see the response indeed. With your scenario, I’d go option 2……. Well, maybe not! Lol

[Reply]

I already do the former, so I’ll stick with that thanks!

I am not into big payouts, and I don’t mind working for a steady income knowing I can save so much more on the type of lifestyle I live.

I don’t exactly work only 2-4 hours a day, but if you average out the hours into a year, that sounds about right, although the money average per month goes down.

This year I worked about 9 months, making $20k/month, working 6 hours a day.

I got 3 months off to chill out.

[Reply]

Financial Samurai Reply:
October 27th, 2010 at 2:31 pm

Sounds great. What is it that you do?

[Reply]

Financial Samurai Reply:
October 27th, 2010 at 2:56 pm

Sounds great. What is it that you do? And why don’t more people just do that? Seems like it’s a myth that the avg income in the US is only around 50k.

[Reply]

Gut – the first! Sweet hours and awesome money.

[Reply]

Sam, what option would you choose?

[Reply]

Financial Samurai Reply:
October 28th, 2010 at 9:43 pm

I’m old now and no longer have the energy to work consecutive 14+ hour days for so long. But, if I was in my 20s, I’d go option #2 all day long. However, come to think of it, I think I already work 16 hours a day Mon-Fri, so maybe I will just go with option #2 because I’m less worried about money anymore, and happy to create something!

[Reply]

Sam, I’m for a combo of both. Bust your but out of college and then hopefully get to a point where you can make a decent chunk of change working a moderate amount (but not killing yourself) WHILE shooting for the big 100 mil payout. I totally think this is achievable with the right combintation of hustles and side-hustles…but only if you do what you love.

[Reply]

With a family to support, I’d have to go with option 1.

But if I were 18 or 21 again (or younger), I’d go with option 2. In fact, once my son is that age, I would recommend him going that route too if the opportunity were available to him…

Sounds like a great game of poker, I haven’t played in years now! :(

[Reply]

Financial Samurai Reply:
October 28th, 2010 at 9:44 pm

Go online! It’s fun and free. However, it’s more fun to play with a group of real guys, where you can chat and socialize.

I hear you on Option #2 during your younger days.

[Reply]

Option 1 anytime over option 2. Simply because you have “something to do” with all that free time everyday and it really takes up a small portion of your day.

[Reply]

I’ll go for option 1 too. A $15,000-$30,000 monthly income for a month is highly enough to support my family and me and give them the comfort of life and 25% of chance to get a $100M and 75% chance are highly risky.

[Reply]

Option Number 1 but would reconsider after 10 years.

[Reply]

Man, that’s a tough one. I lean towards option 1 just because it leaves so much free time to work on other projects, possibly start other entrepreneurial ventures, and volunteering my time for causes I find worthwhile. Who says you can’t do both! earn 30k/month on the one venture and then work the other hours on your possible jackpot job!

[Reply]

Financial Samurai Reply:
October 28th, 2010 at 9:46 pm

Rules say you can’t do both! It’s either or! :)

[Reply]

Financial Samurai Reply:
October 28th, 2010 at 9:49 pm

BTW, how the heck did your latest blog post come up? I’ve been trying to get Commentluv to work for a while. Did you just click the box?

[Reply]

I would’ve picked option #1 because that’s most likely the happiest choice, but only if it’s 100% guaranteed, which in reality is impossible.

However, when you are making $10,000, you will want $15,000 and when you hit $20,000, you will want $30,000. When you get there, then either out of fear of losing $30,000 in the long run or the greed of more, you work more hours. Pretty soon, you are working towards a $100 million goal anyway.

So really, option one has money in the meantime while you work towards the 25% $100 million goal, while option number two means bleeding money all the way and have the same chances. Which one would you pick then?

But btw Sam, in reality, do the owners typically still have 25% of the company by the time they sell it for $100+ million? I’d think that unless it’s those instant successes like admob, if the start up is not making money (as most big ideas seem to be for a while), it’s hard to not sell shares to investors continuously to keep the thing afloat for the years that it’s propping up the economy.

[Reply]

Financial Samurai Reply:
October 28th, 2010 at 9:51 pm

There’s definitely a lot of dilution in startups due to capital raising. However, a 25% ownership for the original founder is quite common, if not conservative.

If I’m making $15-30,000 online every month working only 2-4 hours Mon-Fri, I’m pretty happy and won’t feel the need to work 4 more hours a day to try and double it to $30-60,000/month. It doesn’t mean much after $200,000/yr if all ones debts are gone.

[Reply]

MoneyNing Reply:
October 29th, 2010 at 9:39 am

Thanks for the insight on the start ups. I always wonder about this when I heard of those $200 million paydays! :)

You say you are happy with $15k – 30k a month, but you opted for #2. It sounds like that when you are actually only working 2 hours a day, you’ll want more, because by then, you already have option #1 and it would tilt your desires towards option #2 even more.

When your online ventures hit its stride, don’t say I didn’t tell you so :) We can talk more about this then!

[Reply]

Financial Samurai Reply:
October 29th, 2010 at 10:36 am

Cool. I just think that making money is pretty straight forward. I really enjoy staying under the radar and having little to no one know my business. It is the greatest achievement if after all this time, people think I haven’t hit any stride and am stuck in neutral.

If you need any non online income advice, let me know!

My first inclination was to go for the “security” of Option 1. It seemed comfortable, easy, and a nice way to make a living while having time for so many other family-related things I would want to do.

Then, my brain took over. Looking at a 25% chance of $25 million profit with the other 75% chance being I would have toilled at minimum wage for 2 years – that’s a pretty good expected value.

I just might take Option 2, with that much on the line. Work like heck for 2 years, and if it fails, you capture all the learnings you can from the experience. If it succeeds, it’s a game changer for your life and your family’s security, and some real aspirational lifestyle dreams.

All hypothetical, and I would have to have the guts to pull the trigger on doing it, but I like the EV and upside of Option 2.

[Reply]

Financial Samurai Reply:
October 28th, 2010 at 9:48 pm

It REALLY is a game changer. Two years is NOT a lot of time to work hard. It perplexes me why so many blogs fade after 1 year for example. Why do anything, if one doesn’t spend AT LEAST two years? I don’t go into anything without expectations of working on it for less than 5 years. Maybe as a result, I don’t feel like I’m ever really in a rush. That’s good and bad.

Option #2 baby!

[Reply]

One more thing…

In the big hand you mentioned there were four players. The flush took it down, the straight was in second… what were the other two players holding as they went into showdown? My guess would be pocket aces and someone else made a set with a pocket pair…?

-Mike

[Reply]

Financial Samurai Reply:
October 29th, 2010 at 5:17 pm

They didn’t show, but it’s a good assumption that someone had a strong pocket pair i.e. QQ or higher.

[Reply]

I find it interesting that you mentioned the range to be $15-30K a month working for 2-4 hours. Most responders took the high end of both ranges (working 2 hours and making $30k a month). Says something about people selectively hearing what they would like…

With regard to option 2, what is the certainty that the start up will better humanity? There are plenty of businesses that make big bucks (high frequency trading bots) that don’t necessarily do much to help people. I would consider putting Farmville into that category as well.

-Mike

[Reply]

Financial Samurai Reply:
October 30th, 2010 at 12:22 am

It is interesting how nobody wrote 4 hours a day and $15K a month huh? Option 2 doesn’t necessarily have to save humanity, it just has to provide some type of value, but it world peace stage or simple entertainment.

[Reply]

I would definitely go with option 1. $250k – $360k per year or $100 million over my lifetime, both will give me everything I need in life, Sam.

All the best,

Len
Len Penzo dot Com

[Reply]

Financial Samurai Reply:
October 30th, 2010 at 9:13 am

But, how long do you know how long you will have to live? If you are say, 40 right now, are you sure $250-360K = $100 million over your lifetime?? The $25 million in 2 years could be sweet!

[Reply]

2-4 hours a day for 30K a month sounds great. But I can’t imagine myself only working those hours. I think I’d go for the 25% chance for millions. Because I’d continue to improve my skills while working for minimum wage and even if I didn’t get the millions, I’d feel comfortable I could make up the lost ground.

[Reply]

Financial Samurai Reply:
October 30th, 2010 at 6:31 pm

Cool Jeremy. That’s the thing. The experience over the 2 years during option 2 is priceless! It makes you that much more prepared for your next success!

[Reply]

Option 1 without even thinking about it, even at the lower range ($15k/month, 4 hrs/day). I could use the rest of the time towards other productive ends.

[Reply]

without even reading the comments i guessed most readers of this blog would opt for #1, as would i. such is the group that gravitates to blogging type activities (and the internet).

CNN published a recent study where the BE number to happiness was not 200k, it was actually 75k believe it or not. this number varies for every individual IMO.

for me, using money to live the life i want is the name of the game. there is no value i can place to my time spent on activities i enjoy with the people that are near and dear to me the most. building several streams of passive income over the years has helped me live the life i want, and i wouldn’t trade it for anything…

[Reply]

Financial Samurai Reply:
November 2nd, 2010 at 10:08 pm

Yep, we all know about the widely quoted 75K figure for happiness, which is why I wrote this post, b/c I am here to say it is untrue and selling yourself too short. $200,000 is that magic number!

[Reply]

I definitely would take the $3,000/hour job! There are so man other things that I can do with the other 20-22 hours each day.

[Reply]

Option 1 for me as well. I went in early in a startup once 10 years ago but not early enough to cash in big. I than said no to 3 startups since then (none of them have cashed in yet). The economics have a very thin line of working out and require constant soul pouring into the business. It also take on average 4 years to build up the business and than you are on the hook for 3 or 4 years to really cash in.

I have to admit that I am always thinking of a business plan to start my own in the background. If someone comes along and it clicks … I may take the leap of faith :) So far, the offers I get for startup are from very good pitches and you have to look through that to see what’s really behind and how much it’s really worth.

[Reply]

I would choose the first option. I would love to spend time with my family and enjoy that money as opposed to slaving for a POSSIBILITY of hitting it big.

[Reply]