Are You Ready For Alternative Investing?
The question that you need to answer right off the bat is, what percentage of your living costs are actually covered right now, today, by your passive income if you stopped work?
If the business collapsed, if you couldn’t get a job, if something life-altering happened and you couldn’t earn any more income from the way that you’ve earned income for the first part of your life – what percentage of your living costs are covered?
I have spoken to hundreds of investors over the last 10-15 years and the majority of people are good at building capital, meaning they’ve got a great net worth, but their passive income is next to nothing: it’s really poor or it’s certainly a very small percentage of their living expenses.
Building a Capital Base
There are three things that I think are great indicators for whether or not you are ready for alternative investments.
The first one is that you have a solid capital base. You’re already an investor or you have capital in the form of money that’s just sitting around idle.
I know that a lot of business owners are very careful about the money management inside of their business, but the minute the money flows outside the business, they don’t know what to do with it.
A lot of people like the idea of having a large cash at bank. But perhaps if you’re someone who’s got a lot of cash sitting idle, then putting it into things like alternative investments could be worth considering.
You might have assets that have a high component of capital that you feel are underperforming or just not giving you what you need and want.
The exception to having that solid capital base is if you’ve got a business or an income that’s a cash cow, and you’re in that situation where you’re prepared to divert some of that directly into building your passive income stream.
Now, that last one is probably not the norm, and certainly what I encourage you to do is build a capital base first.
But there are the odd exceptions of people who just have super high income and they simply don’t know what to do with their money. They’re not necessarily interested in the idea of having a high net worth on paper, they actually want to create life altering wealth.
So that’s the first thing: you need to have capital to play with.
Having Another Source of Income Stream
The second thing I think is really important is, you need to be someone who wants another income stream that you can bank on.
There are all sorts of motivations that people have for building wealth or passive income. When we’re talking about alternative investments, the majority of people are really seeking an insurance policy, one that they can actually rely on. It’s about self insurance: “If something goes wrong, do I have another stream of income that I could rely on?”
The second motivation that people have for wanting another income stream outside of their business is, it’s an escape hatch. A lot of business owners and entrepreneurs run great businesses, but unfortunately they’re not in that situation where they can sell their business and bank on that big payday. Or, they are in a situation where they could sell their business, but they just don’t want to rely on that, and they’re looking for a clean exit or an escape hatch that will get them where they want to go in a relatively short space of time.
And then the third component of wanting another income stream is just the simple idea of having some choice. I think a lot of humans like the idea that they do whatever it is they do because they love it, not because they have to. And unfortunately, there are probably several people like this right now who are OK with the work that they do, but there’s a sense of having to pretend to love what they do because they have no choice. But if you really pulled back the curtain and gave them another choice, they would possibly alter what it is they do from nine to five every day.
Having another income stream that you can bank on is definitely the second component of knowing that alternative investments could be a fit for you.
Being Open-Minded to Alternative Investments
The third critical quality that you need if you’re thinking about alternative investments is that you are someone who is open to out of the box thinking.
I think one of the big challenges about alternative investments is that because you can get really unbelievable results in a very short space of time, there are a lot of wealth professionals out there who will poo poo it and say, “It must be a scam. It can’t be real.”
Unfortunately, when you don’t understand something, it’s just easier to kind of dismiss it.
So alternative investments are definitely for those people who are open to a new way of thinking, who maybe look at the current wealth model that’s peddled by most wealth professionals and recognise that there’s some element of it being broken.
How is it that there’s an expectation that we come into the workforce around the age of 20 and we’re expected to pedal and push for another 45 years before we’re allowed to get off and do things that we actually love?
If you see the urgency in becoming financially independent, if you recognise that you want to be that person who puts themselves in a position where they can actually enjoy their wealth while they’re still young enough, alternative investments could potentially be a really great fit for you.
Why You Should Consider Alternative Investments
I was talking to a really astute guy and his wife last week. They had a plan that had been laid out for them by a financial planner that was maybe going to shave one to three years off their timeline from traditional retirement at 65. I think the idea was that they would retire somewhere around 61-62. So it was better than average, but not remarkable in my opinion.
It was by doing all the traditional things, like socking away lots of money into superannuation, which, by the way, I’m not saying is a bad thing. What I’m saying is that the traditional model looks at products and investment opportunities that everybody else is looking at.
If you do what everybody else does, you can only expect the mediocre results of a comfortable retirement, if that, at around the age of 60 to 65.
If you are someone who likes the idea of having the freedom to choose how you spend your time, whether you continue your business, or you do something else, or you do nothing, or you get behind charities and causes that you care about, or you help your community, or you support your kids – then alternative investments are definitely something worth looking at.
Reflection and Insights
So if I were to summarise where I started today: how do you know if you’re ready for alternative investments? Well, the first thing you should be asking is, what percentage of your current living costs are covered by the passive income you already have? If you stopped working, where would you be?
And if the answer to that is, “I’m really miles away from the kind of financial freedom that I need,” – if you have a solid asset base, if you want another income stream that you can bank on, and if you’re open to outside of the box thinking, then I definitely think that alternative investments could be a fit for you.
Now, that’s just the starting point. Obviously, you need to actually look deeper, make sure you understand the opportunities before you get involved, make sure you have your ducks in a row, that you’re structured properly, that you’ve optimised the assets that you’ve already got.
Alternative investments aren’t a fit for everyone, but for the select few who are ambitious, want financial freedom, and care about how they spend their time.
Final Thoughts
I have a playbook on my website that could be a good starting point for those of you who are interested in understanding more, so feel free to grab a copy.
I think the big challenge for a lot of people is, they just don’t know a lot about alternative investments. So this is really a birds eye overview of what they are, what’s involved and a bit more of a deep dive into who they are fit for.
If you’re a business owner feeling frustrated that despite doing everything right in the property investing playbook and you’re no closer to financial freedom, then head over to www.inkosiwealth.com to learn more about how you can use alternative investments to catapult your investing income and blend strategies to shave decades off your timeline to financial freedom.
If you’re interested in understanding how to create wealth through alternative strategies, please check out my programs, where I help you catapult your investment income and blend strategies to shave decades off your timeline to financial freedom.
Or, you’re welcome to get in touch today, book a call with me, and I would be happy to talk you through it – no obligation!
