OK, the goal is independent wealth: a low risk passive income. The math for this is pretty simple.
Say you are a rock star making $100k/yr. After taxes, in CA, that's ~$60k/yr. If you are single and super-cheap (i.e. celibate), you can live acceptably on about 30k. Thus, you build 30k/yr in capital.
Say you need $3k/mo bare minimum, pre-tax, to retire, and refuse to draw down on capital. At a 5% return you will need $720k. It will take 20+ years to get there, assuming you survive as a corporate cog for that long, which is unlikely, given competition from emerging markets.
Of course, if you ever get married and have a family, this won't work at all. And if Wall St somehow takes 30% of your portfolio one year, you are in serious trouble.
Now, instead, say you quit working for The Man, and build a service priced at $10/mo. You have the tech background already, and work hard to learn the necessary ops, marketing, sales, and other skills. You automate everything. You work from home (saving 1 hr/day commute), have excellent margin, no employees, etc. With a web app, to hit $3k/mo, you probably only need to average 400-500 paying customers.
There are several billion people on the Internet. You just need 500.
Sure, a business producing $3k/mo after expenses is not exactly equal to having $720k in liquid investments. It's much less liquid, requires more of your time, faces competition, etc. But it also has some advantages, such as the potential for very rapid growth.
Most importantly, it scales: you can build more than 1 app. So even though you'll probably fail a lot before success, you're probably still better off.
That's true, but a "rock star" engineer at Google Mountain View earns a base of ~ $150k-$200k. Add on a bonus/stock of $75k-$100k, yeah, upper bounds is $300k. Glassdoor also backs up what I've heard.
Options are pretty much worthless till you can execute them. Even then theres only a one time cash-in-hand situation. Believe me I have a ton of options right now and its not helping ;)
No and no. I have only had traditional stock options which are essentially funny money that are vested over a period of years. You still have to purchase the stock but after the stock is vested you just get the ability to execute once there is an equity event such as IPO or sale...
Say you are a rock star making $100k/yr. After taxes, in CA, that's ~$60k/yr. If you are single and super-cheap (i.e. celibate), you can live acceptably on about 30k. Thus, you build 30k/yr in capital.
Say you need $3k/mo bare minimum, pre-tax, to retire, and refuse to draw down on capital. At a 5% return you will need $720k. It will take 20+ years to get there, assuming you survive as a corporate cog for that long, which is unlikely, given competition from emerging markets.
Of course, if you ever get married and have a family, this won't work at all. And if Wall St somehow takes 30% of your portfolio one year, you are in serious trouble.
Now, instead, say you quit working for The Man, and build a service priced at $10/mo. You have the tech background already, and work hard to learn the necessary ops, marketing, sales, and other skills. You automate everything. You work from home (saving 1 hr/day commute), have excellent margin, no employees, etc. With a web app, to hit $3k/mo, you probably only need to average 400-500 paying customers.
There are several billion people on the Internet. You just need 500.
Sure, a business producing $3k/mo after expenses is not exactly equal to having $720k in liquid investments. It's much less liquid, requires more of your time, faces competition, etc. But it also has some advantages, such as the potential for very rapid growth.
Most importantly, it scales: you can build more than 1 app. So even though you'll probably fail a lot before success, you're probably still better off.
I wish somebody told me this 10 years ago.