Posted by Dave on December 31, 2013
I met a really interesting guy while I was floating around a pool in Mexico last week. He was from Oklahoma, and we had both probably consumed more drinks than we should have one afternoon when we got to speaking about what we did. It turned out that this guy was some sort of salvage buyer for insurance companies and has done this his entire life.
As an example of a “deal” he was involved in, he had purchased 150,000 board feet of oak, which was currently drying in one of his yards. He said that the wood would have retailed for around $5 per board foot, but he would be selling this at a much more moderate price. He told me that once this sale was made, he would be able to retire.
As we talked, he stated that he had made millions of dollars over his career and had spent every penny of it, on race-cars, boats, houses and parties. Now, it may have been the enormous cups of rum and coke he had been drinking at the pool bar causing exaggeration, but he really didn’t have much reason to lie to me.
Listening to his story, I told him that he was like the opposite of me. I am far too conservative to roll the dice on some of the deals he described. I can appreciate the fact that he is willing to go for the big gain, to make enough for retirement in one big deal, but I’m not willing to put either my own capital at risk to do something like that, or leverage the deal with borrowed funds to create the dollars.
I would classify myself as more of a “plodder” – I prefer to make more slow, higher probability gains in my financial life than run the risk of financial ruin. I would get too stressed to have a good percentage of my assets, along with someone else’s invested in something super risky in an attempt to create wealth.
My way of growing a reasonable fortune is not risk free – most of my plan revolves around investing in income-producing stocks and hoping for the best, which some people would think is insane as well. While this slow, very moderate method takes (seemingly) forever to achieve financial independence, it is relatively more risk free than other methods and causes me considerably less stress.
I would prefer to be debt free, have low monthly expenses and create cashflow to support my moderate lifestyle. I can’t imagine being able to sleep at night, hoping I’ll be able to unload some sort of truckload of stuff that I’ve sunk cash into in the hope it will work out – it would be too stressful.
Are you conservative in your lifestyle, or do you shoot for the big score to achieve your financial independence? Do you have a risk profile that would allow you to attempt a “big deal”, risking a good chunk of your saved assets to do so?