How You Can Leverage OPM for Investments
Other People's Money is a common avenue to get a needed principle for an investment.
It is important to clarify one thing when we talk about using credit cards. They can be safe to use. Many people have talked about credit cards as being dangerous and enslaving. The truth is that just like anything, if you use it unwisely or too much it can cause harm. If you ate cheeseburgers too much it would be bad, but you don’t see people saying never to each cheeseburgers because the risk is too high. It is your choice if you want to use it wisely. Most credit cards can have up to a few thousand-dollar limit on it. The good news with credit cards is that you don’t always need to pay it off right away. There are lots of business credit cards with 0% APR for the first year. This means you can plan for investments that may not pay off for a few months, or that pay of slowly over several months.
If you have a job, then you are likely on your way to having the money needed to make the investments needed to get your financial freedom. If you are in a stable job or you have been there for a little while you probably have some retirement fund. The most common is a 401K. Most 401K’s have an employer matching feature. Many also allow you to withdraw money from your 401K. Some need you to put it back in later but not always. You can withdraw that money that you didn’t even know you had access to put into an investment. Obviously, you want to be careful on what you invest it in. Warren Buffet is famous for saying he has only two rules for investing. Those are: “First don’t lose money and second… refer to rule number one.” After you have worked at a company for a long enough time you can withdraw money that is essentially all matching, none out of your own paycheck.
This tactic works mostly only if you are investing in something with a product or service. This can even include things like software, coaching and trainings or really anything. The idea of pre-selling can often feel a little sneaky because they are paying for something that may not exist yet. Truth be told this is a common process that happens every single day for very popular products. If your products or service truly adds value than people will want to build it, that is simple. They pay for the product with the understanding that they get some additional benefit like early access. You need to pre-sale enough to pay for your barrier to entry or initial investment. Then you have the asset made and you can sell it to the rest of the market. You should offer your pre-sellers a discounted price in exchange for a client testimonial. This can be used as leverage to sell to the rest of the market.
Debt vs OPM
Something you need to know about leveraging money to make investments is that sometimes when you get other people’s money, it can often incur some debt in doing so, not always, but sometimes. It is a common practice to invest in very safe investments at least up front. When you have a small amount, it is wise to get safe but sure returns early on until you can make higher return moves. Some of these can include things like Tax Liens, Index Funds, or Certificates of Deposit. If the idea of incurring debt scares you, consider your mindset in terms of investments. You might be able to make some big moves with a shift in your thinking.