Personal Finance is Different for Indie Hackers
Dump your money in index funds. This is the standard, agreed upon advice. And it's pretty much the best bet for regular employees who don't plan on leaving their jobs. But indie hackers are different.
If you're the type who is working on your own projects and perhaps wants to escape your day job, I think the common advice of investing in the stock market is misguided for people like us in the early parts of the journey. Here's why.
Your cash is a great enabler. Your skillset and desires can create infinite ROI through your lifetime, and having cash set aside to bet on yourself will allow you to buy back your time and all of the tools/tech to be most productive.
When you compare $25k invested in the market, earning 6% on average per year, to buying a whole year of freedom for yourself to build things, which do you take?
The challenge is the unknown ROI of betting on yourself. You can never say how much you got back from your $25k investment in your own time, as the ripple effect of such a journey lasts the rest of your life and many of the returns from the experience enabled by cash are not financial. But I'd guess they'd have to be worth more than 6% a year.
All it takes is exchanging the known (but small upside), for the unknown (large upside). When you lose in the stock market, you walk away with nothing. But when you fail at your own endeavors, it's obvious how much you learn from them and how many people you meet, all of which can be parlayed to the next attempt.
The decision-making, calmness, and patience you can experience with $50-100k in cash to use on yourself is magical. This little post is a call to think outside the typical financial advice bubble and finally pursue the ambiguous idea of betting on yourself.
I've been thinking about this a lot recently and would like to hear your thoughts and experiences of how personal finance should differ for business owners and employees who want to go out on their own, vs. the traditional worker who will have a job until retirement and not have any time to start businesses (and not need to).
I'm leaving out the part where you can eventually build up to private business investment/portfolio etc. but that's much later on.
You can do both, invest into the stock market (either ETFs, dividend stocks, growth, whatever) and you can keep a year of runway cash. Further, you are flexible with stocks. You can sell them when you need it. When the market is low, don't sell much though.
I wouldn't rule out one for the other. Depending on how much cash you have, you don't have to invest everything. But on the other side. The cash which you don't need now or in the next 6 months is also wasted just sitting in your bank account.
As an employee I would keep 1-3 months of cash worth of expenses. As an entrepreneur, if you just start out, keep a year or more, if you have no revenue yet and can't pay yourself. If you make enough revenue to pay expenses, your lifestyle and have something left, reinvest it into your business or buy stocks with that. Always having a reasonable buffer so you can react to issues.
Doubt that many entrepreneurs & indie hackers are thinking about long term savings if they are committed to starting something successful
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