Ask Steve – Money and Financial Issues

This is a specific example of a particular area of my life that I’m currently struggling with, as a continuation of this post from the “Ask Steve” series.

The first area of my life I’m struggling with involves money and financial issues. I’m not sure how many of you will be able to relate to my particular challenges, but I’ll do my best to explain them. I’ve read many books on money and finance, as I’m sure many of you have, but I haven’t seen this particular problem articulated in any of them.

First of all, my problem has nothing to do with financial scarcity; it’s almost the opposite of that. Here are some of the components of my current financial situation:

  • Erin and I enjoy a solid six-figure annual income. We live off about 40-50% of it and save the rest.
  • We expect to more than double our income this year compared to 2005, and we had a six-figure income then too.
  • We have multiple streams of income from around a dozen different sources, many of which are totally passive or semi-passive.
  • Our income is largely decentralized, so even if we lost the single biggest stream, our cashflow would still be positive.
  • We bought a new house last year and a new car this year.
  • We own some decent online assets, such as this web site.
  • We have no debt other than our home and car payments, and we’re paying it off faster than necessary.
  • We both have good credit and pay our credit card bills in full each month.
  • We’re intelligent, experienced entrepreneurs with many marketable skills.
  • Neither of us has a job, so we can’t be fired or laid off.
  • We don’t have to work particularly hard to maintain our income. Even growing it is fairly straightforward.
  • We have sufficient savings to last us quite a while even if all our income got turned off and we did nothing about it.
  • We have abundant income-generating ideas that we haven’t yet begun to tap.
  • Our LLC provides some liability protection, and we’re reasonably well insured.
  • We live in Nevada, which has no state income tax (personal or business).
  • We donate to charity each month.
  • If you stripped us of all our assets and income and even our business contacts but left us with our knowledge and skills, I expect we could bounce back to this point in less than a year.
  • And lots of other positive aspects…

Although we’re not millionaires, we’ve at least built a solid financial foundation. Depending on your own situation, our accomplishments may seem like a dream come true, a pathetic underachievement, or anywhere in between. To us this was a significant financial milestone. Throughout most of the 1990s, we struggled financially. I remember times when we had to consider the financial consequences of buying a meal at Taco Bell. While it didn’t seem very funny at the time, today I can only laugh about it.

The irony of our current financial situation is that neither Erin nor I are money-oriented people. We certainly didn’t achieve these financial goals by accident — there was a lot of deliberate intention, planning, and action behind them. But the main reason we worked towards these goals was to get financial concerns out of our way, so that we could focus our attention on what really mattered to us.

During the ’80s and ’90s, my favorite TV show was Star Trek: The Next Generation. In Gene Roddenberry’s vision, money was made largely irrelevant because technology provided for everyone’s basic needs and then some. But everyone still worked even though they didn’t really have to. Instead of working to make money, they were all driven by the passion to do what they loved. The Ferengi, a greedy profit-seeking race reminiscent of today’s capitalists, were depicted as a cosmic joke. Although this was fiction, the idea of making money irrelevant really connected with me. I asked myself, “Why not today?” Why not find a way to take advantage of today’s technology to cover all my basic needs in a largely automated way, so then I could concentrate fully on doing what I loved?

Instead of trying to get rich, my primary financial goal was to secure the freedom to do whatever I wanted without needing to worry about money. That was a decision I made in my mid-20s, and it has guided my financial decisions ever since.

Attempt #1 involved starting my own game development business, working on retail titles funded by publishers. I’ll spare you the details, but that approach ultimately failed. I learned the valuable lesson that putting my financial future in the hands of a third-party wasn’t going to work. It was far too risky, as I often found out the hard way.

Attempt #2 was to convert that same company to a direct sales model. I developed and licensed shareware games and sold them over the Internet in a fairly automated way. That approach actually worked, and the business became profitable and stable. I could see that if I continued down that path, I could achieve a decent level of wealth, at least becoming a millionaire. But I hit a snag because I began to dislike how I was making money. The company’s mission to entertain people no longer inspired me. The valuable lesson I learned here was that the method I used to generate income was at least as important as the income itself. I needed a way to earn money that would be inspiring to me and which would truly serve the greater good.

You’re looking at attempt #3 right now. This web site is an outlet for doing what truly inspires me, but it’s also a financial vehicle. This attempt puts both of my previous attempts to shame. I love the work I’m doing, my motivation is sky-high, I’m enjoying financial abundance, and I have a level of freedom that’s a pretty good emulation of the what the Star Trek characters experienced. It took me almost a decade, but I essentially achieved my goal. I’d be pretty darn happy doing this for the rest of my life.

By now you’re probably ready to scream at me, “So what the heck is the problem then?”

Well… I’ve been pursuing this financial goal for so many years that I never clearly understood what it would be like to actually achieve it. This is where my Star Trek analogy totally falls apart. In that universe the characters have all their needs met by technology. There’s no scarcity, but there’s no excess either. The replicators dole out one meal at a time and reclaim what you don’t eat. But my current financial situation is like an overgenerous replicator. It’s spitting out more than I need, and I anticipate that this positive gap is only going to get bigger.

This paradigm served me well up to this point, but I can’t continue using it. Here are some of the issues:

  • What do I do with the excess cash that the business is throwing off? Obviously I could invest it, but my current paradigm has no analogue for investments. What’s the point of investing when you already have the freedom to pursue your heart’s desire?
  • I could upgrade my lifestyle. But I don’t like to shop, and it seems silly to run out and buy a bunch of stuff I don’t need. I’ve got the cake, and I’m eating it too, so who needs extra frosting?
  • I’m fashion-challenged, so it would be hard for me to spend the money on wardrobe upgrades. Last month I bought my first new suit since 1994 (no joke).
  • I barely pay attention to the material possessions I do have. Suffice it to say that no one who visits our home would mistake Erin or myself for interior decorators.
  • Somewhere along the way, I lost all my fear of going broke. I know now that I could remain happy and purpose-driven even if I lost all my stuff, which definitely wasn’t the case when I first started on this path. I don’t need more money to feel more secure. I feel totally secure already.
  • I get so much joy from my work that any bonus material incentives barely register. Offering me a million dollars would be like offering a glass of water to the ocean. I’m participating in the Million Dollar Experiment purely for fun. I’m not even sure what to do with the money I’ve already manifested.
  • The things I love most are essentially free.
  • I don’t need any more money to do what I love because I’m already doing it.
  • My subjective reality mindset renders money almost meaningless. I view excess cash almost as if it were Monopoly money. It doesn’t even seem real.
  • Excess personal income means higher taxes. My quarterly taxes are now more than I used to pay in a year.
  • I currently have an LLC. Would I be better off incorporating or electing C-corporation tax treatment for my LLC?
  • What about forming a non-profit? That does have some appeal to me.
  • I’m not interested in empire-building as an end in itself. But would building a larger enterprise allow me to do a better job of serving the greater good? Or would it just add complexity and become a messy, freedom-killing distraction?
  • Can I attract more like-minded people who’d be willing to work for an enterprise that cares more about genuine service than profits?
  • I could donate the extra money to charity, but that seems rather strange when the nature of my own work is almost like a charity itself. My LLC’s operating agreement specifically puts service to others as a higher goal than profit generation. This would also seem to point me in the direction of forming a non-profit.

I’m stuck in a situation where my unorthodox financial paradigm, my personal values, and my current financial realities are no longer congruent. It’s ironic that their very success ultimately led me here.

So that’s the problem in a nutshell. What I need now is a new paradigm that restores alignment and empowers me as I move into the next phase of my financial life.

I haven’t found any help in the books I’ve read because the authors’ values are too different from mine. Some emphasize trying to make as much money as possible, as if it were an end in itself. Others assume the goal is either financial security or financial freedom, but I feel I’m already there in a sustainable way. I’m familiar with many different paradigms of wealth building, but none of them seem to mesh with the person I’ve become. Most seem to be rooted in fear or greed. What I really want is a financial paradigm that’s rooted in love.

Building a larger enterprise does have some appeal to me, but it’s crucial that purposeful service to the greater good remain a higher priority than profit generation. I’m unwilling to compromise on that, so that leans me in the direction of a non-profit rather than a typical C- or S-corporation. My LLC doesn’t seem like the right long-term vehicle either. However, I don’t think the real problem is at this level of thinking. What I need first is a whole new paradigm of money.

What’s the best way for me to think about money now that I’ve achieved my original goal? What should I do with the excess cash each month? Do I invest it? Do I funnel the cash into expansion? Do I pay off my mortgage? Do I donate it to charity? Do I form a non-profit? Do I ignore the problem for now and just stockpile cash until I figure out what to do with it? Do I try to increase my income even more? If so, what sort of paradigm would motivate me to do that?

Depending on your personal values, you might see this as a trivial problem, or you might recognize why this is such a challenge for me. Either way, if you’d like to share your thoughts, I’m all ears.

This entry is part of the “Ask Steve” series. See the original Ask Steve post for details, or view the Archives (July 2006) to peruse the entire series.