Pancakes on Fire

My daughter had a sleep over last night.  We started the evening with pizza, and then rushed off to the movie theater to catch the early showing of Black Panther.  Needless to say, there were two giggly girls who got very little sleep last night.  I awoke to four ravenous eyes staring at me, and demanding pancakes.  I rubbed the remnants of lost sleep from my weary face, pulled out the ingredients, and went to work.  Now, I wouldn’t call myself handy in the kitchen.  A step above pitiful, I wasn’t surprised that my first batch was burnt on the outside, doughy on the inside, and altogether inedible. The batches that followed, however, got progressively tastier.  Of course, searching for a blog topic this morning, I couldn’t help but postulate the first pancake rule of financial independence.

The first time you attempt something new, it often turns out mediocre at best.  This is not only true of pancakes, but of building a business, investing, and running a side hustle.

There is something about your second, third, and fourth attempts that usually goes better.  Let’s just say that the pan is better primed, the heat is more distributed, and your flipping motion is perfected.  This is the only way, I’ve found, to become a seven figure failure .

You have to be willing to crawl before you walk (OK, some kids go directly to walking, but you get the reference).

The First Pancake Rule of Side Hustles

My first attempt at running a side hustle came at the tender age of thirteen.  Like most kids of my generation, I collected baseball cards zealously.  So when a new type of three dimensional card came out called Sportflics, I saw the immediate revenue generating opportunity.

I cajoled my stepfather into letting me borrow the tax Id number for his coin business, and cold-called the five biggest suppliers of baseball cards to local supermarkets and five and dime stores.  After being rejected by the first four, the fifth agreed to sell at a thirty percent discount.

I put a few hundred dollars down, and bought a case.  With the help of my stepfather, I placed an ad in a national baseball magazine.  We offered a full set of cards at a ten percent discount, and then waited for responses in the mail (there was no email or internet at that time).

I sold a third of the case before the requests dwindled to zero.  I lost half of my initial investment, and still have a few boxes of cards sitting in storage today, thirty-one years later.  The cards are antiques now!  I could sell the lot for a quarter of what I originally bought them for.

This was the first pancake rule of financial independence.  My later side hustles, including selling art and renting properties, were much more successful.

The First Pancake Rule of Investing In The Market

I remember the day my wife and I walked into a Fidelity shop without an appointment, and plunked a check for $100,000 on the table.  We were siphoned off to some random advisor who quickly convinced us to divide the funds into high cost technology and healthcare mutual funds.   The year was 1999.

Needless to say, we became victims of the Dot-com bubble and saw our net worth cut in half.  Making an incremental improvement, we eventually hired a more reputable advisor who then sold these declining assets and locked in our capital losses.

We stuck with this advisor for years gaining modest but below the market returns.

In this case, the first pancake rule of financial independence extended somewhat to the second round of pancakes too.  Eventually, I wrestled control of my own assets and moved everything to Vanguard.

The First Pancake Rule of Real Estate

Our first rental property was not meant to be a rental property at all.  We somehow, in our deluded minds, convinced ourselves that we needed a city home in Chicago in edition to our four bedroom in the suburbs.  After closing on the property, spending all sorts of time on remodeling and decorating, we were finally ready to use our little piece of heaven.

Except that we didn’t.  The kids were too young.  The weekends were too busy.  The parking too difficult.

The condo was easy to rent.  Profits, however, will low based on high HOAs and lower than expected rents.

But, we learned something very valuable from this first pancake.  We learned the ins-and-outs of buying, renting, and landlording.  When the real estate market crashed a few years later, we were poised to jump in at just the right moment.  We bought a couple of foreclosures, and now rent four properties that produce a steady cash flow.

In Conclusion

Don’t let the first pancake discourage you.  The road to financial independence, for us, was littered with missed opportunities, faulty assumptions, and half-baked plans.

The key to success was often as simple as incorporating new knowledge and trying again.