One of the most important concepts in personal finance is to create a second income stream. Having income flowing into your bank account from alternative sources outside your normal everyday work can help cushion stressful periods such as when you are made redundant. It can also help you escape the rat race by providing you with enough income to cover your expenses and enjoy life. This is is the whole concept behind my dividend growth portfolio. Even Warren Buffet agrees on the importance of this by saying “Never depend on a single income. Make Investments to create a second source.”
Whilst many people advocate investing to create an income for people in formal employment, there is not much written about creating that second income source for entrepreneurs or the self employed. Below is a story on Miller Gorrie and his investment in IBM showing how self employed people can benefit from investing in public securities.
Miller Gorrie was a bright young man who attended Auburn University to study engineering. Unlike most people, Miller was a firm believer that investing in great blue chip companies was a great way to build wealth. Miller used this insight to pour money earned from his paper rounds into stock in IBM which had compounded for 20%+ per annum for many years. This led Miller to possess a portfolio worth more than $100,000, which adjusted for inflation, is more than $728,000 today. After attending university, Miller spent three years in the U.S. Navy’s Civil Engineering Corps after which he was ready to become an entrepreneur. Unlike most entrepreneurs, Miller didn’t have the problem of needing to raise capital. The young man was able to use the money from his investment portfolio to purchase a small construction company called Thomas C. Brasfield. He renamed the firm Brasfield and Gorrie. Over the next few decades, Miller Gorrie was able to turn that small company into one of the largest contractors in the United States with more than $2.3 billion in annual revenue. Today, he is one of the richest men in the world and he can thank that little block of IBM stock for giving him a helping hand when he needed it most.