What a loop pedal can teach you about financial life planning
A loop pedal will repeat and repeat and repeat and repeat a recorded sound.
Unless you’re a musician, you’ve probably never heard of a loop pedal.
Basically, a loop pedal lets you record a sound and repeat that sound on a loop.
But instead of telling you what a loop pedal is, I might as well show you what a loop pedal can do.
The interesting thing about a loop pedal is that when you’ve done recording one sound, you don’t have to worry about that sound anymore: it’s there, looping, as a layer of your own personal orchestra. That way, your hands are free to record other sounds that will, in time, be added to the orchestra as well.
At the end of the track, the artist in the video has a whole orchestra playing while he has only been playing one instrument at a time.
Now, what does that have to do with financial life planning? I’m getting there.
Well… think of the different sounds as sources of income.
The traditional way to play music (without a loop pedal) is simply to play an instrument. While you’re playing, there is music. But as soon as you stop, obviously, the music stops as well.
In financial planning, most people « play music » the traditional way: they work and they get paid for that work. But if they stop working, they also stop getting paid.
But what if we would use a loop pedal in our financial life planning? What would that mean?
It would still mean working the whole time (like the guy in the video has been playing the whole time) but instead of producing just one sound, we would, little by little, output more and more sounds. And when you stop, the music doesn’t stop.
The app developper
Let’s take a practical example. Imagine that you would start your career by creating a popular iPhone app. It takes you 6 months of work but after that, the app is available on the Apple Store for $1. Let’s say that you get on average 100 downloads per month. That’s $100 per month. Now that income is going to be « looping ». You’ve done the work. You can stop now. And those $100 will keep coming on your account. But the great thing is that you don’t have to stop. You can create a second app, which brings $500 per month. Now you have $600 « looping ».
What’s next? You could record a course about how to develop apps. It takes one year to create this course but once it’s finished, it brings $1000 a month. And it’s looping too. What now? Well, now you could write a book about creating courses to teach about developing apps. That’s another $400 a month looping. Etc. etc.
Obviously, it doesn’t work exactly like that: at some point, these sources of income will slowly dry out, like oil wells. Plus, everything takes maintenance, so it’s not exactly set and forget. And it seems to work for app developers, but what about chefs or engineers or construction workers?
How can a regular person use the looping principle?
Well, creating a product and selling that product is one way of « looping », but it’s not the only one.
What happens if you want potatoes but have no soil to grow potatoes? Simple: you go to the supermarket and buy potatoes.
So whatever you can’t create, you can buy.
How would that work in practice ?
You start by getting a job and saving some money. From each pay check, you take, let’s say, 1000 francs to buy dividend paying stocks. If they provide a yield of 5%, after one year, you already have 600 francs of « looping » income every year. And that income will keep growing as you keep investing.
At that point, you might want to change things and while your invested money will keep looping, you can direct the additional money to something else, like peer-to-peer lending. Or real estate crowdfunding.
Maybe later in life, after an inheritance, you can decide to buy a rental property bringing 20,000 francs of yearly income.
Then you might buy a vineyard, or a gas station, or a website.
Maybe at that point, you could quit your job so you have even more time to create more looping. Or just rest from all your effort.
In the end, you might have 5 different sources of income, while not having to work for that income. If one dries out, you can just invest some time (or money) to create a new one.
That’s it. That was what loop pedal can teach you about financial life planning.