How to make Money

It seems like a question with a fairly obvious answer – but that’s exactly why it’s important to think about it. Obvious answers are ones that someone else thought of. If you’ve put the work in to think about something, you won’t consider your conclusion to be obvious. And if you’re working off someone else’s answer to this question, then you’ve given up your greatest ability – the ability to choose.

In today’s world, you’re told that to make money, you should get educated, and do an internship or apprenticeship with a successful business, then you should work the system and get yourself promoted.

But for many people, this story doesn’t work out the way it’s been told. Because if we’re all trying to walk through the same doorway, you know it’s impossible for us all to fit. So we have gatekeepers who decide who’s “in” and who’s “out”. And even if you’re incredibly talented, you can be left “out” because you didn’t marry the right company director’s niece. (or something less specific).

So rather than taking this story as writ, we should consider the primary objectives here. What is our goal? What are we trying to achieve?

It’s important to be specific here – just like with any goal, if you don’t know what you’re aiming for, you are assured to miss. In Melbourne (where I live), the cost of living varies between the city and the suburbs, but for most people a livable wage is somewhere between $80k and $100k (AUD), so a reasonable goal would be something like $300k pa.

But this article isn’t about how much money you should be making to be happy with yourself, I just wanted to highlight that you don’t need to be earning 7 figures to be successful.

In a capitalist world (and on any black market for that matter), there are essentially four ways to make money.

  1. Employee
  2. Self Employed
  3. Business Owner
  4. Investor

Think of it like this:

cashflow quadrants

Get a Job

The employee route is the one described in the introduction. You get a job, and someone pays you to do what they ask. They’ll provide the tools, the training (or some of it at least), and the structures needed for you to “create value” for them. In this case, you create value through developing skills and offering services on behalf of someone else.

Own your Job

The self-employed route is where a lot of people wind up once they’ve spent some time working for others and realized that it’s a lot like renting a house. It might be cheaper and easier, but you’re ultimately making someone else rich, and all you have to show for it is whatever you’ve managed to save. It’s up to you to find the tools and training, and to find clients to work for. Working for yourself seems wonderful, but often you wind up working for a larger number of “bosses” (each of your clients or customers). In this case, you create value by offering products or services to businesses or individuals on behalf of yourself.

Invest in Your Business

Becoming a Business Owner is the first time you start to trade money for money. You’ll still be very involved, because you need to trust that your staff are willing and capable of doing the job, and you’ll need to manage them to ensure they’re not just spending all that time planning their own business venture! In this case, you create value by employing others to offer products or services to businesses or individuals.

Invest in Other Businesses

The ultimate stage is to operate as an investor, to have enough shares in enough businesses that you’re able to generate wealth through dividend payments and through the increasing value of your shares. In the most extreme case, you’ve entrusted the management of the business to a board, and you’ll occasionally read shareholder reports or attend an AGM. In this case, you create value by providing finances directly to a business so they can fulfil their objectives in offering products or services to businesses or individuals.

Create Value

As you can see, in all cases you create value by contributing a combination of your time and / or money. To “make it” as an investor requires an extremely large pool of wealth, but it’s a lot easier to move into the Self Employed and Business Owner categories.

No matter where you are on this graph, know that you’re not stuck there. You can move in any direction, but you need to put the work in. This is what people mean when they say “work smarter, not harder”. Have a purpose in your work, and move towards your goals every day.

If you want to get a deeper look into this kind of thinking, get a hold of “Rich Dad, Poor Dad” by Robert T. Kiyosaki.

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