How do you make money? Is it enough for you? Are you exploring new means? Which ones? Are you preparing yourself for that possible change?
Yes, we know what you’re thinking—just another clickbait piece of content to get our attention—but not quite.
It’s sad that the money making discourse has been reduced to disjointed and shallow conversations of get rich quick schemes. For something that dominates most of our lives, we should have open, sincere and in-depth conversations as well as supporting bodies of knowledge.
We are going to try and change that, starting with four principal ways of earning money.
Individual Effort
This is when you use your skills and time in exchange for payment, otherwise known as employment.
As a society, we mostly gravitate towards this method. It’s like a default setting, probably configured in our upbringing. But is it sustainable?
Through an education or otherwise, we’re typically taught and encouraged to acquire a skill that would become the basis of our sustenance. Whether you’re an actuary, plumber, farmer or mechanic; at the basic level, you’d be exchanging that skill and your time for money.
To earn more, you’d have to be great at what you do, and you’ll always need to be directly involved. This can give you a decent livelihood but would mostly be limited to your physical ability and lifetime. Robert Kiyosaki calls this method, the rat race, in his infamous, Rich Dad, Poor Dad book.
Multiplied Effort
This is when you create employment for others and they produce for you, mostly what happens in entrepreneurship.
What gives you relevance through this way of making money is producing or selling value to others. So much so that you’d need extra hands to help deliver that value.
Multiplied effort usually comes with more money, and a sense of purpose derived from discovering ground breaking solutions or giving other people chances to also make money through employment.
But to do well, you’d probably need to work much harder than you’d do as an individual. You’ll also need to be directly involved and may operate under stressful environments from time to time. Without adequate planning, the money made through multiplied effort may last for only a single lifetime.
Capital Growth
This is where you use your money to create more money for you, otherwise known as an investment.
For some, property is their sure game while others settle for stocks and bonds. Probably the more aggressive folk invest their money in high risk and fast growing enterprises as venture capitalists, hedge funds or private equity.
At this stage, money starts to work for you. Though returns are not always guaranteed, you don’t have to be directly involved and you could start the transition from just making money to creating wealth. Most of the super rich operate at this level.
The catch is you must have some form of capital to start with.
Inspiration
This is when your name gets to make money for you as a legacy. Michael Jackson sold more records in his grave than he ever did whilst still alive. There are many other folks who are compensated for use of their names and works, dead or alive.
They’re the Da Vincis and Picasso of this world, who worked hard their entire lives to create a legacy that perpetually rewards them and or their offsprings.
Just like through capital growth, they don’t need to be involved and usually create intergenerational wealth.
Conclusion
It’s important to mention that these four principal ways of making money aren’t mutually exclusive. At times, you may go through all levels on your way to creating wealth.
Start where you’re but plan for where you eventually want to be.
Now we ask again, how are you making money?