In any wealth building and investing endeavor, you’ll need money. It can be your own money or other people’s money. But you need to start with some money.
There are 2 types of income
Active or earned or W2 income - requires your time and attention to actively participate in income-earning activities, such as having a job, driving uber, selling things on eBay or Craigslist.
Passive or leveraged income - still requires your time and attention in the beginning. But once a system is set up in place. It generates income on auto-pilot. Income comes in the form of rental income, capital gain, dividends, interests, commission, royalty, lease rent, profit, revenue, etc.
There are mainly 3 ways to make money
Trading time for money. 94% of people use this method. They are employees and self-employed. Sorry, if you’re self-employed, you’ll still an employee because you’re doing all the work. The only difference is you’re the boss too. So you actually have 2 jobs. How many hours do you have in a day? We all have 24 hours in a day, why some people make minimum wage, and others make millionaire while sleeping and having fun. Employees make earned income or W2 income. These income are taxed at highest tax rate because of social taxes.
Trading money for money. Only 3% of the population can make a good living investing their money to create more money. Investing requires special knowledge and experience. Many people say they invest in stock market or real estate by timing the market. Well, guess what? Most of these people are just “speculating” because they’re just hoping that their money will appreciate. If you know how money works, any time is a good time to buy or invest. “Timing the market” is not an investment strategy. It’s speculation. People who trade money for more money earns portfolio income, which is still a type of passive income.
Leveraging other people’s money and other people’s time. This is 1% of population. And these are mostly business owners and business investors. They invest in a “business system that generates money on auto-pilot”. Most of us are familiar with these business system, because most of us at one time or another work for a company that you never meet the owner.
So which is the best way to make money?
Let’s see what the wealthy people do, or the millionaires.
75% of millionaires are business owners and investors.
25% are professionals, such as doctors, lawyers and accountants.
What do millionaires do differently?
The wealthy invest in profitable businesses, and that’s how they accumulate their millionaires. Poor people buy stuff and the middle class buys liabilities.