3 types of income to build wealth
Who doesn’t want to be rich?! Building significant wealth is an important goal in life for most people, regardless of where they started. While some acknowledge it and act, others dream on. The real game-changer is in the approach, and whether you do anything about it at all, because most people’s only act is to expect their employer to provide them with fabulous fortune. In my article, I will not only discuss why this is a mistake but also introduce you to two other ways of making money that will help you build real wealth.
The illusion of building wealth from Earned Income
Unless a hidden uncle from the past shows up to give you a sizable inheritance, self-earned wealth is something you have to work for. However, most people take this literally: they want to build wealth by working from 9 am to 5 pm. This type of plan usually looks like this:
- You start your career at a company.
- You work overtime for a promotion.
- You find that the promotion does not come with a big enough raise. In many jobs, it's a miracle if you can save any money at all.
- You get caught in a forced promotion spiral that leads straight to burnout because you realize that even working harder and harder will not get you any closer to your goals.
- You accept the inevitable and do not get rich.
Unfortunately, the above story is not fiction, countless of my acquaintances, friends, and millions of Americans struggle with this problem. But how do you get out of this problem? Where is the flaw in this approach?
The biggest difficulty of earned income is that you want to build wealth, i.e. make a lot of money, while other people (the managers/owners of the business) are making money off you. How many times have we heard in sales jobs that the employer will only pay a commission if he has already earned three times the salary? In any other job, it's the same thing: the owner buys the employees' time and builds his own business that makes him rich.
While it's not entirely impossible to build a serious fortune through earned income, it does require a truly high-profile career. As the CEO or co-owner (not essentially a founder) of a startup that is about to exit, you have the potential to get rich even though you are someone else's employee.
The wonders of Portfolio Income
In addition to earned income, there are two other categories that you should consider if you want to build wealth. It is very important to note that these two income streams are a good supplement to your earned income even if your goal is not to become a millionaire.
Earning portfolio income gives you an asset that you can sell for a higher value after a while. Real estate is a great example where investors look for low-cost buildings, apartments, or commercial spaces that can be resold at a higher price after renovation.
When buying stocks, the barrier to entry is even lower than with real estate, making it truly accessible to everyone. The stock market has seen countless success stories over the past decade, such as Apple, Tesla, Alphabet (Google), and other technology companies. If you bought a Tesla stock 10 years ago for $1,000, your investment today would be $36,000.
Your portfolio income has numerous benefits, including:
- You can potentially create much more value for yourself than through the earned income channel.
- You do not sell your time because you do not have to constantly participate in your portfolio generating money.
- It's up to you how much risk you take. You can jump on the wild stories, but if you are risk-averse, there are still plenty of ways to build a portfolio that fits your plans.
What's not going to happen? One thing is certain: you will not get rich overnight. In recent years, it's become especially fashionable to hear financial "gurus" tell you instant wealth - well, they are not telling the truth. Building a healthy portfolio takes time, especially if you start small, and it's important not to lose money in the process. It's best to gradually build a portfolio from your earnings that promise bigger gains in the long run.
It is important to invest only in assets where you have carefully weighed the risks. It is a classic stock market mistake to say in retrospect, as an outsider, "If we had put all our money into this, we would be worth billions now." Unfortunately, nobody can guarantee that the next investment will provide similar results. But if you think about your financing options and the portfolio investments that serve your long-term plans, you'll be one step closer to building significant wealth.
Passive income generation is the holy grail of wealth building because, as the name implies, it generates income almost automatically. At the same time, as I said at the beginning of this article, there is no source of income that does not have to be earned first.
The biggest advantage of passive income is that once you build it, the system will generate income for you for a long time, so you can sit back and relax.
Renting out an apartment is one of the most classic and accessible types of passive income. With AirBnB, you can rent out on a short-term basis (though you'll have to do some administrative work), but a good location and a well-designed interior will generate money for you automatically.
A classic example of passive income is royalties, where you create something (invest your time and work) that then generates royalties for decades - without you having to do anything. This includes songs, other artistic creations, but also various inventions.
You can also earn passive income in the stock market, where there are many shares available that pay dividends to the owner. This may not be a lot of money per share, but if you build up a large portfolio over the years, it can become a significant source of income.
How to put this in practice
The system I have developed is a solution that can be started even with a full-time job and generate income immediately. As a first step, we will build a source of income that will help you live an orderly life, free from any hardships. Being a Freight Dispatcher helped me turn my previous year's income into a monthly salary, and with what you can learn in my courses, you can do it too!
Once you have the basics in place, it is very important to assess the channels through which you will reach your ultimate goal. The ultimate goal I offer is to make a living from passive income. For this, I have chosen cryptocurrency and AirBnB, but countless other solutions fit your risk tolerance and can help you achieve the success you desire in the foreseeable future.