Basic Ways To Make More Money.

In my post From Zero to Millionaire I talked about 5 phases that you work through to go from nothing to having financial freedom. The exact order varies from person to person and the amount of time each person spends in each phase varies. The phases also overlap. But anyone that reaches financial security will pass through each one. The five phases are Make More Money, Save It, Pay Off the Debt, Invest, and Create. I talked a little about each of those, but there is a lot more. It would take books and books worth of information to truly cover each one well. Perhaps I’ll do that one day.

 

But today I’ll talk more in detail about the first one. How to make more money. This is one of the key parts of personal finance. Making more money makes it easier to pay your bills. Then it gives you more extra money to save or put towards other projects or investing. So how do we do this? Well, here are five ways to make money. You can trade your time for it, you can run a business, you can own a business, you can invest in someone else’s business, or you can license your property.

 

Trade your time for money.

What it is.

This how most people make money. They trade their time for it. They get a job where they are paid to perform a task. If they develop a valuable skill they can get paid a lot of money. Many college degrees will help you get a job that pays more when you graduate. With hard work most people can afford to retire after working for 40 years. The more money you make relative to the amount you spend the less time it takes to retire.

How to make it work.

You can use several strategies to make more money here. The most common is to get a job. The next most common is to change jobs to one that pays more. Once you develop a skill set you can use it to get a higher paying job. You can also use college, trade schools or continuing education programs to increase your skills. Employers want people that have skills and continue to grow them. Another option is to get a second job. This takes careful planning and a bit of sacrificing of your free time, but it will help you achieve your financial goals.

 

Run a business.

What it is.

A lot of things can fall into this category. But for today I’m talking about people that start a business that they actively run. This might be a person that starts a landscaping business that they actively do the work on. It would also include lawyers that have their own firm. People in this category aren’t working for someone else, but they are still trading their time for money. This has the advantage that when it is doing well you can make a lot more money. It can also provide you more freedom to do things the way you want. The disadvantage is that when things don’t go as well you don’t have the support of a regular employer.

How to make it work.

This is a great option if you have experience in something and want to do it full time. You will need to plan and research all aspects of running a business, not just the specific service that you want to provide. Meaning that you will need to learn a little bit about accounting, marketing, and other aspects of business. This can be a great option while you have a regular job. You can start a side business that you do on your days off or in evenings. Pick a skill that you have and offer it to others. It works best when you find a skill that you have that other people don’t have and that they may want. For example, if you can fix computers or cars or appliances. You can offer to fix them for people.

 

Own a business.

What it is.

This is a little different than the last. In this case you own the business, but don’t necessarily do the day to day work. For example, the people that own a restaurant franchise don’t usually participate in the day to day operations, but they do get paid from the profits.

How to make it work.

This option usually requires money to start. You will either need to start a new business and hire the people to work it, or you will need to buy an existing business. Either way those usually cost money. Once you do own the business you can hire people to run each aspect. This allows you to oversee the company without having to spend a ton of time on it. You can spend your time on other projects. This will generally mean less money for you since you will be paying other people to run the business, but it means you will have considerably more time available. This also means you can own more businesses or work a regular job.

 

Invest in a business.

What it is.

In the previous example you directly owned the business and were responsible for operations. That meant that you had to spend some time checking in on things to make sure they were going correctly. You also may need to do some hiring and firing to make sure you had the correct people in place. It wasn’t a completely hands off option. Investing in a business is much more hands off. You have less say in what is going on and the profits are lower. But you have no responsibility to the business and you have maximum freedom and time.

How to make it work.

The most common way to do this is by buying stocks in the stock market. This involves opening a brokerage account, researching different companies, finding one or more that you think have the potential to make money for the long term, then buy the stock at a price you’re willing to pay. This can be the most intensive in the beginning. It can also be expensive. To do this well you will want to ignore the hype and the news. You’ll then want to read financial reports on different companies to find out what they are truly worth.

 

All that seems like a lot of work. Another option is to invest in a mutual fund. I’m a big fan of index funds. You buy them similar to stocks. The difference is that your money is pooled with other people’s money and the fund will own a lot of different companies. One of the most successful is an S&P 500 index fund. These funds own a little bit of 500 of the biggest companies in the United States. This can be a great way to start investing. This gives you the power to invest in a lot of companies. It also gives you safety. By diversifying into 500 companies instead of one you are protected in case one fails. The price will go up and down with the market, but in the long run it will end up higher. Just don’t sell when the market is down. It will always go back up.

 

License an idea.

What it is.

This my favorite. It is also nearly completely hands off. It has the potential to make you the absolute most money relative to the time you have to spend. This is when you create something and then other people pay you to use it. You could create a song, write a book, invent a gadget, write a program, or anything else that once you create you can sell over and over with virtually no more input from you.

How to make it work.

This may be the hardest. You know of authors that write books and sell millions of copies. You know of musicians that do the same with their music. For each of those there are many others that still make good money without selling millions of copies. But you do have to create something that people want. Then you have to market it. You can do that by talking to people in the field. For example, if you record a song you can post it for sell on iTunes then promote it on your band’s web page. You also want to market externally so you would find places to play your music for the public. Radio stations, musical events, websites, or anywhere else potential listens will be. The point is that it can be difficult to create something that people want to buy. Then you have to work to get people to know about and want to buy your product. But once this is started you relax, keep your name on their minds, and watch the money come in.

 

These are five basic ways to make money. Did I leave anything out? Do you have any examples of how you make extra money?

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