Knowledge is power. You know this – I know this. Everyone hopefully knows this to a certain extent. In Secrets of the Millionaire Mind, T. Harv Eker says that the only difference between a guy who is rich and a guy who is broke is what they know.
Think about the people who win the lottery. Lottery winners are literally handed massive amounts of money for doing nothing. They didn’t earn it and they didn’t learn anything about money in order to get it. Fast forward a short time and the money is always gone. I have yet to hear of a story where lottery winners invested their money and became financially successful and abundantly wealthy. Why? Because money is a thing – money is a skill – money is something you have to learn about.
You have to learn 1) how to manage your money and 2) how to make money — these are two completely separate things, however. The lottery winner is given large sums of money and ends up losing it because he doesn’t know how to manage his money (living below his means, budgeting, saving, etc.). Conversely, someone who knows how to manage money but makes very little money has an income problem, not a money management problem. This person may save, live below his means, and not be in financial trouble. However, he is also not rich or building wealth because he doesn’t make enough money. The point is that you need to learn how to do both — manage what money you do have and make money in the marketplace. This post specifially focuses on the making money part of the equation, not managing the money part.
Traditional Model of Trading Time for Money
The traditional model says that you get paid for going to work – called active income. You work X amount of hours and you are paid Y amount of dollars. This model is what is called “trading your time for money”. There will always be a cap on your income when you are trading your time for money because there are only so many hours in the day. Furthermore, you are always going to be working a ton of hours under this model if you want to make more money because you are paid for your time. This applies to hourly and salaried workers. You go to work full-time (even if the hours vary from week to week slightly) and then you are paid a salary. This is how you trade time for money.
Example: As a lawyer I traded my time for money. A lawyer bills clients by the hour. Attorneys have a base salary but the firm makes money from the hours that an attorney bills out to the client. This is why lawyers work non-stop – they bill clients by the hour. You have to work more hours to make more money.
The good thing about trading your time for money is that you are an active participant in society. Generally, it’s a good thing when people go to work. It makes society better when everyone is contributing. It also makes you personally feel better and more productive – like you’re giving back. And if you are doing what you love, then your day job is where you should be spending your time. But as far as I can tell, these are the only good things that comes from trading time for money. Otherwise, there isn’t much benefit. This is because trading time for money is just one way to get money. There is actually a better way.
I say “getting” and not making or earning because there is so much money out there for you to get – for me to get – and for everyone else to get and you can do it by learning about money, and learning how to get money. It really has nothing to do with how smart you are, what skills you have (or don’t have) or what anyone thinks about you. You will get a lot of money when you know how to get money from the market. The hard part is figuring out how you can provide the most value to the market (something I cannot help you with!).
The Non-Traditional Model
You can get money wherever people are willing to spend their money in the market. Look at what’s popular. Look at the niches. This is where there is money to be made. You can get money this way through portfolio income (stocks, bonds, funds, etc.) and through passive income. Passive income is money you get from assets you own, regardless of whether you are actively working (more on income types here). An example is a rental property. If you own a rental property outright and you get rental income, that money is passive income. You still have to maintain the house and put work into it (so passive income does not mean that there is no work involved) but you’re not trading hours for dollars. Similarly, if you own a business and sell products online, money generated is in the form of passive income. You will have to put in work to create the product, and you won’t be paid for the hours you put in, but once you start selling that product, your work is mostly done (besides maintenance and marketing), but your income potential is unlimited. You can continue to earn and earn month after month without trading your time for money.
When you don’t trade your time for money — when you get money by selling a product in the marketplace — you create unlimited potential for financial success.
Example I also sell things online in my Financegirl Store. I have an ebook that teaches you how to create a life plan, along side other digital products, and I have paid advertisements that I use on my blog. All of these things are done by not trading my time for money. I created products and then put them up for sale. They keep selling and my work is done. Pretty awesome because there is no cap on the income that I could potentially receive. Admittedly, my ebooks and advertisements do not pay me as much as I make from my job. So, the only way that this system of getting money works, is if you build your brand as an entrepreneur and get money that exceeds anything you could make by trading your time for money. The potential is there.
My own experience online is how I started changing my thinking. Instead of thinking about getting paid for giving your time, think about getting paid for providing value in the marketplace.
Although I am not yet a full-time entrepreneur, the money lessons I have learned are invaluable. I now understand money differently. I urge you to try this. I believe that once you start “getting money”, you will truly change the way that you think about money for the rest of your life.
Give It A Try!
My call to action for you is this: I want you to create something and sell it. It can be anything. If you have an idea already, go with that. If you don’t know what to sell, here’s my advice: create a one-page template of something that you have a skill set in and sell it. This could be a budget template, lesson plan, multiplication chart, summer reading list, positive affirmations, or workout routine (anything). And then sell it for $1. The point of this call to action is not for you to get rich. The point is for you to learn how to get money without trading your time. Send out an email or post on social media telling your friends and family that you are doing a money experiment and if for no other reason than to help you out personally, ask them to please buy this template for $1. Give them your Paypal email address and they can send you a dollar.
I would love to hear your experience after you do this. Please email me and I’ll share your results on Financegirl.
My hope is that by reading this post you know a little bit more about how money works. My hope from my call to action is that your knowledge of money runs even deepr. And beyond that, my hope for you is that you continue to learn about how the world works, build wealth for yourself (because you deserve it), and give back, leaving the world a better place because you were here.