Getting a job and not spending all the money each month is the
slowest, hardest, and least efficient way to build up a big pile
of money. Saving money is a worthwhile net worth building
activity, but it doesn't offer much more than that unless your
goal is only to have a little cash at the ever-increasing age of
retirement.
This is because wages are the most heavily taxed source of
income. Income taxes (federal, state, and social security) choke
off about 35% of this earned income before you ever see a dime.
And second, your income is capped by the number of hours that
you can physically work in a week; even if it pays well.
Ownership is the financial goal that we all have; owning
investments that will passively pay us interest and dividend
checks. But there are two wildly different paths to get there.
One path is very slow and slightly uncertain, and the other path
is much quicker but more uncertain to accomplish.
The fastest and most efficient way to build a pile of money is
through entrepreneurial activity. This way, you can get into a
position of ownership without buying it, because you are
creating it. You bypass the taxation tollbooth of wage-earners,
and the limitations of your salary and time. The goal is to
create your own piece of equity that gives you a source of
income that you control. Now before you start rolling your eyes
that this is too risky, too hard or you don't know how to do it,
let me give you some ideas to help reduce your hesitation.
Maybe it isn't your money (borrowed), or your expertise (a
partner's), or skill (hired, outsourced); but if you lead the
team you can create your own piece of the equity. You can start
out on a tiny scale; I am acquainted with someone that earns
over $100,000 with a dog walking service. She has other people
walk the dogs, so that she can focus on marketing and managing
her walkers. Don't you think that you could think of a dozen
similar services that might be needed in your area?
It is mentally challenging to start an entrepreneurial activity,
but more importantly, it takes money, knowledge and persistence.
It takes knowledge because there is always going to be trial and
error in refining your business model; and it takes money
because you need enough money to find a successful business
formula that pays for itself before you run out of money. It
takes persistence because obstacles are natural when creating or
maintaining any business activity.
There are zillions of areas to become entrepreneurial and build
up equity, but here is another idea that nearly all communities
offer; I bet that there are at least three successful
residential home rehabbers working your community. Find them and
convince one of them to help teach you in exchange for being a
free assistant. And when you strike out on your own and need
additional help, offer to give him or her a percentage of your
profit.
I want to show you an example of entrepreneurial persistence,
even though it uses real estate again. There is a giant mall
being built at a nearby city. I was dropping off a friend that
lived there and he said that it was a great story about
obstacles. The city didn't want a new mall to take business from
the downtown strip, so the developer moved the project outside
of the city limits. Then the state government said they couldn't
allow it without a larger highway exit, and they didn't have
enough money to make a highway exit. So the developer raised the
money and built the highway exit himself. The point is that no
matter how insurmountable an issue first appeared, the developer
was undeterred from reaching his goal.
Developing a side business to ramp up your income is the most
financial rewarding activity you can undertake. Imagine if you
took half the effort you put into studying for school and put
that into business building over four years - I'd suspect your
results would be far greater than setting aside some of your
paycheck each month.
About the author:
Francis Kier has an MBA in finance and shares his two decades of
experience with investing and personal finance. More of his
articles are available at
http://investing.real-solution-center.com.
