THERE ARE FOUR METHODS TO MAKE MONEY

[Annjoki]

Based on Robert Kiyosaki’s work (Author of Rich Dad, Poor Dad)

There are four methods to make money.



The cash flow quadrant (in the picture) illustrates this point: Four basic methods and four types of personality with regard to the money. The first method is to work for a company, a person or the government; being an employee. It is a common method for many people, from students to important managers in big corporations. The employees sell their time for money. And usually they take orders from a boss. The best of this: financial “security” (the income arrive every month but, come on! nowadays it is difficult to talk about financial security for employees). The worse of this: they are not very free, unless they really enjoy the job. In short, if you are an employee, then you work for your boss, your company or the government.

The second method is to work by yourself without a boss: being a self-employed. It is a common method in several professions: engineers, lawyers, accountants, doctors… They do a job without supervision and they are committed to finishing a well-done job on time or being advisers for a project. Another type of self-employed people is the owners of a small business: restaurants, stationeries, bars, stores; this type of self-employed people actually work into their business and usually they are the “soul” of the business, although they can have several employees to help do the work. They are relatively free in deciding if they will do a job or not. The best of this: relative freedom. The worse of this: usually a self-employed works a lot of time because they compete with companies and other self-employed people. Actually, in most of cases they work harder than employees, and they can make a lot of money if they are really good. A mediocre self-employed always will have low incomes from his work. Many self-employed will age very soon because they work many hours per day. In short, if you are a self-employed, then you work for yourself and really can say: “I enjoy the fruit of my work” (but it could be a small fruit or a big fruit).

The third method is by creating a business where you can have people working for you: being a business owner. There is a difference between the owners of small businesses in the second method and the business owner in this one. In the second method they are employees without a boss.
They have to work in the business and usually the business depends on them and the time they dedicate. In this third method they don’t need to become employees into the business unless they want: they have people doing all the necessary tasks. If they are on vacation, the business continues operating. They build a business system and then look for talented people to run it. And always they are the big boss. The best of this: Freedom to decide (you are the big boss and the system is yours); if the business is successful, then you really can make a lot of money and be rich. The worst of this: risk (90% of business ideas will fail, and then you need to be very perseverant). In short, if you are a business owner, then you have people working for you.

The last method is by investing: being an investor. But you only will be a real investor if you have appropriate financial education, experience (including some unsuccessful investments) and cash surplus to invest (you can put food on the table even if your investment fails). We don’t talk about a stockbroker who really is an employee in most cases. We talk about the people that know where to put the money and earn a lot of cash while the time is running. They invest in three basic things: real estate market, stock & financial market and shares of businesses. The best of this: successful investors have financial freedom. The worse of this: It is not easy to become a real investor: you only will be a real investor if you have knowledge, experience and cash surplus. In short, if you are an investor, then your money is working for you and maybe you don’t need to work.

The first and second methods are the left side of the Cash flow quadrant. Most people are in the left side. It looks like people prefer the security instead of freedom. Sometimes people really love their job, but the world is full of fearful people doing a job that they hate and the only reason is to have a check to pay their obligations and life expenses (the rat race). It is the typical path for poor people and mid-class people. The third and last methods are the right side. The real rich people are in this side. If you want to have financial freedom and you are not rich, you need to focus yourself on leaving the left side and going to the right side. It is not easy but if you are perseverant and intelligent, then you can reach your goals. But many times it requires a change of mind about money topics. Education is the clue. I'm sure that I have left out other terrible investments out there (and feel free to add to the list here), but knowing what to avoid when investing is just as important as knowing what is a good investment.