How I want to make money – an overview and analysis of various ways to generate income

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The good life?

This past weekend I tweeted :

I am fairly confident that one day I will tell people ‘I used to be an accountant’

A fellow accountant, Lance from Money Life & More responded to this tweet and led me to reflect on what my goal really is with my career, income, and my dang entrepreneurship itch that I’m afraid will never go away. I’ve already written about the benefits of being an employee as well as some of the perks of being a full-time employee. The reality is that there is a huge incentive to get a career/job and stick with it until retirement. With that being said, I know for a fact there are millions upon millions who will end up or already have ended up reaching retirement wishing they had given something else a try.

I’ve researched different ways to make income and create wealth quite a bit. Don’t ask me why, but I started to read Donald Trump’s books in middle school. While most of his books are pretty much high-level and broad advice, I have also looked into and seen firsthand how people have made income in various other ways. This has ranged from online poker (there are multiple people from my high school who have in excess of $1 million in lifetime winnings) to writing to small business ownership. Overall I think that income generation comes in a few different stages, which I which I will go through now and in the end I will talk about what my overall goal is for how I generate income.

Employee

Whether it’s working at Pizza Hut (which I still think was the best job I ever had…in a non-monetary sense) or working as a financial analyst at a huge corporation, an employee is someone who essentially works for one company and trades their time for money. Again, there are a ton of benefits to being an employee versus some other income-generating options, but the biggest drawback is that you are trading your time for money and it’s highly unlikely that arrangement will change as long as you plan on working for someone else.

This is where most people stop. There are countless would-be entrepreneurs who simply are not in the position to take the risk of entrepreneurship or simply are willing to keep the security of a job and enjoy their life outside of work as much as possible.

Self-Employed

Self-employed individuals are people who have a special skill and essentially have one-man shops. There are many benefits to this sort of income setup. You get to set your own hours, take on as much or as little work as you desire, and you answer to no one but your clients (which are essentially ones you choose to work with versus being forced to work with a client as an employee of a larger company). While self-employed individuals have the ability to essentially choose how much their time is worth, they also have potential to make more money as they become more in-demand for referrals. I wrote about ways to find customers for your service business and stressed that there will always be clients needing certain work done. Lots of frustrated and disgruntled employees see self-employment as the best chance they have at getting away from working for someone else. But most also do not realize they should have a strong sense of organizational leadership to make it work.

Business Owner

Business ownership is a lifestyle that is idolized by many employees who would love to stop “working for the man.” Not only are you the boss as a business owner, but you have employees who you can utilize and leverage to maximize the value of your company. Depending on the size of the business (and the financials), business owners could realistically spend very little time on tasks they do not want to do, such as accounting or marketing.

I would like to further split business owners. There are many small business owners who end up working eighty hours a week and constantly have something that needs their attention. They might make a lot of money or they might make a little money, but they’re the boss. They set the agenda for the company and success and failure ultimately falls on them.

The second group of business owners are pretty much completely detached from the company. Everything from sales to support to advertising is automated; the owner has built a system that does not require him to be part of the process. Easily the best book about this sort of income generating setup is The 4 Hour Workweek by Timothy Ferriss. In fact, the entire book is meant to explain exactly how to go about setting up your “muse” and trying to convince you that it’s a myth that a business owner has to be a vital part of the business model.

My Take

Personally I really look at it as a progression system of sorts. Most everyone will start out their working lives as an employee. A large majority of people will stay there and will never move on to self-employment or business ownership, and that’s okay. A smaller percentage of people will try to work self-employment on top of their regular job, and even less will eventually quit their job to work this business full-time. There is a decent number of people who will either be self-employment or own a business most of their life.

It’s natural to progress from an employee to self-employed or business owner. What I personally care most about isthe nature of how income is created in terms of time committed. The reason I think that in forty years I will not still be an accountant is because I’m so interested in the various forms of income generation and have been intrigued with forms other than employment. I personally know quite a few people who are either self-employed or own a business and are making more money working less hours than they would as an employee.

Right now I think I am in the right place, and that is working as an accountant for a large corporation. I have a career track, I’m gaining valuable skills, and the salary and benefits are exactly what I need. Long-term, though, I still think I will give self-employment or business ownership a shot, with a long-long-term goal of creating a muse (Timothy Ferriss’ term) where I own a business (or multiple businesses) where I have outsourced most of the work. What that will look like I’m not 100% sure at this point, but I certainly have been inspired by various people I have met – primarily through blogging – who are showing that it is much easier to design a lifestyle you want if you are not an employee.