“If you don't find a way to make money while you sleep, you will work until you die.” This is a famous quote by one of the great investors of our time – Warren Buffett. How true is this statement? And do you agree with it? We will be discussing the two ways to make money in this blog – ‘You working for it’ or ‘Making it work for you’.
‘Working for money’ produces ACTIVE INCOME. This is the income earned in exchange for performing a service. It is the most common form of income - frequently earned by trading time for money. E.g. hourly wages, salaries, commissions, tips, etc.
‘Money working for you’, on the other hand, produces PASSIVE INCOME and/or PORTFOLIO INCOME. These are cash flow received regularly, requiring little to no daily effort to maintain. This kind of money keeps coming in, even while you sleep. E.g. Music and book royalties, interest earned from investments, asset appreciation, capital gains, dividends from shares, etc.
‘Working for money’ is extremely important. We have to work for money first to be able to have it work for us at some point. We, however, only have a limited number of hours in a day to work, so if our only focus is on trading our time for money (active income), we will be restricted.
‘Money working for you’ is also doubly important because our physical presence and effort aren’t continually required to make an income. If you have a passive and/or portfolio income stream, you can make money at all hours of the day, and every day of the year. So, whether you are sleeping, watching the television, or on holiday, you can still be making money.
Let me pause here quickly and point out that ‘money working for you’ is not a get-rich-quick scheme. Creating any streams of passive and/or portfolio income requires an investment upfront, whether of your time or money. Oftentimes, the upfront work required can take years. But that effort will generate income for years, or even decades to come.
So, which of these two ways of making money is better? From my perspective, both ways are important on our wealth-building journey. I also believe both ways can co-exist; we can and should benefit from both worlds by leveraging the valuable attributes of each. And as we gradually journey into financial independence, ‘money working for you’ will be the natural shift we will all look forward to enjoying!
Is your money working for you? Or are you just working for money? There is definitely room for both!
About Nike
Oyenike Adetoye (aka Nike) is an impactful speaker, author and personal finance expert. A Chartered Management Accountant by profession. Nike is the founder and CEO of LifTED Finance, a private financial firm that educates, coaches and supports people on their journey through financial fitness and wealth management.