There are many ways to create wealth for yourself. But out of all those different methods of making money, they are part of either one of two categories. The first category is the owner category. This means you have equity in something or that you own something. You own a business or a piece of a business. The second category is the employee category. This means that you are a worker. You are paid for your time that you put into the business. You will make money using one or both of these methods, however one method is vastly better for wealth creation.
What is wealth creation? It’s not necessarily just cash in your bank account. Wealth is a bit more complex than just money. Wealth takes into account your cash, your equities, your assets, you revenues, your expenses, your debts, or practically anything else you may see on a company’s balance sheet. Wealth takes every aspect of financial health into account rather than just cash in a bank account.
The only two ways to make money in this world are to become an employee or become an owner. A mixture of the two also works and is common. As an employee, you have a significant limitation that is stopping you from making real wealth. And that limitation is time. If you only are making money during the time you are working, then that wealth creation will be very slow. Wealth creation is linear in this scenario. That means there is an invisible ceiling on how much money an employee can make since an employee can’t work around the clock 24/7. An employee needs to take breaks, go on vacations, or get sleep. Or the employee can get sick or hurt and miss work which means missing out on their paycheck. There are some obvious downsides to being just an employee, but this is where practically everyone starts. Since you have little money or skills when you enter the workforce, this is usually the only option to start with.
Although being an employee may sound a little dull perhaps, know this. Some people do very well for themselves by being an employee. Doctors and lawyers are both examples of employees that make a good amount of money for themselves. However, the same limitations apply to them as a factory worker working for minimum wage. They are only making money when they are on the clock. If they are not physically working, then they are not making any money. The real wealth creation is made when these doctors or lawyers own their own firms. That brings us to the next category of wealth creation.
Being an owner is the best and most effective way to create wealth. Using the last example of a doctor or lawyer, they can only make money when they are physically working. However, if they are the owner of their own firm, they can make money around the clock, 24/7/365. This is because they have ownership or equity. Now although they themselves can’t make money around the clock, a business can. And if they have partial or whole ownership over their business, that means they are now making money around the clock too. A business has no limitations to how much money it can make. A business creates wealth by not only making profit, but more importantly by how much the business is worth. The market value of the business is where real wealth is created. That’s why becoming an owner is so important for creating real wealth.
It can take years of hard work to be able to be in a position to start becoming an owner. You can either become an entrepreneur and immediately transition into being an owner, or you can inch your way into becoming an owner like most people. Entrepreneurs take on great risk because their wealth relies on the value of their company. If their company isn’t making money, then their company evaluation will be low and they will not have made any real wealth. In other words, there is extreme risks involved which is why it’s rare that entrepreneurs make it big. However, when they do make it, the rewards tend to be very high. Higher risk means higher potential rewards and higher potential losses.
A better and more secure way to create wealth is to ease into becoming an owner. There are a number of different ways to do this. The easiest and most accessible way is through the stock market. Buying stock allows anyone to own a piece of a public company. Owning stock is a way to become an owner. Your money will work for you in the stock market and has not limits, like you have physically. Like a company’s valuation, your money will move with the company at any given time.
Another way to become an owner is to start a side hustle. Instead of going all in at being an entrepreneur, start a side business that you work on outside or your normal day job. This is my favorite way to create wealth because you are beginning to become an owner while cutting out a lot of the risks of going all in. By easing into entrepreneurship with a side hustle, you will become an owner of something small, build up skills, and chances are do something that you find meaningful. And if you are successful with your side hustle, you may even consider doing it fulltime and quitting your day job. As your side hustle grows into your day job, the market value will increase and so will your wealth.
Becoming an owner is the name of the game here. Although practically everyone starts out as an employee, there are secure steps with lots of upside that everyone can take to inch their way at becoming an owner. Over time and through hard work, transitioning into an owner will result in more real wealth that can be used to create even more wealth. I hope everyone takes some level of effort into becoming an owner to start making real money.