The 5 Methods of Making Money

Tuesday, January 5, 2010 , Posted by Johnny Fuery at 4:20 PM

Originally Published 2007-11-13 19:20:37

It's been on my to-do list to write about the concept of leverage for about a week now. It struck me as I was making a mental outline of the not-yet-written article that leverage is only one way to make money, and that the classification of these categories, while seemingly simple, is worthy of review.

So, in broad terms, there are only 5 legitimate ways of making money. This is irrespective of methods that are illegal, of course. You're also free to seek out and marry a wealthy older mate, but that's outside my scope of expertise. :-)


  1. Employment. Go work for "the man". It doesn't matter if you're flipping burgers or performing open-heart surgery -- if you trade time for dollars, you're still here.

  2. Business. Employ others, create value, and re-sell at a profit. Be "the man".

  3. Creativity. Write the great American novel or compose the next Thriller.

  4. Investment. Take your earnings from the other methods and buy appreciating assets, like stocks, bonds, and real estate.

  5. Leverage or "other people's money" (OPM). Borrow lots and lots of money and reinvest it at a higher rate of return than the amount you're paying in interest. This is, in essence, the business model of traditional banking (the term "savings and loan" is a direct description of this practice).


Now, ideally, you'll employ all five on your way to riches. I highly recommend putting effort into all of these (save for employment, perhaps, because most of us have that one covered).

Want more info? Leave a comment!

Comments

On 2007-11-13 20:00:57 Mortgage Business » The 5 Methods of Making Money said:
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On 2007-11-30 00:21:14 Srini said:
That is interesting. I am in my 20's and always wonder how anyone finds so much time to do all 5 of these! At present, I work a day job, side-gigs online and invest in shares minimally. Between that, I am up to my neck already...

On 2007-12-03 08:37:43 TigerTom said:
6. Capitalism is all about making a profit of other people's work. Set yourself up as a middleman, and rake in the moolah.

On 2007-12-30 23:53:45 Protein Skimmers said:
You should view yourself as a business. "ME INC." Using all 5 methods you posted, ME INC would have 5 revenue streams. Most people have only #1. Take a step back, look at yourself as a small company. View your job as a business and you can grow its income (ie. get promoted, get raises). You probably will view #2-5 like that already, so why not do it with #1.

On 2008-04-02 04:41:39 work from home said:
work from home...

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On 2009-12-01 00:18:44 Janice | Jobs in Abu Dhabi said:
I feel the most basic thing to make money is 'employment' or getting a job. The idea of 'leverage' is also good however we have to be careful and smart in what we invest the money. I like the way you have listed everything.

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