December 12, 2009

The Three Ways to Make Money (Without Winning a Lottery)

You can be young without money, but you can’t be old without it.
--- Tennessee Williams

There's more to life than money but money is an important part of life. How can you make more?

Here are the three ways
  1. be efficient (catch more fish)
  2. be effective (catch bigger fish)
  3. be creative (keep more of each fish)
We'll explore each.

Be Efficient
A rich man is nothing but a poor man with money.
--- WC Fields
Do more of what you're already doing and you'll get more of what you're already getting. Picture an assembly line.

You can work more hours. Your rewards won't grow in exact proportion but will improve until you're not getting enough sleep or spending enough time with your family. If you're on salary, you can still work longer but won't get much for it. Would you get better returns by investing the extra time in improving yourself?

You can also do more with less. Maybe you can reduce your costs by using more technology. Picture Wal-Mart.

Be Effective
Money can't buy happiness, but neither can poverty.
--- Leo Rosten
You can specialize. You target specific markets and discard what doesn't fit since those are distractions. Your costs may increase but your revenue goes up even more. If you're after a particular kind of fish, you must return other fish, no matter how they tempt you.

Think of Ghostbusters. Who you gonna call when only the best will do?

When you invest in yourself, you multiply your financial rewards when you push through the dip and apply the 10,000 hour rule.

Each of the approaches above has merits. One is not better than the other. Each works alone or together.

Be Creative

Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy.

--- Groucho Marx
Keep more of each fish. Reduce wastage. Can you keep more of each dollar you earn? Financial literacy and tax planning helps. You can't change the tax rates but maybe you can increase your tax deductions to achieve the same result.

Podcast Episode 47 (3:12)

1 comment:

Unknown said...

Interesting thoughts! I want to comment on a part of your article about money and happiness. I believe it’s not possible to make a general statement on whether money makes people more or less happy. Money comes with a whole set of new elements that may have good or bad impact on our happiness, and depending on how susceptible we are to every one of them, the conclusion will go one way or the other (i.e. different from person to person). I recently made an effort to provide a more comprehensive picture of what these ad- and disadvantages are. I invite you to have a look at Money and Happiness and tell me what you think!
Thank you, Nick