Wednesday, 7 January 2015
WANT TO BE WEALTHY? OWN SOMETHING
I was talking to a friend at work last Friday about what he did for the Fourth of July. He went on to tell me about going to a friend’s parent’s house for a pool party. He said their house was amazing. I immediately asked what his parents did for a living or how they made their money.
For most of my life I have been very interested in how people build and attain wealth. As a child I noticed
that the people who had a lot of money seemed to have a less stressful and generally easier life (or at least as a child it seemed that way!). Because everyone has to work and provide for themselves and their family, it only made sense to me to figure out how people attained their wealth and copy those who have reached “financial independence.”
I’ve realized there is one key to wealth generation: own something.
There are many jobs that can make you wealthy. Doctors, lawyers, CFOs, etc. all can demand very high pay for working similar hours as the manager in a cubicle slaving away 60+ hours a week. They can leverage this money through investments, which is consistent with my point that generating – and sustaining – wealth typically comes through owning something.
Let’s pretend that you aren’t going to be a CFO of a Fortune 500 company, nor are you going to be a specialist performing surgeries each week that keep your bank account growing. Or let’s say you simply don’t want to have to answer to anyone, so working as a director at a corporation is unattractive even if it is attainable. There is are other ways to build wealth, and it’s through owning revenue-producing assets.
I talk a lot about side hustles and side income on this site. One thing I often stress with these is that a side hustle that has potential to grow into a legit company that is worth something in equity is by far the best path to take. Ideally you can remove yourself from the entire business one day, if you so choose.
There are plenty of reasons people do not pursue ownership and development of income-producing assets:
Risk – There is always risk when you own a small business. You could lose some of your personal savings and assets if the company gets in financial trouble. You can get sued over something and have to defend yourself in court.
Time – Initially building up a company can take a ton of time. Many companies started with one entrepreneur who did pretty much all the work. It’s not uncommon for the founder of a company to spend many months (or years) working long hours for meager returns. Not many people are willing to make this sacrifice.
Comfort – Many people will start a 9-5 job, get comfortable in their position, and never pursue anything further. Go to any corporation and you will see people who want nothing more than to check in, check out, and enjoy their time outside of work. There is nothing wrong with this, unless you desire wealth and “something more”; you just might regret getting too comfortable too soon.
With these risks in mind it’s important to also think about the potential benefits of ownership. Do you think Mark Zuckerberg would have been better off simply developing web applications for huge corporations? I don’t think anyone would argue that.
If you take risks, you have a higher chance of return.
Owning a rental property is a risk, but it can generate you income while also building equity. Owning a website that you work on at night is a risk because you may be sacrificing a ton of time and energy for something that never generates a profit. Your small business may start requiring more of your time and you might not want to make that painful choice of staying at a comfortable corporate job or leaving it to pursue your small business full-time.
What do you think about my theory of ownership and wealth?
By Bomia Gabice.