When it comes to accumulating wealth, there are 3 main ways to go about it.
- One, you can work for someone else, get paid a salary and try to save some money with every paycheck;
- Two, you can make your money work for itself by investing it wisely;
- And three, you can start your own business and become your own boss.
The 3 choices above are not all equally effective. In fact, I would say that investing your money wisely and starting your own business are the only truly scalable ways to make money.
First off, what do I mean by scalable?
Let’s take your day job as an example. If you work for someone else, chances are you are either paid by the hour or paid a fixed salary. As a result, since there are only 24 hours in a day, there’s is only a finite amount of money that you can possibly make in a given year.
Sure, you might get a small raise from year to year, but in reality you will never be able to make “life changing” money with just your day job.
Now I’m not saying that having a day job is bad.
After all, having a steady salary is an excellent way to make ends meet and pay the bills. But the best way to expand your pool of wealth is by starting your own business and investing the money that you do accumulate.
The Trap Of Working For Someone Else
So why do so many people devote their lives toward working for someone else when there’s limited earning potential?
It’s actually a very easy trap to fall into.
For example, when I first graduated from college, I practically lived at the office. Every morning, I’d get to work at 9am and leave at 10pm every night.
While my hard work paid off and I was promoted every single year, I also found that my work responsibilities did not scale proportionally with my yearly raises. In other words, I was getting paid less and less to do more work and I wasn’t seeing any of the upsides of the business. Even though my company grew more and more profitable, I wasn’t seeing any of that extra money being deposited into my bank account.
It wasn’t until my wife became pregnant with our first child did I finally realize the fallacy of devoting all of my time and energy into someone else’s business.
How did fatherhood wake me up?
Well I got a swift kick in the butt when my wife decided that she was going to give up her 6 figure salary, quit her job and stay at home with our child.
All of a sudden, we had to find a way to replace her lost salary and working more hours wasn’t the answer.
Even if I could get another job and work 20 hours a day, there was no way that I’d be able to make up another 100K.
So what did I do?
I became more efficient at work, spent less time at the office and decided to start a business selling keepsakes for women and table linens for events and weddings online with my wife on the side.
To make a long story short, by devoting our free time to our business instead of our day jobs, we managed to make up my wife’s lost salary with our online store during our first year, and the business has grown in the double and triple digits ever since.
Today, my wife works only a few hours a day and spends most of her time with our kids. Also, the business makes enough money that I don’t really have to work anymore and I do so on my own volition.
The Beauty Of A Business
Most people think that starting a business is risky and to a certain extent there is some amount of risk involved.
But you can greatly mitigate your starting costs by opening a business online. For example, my wife and I started our online store for only $630 but realistically, we could have gotten by with only $35 dollars a month.
Glen, the owner of Free From Broke probably started this amazing blog for only 5 dollars a month and today he makes an excellent living writing articles online. [Glen’s Note: I started for the cost of the url which was a whole lot less than $5/month. The hardest part was time and ideas.]
It doesn’t take a whole lot of cash to get started with an online business idea. After all, what do you have to lose? Can you spare a few extra bucks to start a blog or put up a website?
Your Business Can Only Grow
Since it costs so little to maintain a website, you can easily stay in business indefinitely or as long as it takes for you to become profitable.
One of the beauties of running a business online is that your web traffic gradually grows over time as you add more and more content. As Google indexes more and more of your website, the more likely that people will be able to find your site through a web search.
When it comes to web based businesses, being consistent is one of the main ingredients for success.
By devoting your free time to adding content to your website, you can ensure that your business and customer traffic will continue to grow over time.
You Are In Control
Unlike your day job, you can’t get fired and no one can take your business away from you.
You get to call the shots and make your own decisions. And the best part is that you get to pocket all of the profits as well.
For the past several years, my wife and I have been receiving double and triple digit raises every year because our store continues to grow organically. But if we were salaried employees, we wouldn’t see any of that upside.
After all, when was the last time you received a double digit raise at your day job? Probably not in a very long time…
Furthermore, the extra money has allowed us to feel more financially secure because we own the business and no one can take that away from us.
Never Too Late To Start
If you find yourself working 80 hour weeks at your current day job, you should take some time and re-evaluate your situation.
In reality it doesn’t take a large block of time to start your own business. It just takes consistency.
If you can devote just 5-10 hours a week to your business for the long haul, then you have what it takes to be successful.
When Glen started this blog, he probably didn’t make money right away. But he kept at it for several years and his traffic and profits have snowballed. Similarly, my wife and I didn’t make much money with our online store during the first few months either but we stuck with it. [No, not at all right away. I’d add that as well as being consistant you need to network with great people, like Steve.]
Success with an online business mostly requires consistency but it’s hard to find time to devote to your business if you spend all of your time working for someone else.
So while your day job is great for paying the bills, your quality time is best spent elsewhere on your own endeavors. Avoid investing your extra hours at a place that has limited upside potential. Otherwise, you will never drastically improve your financial situation.
Steve owns the popular blog MyWifeQuitHerJob.com where he writes about entrepreneurship and how to create a profitable online store
Warren Rutherford says
Great post. Initially I thought – where are you going with this concept, and then you described succinctly the benefits. We know that starting your own business is not for everyone and when you do decide to take that leap you need the faith, persistence, and go-get-’em attitude that you and your wife have to be successful. Being an entrepreneur requires focus and determination – which you describe well – and of course the all necessary motivation to be free from that day job. Thanks for the inspiration – particularly with the online focus – inbound marketing works remarkably well.
Financial Samurai says
I like the idea of doing both for the first several years, if your company will allow.
Steve, having your online store is great, and it would be so cool if everybody could earn a recurring income that way.
I like the idea of being a stay at home dad. We will unite!
Are you planning to have a kid Sam? 🙂
I like doing both for a year or two to prove the concept as well. It’s not easy to jump into the unknown.
Invest It Wisely says
Doing both is definitely a great way of lowering the risk, if your company allows it. Get some security and use that to leverage into building a business. In any case, job experience is highly valuable, and I think a few years of working for the man after graduation definitely teaches you a few things, and you can take that knowledge with you and apply those skills later on.
Financial Samurai says
I must just have several already!
I have already registered the sites: retireby41, retireby42, retireby43 etc, so let me know if you want to buy the .com or .org versions!
Invest It Wisely says
LOL… he’s egging you on, Joe!
I always will be for that second and more exciting option. Starting your own business!
Great post! Thank you for sharing at BizSugar! I love to read posts like this!
P.S. Sorry for last comment, its all my fault.
Ginger @ Girls Just Wanna Have Funds says
I love love love this! Such an awesome example of a husband and wife working together as a team towards one goal for the benefit of the family. I also love the points about working for yourself and ultimately being in control of your own destiny.
I have some things to think about this weekend!
SB @ One Cent At A Time says
Even the topic suggested some discussion on climbing the corporate ladder, but in reality you only spoke about having a small yearly raise. I know climbing up the corporate ladder do not mean getting a small yearly raise. Its much higher increase and believe me top executives do earn a salary which businesses can’t for them.
Glen Craig says
But you’re talking about moving on the higher end of the corporate ladder. For many, moving up starts from the bottom and those raises and promotions aren’t always large.
Also, a big point Steve was making is that with those raises and promotions comes more responsibility and time. You may get paid more but you may be giving up relatively more of you life as well.
I think you have to understand the big picture. Every person’s situation is different.
Okay, so I’m 22 and about to complete a degree and go into the world of work in some form or another. I’m probably more suited to my own business due to a desire to seek perfection and new ideas that seems to wind up corporate types. Other than start a blog which I’ve already done, what sort of business can someone like me set up with little knowledge or experience. I’ve previously bought guitars locally and sold them online, but its by no means a volume business and I’ve been a self-employed gardener ones summer, for which getting business was one of the hardest things I ever did.
Everything I do I want to give me all to so once on the corporate latter I’ll want to be a success at that. Is business all about a side business turning into to something more substantial… or is something you can just do and seek out?
Glen Craig says
You could do both. Go the corp route and try out some different ideas on the side. See which flourished for you.
Where do you think you can put your unique skills to the best use? Brainstorm some ideas and get started.
Corporate payouts are very high and businesses can have very high returns. The only way to get better returns is to invest wisely.
Dan Meyers says
Good article, but I don’t totally agree that you can’t do as well going the corporate route. There’s a lot of money to be made in that world if that’s what you like. However, there are some major intangibles that are much harder to get and make starting your own business even more worth it… love the advice to be consistent and persistent.