Are You Trading Too Much Time for Money?



One of the more interesting things I’ve heard about recently was a piece about how the wealthy think differently than the middle class.

Steve Siebold, the author of the book How Rich People Think, interviewed more than a thousand millionaires and billionaires and came up with some information on the way that the wealthy approach life.

Among Siebold’s most interesting observations is the fact that, in the middle class, many people trade their time for money. Here’s what Siebold points out:

Formal education teaches people how to think and perform in the linear world of commerce, but the rich rarely become wealthy trading time for money.

This made stop and think. Am I trading too much of my time for money?



The Problem with Earned Income

According to Siebold, the emphasis on getting advanced degrees — and even four-year degrees — might be preventing some of the middle class from joining the ranks of the super-wealthy.

After all, a formal education prepares you for a job or career. It doesn’t really prepare you to engage in some form of wealth creation.

I know that when I was working as a business to business sales manager, I traded my time for money. From talking with customers to flying all over the country to have meetings with them, I spend time and effort in exchange for payment. This is earned income. Earned income can be a great way to live comfortably, and even provide you with a way to set aside money for the future, building a nest egg for retirement (if your job is a “good” one). After all, I was already making six figures over ten years ago.

However, earned income rarely results in financial freedom right now. And it doesn’t set you up to eventually rely on regular, organic revenue streams, rather than always having to give up time in order to get money.

To this end, many of those who are wealthy cultivate diverse revenue streams that involve passive income.

How to Develop Passive Income

I’m not going to lie. Passive income does require a lot of work to get going. In order for your portfolio to pay enough dividends to matter, you have to put in capital and saving doesn’t happen as soon as you get the idea. You can look into dividend stocks and more high yield investments, but you are taking a risk that the companies you pick will do well long term. If you are talking about building a business from the ground up, then that’s even more work. You can also become involved in a creative endeavor designed to provide you with royalties, but that doesn’t happen overnight.

The common thread here is that you first have to put in the time. The good news is that once you have a few years of effort under your belt, you’ve cultivated passive income that provides you with revenue — without the need for you to always be trading in your time.

Instead, you have a little more flexibility and freedom. To a certain extent, a career like the one I had provided some of that. At the very least, I didn’t need to stay in the office all day and when I’m out and about, I can schedule my own meetings as long as everything that needs to be taken care of gets looked after. However, the job was my life, since I was routinely working 70 hours a week. I was trading my time, if not my life, for money.

That changed when I started MoneyNing.com. I still worked really hard, maybe even harder when I first started, but I was building something that could last. If anything, I was much more flexible, because I can set my own hours and work as much or as little as I want. I can go on a vacation on a whim, or play in the day time and work at night. I can also only work during 9-5 on weekdays if I wanted.

I also kept investing. It took years of saving to see my nest egg grow, but my investment portfolio now throws off enough income to make my life much less stressful. I still run MoneyNing.com, but I’m at the point where much less of my time has to be used to earn a living.

What about you? Let me warn you again that nothing is going to happen overnight. I started MoneyNing.com in 2007 and I have been investing since I was a teenager, almost 30 years ago. Things take time to build, but the good news is that anything you build will help you much more than if you never started. For example, if you need $1 million to throw off enough income to pay for your living expenses, then even reaching $100,000 means you only need to work 90% to make ends meet. Procrastinate on saving and investing and you’ll have to work 100% forever.

What do you think of Siebold’s observation? How much of your time are you trading for money?