The foundation to a secure financial future starts with your skills.What value do you bring to the marketplace? What can you do that somebody will pay you for? What do you have to offer?
There two basic ways to make money. 1.) Trade your time and services for money, or 2.) Have your money work for you.
The ultimate goal should be to have your money work for you and generate income through interest, capital gains, dividends, etc.
How much is enough money? Well first thing is to determine the amount you need to live off of. Let’s say you need $55,000 a year in order to live a normal middle class life. Next we will assume a return of 8% a year. Given these numbers you will need $687,500 (55,000/0.08). I can get more into the details of the assumption in more details in a different post, but this gives you a general idea.
So how can we get to that point? Well that’s where the possibilities are endless. That part is up to you. But let me offer some of my thoughts. There is a risk to reward ratio in the path you choose.
The absolute worst thing you can do is to take the high risk low reward path – working at a high-school level job and not continue your education. If you’re being paid at the poverty level you should really consider upping your skills. Staying at a dead end job is both high risk and low reward because you are easily replaceable.
A. Higher risk with higher potential reward options include becoming an entrepreneur or a commission only salesperson, etc. These are the Bill Gates, Elon Musks, and Richard Bransons of the world. What I’d like to point out here is the phenomenon of survivorship bias. This means that we don’t hear about the people who failed horribly and ended up broke. The reality is that 80% of businesses fail in the first 18 months and the majority of commission only salepeople make just enough to get by. If you want to become the next billionaire you’re going to have to take some risks.
B. On the lower risk side is to go to college or trade school and study something that interest you and get a high paying job. If you are not the traditional school type then I would recommend a trade like something in construction or maybe something in cosmetology. My two cents would be to study business or one of the STEM fields, Science Tech Engineering Math. This path offers you a higher probability of success but your financial reward will likely be lower than that of a successful entrepreneur.
C. I think a hybrid approach offers the best risk reward. First go study and learn your desired area of expertise. Go work in that field for a few years and get some experience then you can make the jump to entrepreneur. Or you can have your steady high paying job and start a separate business on the side at the same time.
No matter what you do, educating yourself and learning new skills is key. Remember, Elon Musk, Bill Gates and most other billionaires were really smart and went to Ivy League universities. An education will greatly boost your chances of earning an above average income. Money comes and goes, your business may prosper and crumble, but no one can take your experience and education away from you.
