One of the more interesting things I’ve read 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, even though I’m self-employed, I often trade my time for money. My freelance writing business requires that I spend time and effort in exchange for pay. 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).
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
Passive income does require a lot of work to get going. You have to research dividend stocks and spend time building up an income portfolio. You might have to build a business from the ground up, or become involved in a creative endeavor designed to provide you with royalties.
However, the common thread is that after a few years of putting in the time, 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 mine provides some of that. I do have some flexibility in terms of being location independent, as well as being able to set my own schedule and decide which clients to work with. However, I’m still trading my time in for money.
I don’t expect to always be doing so, though. I’ve started investing in dividend paying investments, as well as considering other alternative revenue streams. The goal is to eventually get to the point where much less of my time has to be used to earn a living.
What do you think of Siebold’s observation? How much of your time are you trading for money?