Increasing your active income is usually associated with just getting another job. While that does increase your active income incrementally there is an upward limit ultimately that you will earn going this route. In addition, there is a period of time you have to wait as well as employers don’t necessarily want to see a lot of short term job switching.
In addition, when I’m looking at any new opportunity I want to consider my time spent working versus the benefit that I am getting back. While I could get a 20 – 40% increase in salary, if that means that my quality of life significantly diminishes then it doesn’t make a lot of sense to make that trade off if it limits my options to only earning active income from that one source.
While it doesn’t necessarily take money to make money it definitely takes money to invest. Therefore, I like to think about my wealth generation process as a funnel. If I can start with one active income stream and incrementally make that stream more passive then I will be able to step away to start another stream. What I am focusing on at the moment is to develop entrepreneurial ideas that will eventually lead to a side business to replace my active income as an employee. Taking an approach where I can test the waters allows me to not put my overall financial health at risk but still allows me to steadily work towards my goals.
Although the process can be overwhelming the key is to simply start on something. By just doing something and see what happens you’ll experiment, learn, and ultimately inch closer to your goal. Start small and find something that will actually make money. Sometimes having a grand vision is just another way to procrastinate. I often have this problem as I at times lose sight of creating a minimum viable product and try to create the perfect product. Instead, I want to focus on creating simple products and applications then test the market viability for those products.
Once you start though you must continuously improve. If you create an idea and the market doesn’t take it on after a few months, scrap it and move onto the next one. Once you get to the point where you are getting traction then identify inefficiencies in your processes and improve them. Consistent commitment, focus and output will ultimately lead towards achieving your goals.
In the context of improving active income focus on growing your income by 3% month over month. If you are able to do this after two years you will have nearly doubled your income. When you focus on experimenting in this way it helps to gamify your experience so that it takes the emotion out of it and makes it hopefully more fun!
According to the five day weekend there are a few different types of capital: 1. Mental Capital, 2. Relationship Capital, and 3. Financial Capital.
Mental Capital helps you create value for others and can basically be described as what you know. To improve your mental capital focus on one thing and become a top expert in it.
Relationship Capital can be thought of as who you know. Helping people solve their problems and get closer to their goals helps you to build relationship capital.
Financial Capital occurs when you create more value than you consume and can be thought of as a byproduct for the value that you create for others through products or services.
A high level equation could be represented as Mental Capital X Relationship Capital = Financial Capital.
It can be difficult sometimes to determine what to do once you have the desire to become an entrepreneur. Part of the challenge I find is that there are so many things that could be done I get lost in all of the divergent possibilities. That said, it helps to just start somewhere and start documenting a list of things that could be done and then narrow down that list to just start on one.
Personal Services: These could range from sites like Fiver/Upwork, Freelancing, Service Businesses, and creating applications. These are usually short term engagements where you can eventually build up a client base to sustain income. However, some of these are really only one level up from employment to self employment (at least initially). Coaching and consulting are good ways also increase your active income. However, if you are the coach/consultant then you are still trading your time for money and there are profitability limitations to scaling an agency.
E-Commerce: Creating an online store is a good way to start selling products. This approach can take some time but if you are able to get a foothold into an unmet need, become a low cost provider, or just provide better delivery time then you can build up a decent income stream. The process to launch involves picking a product niche, building the store, and developing relationships with suppliers.
Fix and Flip: This option involves finding a lower value asset and increasing its value to resell it. When thinking about the item to acquire the bigger more expensive items will have higher profit margin but will require more upfront costs as well as a greater potential for losses. Its better to start small then go big all at once. This will provide an idea of what works and what doesn’t.
Domain Trading: This involves buying a domain name for a common business niche and then selling it at a much higher price.
The Sharing Economy: This involves profit sharing with existing assets. A few good examples are uber/lift and airbnb. These services turn a person’s home into a rental or someone’s car into a ride share. As an individual you can make a little extra income for assets that you already have.
Online Opportunities: There are a ton of ways to make money online with some of them not being invented yet. It really just involves as much creativity and determination as you can to create videos, blog posts, start a podcast, and sell products that will produce an income stream. Your focus should be on creating great content and the monetization will eventually follow. Monetization strategies can be in the form of ads, subscriptions, and products associated with your content.
Direct Sales/Network Marketing: This involves creating advertising for products that already exists and getting others within your network to purchase it. It could be thought of as similar to affiliate marketing.
Knowing which opportunity to pursue can be hard. The best ideas to pursue will be a cross section between something you love, something you are good at, and something that the market wants. It isn’t so much an exercise in finding where the opportunities are abundant to make money but rather self exploration to find what you enjoy doing independently.
