When it comes to income and our job, we all get dealt a hand at the poker table of capitalism. If you have ever played poker for more than a couple of hours, you quickly realize that hitting a straight flush is an exceedingly rare event in real life — 64,973:1 when dealt five cards — although James Bond makes it look quite a bit easier than that in Casino Royale. The same odds hold true in receiving super-high-income wages.
Every time you change jobs or get a significant promotion, the income producing “poker hand” that you are dealt changes. But for most, you wind up playing less than 10 or 15 hands during your career, and the hand you hold is one of employee. Make no mistake: capitalism is the best economic system on the planet, but the capitalism game is slanted to reward the business owner over the employee. Employee earnings are bound by supply and demand of people with similar capabilities and experience, not by the economic value they directly produce for the company. Risks are higher for the owners but rewards are better too, for they are tied to economic success of the enterprise.
Because of the employee dynamic, unless you received smart advice while growing up, heeded that advice, played the game well, and got a bit lucky too, your hand looks something like this:
Employment is designed to keep a person content but not independent. Jobs usually require so much of a person’s week that barely enough time remains for family and rest. This balance ensures that the employee stays loyal to the employer, in essence putting all their eggs in one basket. Few people diversify their sources of income. When a job is lost, the only logical choice is to find another job as soon as possible or face financial ruin. Most people are like hamsters on a wheel, going nowhere fast and never escaping the gilded cage.
One must improve their poker hand and not just sit on the 5 cards dealt. Everyone I know would prefer to have multiple sources of income but only the optimistic, decisive few actually improve their odds. Most people have a pair of fours and stay pat. Wishful thinking does not result in a new stream of income.
There are multiple ways to escape the hamster wheel of employment. You have to start making money on the side. You have to actively draw new cards to try to improve your income producing poker hand.
The most common and reliable way is to save and invest. When your savings starts paying back dividends or gains, this passive income is truly a blessing, especially when measured against the limited hours one invests to earn the windfall. Savings and investments take time to compound, so the earlier you start, the more likely investment income becomes a substantial piece of your financial pie. Every teenager should be required to read this book: The Richest Man in Babylon. If the simple lessons sink in, your teen will be better off for the rest of his or her life. If you have not read it, consider doing so: It is short, simple to read, and easy to understand.
Another way to improve your hand is to find a new job with higher potential. You have to seek if you wish to find. In practice, people do not change jobs often. Surveys find that the single most frequent reason a person changes jobs is because they seriously dislike someone they must work with on a daily basis, rather than to enhance their income. Yet in truth, the compounded effects of climbing the income ladder faster are incredible when you look at a 40+ work year career.
Your chances of becoming the Millionaire Next Door are not very good if you have a pair-of-fours job and don’t do anything about it! One of the more interesting facts from Dr. Stanley’s extensive surveys of American millionaires is the relationship between self-employment and financial success: “self-employed people make up less than 20 percent of the workers in America but account for two-thirds of the millionaires. Also, three out of four of us who are self-employed consider ourselves to be entrepreneurs. Most of the others are self-employed professionals, such as doctors and accountants.” This clearly shows that the capitalistic system does not favor the “normal” employee. (this link above is a summary and well worth the 5 minute read – one can’t help but be optimistic when you realize that 81% of millionaires in America inherited no money!)
The logical conclusion is that most of us should have a goal of starting an income on the side in addition to our primary job and income we receive from investments. This is not an easy endeavor but it is well worth it. The first step is to become a professional at time management. Using your time well, balanced across your primary job, your family, and your secondary income stream ideas is required. A person who becomes great at time management can often get their primary work done in less than 40 hours per week. It requires great discipline to change gears and reserve quality hours for your secondary ambitions.
What can you do to earn more income?
Buy low, add a bit of value, sell high is a proven formula as old as the sands of the Sahara. Explore the multitude of manufacturers peddling their products on Alibaba — if its made in China, you can find it on Alibaba, buy it, and get it here with more than a 60% profit margin at U.S. price points. Selling it becomes the trick.
Another proven idea is to own rental properties that turn a profit. This works especially well if you have good knowledge of real estate values, skills at fixing up houses, and a decent credit rating. Right now, mortgage rates are very low while demand for rentals remains high.
Creating things from scratch that then sell for good profit is much harder, but the strategy works for many as well. When you create something that becomes a successful brand, the payoff is usually handsome. Be careful to not try to make a new market where nothing exists. It is exceedingly risky to create demand.
We have a service economy so there are a multitude of ideas in the services front, although services usually don’t scale well unless you hire employees, because the primary input is often time, the one precious resource that you are trying to juggle across your primary job and family. Spot a great idea that is working in big-metro neighborhoods and bring them to other neighborhoods. As with all business, the idea doesn’t have to be brilliantly new, just well done.
The long-term tortoise-beats-the-hare goal is to improve your poker hand, year in and year out. In fact, you would like to have five or more sources for income, making you bulletproof against any one venture going south. When you have five sources, your optimism, freedom, and security will reach extraordinary levels. This gives you the ability to pursue an endeavor that you desire. Isn’t this the definition of “Be All you Can Be”?
I.M. Optimism Man