If wealthy people have multiple forms of income, how do you do that when you are struggling financially?

It’s absolutely true that wealthy people have multiple streams of income. Some would even argue that the definition of being wealthy is having multiple streams of income that are on some level passive and sustainable long term.

There are obviously substantially different types of was to generate income, they all fall on a spectrum. Most books, media and sites like this one tend to focus on each end of the spectrum.

On one side is the labor intensive work where you trade your time for money. This is any regular job that requires you to show up and they pay you an agreed upon amount each week. This type of income is mostly free, we don’t have to invest any cash to show up to work tomorrow.

The other end of the spectrum is the totally passive investing. This is putting money into investment vehicles that you have no control off an and spend virtually no time on. This includes things like mutual funds and ETFs where you can put money in on an arbitrary schedule and they do the rest. There isn’t anything you can legitimately do to improve the process or create value, you just put your money in and wait. A lot of books, blogs and podcasts like to tout the value of this type of passive investing because it doesn’t take anytime, it’s hard to screw up and it’s easy for them to provide actionable steps. I could easily write directions on a blog (or this answer) about how exactly to open a brokerage account and start investing, I could even tell you what all the best funds were.

The hard work you do everyday at your day job is either free or very cheap. If you are starting out or broke, this is really your only option to get the ball rolling. This is because you have more time than money. You can invest $0 dollars and a lot of time into your career and start making money.

Passive investing is very expensive. When you buy into a fund, you are trading a higher return for convenience and expertise. Index funds return 7–10% per year, there are other things that you can do with your money to make or save more than 7–10%. Passive investing is attractive because it eliminates the work and you can focus on other things like your job.

There is a whole world of investing that happens in the middle. You can combine your time, talent, experience and money to create much higher returns and do so much more quickly. Working a day job and investing in something that makes 8% per year doesn’t add up very quickly, it will take decades to have your passive income grow larger than your salary.

ALL wealthy people found some point in the middle of passive investing and hourly labor that made them large amount of money. Early in my career I worked at a real estate investment trust (REIT), where the basic business model is the investors buy a share of the company, the company buys income producing rental properties, then returns the profits to shareholders with dividends. REITs are often very large, owning hundreds if not thousands of properties, which means returns are very average, they also charge a fee to investors to manage the assets. So if you want to make money in real estate, there are three basic categories you can be in; you can be a worker, an investor or an entrepreneur. I started as a worker, I traded my time for a salary. While doing this, I saved some cash and put in into the fund, I became an investor earning 8%. This equation was going to take decades to make any real progress.

Then I put myself in the middle spot. I sold off all my shares in the fund and multiplied my time and money together to earn much higher returns. I started buying investment properties on my own. Rather than paying a fee to a fund to manage my assets for me, I became the asset manager, property manager, maintenance guy, accountant and leasing agent; I did it all. I made a lot more money doing this than I would have in the fund.

The key here though is that I had unique experience and skills that put me in an advantageous position. I knew the industry, I had seen the pitfalls of others, I knew how to find value. This wouldn’t have worked if I just started random business without any extra knowledge.

You may not want to start a business though, most of you shouldn’t. You can still make an active investment. You invest your time and money into furthering your education, improving your skills and gaining experiences that make you more valuable. The people that rise to the top of organizations spend years improving their skills and compounding their value to the firm, this is how get massive paydays.

If you want to generate wealth and income. Find some place in the middle of day job and passive investor where you can add value. This doesn’t mean that you have to give up the others. The ultimate goal should be to have a variety of income streams and assets, not just be all in on one thing. Most wealthy people had a day job, they own stocks and real estate, they start and own small businesses, they invest in their skills to be better at their jobs and improve their careers. Successful people capitalize on all these different types of opportunity, they don’t put themselves in a box.

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