Based on research, only 9% of millionaires got their wealth by inheritance. The rest of them worked hard and earned it. How could they achieve it? How to make money investing? Let’s discuss basic mindsets of income that become the earning foundation. Unless you inherit big business, there are many things to do to become millionaires. You must understand how money is earned. There will be many methods to achieve wealth. Working, business, and investment are regular methods to earn money. Each of them has different benefits.
Makin Money by Selling Your Time
Low and middle classes use this method to earn money. They spend time as income source. Basically, it’s the most important. The concept is simple. An employer will use your time and energy for his business. You receive the money by selling your time. Wages and salary are the representations of your hard work. Most parents tell their children to get a good job with benefits. It’s common among us. The rate of wages you receive depends on how great your skills are. Gifted people make more money a year because of their uniqueness. There aren’t many people who can do something like those gifted people.
Cash Lent and Interest Income
This income comes from people who borrow your money. They pay interest for the capital lent by you. Banks apply this method to get more profits. If you buy a deposit certificate from a bank, it means you lend them the money. As the benefit, you’ll receive certain percentage of interest per year. The banks use your money as additional capital. They lend it out to receive higher interest return. You can use similar method to earn income. Make sure to lend certain amount of money to others. Later, you earn the initial capital along with the interest. It costs you less effort.
Income from Capital Gains
Capital gain is the most challenging income generator. You’ll receive money by performing transaction of assets and investment products. First, you should buy asset in certain price. Later, you sell it for higher price. The profit comes from the gap between the transactions. It doesn’t really matter about the assets. You can choose wide array of business or stocks like diamonds, furniture, mutual funds, valuable paintings, properties, or others. The profit is called as capital gains. This source of income represents the way to invest money smartly. You don’t even need to work to earn benefits.
An Investment With a Guaranteed Return: Pay Down Debt
This one sounds almost too simple. Maybe you’ve heard it before, but whatever you’ve heard, it’s absolutely true. If you pay off a credit card where you are paying a 10 percent interest, that will be the equivalent of earning a 10 percent rate of return on the same amount of money invested in another asset.
But it’s even better. The return that you will earn on paying off debt will not have income tax consequences. Therefore, paying off debt can produce superior returns to most other investments. And that return is guaranteed and completely risk-free. If you have debt, this should be your first “alternative investment.”
The Ultimate Tangible Investment: Real Estate
Real estate is an investment topic that is worthy of its own article, but I’ll just summarize the main points here. There are several characteristics of real estate that make it a desirable investment:
- Just as the name implies, real estate is a “real asset”; it’s a physical commodity that has value in and of itself.
- It is needed for shelter and for economic purposes, such as housing a business, warehouse or manufacturing plant.
- It can produce income either through rents or capital appreciation or both.
- It is a tax favored investment, with generous depreciation write-offs, as well as favorable capital gains treatment if held for more than one year.
- There are times when real estate booms, and you can earn a fortune investing in it.
- There are times when the market collapses, and investment-worthy bargains are everywhere.
- It’s an investment, but it’s also a hands-on skill. By managing your own property investment, you become more skilled in real estate investing.
There are several ways that you can invest in real estate:
- Buying property direct. You purchase a piece of property, either to produce rent income, capital appreciation upon eventual sale, or to rehabilitate and flip for a quick profit.
- Real estate limited partnerships. This is where you invest money in a real estate partnership that typically invests in commercial property, such as a shopping center, office complex or apartment building. You are a limited partner, so you can lose no more than the amount of money invested. There are typically tax advantages to this type of investment, primarily concerning depreciation.
- Real estate investment trusts. These are something like real estate mutual funds that invest in real estate or real estate mortgages. You buy shares in the REIT, then collect income through dividends and/or capital appreciation. There are also significant tax advantages to REITs. It can be a perfect investment if you don’t want to get your hands dirty and want to limit your risk.
There are other ways to invest in real estate, such as buying and selling mortgage notes, which is more for the sophisticated investor who has a nose for buying debt securities at a discount and collecting a full face value.
Wine — Bet You Never Thought About This One
Wine is one of the few consumable commodities that can increase in value with age. But that is exactly what can happen with the right vintages, those that are the most sought after.
You have to have a strong understanding of wine in general, and you also need a temperature-controlled room to store them in. This is because you need to store a significant quantity to reap substantial profits. And you will need to keep accurate records of the type of wine, as well as when and where you purchased it. Wine connoisseurs will want that information before buying wine from you in the future.
It can be well worth the investment and the effort. You can earn as much as 15 percent per year if you can identify and store the right wines.
Dividend Income from Investment
There’s another simple method to generate income. It’s the dividend income. You obtain profits from business investment. The company provides the investors with profit shares. If you own 25% of a company, you’ll obtain such percentage of profit. As an example, the company has sales of $2,000 in pure profit. Your share of the profit is $250. Your job is to find a reliable and big company to invest. The money works for you. There’ll be no hard work or busy jobs. You can sit and relax at home by monitoring the company’s development.
There are more ways to invest than we commonly think. A five year bull market can make us lose sight of what the alternatives are. But now is the perfect time to be getting ready for the days when the stock market may not be performing so reliably. You may even find that your best investment returns come after the bull market ends.
How to make money investing? You should decide the best way to earn your ultimate income.