How Do We Get Money?

How Do We Get Money?

Warren Buffet, one of the richest people in the world, said there are only two ways to make money: find value or create value. There is no such thing as something for nothing.

One morning at the gym I overheard a middle-aged man talking to the man next to him. He just found out that an old girlfriend of his from many years back recently inherited $130 million, so he is planning to call her. He said, “Hopefully she still loves me.” I am amazed that so many people are always searching for a quick path to easy money.

Too many people think society owes them a living. Of course we all have an obligation to care for those who truly are physically or mentally unable to care for themselves. Extenuating circumstances may also necessitate a temporary lending hand even to capable people. Otherwise, everyone who is physically and mentally able to earn their own living must accept their responsibility to do so, no matter how difficult it might be. Those who do so feel much better about themselves and become a benefit to society rather than a burden.

We should never seek to take money away from others without giving adequate value in return. This is one of the reasons I am not a fan of gambling. In order for one party to win, all other parties involved must lose.

There are many ways we can acquire money legitimately through finding value or creating value. We can find value by purchasing property that generates current income, that has the potential to generate income in the future, or that we hope to be able to sell at a future date for more than what we paid for it. We can create value by inventing something useful, building something helpful, or rendering valuable personal service.

Those of us who are self-employed or own a business create value by providing products or services the public wants. We are paid by our customers for delivering that value. The amount of income we can generate is determined by the quality, quantity, and spirit of the service we give.

Those of us who are employees create value by providing services our employer needs to effectively deliver their products or services to the public. Sometimes I hear employees complain that all they are doing is working hard to make someone else rich. If that is true, what is wrong with that? An employer will only hire me if she believes that she will make more money after paying me than she could make without me.

Complaining does not solve anything. Those who are not satisfied with their current income should seek to create more value for their employer through increased education or stronger work ethic, or find another employer who values their contribution more, or try their hand at delivering products or services directly to the public. Unfortunately, after going out on their own to spite their employer, some people discover that they were actually taking home a lot more money as employees than they ended up being able to make on their own. Working to increase the wealth of an employer is not demeaning as long as we are being fairly compensated for the value we create for the employer.

 

Adam Dawson, CFP® is a Principal at Capstone Capital and the author of Timeless Principles of Financial Security.

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