What is money and how do you acquire a lot of it?

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I was talking to my mom and girlfriend and friends about money and decided to write about how and why my opinions and decisions are different from them. This is from me reading a lot about money, practicing business, and going to school in Boulder, Colorado, a place filled with rich, open minded hippies. I learned a lot at Colorado and their mentalities shaped me much. Here it is.

==what is money?==

Money is a medium of exchange. Let's say you're an apple farmer with acres and acres of apples in a world without money. One day, you decided that you want pears. You can barter with a local pear farmer to obtain the pears. Let's say he's willing to trade 10 pears for 10 apples. You gotta find him, figure out a rate, and haul the apples to him to obtain your 10 pears.

However, let's say money exists and that you have some money on you. You can go to the pear farmer, pay him a set amount for pears, let's say $5, and then take your pears home. You can also have a stand for your apples and accept money from people for your apples too, so that you can buy more pears later or whatever else you'd like.

That is how one of the functions of money is a medium of exchange. Money facilities transactions sort of like how oil lubricates an engine. Money makes transactions easier. If you have more money, you can do more transactions and/or do transactions that are worth a lot more.

==how do you get money?==

So how do you get more money? Well, since it's a medium of exchange, you gotta exchange things. Broadly speaking, you can exchange: time, labor, "life energy", businesses, intellectual property, real estate, things, and money itself ("capital"). I'll go over each.

Time/labor/life energy - For most people, they trade their time or labor or life energy for money. It is on a continuum with hourly employees on one end and salaried employees on the other and some people in between. Hourly employees exchange their time for money. Work 8 hours at McDonalds at $10 an hour and you'll be paid $80 gross. Quite simple. For salaried employees who sign contracts where the company owns their "creative works", they're trading their life energy for money. Let's say it is a professional chef who signed a work contract saying that, if he makes any recipes, it is owned by the company. That dude is o-w-n-e-d by the company and his whole creative power is owned by the company. He's trading his life energy for money. Somewhere in between would be an owner-operator of a painting company, for example. He is the only employee there but he's not trading hours for money. He's trading contracts for money but he's the only one fulfilling the contracts.
businesses - If you build a business and sell it, you sold a business for money. Owning stocks is also selling a business.
intellectual property - If you make a song, patent, book, or something else that is intellectual property and sold the rights to it or sold the property itself, you're trading IP for money.
real estate - When you buy or sell real estate or when you rent or lease real estate, you're trading real estate for money.
things - when you trade things for money, you're trading things for money. Think of someone selling stuff on eBay.
money itself ("capital") - When you put $100 in a 2% savings account, you're trading money for money. Bonds are also trading money for money.
inherit it - this is the classic way and most common way to be rich. You just are born rich. Can't help you here if you want to be this and you're not reading this if you're in this category.
steal it - another way to become rich. It's harder to steal wealth nowadays (and be able to enjoy it with peace of mind) but it has been done. Fidel stole the whole island of Cuba. There's tons of countries where government employees and politicians stole from public funds. If you can do this and get away with it, good for you! I don't want to be next to you though. You're either someone to be feared or someone who might get backlash from the people you stole from. Good luck.
fame - it's 2022. You can become rich by becoming famous. It's weird. It's social media and celebrity culture. It exists but it's not for me and I don't know how to do it.

==how do you get rich? (aka have a lot of money)==

So, if you want to get rich, in a "good guy" way and weren't born rich and are not famous, you need to divorce your earning potential from your labor/time/life energy or make your labor really, really valuable. If you go the route of, let's say, having a government job with steady raises and plan on retiring after 40 years with a pension, you'll have a secure livelihood but you won't be rich. This is for people who want to be rich and can take risks. Government work or salaried employees with pensions are for someone else.

===divorce your earnings potential from labor/time/life energy===

To do this, you need to make an intellectual property that sells; make a business that makes money and keep the business running and take the profits and put it aside as savings so that you can build your wealth; make a business that makes money and keep the business running and sell the business for a huge exit; trade stocks well and build up your portfolio; flip real estate and do that well so that you have a portfolio of houses.

here's examples:
* write a book. The Obamas made $1,000,000 from their book. This is fame and IP.
* start a small business and keep it running over the years, save up your money, and build your wealth - I know a guy whose grandpa started a liquor store. The family now owns the street as they are landlords to most buildings on the street.
* Save up some money, buy a house, fix it up, flip it, take the profits and repeat many times.
* make a website and monetise it with affiliate offers and ads and exit - most people on this site do this.
* buy a site, fix it so that it makes more in ad revenue or has more traffic and flip it.
* trade stuff you found on AliExpress to people who will buy it for more on Facebook - I know a guy who had 7 figures EBITDA last year doing this.

===make your labor really, really valuable===

The average American adult earns $50,000 a year. If you can earn $150,000 a year, you'll be rich compared to the average as you're earning 3x the average. If you can earn $300,000 a year, great for you. To do this, you can go the route of education and get a job that is really in demand with a small pool of potential candidates. Think of airline pilots who need 1,200 flight hours. The only people who can meet that qualification are military pilots or civilian flight instructors. Therefore, the pool of airline pilots is super slim. That's why airlines need to pay top dollar for a pilot. Keep on working this job over the years and you will be rich.

==Key points==

* To build wealth you need to save money. The better you are at saving, the better you are at acquiring wealth. Do not fall into the trap of increasing your lifestyle when you earn more. This will increase your consumption and cost of living, which will decrease your savings or keep your savings rate proportional to your income, which would not increase your savings rate. Celebrate, yet, but then get back to work. Just aim for "enough" and keep it there. Be humble.
* Wealth can be created and it can be destroyed. A good wealth sticks around. Exchange your risky online business for a less risky real estate holding. Exchange your profits from affiliate income to stocks so you diversify your income sources. You don't want all of your eggs in one basket and want many income streams. A bad year will take a few years to recover.
* don't be afraid to break the norm. Some decisions seem crazy or unreasonable but are much wiser once you know how money works. For example, a house in Boulder, Colorado costs $1,000,000 to start. You can rent for $1,000/month/room. So a 4 bedroom house will cost and bring in $4,000 in rent. Instead of renting a room for their daughter's 4 or 5 years in college, this family I know just bought a $1,000,000 house. Instead of paying $60,000 in rent over 5 years, they moved $500,00 from their portfolio into a piece of real estate in Boulder and had her manage the property for 5 years when she was there. The property gained value and earned $3,000 in rents each month. In 5 years, that is $180,000 in revenue. So instead of -$60,000 to the family's wealth for her schooling, they had +$180,000 plus whatever appreciation the house had. Smart move. It added diversification to their family's wealth and portfolio, it gave her a job in school, and it increased the family's wealth instead of decreased the family's wealth.
* don't chase money but chase ideas, pursuits, and "trends". If you chase money for the sake of money, you might lose your path in life and become a criminal. Trends, ideas, and pursuits that are worth pursuing are what makes money. For example, American are shifting from prioritizing things to experiences so moving from manufacturing things to creating lasting memories for people would be rewarded. Chasing money breaks the rule that money is a medium of exchange. What are you trading for money? If it's something tangible such as a car or a vacation, then it is a good exchange. Don't forget that money is a medium of exchange. That's all it is.
 
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I appreciate that you put some amount of time into this post.

Referring to the first sentence from the first paragraph, I'm interested to know which opinions about money that your mother, girlfriend and friends have are the ones you disagree with. If you'd like to elaborate on that bit in particular, I would find that particularly interesting.

Thank you again for putting your thoughts down.
 
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@JesseEddleman here they are:

Mom: she's a factory work who saves money. She's not a spender and grew up under communism. Definitely against consumerism and high prices.

Girlfriend: Her family are savers and she's super cheap. Great for me! ^^ They also own a few rentals themselves and that's her mom's only source of income.

Friends: Most are employees and just want to have a middle class lifestyle. They're ok with trading their time for money or life energy for money.

I'm definitely the odd one out. I did learn a lot from a lot of people I've meet on in passing or connect with though. I think they did shape me a lot.
 

Ryuzaki

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You covered a lot of this already but I feel compelled to respond with how I think about it.

The best succinct description of money I ever heard I think came from Ram Dass (Dr. Richard Alpert), who described it as Green Karma. Which definitely implies some relationship to "energy" in the mundane sense and even "justice" in a metaphysical sense (except in the case of theft and fraud).

It's more easily understood without the Hinduism overtones, which M.J. DeMarco managed to do in his book The Millionaire Fastlane. In his language, it's all about both scale and impact (or scaling impact, rather). His framework is that if you want to get rich you have to reach scale in either impacting a huge volume of people a little bit or impacting a small amount of people in a huge way. Or, of course, you could be Apple or Google and impact a ton of people in huge ways. It's the impact on their lives that attracts the money to you.

That circles back around to the green karma concept. It's karma in the inaccurate sense of "you get back what you put out there" and in the more accurate sense of "cause and effect". Instead of focusing on the end result (getting money), we should be focusing on the causal relationship between positively impacting people's lives through a business and the money comes as a result (and we don't have to concern ourselves with that part as much as we do).

But the focus is in the "samskara" direction of the mental impact we create, not only in ourselves with focusing on the means and not the end, but also in the mental seeds we plant out in the minds of others. It's literally like planting seeds in the gardens of other people's minds (marketing), which eventually sprout and cause action to be taken (first time purchase), which eventually matures into a money tree (returning customers).

The aspect I'm trying to emphasize here is it's about our own mental and spiritual state, and how our offerings positively impact the physical, mental, and emotional states of our customers. That's the karma aspect. And while you can definitely succeed while greedily thinking "money money money", it's like we've all heard a million times before: focus on the value you're offering and the problems you're solving.
 
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You covered a lot of this already but I feel compelled to respond with how I think about it.

The best succinct description of money I ever heard I think came from Ram Dass (Dr. Richard Alpert), who described it as Green Karma. Which definitely implies some relationship to "energy" in the mundane sense and even "justice" in a metaphysical sense (except in the case of theft and fraud).

It's more easily understood without the Hinduism overtones, which M.J. DeMarco managed to do in his book The Millionaire Fastlane. In his language, it's all about both scale and impact (or scaling impact, rather). His framework is that if you want to get rich you have to reach scale in either impacting a huge volume of people a little bit or impacting a small amount of people in a huge way. Or, of course, you could be Apple or Google and impact a ton of people in huge ways. It's the impact on their lives that attracts the money to you.

That circles back around to the green karma concept. It's karma in the inaccurate sense of "you get back what you put out there" and in the more accurate sense of "cause and effect". Instead of focusing on the end result (getting money), we should be focusing on the causal relationship between positively impacting people's lives through a business and the money comes as a result (and we don't have to concern ourselves with that part as much as we do).

But the focus is in the "samskara" direction of the mental impact we create, not only in ourselves with focusing on the means and not the end, but also in the mental seeds we plant out in the minds of others. It's literally like planting seeds in the gardens of other people's minds (marketing), which eventually sprout and cause action to be taken (first time purchase), which eventually matures into a money tree (returning customers).

The aspect I'm trying to emphasize here is it's about our own mental and spiritual state, and how our offerings positively impact the physical, mental, and emotional states of our customers. That's the karma aspect. And while you can definitely succeed while greedily thinking "money money money", it's like we've all heard a million times before: focus on the value you're offering and the problems you're solving.
Agreed. People should do things that are socially positive ("green karma") and the more positive impact people have, both in magnitude and scale, the more money they'll receive.

There was this book from a Libertarian and he was related to the guy who started Wholefoods that I read awhile back that you might like. He argues that people need to consider *many* different audiences nowadays much more than just their customers. What might be good, green karma for one group (customers) might be bad karma for another.