incometowealth.com is about creating wealth by building multiple streams of income. The world is changing at an incredibly rapid rate. You need to build an antifragile financial plan to succeed in this brave new world.
Disclaimer: The information below is not supposed to frighten you, but it is supposed to open your eyes to the reality of the world.
To put it bluntly, most people have the wrong financial plan. The majority of people you meet are following one of two paths:
- Going into debt, mindlessly consuming, and living for immediate gratification.
- Working a 9-5 job, saving 20% of their wages and hoping to have enough money to retire at 60.
The path of debt and consumerism is obviously wrong, but the careerist path will fail for most people as well. People will lose the majority of their life savings and their will be a lot of tears. These mainstream personal finance ideas may have worked in the past but they will likely not work as well in the future. Most people also disregard sound investing advice and make the following mistakes
- Ignoring recession risks (or not preparing for a recession): people invest their money into passive investment vehicles and hope that the value increases in the future. They have heard the common knowledge that dollar cost averaging over the long term is the best strategy and they take absolutely zero precautions to prepare against a recession with things such as diversification, hedging strategies, etc. This is a great way to lose 50% of your net worth in a recession.
- Investing while looking in rear view mirror: Past returns to not guarantee or indicate future returns. The most popular stock index is the S&P 500 which since its origination in March 1957 has an average return of 9.8% annually with dividend reinvestment. This is the nominal return without taking into account inflation. When you take inflation into account the average return is 6.0%.
I am not advising you to not invest your money into the markets, I am simply advising you to lower your expectations for future returns. This is not solely my opinion, finance experts expects returns on investments to be lower in the future as well.
What do do about it?
Focus on building your wealth through increasing your income rather than investing your way to wealth. Standard personal finance advice is to make money in your career and then build your wealth through investing in the financial markets over long-term time horizon. A career and proper investments can be part of a financial plan but they shouldn’t be the entire plan.
The best financial plan is to build multiple income sources. The first income source should be your career, this is a consistent income stream where you can collect a consistent paycheck biweekly. Your second income source should be an online business. For most people I recommend starting an affiliate marketing website and for others I recommend starting an eCommerce website.
If you are unsure of what kind of online business to start I recommend taking the online business quiz I created. It will help you determine what business is the best for your personal circumstance (savings, amount of time each week, etc.)
People that put determined effort into finding a good career will be rewarded. The issue is that people are not proactive about their job search, networking, career development, and salary negotiations. This is why so many people end up in dead end jobs they hate. People end up in bad careers because they are reactive instead of proactive. They believe they are acted upon by the outside world, they do not view themself as in control of their own destiny.
If you are smart, hard working, proactive and understand the way the game is played you can have a long, happy, successful career working for a corporation. Some people like working for others and some people hate it. If you enjoy working for others more power to you because it’s the most stress free way to make money in the present.
Unfortunately, the long-term prospects for the average worker are not optimistic. A 2013 study from Oxford University’s Engineering Sciences Department states that 47 percent of US jobs are at high risk of automation in the coming decades. When jobs are automated there is a risk of declining median wages in an economy. This happens because the demand for labor decreases and with the same amount of labor supply the wage level decreases.
Real wages for the U.S. as a whole may decrease. It’s always tough to predict the future, but the economics are illustrated above. Labor demand shifts to the left from Labor Demand 1 to Labor Demand 2 and the equilibrium wage moves from E1 to E2 hence a lower wage. There is also a lower amount of people employed.
I apologize for the charts right out of an Econ 101 textbook. This means in the long run, the average citizen may see lower wages and a lower standard of living. The people at the top of the corporate ladder will likely still see high wages but there is a good chance the average Joe will be poorer.
If you are going for the top go for it, there will always be good money at the executive levels.
-> can cover your bills while your online business is taking off
If your goals is to be a company executive, doctor, lawyer, engineer there will still be good money. If not I recommend you start an online busienss on the side.
A lot of people have the false impression that it’s impossible to make real money online. Meanwhile these same people use all kinds of websites that make millions of dollars per year. I’m not talking about multibillion dollar websites like Facebook and Google, I’m talking about websites you see when you ask Google “What’s the best espresso maker” or “List of plumbers in Kansas City”. Every page you visit on the internet is owned by somebody and that person makes money when you visit their website.
Important to remember:
Just because you don’t know anyone that makes money online, e.g. your parents, cousins, and grandparents don’t do it doesn’t mean it is impossible.
It often takes time for beginners to make serious money online, most people need to develop the marketing skills to replicate their career income online. This is why I recommend people build an online business while they keep their day job. You simply work during the day at your day job and on your online business in the mornings, evenings, and weekends.
It takes work but you can’t expect to make a full-time living online (the dream of 90% of people) without putting in the work. Once your online business becomes big enough you can make any lifestyle decision you want. You can:
- quit your day job
- keep your online business in cruise control and add another income stream by starting another business
- keep growing your current online business
- do exactly what you have been doing because you love it
It often takes time to build a successful online business and many people fail in their first venture. This happens because they follow the terrible advice that less than credible people online give them. There are huge mistakes you need to avoid when you start an online business that will cost you months of your time and limit your profits massively. That article will be a lifesaver for you. In the internet marketing world there are also a number of online business myths that keep many online entrepreneurs and marketers from achieving their full potential. If you don’t know what type of online business to start you can take the online business quiz.
If you have any questions or want a second opinion on a business idea feel free to send me an email to me: Leo(at)incometowealth.com or reach out through filling out a message at my contact page.
Why online business + career?
If you have never made a full-time income off an online business it’s very foolish to quit your job before you have consistent earnings.
You can live comfortably off your career income while you scale your online business. If you are making solid income you have the flexibility use your career income to reinvest and scale your business.