Young Entrepreneurs

How to Make More Money with Leverage

leverage

There are two ways to make more money. Work more using your own time and skills or work less and use the time and skills of others. If you had a choice, would you choose to work more or work less? I’m guessing that many people would choose to work less, especially if they could make the same amount of money or more. Working less requires the use of leverage. Businesses use leverage all of the time. Sometimes it comes in the form of a loan or working capital and other times it comes in the form of labor or outsourcing certain technology needs.

leverage

Active Income

If you’ve already picked up your copy of 9 Steps to a Profitable Portfolio then you know that I talk about the difference between active income and passive income. Active income is what 99% of the population makes. It’s the income that comes in after a long day’s work, after spending your day in a cubicle or serving patrons at a restaurant. This type of income is dependent on your active time investment. You are trading hours for dollars. When you stop trading your hours, you stop getting dollars. There’s nothing wrong with active income but at some point, you will not be able to trade hours any longer, and your cash flow will dry up. That is the reason that I am a big fan of building up passive income.

Passive Income

Passive income is talked about often on the web and blogs and sometimes it’s from pretty unsavory characters that just want you to buy into their get rich quick products. Trust me, been there done that. The myth is that passive income requires little to no active work hours. And that’s where most people become disillusioned. The fact is that building up passive income sometimes requires more time and effort than just bringing home a check from active income. The reason being is that you have to work today and build something for tomorrow, so that often takes twice as long. For example, I have a friend that is working on writing an ebook, however, he also has a full time job, a new house, a wife and a successful part time business. The ebook could generate an ongoing stream of passive income but it’s going to require an upfront committment of time in order to get it done. (I plan to stay on him til it’s done. How’s that for motivation? :D )

Making Passive Income with Leverage

There’s a third level of income that I didn’t mention in the book, and it requires more than one person. Active income is the effort of one person. Passive income requires double the effort of one person, but passive income with leverage requires good management skills. Have you ever hired an employee? If you were a toy maker and by yourself you could make 10 toys and hour, you would be making active income. If you patent the process that you use and then license that patent to others who want to use it, you could be making passive income, but if you hire a team of 10 elves that could make 100 toys an hour, you have just used leverage to generate passive income. Whether you are actively working or not, 100 toys get made. That’s passive. If you hire a foreman to oversee the elves and you could fly to Barbados for a week, that’s passive.

Do You Want Passive Income?

So with that said, I ask you, do you want passive income? Are you willing to work for it? If you put in the work now, and surround yourself with a network of the right people, you all can help each other to the top.

How are you building passive income?

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  • http://lifeandmyfinances.com Derek@LifeAndMyFinances

    Thanks for staying on me about the eBook! It’s a huge untertaking and I really had no idea that it would take so long!

    • http://youngadultfinances.com LaTisha Styles

      You’ll get it done soon! I know the house is taking up a lot of your time. I really like the renovation you did on that bathroom too!

  • Hunter @ Financially Consumed

    e-book is in the works LaTisha! Then I am happy for it to work for me : )

    • http://youngadultfinances.com LaTisha

      Awesome! I’m looking forward to reading it.

  • http://onecentatatime.com/ SB @ One Cent At A Time

    Great that you are allowing backlinks in comments. Incidentally I too posted about passive income this week.

    My passive income are all interest and dividend at the moment.

    • http://youngadultfinances.com LaTisha Styles

      Yeah I just saw that! We must be thinking the same thing :)

  • http://www.20sfinances.com 20′s Finances

    I love the idea of passive investing (if you don’t already know this). I am working on a couple ideas to set up more streams of income. This niche site being one of them, although it will be a lot of upfront work. I hope it pays off. *fingers crossed*

    • http://youngadultfinances.com LaTisha Styles

      I’m looking for mine to pay off too! I need to get some more tips from the Financial Blogger because he has sites making 100 a month passively, but he usually buys them already created. I have to put in the work up front.

  • http://novelinvestor.com novel investor

    More people should be pushing to make passive income, including me. Think of it as the new emergency plan. Have enough passive income to fall back on when times get tough.

  • http://retireby40.org retirebyforty

    Making passive income with leverage sounds like the way to go. :)

  • http://www.ultimatesmartmoney.com/ UltimateSmartMoney

    That is a good question? How do you build passive income? I understand the importance of passing income but I don’t exactly know how to accomplish this? So far, I only have rental property that could be considered passive income… Not sure what else is out there that can be passive besides interest and dividend.

    • http://youngadultfinances.com LaTisha Styles

      Those are both perfect examples of passive income, especially if you have to put in little to no effort to get paid.

  • http://www.yakezie.com Financial Samurai

    The Yakezie Network can help one’s leverage too. Helping 50 bloggers at once can be 50X more impactful than just 1. It’s what one makes of it!

    Best, Sam

    • http://youngadultfinances.com LaTisha Styles

      Very true! I really would not be as far as I am without the network. Arising tide lifts all boats. (As long as you work hard to carry your boat to the shore!)

  • http://thriftability.com Lisa @ Thriftability

    Most definitely – creating passive income is the way to go… and understanding the power of networking is tremendous. For example, gaining visibility and offering advice via the Yakezie Network – and also in supporting one another by reading/commenting on blogs – increases your potential infinitely. I’m like many other bloggers – building multiple sites and putting myself out there as much as I can. I’ve also started hiring some freelance help, so that I can focus on the things I’m best at, in order to move forward while I have the momentum going.

    • http://youngadultfinances.com LaTisha Styles

      That’s great! You have a really great site as well. I’ll have to do some digging and find your other sites :)

    • http://twitter.com/Nunzio_Bruno Nunzio Bruno

      Couldn’t agree more!! :)

  • Make Passive Income

    Well, Building streams of Passive income is my TOP priority now. I added in one more thing. That’s growing my streams of passive income exponentially through leverage!

    Well, no risk no gain. hah

  • http://twitter.com/Nunzio_Bruno Nunzio Bruno

    I really liked your idea of leverage in terms of passive income. Sometimes I wish I had a friend like you to keep on me until my infoprducts are done lol Really liked the post and am positive that while the passive income may be more work in the front – the benefits of living my target lifestyle are always going to be worth it :)

  • Emily

    Ah, yes!

  • My Wealth Desire

    Yes, I believe in passive income. Those who
    have a passive income can easily get out of the rat race and win the
    money game. Wealthy people become rich mainly because of earning passive
    income from their investments.

    • http://YoungFinances.com/ LaTisha Styles

      Veyr true. Investments, businesses and intellectual property are 3 popular ways that the wealthy build and maintain wealth.

  • Shawn James

    There are two ways to make more money. 1. Work more using your own time and skills or 2. work less and use the time and skills of others.

    I always believed on first tip but did not get desirable success till now. So this time going to follow “work less and use the time and skills of others.” I hope, your tips will work now.

    • http://YoungFinances.com/ LaTisha Styles

      Using the skills of others or rather building the systems that use the skills of others is also called leverage and a great way to build wealth.

      • Shawn James

        Thanks for your response and tips. I will go behind your suggestions.

  • http://www.pipstoday.com/ Shawn James

    There are two ways to make more money. 1. Work more using your own time and skills or 2. work less and use the time and skills of others.

    I always believed on first tip but did not get desirable success till now. So this time going to follow “work less and use the time and skills of others.” I hope, your tips will work now.