Do you want to build a money making machine that will pay you? You can create your own money making machine by buying assets that will pay you money and will support you in to your (early) retirement.
Wealthy people always seem to get wealthier and wealthier. How do they do that?
Simplified, wealthy people make smart money decisions and invest their money in assets instead of liabilities.
As Robert Kiyosaki of Rich Dad Poor Dad put it: an asset is something that puts money in your pocket and a liability is something that takes money out of your pocket. For example, real estate or business is an asset, and the car your drive is a liability.
How can you build a money making machine when you have no idea about real estate, business, or any other way that rich people make money?
Become A Business Owner
Well, that’s easier said than done, I can’t possibly become a business owner! I know nothing about business, I like my job, and what would I ever do?
Okay, let’s pause here for a minute. I think there may be a misunderstanding.
You CAN absolutely start a business. I’m 100% positive about that. You just need to look at things from a different perspective.
You don’t need to start a traditional business, you can start your business in everything or anything you want.
I have a great business idea for you. It will be a business that requires almost no money or time to set up, it can make you money instantly, and it’s very easy to start.
The most important feature of a business is that it is making money, that it’s a money making machine. This business is exactly that!
Get In The Business Of Buying Stock
Before you think that buying stocks is not a real business and that you want a real money making machine, hear me out!
A business is only in business because it makes money. Would there be no money to be made, the business would not exist.
Your business of buying stocks also has the aim of making you money. The goal of your business is to buy as much stock as you can.
Plus, you can tailor this business entirely to your personal need. If you have a lot of money, you buy a lot of stocks. If you have little money, you buy one stock at a time.
Remember: your business is creating a money making machine using stocks.
There are two ways to make money with stocks:
- Dividends on your stock
- Your stock increases in value
Dividends On Your Stock
When you own a stock of a company, dividends are a way of the company saying thank you for investing with them. They give you a percentage of the profit they have made over the last period.
Dividends are a way of earning passive income with your investments. Passive income is the main reason the majority of the people are drawn to dividends. Who doesn’t want to make money while they sleep?
The more stocks your own, the more dividends they will pay you. For illustration, I received $250 in dividends in April. That means that I get paid an additional $250 because I am holding an X amount of shares.
When you are going to build your money making machine and setting up your business this way, you will get dividends automatically with the majority of the companies.
Do you want to learn more about dividend investing? Check out this article on why dividends are just like nachos (yes I was hungry while writing that).
Your Stock Increases In Value
When you own a stock of a company, you hope that stock will rise in value in the time that you hold it. If a stock increases in value, it means that the price is appreciating. You sell the stock a couple of years (or months) for a higher price and you have yourself a nice profit.
Increasing the value of your stock is something that happens naturally over time. Companies will add more value and the economy as a whole will grow.
Historically, a stock will rise an average of 7% per year. That means that, on average, your stocks should appreciate 7% every year (adjusted for inflation).
The real world learns that the value of a stock is not linear. Meaning that some years your stocks will appreciate 20%, while in other years it will decrease by 6%.
When you are investing in the stock market, it is not about timing the market or only selling when you think the stocks are high. You simply can’t know if the stock market will increase further for another couple of years.
That’s why there is a famous saying that goes: time in the market beats timing the market.
Build Your Own Money Making Machine
How do you build your own money making machine? By buying stocks.
You are simply buying parts of other peoples’ companies.
How can you know what stock to buy? How can you see what stock is successful?
You never know what stock will be successful. Don’t try to pick individual stocks and bet on them, that means an increased risk of having losses in the long term.
Spread out your money and buy a piece of a lot of companies in the stock market.
The best way to do this is to buy an index fund that tracks the world economy. A popular fund that has over 3,900 businesses in it, is VWRL (Vanguard All-World ETF). You own a piece of every one of those companies.
Is Investing In Stocks Risky?
Many people have asked me over the course of the years if investing is not risky. This includes my family, my friends, and even my colleagues (I work in finance, go figure).
This is the general consensus: investing in the stock market is risky and you can lose a lot of money doing it. Everyone knows a story of someone who invested in a stock that went bankrupt.
Even when I was in university, my professors couldn’t stop talking about big scandals and the subsequent bankruptcy of companies like Enron and Arthur Anderson.
That is why investing in individual stocks can be risky. These companies can go bankrupt and you will lose your investment. 89% of the companies that are in the Fortune 500 in 1955 are not there anymore in 2019. As reported in 2016, for the S&P 500, about half of the companies will be replaced by others. The volatility in the market increases and that will not end well for the majority of the companies.
So why the hell are you telling me to invest?
I’m telling you to invest because investing in low-cost index funds is safer. It is safer to invest in 3,900 companies than to invest in 1 single company.
Companies that aren’t successful will be replaced by companies that are. Since companies are money making machines, only the companies that are making money stay in business. Companies that are not making money will be filtered out and you will not notice much about that.
If one stock, that is 0.2% of the index fund, will decrease by 50%. So what? You will barely notice it. If one stock, that is 50% of your portfolio, will decrease by 50%. You bet that is no fun.
Something that I would tell the majority of people: low-cost index funds are the way to go.
Let Your Money Making Machine Work For You
The entire stock market is working for you! You are limiting the downside by making sure that the individual companies’ performance can’t harm you. The downside is limited since they can only go to zero. You have no limited upside because the value of a company can increase until infinity and beyond.
The market does the filtering for you. Underperforming companies are filtered out and companies that overdeliver keep growing. Win-win!
Warren Buffett agrees!
That’s not to say that there is absolutely no risk in the market, because there is. That’s what we are seeing right now. There is volatility in the market and they keep moving up and down.
Investing in the stock market means sticking with your plan even if the market goes haywire. Keep in mind that no matter what the stock market does, the general return is still 7% inflation-adjusted.
Do you want to maximize return? See what’s the best to invest in Large Cap, Mid Cap, or Small Cap stocks.
Here’s the S&P 500 index:
If we look at the stock market, we see many up and down moves. Some years your returns will be golden and other years your returns will be below-average, to say the least. That’s all okay. Focus on the average and you’ll be good!
No business is risk-free. Neither your traditional business nor the stock business. Investing involves risk of loss.
How can I start investing? Check out these resources:
- Vanguard – One of the biggest investment companies and a great place to buy your index funds.
- DEGIRO– A low-cost European broker that I’m personally using.
- M1Finance – This is a US-based company that allows you to build your own stock portfolio, completely for free. No fees involved!
- Acorns – Helps you to invest your spare change and start small with investing.
Congrats, You Have Your Own Money Making Machine
Great job, you have successfully set up your very own money making machine. How awesome is that?
Now it is important to you stick to it. This can be done in various ways:
- Pay yourself first – meaning that when you receive your paycheck a fixed percentage of that goes to your various money goals. Saving, investing, emergency fund, and more.
- Track your net worth – a great motivator to keep going is to track your net worth. This is basically your assets minus your liabilities. If you don’t want to calculate that yourself, use an app for that – Personal Capital would be a great place to start for free.
- Remember: you don’t need to be a stock pro to start investing. You don’t need to be the next wolf of Wall Street. Everyone can do it!
It is important to stay motivated to stay the course. One way I’m personally doing that is working towards financial independence, where I don’t need to work for money anymore. Identify your own money goals and use that as a motivator. Believe me, you will achieve your goals a whole lot faster!
If you want to fuel your money making machine even more, you can consider making more money to put into your money making machine.
Wow, I’ve never said money so often in a sentence.
How can I make more money?
- Start testing websites – this is actually a great side hustle. You can earn money from the comfort of your home and the pay is not bad at all. You often get $10 per 15 minutes. The only thing is that you need to patiently wait for the opportunities, as many people want to do it.
- Start a transcription job – this is making money from home typing. It’s not like you’re making money while you sleep, but the faster you type the more money you make! Check it out and see if that is something you want to try.
- Start a data entry side hustle – data entry is a side hustle that has a very low barrier, you can simply sign up with a platform and start. If you’re looking for a marketplace of jobs, Fiverr can just be what you’re looking for!
- Walk dogs – okay, we can’t skip the dogs. Go walk dogs with Rover and make some extra bucks to put towards your money making machine. Who doesn’t love dogs?
- Sell things around your house – selling things can be as easy as walking around and picking up things you don’t enjoy anymore. If you find anything that you want to sell, simply list it on eBay and sell it to the highest bidder.
- Start a blog – blogging is awesome and I absolutely love it. Start writing about your favorite topic and start your blog using Bluehost for only $3.95 including free domain name and with a 30-day money-back guarantee. What do you have to lose?
- Get a raise – last but not least, increase your earnings at your current job. Getting a raise is something that is often overlooked but is low-hanging fruit when it comes to making more money!
Other tips? Check out this side hustle post!
You’re all set up and prepared to make the most of your money making machine, let your money work for you, and make more money to get to your financial goals even faster!
Do you have your own money making machine?
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