If there were a magic pill for making a million bucks, we would all be filthy rich by now; but that isn’t the case. Instead of magical, getting rich is a steep learning curve. As a result, most hopeful millionaires end up drowning in the vast sea of financial knowledge, without ever making it to the wealthy shore. It turns out, only a handful of people know how to get rich and if you look closely, they all are well aware of the three following things:
Number 1: Subject Knowledge
The first circle of wealth that will increase your ability to build wealth is subject knowledge. This refers to industry-specific knowledge that one acquires through an education system. The only key difference is that, in this case, you specialize in one subject area and hone your expertise through consistent practice.
Let’s say you choose software engineering as your subject area. In the modern world, there’s a skyrocketing need for software products such as mobile applications, yet only a few people are willing to exert the effort needed to master Software technology. If you don’t mind challenging your mind to complex programming languages, you could take up a Bachelor’s degree in software engineering and become an expert software developer.
Currently, the average annual salary of a software engineer guru stands at $175,000, which will definitely increase as you advance your career. Also, you’ll notice that the more extensive your subject knowledge is, the higher your chances of squashing income barriers. Pursuing higher levels of education in your field will stack the odds in your favor.
For a fact, your expertise is bound to attract respect and admiration that could quickly bag you a more senior position. Compared to someone whose knowledge is scattered, specializing gives you a competitive edge. Also, keep in mind that subject knowledge doesn’t necessarily imply something complex. Even a subject as simple as a foreign language can be valuable if applied in the right contexts. So what’s the take away here?
First, the most important benefit of acquiring subject knowledge is career advancement. As it turns out, formal employment isn’t always the villain when it comes to attaining financial freedom. Choosing the right subject area will position you for financial success. This is because there are career paths that pay relatively higher than their counterparts. We also have those with brighter prospects for growth, which means that you’ll climb through the ranks faster. For example, medicine, economics, and IT are considered the most lucrative, and with the greatest potential of creating millionaires. So as opposed to acquiring shallow knowledge in different subjects, get your hands on one and dissect it thoroughly.
Secondly, subject knowledge sharpens your brain. Whatever it is that you choose to learn, your brain stretches in order to join the dots and comprehend what you’re being taught. As a result, you accustom your mind to decoding complex puzzles and facing challenges head-on.
If you ask me, these are some of the most sought-after skills in the job market. A sharp mind also comes in handy in business. So, if you’ve been contemplating advancing your education in a certain field, do it! Get that MBA, apply for an industry specific course, and channel more time towards improving your craft. You won’t regret it.
Number 2: Business Knowledge
Moving on, the three circles of wealth would be incomplete without business knowledge. If employment doesn’t excite you, or if you’re more determined to break inherent income ceilings, running a business should be on your roadmap to financial freedom.
For starters, business knowledge is the general understanding of how you can transform your skills into a profitable venture. In this case, I’m not talking about rigid income sources like salaries. I’m talking about using your skillset to diversify your income streams and earn using other channels.
As it turns out, business knowledge is a mash-up of an individual’s skills set, industry insights, and personal experience in entrepreneurship. Don’t feel lost; I’ll break it down for you. A skillset refers to the career competencies required to excel in any work setting. Skills such as leadership, problem solving, and innovativeness fit this description. Industry insights, on the other hand refer to real-time industry data that unveils a useful reality about competition in a certain market. Usually, industry insights are valuable to business owners because they provide crucial leads for business success. Industry insights guide you on how to get ahead of your competitors, and the future prospects of your industry. They might include things like market demographics and the state of technology in your area of interest.
Finally, personal experience in business or career can also provide essential business lessons. For instance, you can infuse tips gained from your day job into your side-business. Clearly, business knowledge isn’t something you can learn overnight. But you also don’t have to learn it in the confines of a classroom. While leveling up your education isn’t a bad idea, it isn’t an assurance of acquiring helpful business knowledge.
Any successful entrepreneur will tell you that classroom education is just the tip of the iceberg. The real learning begins when you dip your feet in the business waters and face all the challenges that come with it. Also, you can learn a lot about businesses by keeping your ears open. Watch business news and educate yourself on modern business trends. Expose yourself to innovative technologies that help businesses grow. Other valuable sources of business knowledge include business books, podcasts, and business seminars. If you can find memoirs written by wildly successful entrepreneurs, you’re headed in the right direction. One key benefit of business knowledge is that it teaches you how to build and scale a successful business. Through learning concepts like income automation, you can make money continuously without sweating.
This type of knowledge teaches you the business aspects of your craft. For example, how can you package your subject knowledge into a profitable product? Are there ways of automating the income you acquire from your area of specialization? These are some of the questions that you’ll be able to answer if you acquire business knowledge.
As a result, business knowledge opens the door to countless money making opportunities. For example, if you’re a software expert, you could choose to build a niche-specific website through which you share your craft with the world. While teaching other people how to decode complex applications, you can reap off it by infusing paid ads, courses, tutorials, and e-books. To wrap it up, you can set up an online store and sell tech-inclined physical products. This way, you will supplement your income without exerting too much effort.
Number 3: Money Management Knowledge
After acquiring subject knowledge and business knowledge, the odds of securing a lucrative income is at an all-time high. However, it would be pointless to make a million bucks if you’re clueless on how to use it to generate wealth. Sadly, most individuals fall in this category. They spread themselves thin at their jobs, only to end up splurging their income on useless fluff. If this description hits a nerve, you need to change your ways NOW!
As it turns out, money management knowledge is your best, final shot at getting rich. This is because it teaches you how to apportion your income and spend on your priority items. For example, money management knowledge directs you on how to save and invest your money. Using the 50/30/20 budgeting rule, you get to dictate what portion of your income goes where. According to this rule, 50% of your income should go to needs, 30% to wants, and 20% to savings. Knowing this will help you strike a balance in your spending tendencies.
As such, you won’t just stash your coins in an underground bag and pray it transforms magically into a money tree. Personal finance enlightens you on cash generating assets that actually have a snowball effect on your finances. A good example of an income-producing asset is dividend-paying stocks. In a nutshell, dividends refer to periodic payments made by companies to their investors. If you happen to own company stocks, and the company makes profit, you’re entitled to receive part of this profit. This way, you can make money while you sleep, without lifting a finger. Other examples of income-producing assets include bonds, high-interest saving accounts, and rental property.
Another benefit of money management knowledge is that it sheds light on important financial concepts like compound interest. When I ask older people about their gravest financial mistakes, not saving early is often a common rhetoric. Most people push their retirement goals to the back and end up missing out on the power compound interest. Compound interest refers to the ability of your earnings to generate additional earnings, which are then ploughed back to generate more. If you learn money management, you’ll understand how important it is to get your financial house in order, and to do it early. For instance, someone who starts saving for retirement at 25, will reap more than someone who starts at 35. In the financial world, a 10-year difference is a long time. A 25 year old who starts putting away $80 every month will accumulate more assets by age 65, compared to another investor who starts at 35, and saves $100 every month. As long as you save money through a longer time horizon, you have higher chances of achieving financial freedom.
But where do you learn these money management tricks in the first place? Sadly, schools and colleges shy away from imparting money management knowledge. Instead, they bombard you with complex skills that make you employable, without showing you how to handle money.
But it’s not all gloom and doom. Thanks to the internet, you can learn personal finance management from anywhere in the world. Get your hands on books that will enrich your mind with the key principles of money. Learn how to automate your savings in order to instill a sense of discipline. Take personal finance courses that will sharpen your mind and change your perspective about spending money. And most importantly, surround yourself with like-minded individuals whose money habits you admire. Because your monthly income notwithstanding, you won’t get anywhere with poor money management tendencies. I’m sure you’re wondering whether you can get away with mastering just one of these three circles. Thing is, you can’t. There’s a strong correlation between subject knowledge, business knowledge, and money management knowledge.
For instance, you could be a well-paid software guru but without proper money management skills, you’ll lose your money to overspending. Unless you grasp good money habits like saving and investment, you will remain broke!
Take another scenario where one is great with handling money. They also have sharp business knowledge, but sadly, they fail to acquire subject knowledge. In a highly-competitive job market, this person will lose lucrative job opportunities to experts who’ve taken time to hone their skills in a specific niche. Unknowingly, this person places an income barrier that stops him from utilizing his money management knowledge.
The bottom line is, it’s safer to acquire knowledge from all the three circles of wealth above. Here’s the recipe to true wealth:
1. Use subject knowledge to become an expert in one field, then take advantage of your expertise to negotiate a high salary. 2. Proceed to use business knowledge to devise multiple ways of monetizing your craft. This will lift income limitations that could stop you from being rich. 3. Use money management knowledge to spend wisely and invest in cash-producing assets.
There you go! Those three circles of wealth that everyone must know!