How to "Make" More Money

The way that things become worth more money is by adding labor to them. What the populace-at-large calls this is “adding value.” Basically, if you have something that’s worth a certain amount and you do something to it to make it more appealing, you are adding value – that “value” was added by your labor. So, that’s the short explanation of how you can make more money with whatever you have. Of course, that doesn’t mean that it’s possible or even desirable to add value to everything.

Let’s take a piece of cotton for example. If you grow the cotton and sell it how it comes off the plant, you’ll probably only be able to get a certain amount of money for it. However, if you weave it into a beautiful white cloth, you’re sure to get a much large amount of money at sale time. Now, there’s no telling what value could be added to that white piece of cloth! It could be turned into a nice T-shirt, or it could be turned into baby clothes: this is where entrepreneurship comes in. The entrepreneur must now decide in what way value will be added to the cloth in order to allow it to sell for the most amount of money. (That’s where things like marketing, branding, etc. come into play, but that’s a topic for a whole other post.)

There’s basically no way of escaping the fact that you have to add labor to things in order to make them worth more. Even for a basic natural resource such as water, the labor of getting it from the source adds value to it. Sure, water in the well is free for all, but if you want someone to get it out for you (or you want it to come in bottles), you’re going to have to trade your “money” for the added value. In fact, if you get the water yourself, it seems free, but you’re actually paying for it with your labor (maybe you could’ve sold that labor for something else?).

So… labor away, people! Haha… but really, if you want to sell something, make sure to add more value to it, thus increasing its worth and at the same time increasing the percentage of profit you can make off of it. Every further step of value-adding increases a product’s selling price by a larger percentage, after all! (Think of LV, Gucci, or any of those other high-priced things.)

The Real Value

Since gold is no longer the governing factor against which all other commodities can be compared – what can we use to figure out the price of what things are worth? We certainly can’t use the paper, coin and kilobits that we call money to determine what things are worth; that fluctuates everyday and depending on what country you live in, it could go up or down. For example, if you live in the U.S. right now (or are watching the price of things in relation to greenbacks), you see that a lot of things have apparently gone “up” in price. Oil has skyrocketed and gold has reached all-time highs!

However, what has actually happened in this case is that, yes, oil and gold have gone up in value relative to other things – but one must consider how much of that “increase” in the price of those two commodities can be, instead, attributed to the weakening of the U.S. Dollar? If you’re a Canadian, your dollar has gone UP versus the American dollar, and therefore, the gold and oil price rises haven’t been as great. Therefore, you must always consider the many factors involved in the rising price of things.

Just maybe, however, nothing has gone up in price: wages have gone down! Have you ever considered that? The price of oil, food, gold, etc. have all stayed the same, but it is wages that have gone down. Maybe it’s a conspiracy where the powerful people in the world are raising the price of everything in order to corrode your buying power. You see, they’ve gotten clever. Instead of giving in to demands of workers to raise wages and lose money… they just raise your wage a little, making you happy that you have “more,” and then just turn around and raise the price of everything beyond what you got! Smart, eh?

In actuality, that’s how inflation works, but on a slower and less conspiracy-like scale.

All I’m saying is that you should not just be thinking about the numerical value of the money in your pocket or in your computer – you must think what it can get you! Adam Smith says that corn is the good against which all things should be measured, because it is the staple of all food. He also postulates that labor is the REAL measure of what things are worth: as in; how many hours or days of work does a certain thing take to obtain? The longer it takes you, the more it’s worth. Corn in this case, is just a comparative measure. Make sure you compare the right things!

Multiple Streams of Income

If you've read any book about personal finances or are familiar with any of the "techniques" for great wealth - then you've definitely heard of "multiple streams of income." The analogy is that a large river is fed by many tributaries - streams - and they all coalesce into one mighty, unstoppable force. So, the advice goes that you should do the same with your own life. Don't just depend on your one job to give you all the money you need for your life; find other ways to supplement your income, in addition.

This is a good idea, actually; you work your daytime job and start searching for ways to gain extra income in your spare time. Maybe you like making wooden toys and other people love your toys. Sell them on Craigslist and in no time, your wooden-toy-income will make up about 10% of your monthly income! Great! Now, you've got two "streams" of income; one big one from your day job, and one small one from your wooden toys. Financial gurus tell this to you like it's a new and crazy idea. They tell you to keep doing this until you have several sources of income, each only representing a small percentage, so that in the event you lose one source it won't cripple your finances. This is all true and good advice, yes, but the catch is that it's not a new idea.

In fact, it's one of the oldest ideas on Earth! It was, however, because of the industrial revolution that this idea of multiple streams of income became erase from the minds of average people. During the industrial revolution, extreme specialization and dedication to one factory/company/job was all the rage; capitalists wanted you to dedicate yourself to the factory. They wanted you to break your days down into three, eight-hour shifts, so that their products would roll off the lines quickly. One shift for working, one shift for sleeping, and one shift for the rest of your life! Ever since those times, that mindset has predominated and has caused people from all walks of life to only look towards their daytime job for income.

In the past, before the industrial revolution, society was mostly an agrarian one. There were mostly farmers, but there were also those that lived in towns in order to provide other services; such as butchering, blacksmithing, carpentry, trading, etc. In such a society, you could be sure that each and every family (and person) had more than one source of income. The farmer didn't just farm all day and watch his crops grow in the meantime; he would tend to livestock (chickens, pigs, children, etc.) or maybe he would spend some of that time as a carpenter. Thus, the farmer had multiple streams of income, and you could be sure that if his income from carpentry exceeded his income from the selling of his crops that he'd concentrate more effort on that. However, he would not always completely give up any one of the trades.

His wife, too, would be pursuing multiple streams of income if there were any young children to be taken care of in the home (yes, back then, tending to children was the woman's job). She might be knitting things for her own family and selling the excess, she might be making preserves to sell at the market, or she could be taking care of rich people's children! There were many options for her while cooped up in the house with those noisy and demanding children. Of course, when the boy children reached the tender age of seven, they were immediately sent out to help pa with the farming. The girls would help ma with the in-house projects.

Opportunity Cost

If you've never taken a course in economics (and maybe business), you've probably not heard the term, "opportunity cost." However, it's a sure-bet that you deal with it everyday - you just don't have a term for it. Or maybe, just maybe, you don't even think about it at all! Yes, it's true, some people don't think about opportunity cost at all, thus costing them opportunity.

The bane of all of our existences is basically that we can't have all we want, right? Sure, we may have enough money to trade for that awesome car we've always wanted... but then there's nothing left over for the even-more-awesome house that we wanted. Or maybe you make a lot of money, but since you work so much, you never have time to spend it. And yet again, maybe you have lots of free time, but no money to go anywhere because you don't work much! All of these circumstances blow, don't they?

That's the reality of life, but never fear, because opportunity cost is here to help you understand how to deal with life's decisions. Let's say you only have $20, and you want to purchase some clothes; so you go to the shop and see a great pair of jeans for exactly $20 (no tax!). Great, you can get those jeans and it costs you only $20, right? Wrong! It also costs you the opportunity of maybe buying two T-shirts for $10 each, or costs you the opportunity of saving that money for the proverbial rainy day, or costs you whatever else you can think of that $20 can do. So you see, the cost is not just the money... but the cost is lost opportunity.

Opportunity cost is not just talking about things costing you, either. This term could be talking about trade-offs that are either good or bad. Let's say that tonight, you decide to put in overtime at the office rather than go to a boring family dinner. Well, working that night cost you the opportunity of going to the boring dinner, but it also cost you the opportunity of not earning extra money. So basically, working that night maybe took away one positive thing (if the boring dinner is considered positive), but also gave you another positive (the extra money). This is a second way to look at how the decisions you make in life affect you.