I have decided to break the ice and speak (or, write, rather) about the subject of money. Today I will talk on some ground topics or make a foundation for further discussion on the subject of money. We all are on different places on the journey to financial freedom. As a student of wealth creation through the school of involvement, I have some invaluable tips I always like to share on this important but usually neglected issue of money. Money is so important that a search in the KJV Bible shows a minimum 125 results on ‘money’.
There are 3 key approaches to the subject of money we must master, if we must become financially free.
- Creating or Making Money
- Managing Money
- Multiplying Money
MONEY 101!
What is Money?
We use Money in everyday life, it is that basic. We all live our lives around money and I believe about 90% of our lives revolve around money yet our educational institutions most times did little or nothing to prepare us for this in the light of the 3 key areas mentioned. It is therefore our sole responsibility to invest in our financial education. We should therefore first ponder on how much of the concept of money we understand. I will make some bold attempts to explain some basic concepts.
To start with, Money is a medium of Exchange: In a value system you exchange money for a service or product of value. That is why on a dollar bill you will find a line of information ' This note is a legal tender'. Money is any document that has legal backing as a legal tender in a value system. To therefore simply put, money is anything you can exchange for value.
Money is an idea
I also believe the concept of Money as an idea, as opined by financial advisor Robert Kiyosaki. This means money is really an idea. It evolves from ideas and it is really an idea itself. The concept of money is an idea that defines the reward system for certain value and thus becomes a standard in a specific community, society or in a given economy. These two explanations will suffice for a good definition of money outside an Economics class.
The Two types of income
There are majorly two types of income or earnings, they are simply passive and active income.
Passive income is money you do not have to work for actively with your time, energy or physical efforts to earn it. You usually have worked or created a system which now earns more of this for you without any necessary physical efforts. It is money you earn whether you work or not. A good example of this is rental income or royalty from books or music.
Active income: Active income is the money you have to show up to earn, to earn this kind of income, you will be actively engaged or involved. You have to spend your time or energy to earn an active income. A good example of this is the salary or wages.
We can conclude by saying money is a measure of value and can either be earned actively or passively.
These explanations will set the new pace for our next discussion on Ways of Making Money.
Emmanuel Ayeni