If there’s one phrase you’re bound to hear a lot in personal development circles it’s, “don’t trade time for money.”
It’s ubiquitous… You hear it practically everywhere, phrased in different ways but usually along the lines of:
“There are two kinds of people in the world, those who own, and those who trade time for money. The former get rich while the latter get nowhere. The lesson is, don’t trade time for money.”
I understand where this advice is coming from. Billing by the hour, you’ll inevitably hit an income ceiling. You might increase your income from $50 an hour to $100 an hour. It’s not uncommon for Lawyers to bill $500 an hour. I even knew an economist in my college days who billed $1000 an hour. But have you ever heard of someone billing $50,000 an hour? Doesn’t happen. There is a real limit to how much money you can make by just selling your hours.
Now, consider the realm of ownership. Things are different here. When you think of yourself as an owner of assets instead of a seller of time, you’re in a whole different league. There is no clearly discernable cap such as, “the highest hourly rate anyone would never pay for a service.” An owner of stocks could see his holdings increase by the millions in a matter of weeks. There have been people who have made $1 billion in just one day. So it’s not hard to see the logic of people who say, “don’t trade time for money.”
Still, I think the advice misses the point slightly. It’s not that trading time for money is a good thing–it’s that, at least in the early days of your business, it’s unavoidable. In the early days it’s practically impossible not to trade time for money… and, even later in your career, it’s not always possible to shift to a different model. There are a few basic reasons why:
1. Everyone Trades Time For Money In The Beginning.
When somebody talks about not trading time for money, the question you want to ask is, “what’s the alternative?”
This is where a lot of advice-givers will tell you about affiliate or recursive income. Others will point to investments like real estate, stocks or bonds.
The problem is, in the early days of your career, you likely won’t have the money for these types of business models. Affiliate marketing depends on advertising. Investing requires money to invest. Early on in your career you likely won’t have the money to do either of these, so your first business will usually involve selling hours in some form. True, it is possible to get started with a loan. But unless you’ve already got a solid track record in business it can be hard to get one. So most likely your first efforts in business will involve selling hours, in one form or another.
2. Selling Hours CAN Scale.
One of the main reasons “selling time for money” is looked down on, is that it doesn’t scale.
The idea here is that when you sell time for money, you’re limited by the number of hours you can work. Therefore you can’t scale.
This is true only if you’re limited to selling your own hours! Because in fact, it’s possible to scale an hours-based business by hiring contractors. If you hire more people to do work that you’d been previously doing, you can scale while still being in a hours-based business.
This is why the richest lawyers can earn well into the millions of dollars a year. Sure, they’re trading time for money… but not just Their own time!
3. “Ownership” Is A Double-Edged Sword.
Another issue with not trading time for money is the risk involved.
Generally, hours-based businesses are less risky than those based on passive income. If you are an investor, you’re at the whims of the market and regulators in everything you do. As a service-seller, you’re much less exposed to these types of risks. A real estate speculator may be able to earn $50 million in a day, but he can lose the same.
4. Even If It Looks Like Someone Isn’t Trading Time For Money, They Probably Are
Last but not least, basically everyone trades time for money in some way.
Yes, there is some difference between someone who bills by the hour and someone who earns investment income.
But think about it like this: can the guy earning investment income really put zero hours into his business? Can he just say, “Mr. Stock Broker, put my money in a good portfolio where I’ll earn lots and lots of dividend income?”
Honestly, probably not.
The only way you can live totally safely off passive income is if you’re already mega-rich and can afford to live off of index funds or bank interest. If you want to get a better than average return off of invested money you need to put time into it… Research, accounting and so on. So while you’re not trading time for wages, you definitely are trading time for money.
The bottom line is this:
We all trade time for money in one form or another. While moving up from wage work to ownership is a great goal to have, it’s important not to have unrealistic expectations… Learning how to manage your time well is one of the keys to making more money. Your income will always partially come from how much time you spend earning it… So, instead of asking, “how do I stop trading time for money,” ask, “how do I leverage my time for maximum earnings?”