Blog - Page 3 of 3 - Som Prakash

Whats The Difference between Income and Wealth ?

Why do the rich get richer and poor and middle class remain there ?

Never in the history of any country, had we seen so many working mothers. I am not against women working, as a matter of fact I am a strong proponent of equal rights and women empowerment and that is what I have been teaching my nine-year-old daughter about as well. However, the point I am trying to make is- Single income household is becoming a thing of past. With the rising cost of living, both husband and wife have to work to make the ends meet. So, TWO household incomes is a now a necessity rather than a choice.

If two income streams are not sufficient, what could you possibly do to increase the income further? You could choose between another linear income or a passive income. It’s very important to understand the difference, as I didn’t know the difference until I read a book by Robert Kiyosaki called “Rich Dad Poor Dad” and a subsequent book called “Business of the 21st Century”.

Linear Income Vs Passive Income

A linear income is the income that you make by trading your time. That could be another part-time job or freelance work. The advantage of linear income is- it’s an “immediate income” but the negative side of it is your time is limited (24 Hours) and you will get busier and more exhausted. And when you stop working, the income stops.

Passive Income from Money leveraging

Passive income is the income you make without putting the proportionate time for it. The best example for this could be investment income (Rent, Dividend, Interest etc.). Usually these are driven by investment of MONEY not Time. The downside of this income is – The effective income (Invested amount less the return of investment) may not be immediate i.e you may have to wait for some time before you recover your invested amount. The positive side of this income is the TIME. Your income becomes independent of your time. So, you will have a lot of FREE time compared to someone having another job. Hence, most of us invest our spare money in stocks, shares, real-estate etc for retirement if not as a secondary source of income.

Passive Income from Time leveraging

So, as we could make our spare money work for us to create a passive income, could we make our spare time to do the same? The answer is absolutely YES. You could either make money work for you or a system which multiplies your time to work for you. Let’s say- you start selling some products online in Amazon or E-Bay. What these websites are doing is giving you 24/7 platform where you don’t have to sit to sell the products. You just have to spend the time to post the product on the e-commerce site and the website works as a system- 24/7, showcasing your product, taking orders, depositing the sales proceeds into your bank account and programme like Fulfilment By Amazon (FBA), even ships the products on your behalf to your customers. Hadn’t there been any system, you had to be at your shop doing these or you had to buy the time of others (Hiring people) to do these. So, the websites are nothing but time leveraging system. As long as you keep doing your market research about the products which have big demand online and keep selling those products, you will keep making the profit. The only caveat here is- selling on a third-party platform like Amazon, E-Bay, you never build your own loyal customer base. These e-commerce platforms never reveal your customer contact information to you. Hence, the websites like Shopify starting to get popular where you could own your customers, but you have to create your own traffic through your own marketing.

So, both Amazon and Shopify have their own advantages and limitations.

However, is there a way I can have an online platform, where my loyal customers keep growing exponentially forever automatically, growing my business turnover? The answer is YES. It can be done, when I help my customers to become business owners, just like me and help them to make money. This is a very powerful concept, where entrepreneurs breed other entrepreneurs. This business model is called “Network Marketing”. This concept should not be confused with the illegal Pyramid selling where the highest reward goes to the person who is at the top. In a legitimate Network Marketing business, the system rewards the entrepreneur who generates the most turnover helping the most number of other entrepreneurs.