Just think why we need wealth
I mean money? In answer, many- many reasons we have. One common reason is that we can buy or get
things with money. Actually one can get things in various ways- by stealing,
robbery, begging, job, business. As first three options are illegal or immoral
so same are not worth to discuss. But we
see people engaged in stealing, robbery or begging. It’s very personal and psychological why one choose such way.
We have only FOUR legal ways
to earn money – Job, Self Employment, Business and Investment. There is very
clear logic for choosing one or more legal options for earning money, let’s
take one by one…..
The easiest way for earning
money is JOB….
In job we sell our time to
other person or organization by doing some work or task for them and in returns
we get wage or salary. Now this wage or salary is our income from which we will
get things and save for future. If this wage or salary is not sufficient for
meeting our expenditures or savings and investment target then we try to increase income.
Income from job can be
increased by working for more time or increasing wages or salary for same work
and for same time But there are
limitations in both ways. How much time one can work in a 24 hrs. day? 8 hrs or
10 hrs or 12 hrs or 14 hrs or more…regularly, but cannot work for 24hrs. Regularly.
If a person works on an
average of 8 hrs a day , 6 days in a week from the age of 25 Yrs till 60 Yrs,
total working hrs would be aprx 1 lac
Hrs. It means your total income would
depend on your total working hrs. You cannot increase working hrs after a
level.
Secondly you can increase
your wage or salary. There is also a
limit. Firstly, increasing wage or salary depends upon some factors beyond your
control. Wage increases on better skills
, abilities, productivity, expertise
likewise salary increase on promotion or annual increment in salary. It means you have to be more
productive, competitive, better equipped with desired skills, and lot of direct
and indirect positive things in your favour from the rest and have to
maintain for a long period.
Here, one
question – can all be in front in many of these factors for a long period
consistently because everyone wants increment in salary. Also every one cant be
promoted. Not promoted employee can wait
for annual increment and work for promotion or join another organization in same position or higher
position for higher salary package. But how many can join at such level , not
everyone because at higher level in any organizational hierarchy, positions
become fewer in number, which is called organization Pyramid.
Still you need or want to
increase your income as costs of living keep increasing and needs for higher things always increase gap between
income/ saving and target/ financial objectives.
Here one more way comes in
picture for increasing income that is….
Self Employment or Business….
First understand why self
employment or business is better than an average JOB !
Compare a salaried person and
a self employed or businessman having
same annual income .In most cases self employed or businessman would be in better position in terms of saving
and living standards . Because of one
common factor--- Expenditures !!
A self employed person or
businessman deducts business related
expenditures from taxable income ,even manage other possible expenses as
business related expenses, buy moveable and or immoveable assets in business
name and gets depreciation benefits , hence taxable income remains less and pay lower tax…. Hence, more saving … and more return on investments. While
salaried person have no such benefit , it means more payment in taxes … less saving and Less return on investment.
Second biggest factor in favor
of self employment or business is the possibility for increasing working hours up
to very higher side comparatively with a salaried person. As working hours of
an individual cannot be increased beyond a level but can be increased unlimited
indirectly !! How?
To understand this we have
to go back with wage earner / salaried person. He or she sell time to someone ,
it means there is a buyer of time and pay wage or salary in return of the work
done during that sold time period. We know there are many employees working in
a companies or organizations.
A businessman buy working
hrs of many persons and get done some work , which may be manufacturing or
trading or providing service or many more like this and in returns get income , out of this income,
pays wages or salary to the persons who
did the work. Balance of this income is the profit of the business.
A businessman does not get
profit always, sometime balance remains very low or none… if payment of wages
or salary exceeds income from that business , it’s a loss. This uncertainty of
profit and loss is called business risk.
All person not ready to take such risk and thus we see few people as self
employed or businessman.
Basically to become a self
employed or businessman one need-
1-
Knowledge of
intended business ,
2-
Experience ,
3-
Investment and
4-
Risk appetite.
A person may choose to be a
self employed if having professional or vocational education and put time in
own business rather than to become a salaried person. A person choose self employment on some basis. A self
employed person works alone and hire very few people for wages or salary for some assistance.
As bill of wages or salary becomes a major
part of expenditure for a self employed
.So need for lot of money for payments of wages or salary and thus high number
of employees can not be hired in case of self employment. This is a major
limitation in such nature of business.
In self employment, a
portion of profit is used to purchase more time- employing more people, or nature of business may not provide
possibilities for more employment. Its why we see most of self employed persons
and or next generation in same employment.
A self employed person too directly or indirectly works for others by way of selling of goods and
services. In this way salaried and self employed person are same as they works
for others. If huge investment is possible and available then many people can
be hired for purchasing of their time in a business. With lot of working hrs.
lot of work can be done and huge income can be earned. Although risk increased simultaneously.
So it’s the reason why
wealthy people are businessman or Investor and some people manage investment to start a
business rather than doing a job !!!!
If someone gets enough money
in inheritance or have investible money and invest the same instead doing a
business and gets returns. This is the income from investment. Very few people have
so much money, to depend only on income from investment.
Approximately more than 90%
people in the world are either salaried or self employed. And only aprx.10%
people are Businessman or investors.
This group of 10% gets upto 95% of total income
while the salaried and self employed
group gets only 10 % of total income.
What is your choice??
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