The Difference Between Making Money and Having Money
If there's one thing that I've learned over the years related to personal finance, there is a difference between having money and making money. Having money and making money or both critical components of many people's personal finance formulas, and in order to find the right balance between the two, you should understand the difference. Let's talk about it:
Making Money
In this blog, I'm going to define making money as your ability to actively bring in wealth by trading your time. For most people, this is their job and any side hustles or businesses that they actively participate in for extra income. Making money is an important skill because it allows you to generate wealth using your experience and time. Once your money-making skills are learned, they aren't usually lost because your expertise and experience in your career field will not disappear overnight. However, it's still important to remember that your ability to make money can easily be overshadowed by your ability to spend it.
Having Money
In contrast, I'm going to define having money as the amount of assets and wealth that are accumulated over time and consciously allocated for different purposes. Having money could refer to having a sufficient emergency fund ready to be accessed at a moment's notice, while also maintaining consistent investment and retirement accounts that hopefully are generating wealth on their own. Having these funds available and managed properly will provide you with security and a certain amount of Freedom depending on how much wealth you have it your disposal. If you have enough money, you no longer need to make money (this is commonly referred to as retirement).
So What?
Now that you've seen the difference between having money and making money, you can start to apply a more qualitative lens to your own personal finance formula:
You should develop your skills to make money, so that you can save and invest it so that overtime you build wealth and have money.
Once you have more money, you can afford to take more risks and find new and different ways to make money. This consideration is particularly important for the people who wanted to start their own business, but could not afford a few months or years without significant income from it.
Figuring out your dream lifestyle will depend on the right combination of both having money and making money. Some people prefer to work in a high stress job and make a lot of money just to spend it all on things that make them happy, while others may want to aggressively invest so they don't need to put up with that stress for the rest of their life even if it means living frugally for a while.
If you made it this far, thank you for reading! Now that you're here, you should ask yourself:
How do I make money?
How can I make sure I have money?
Is making money or having money more important to me?
How can I mix making money and having money to get the lifestyle I want?
Answering these questions will put you on the right path to your own personal financial success. Good luck!