- Sell your time: The more rare the skills you posses, the more valuable you are to society. A star NBA player or a neurosurgeon cannot be easily replaced, whereas there are millions of people capable of loading boxes into a truck. That's why the former earn higher pay rates than the latter. It has nothing to do with intrinsic worth as a person (Americans have a perverse desire to equate income and wealth with a man or woman's inherent value, which is - if you'll forgive me - stupid.)
- Sell a product or service: If you own the rights to a song, or a patent, or cupcakes, or software code, or real estate, you can rent, lease, or sell the asset to someone who wants to use or own it. In exchange, you get money. The scarcer your assets, the more money you can likely get for them.
- Illegal or political seizure: If you seize the assets of someone else, as was common for monarchs when someone opposed them, or through taxation if you are a member of the legislature, you are able to benefit from the usurped assets, living off the labor of other people. This behavior is immoral and unethical so for most of us, it's off limits. The dictator and the shoplifter are separated only in the scale on which they operate.
Looking at the chart on class in the United States, it becomes quickly apparent that those who reside toward the top either have rare skills that allow them to earn much higher annual incomes, or they own rare assets, that generate large streams of cash for them to use. At some point, the more intelligent members of the super-rich class (aka the "Capitalist Class") learn to generate money from both categories. Jack Welch, by way of example, not only has hundreds of millions of dollars in stock holdings from his days running General Electric, but he is now able to command considerable speaking fees and consulting fees for his expertise. Often, the two go hand in hand.
What This Means For You As a New InvestorAt this point you may be wondering, "What does all of this have to do with me?". The answer is simple: If you don't have enough income to invest and build your assets, you are going to have to figure out how to either increase the value of your time (e.g., go back to school and become a nurse so you can earn more per hour than you could as a receptionist), or possess cash generating assets. The libraries of the world are filled with books and articles about men and women that figured out how to get their hands on capital to start earning dividends, interest, and royalties. They are no better than you!
I've heard of people leasing with an option to buy car washes so they didn't have to come up with money for the purchase because they had terrible credit, effectively using the asset to pay off the debt. I've know of people who bought houses with little or no money down, rented them out, and effectively used the house to build equity. Likewise, there are business owners that sell their company to people and are willing to finance the purchase, letting you use the profits to pay off the debt. If you can get over your fear of rejection or failure, and do everything necessary to reduce your risk to as low as possible, you have a chance at drastically improving your standard of living and jumping into the higher brackets of household wealth in the United States.
For those of who don't believe you can make $100,000 or more a year from new sources, let me ask you this: How many hours last year did you actually devote to working on, or seeking out, opportunities to earn passive income? If you spent any time at all, I'm going to guess it was far less than you spent watching television or working at your full time job. Life is full of opportunities - any time you can solve someone's problem, you can get paid for it. The only thing standing in between success and your balance sheet is you. Figure out what you need to accomplish to start generating passive income and then take action today.