A great way to make money is to always invest in assets rather than liabilities. To start with you have to understand what these two important terms mean.

Liabilities

These are things that cost you money. For example your mortgage, rent, bills, insurance and car. Some people think that their house is an asset rather than a liability yet all the time you have a mortgage or refinance the house never produces any positive cash flow. If all you spend your money on is liabilities than you are never gaining any wealth. You are simply gaining it and spending it again

Assets

These are things that make you money. It’s basically the opposite of a liability. One cost you money the other makes you money. Examples for common assets are stocks, real estate and investments such as buying business, saving that produce interest and more recently websites. Website are like virtual real estate you can buy a site already made or build your own and you then set it up to sell a product or service.

Starting your own business is another option but this far from passive to start with. With a well thought out plan you could set one up with the intention of turning it passive. For example you could open a small shop. You could run it for a year and get it off the ground then you could employ staff to run the shop for you. This would leave you free to then do something else and you would become a business owner rather than someone who runs a business.

Now I’m sure your asking “but after I pay all my liabilities I don’t have any money left for investments”. Well you have two options.

Increase Your Income

Take a second job, work some overtime or sell some stuff thats laying around your house gathering dust. If you are currently working as many hours as you can in a job then you could also start looking for a new job with higher pay.

Lower Your Living Expenses

Cut back on thing you don’t need. Saving a bit here and there all adds up and you can then use that money and turn it into an asset. Start buying things in bulk to cut costs, make a lunch at home and take it to work rather than buying it once you get there.

I hope by understanding liabilities and assets you can now start to set yourself free financially. Work hard, cut expenses but don’t forget to still have fun once it a while!