Disclaimer: The statements made in this post are the opinion of the author. They should not be viewed as financial advice. Please consult with a financial specialist before making any financial decisions.
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First of all, let me say that the money making machines I’m going to talk about are NOT LEPE machines which the government uses to print money. That would be counterfeiting and that is illegal.
So if you are just wondering what a money printing machine is called, there you go, it is called an LEPE Machine.
The best way to create a money making machine is to build something that “duplicates” your money legally.
The way to do this is buying income producing assets.
There are many ways to make a money making machine. You can make a machine that grows through appreciation, or a machine that pays dividends, machines that pay interest or even machines that pay rent.
All of these machines are useful money making machines.
How To Make a Money Making Machine
To make a money making machine you need to save money to buy assets. So the first step is to spend less than you earn. The second step is to invest the difference.
Once you have money to invest you need to decide what money making machine you want.
There are a few different money making machines out there. I will name four because they are the easiest to understand.
1. Loan Interest
The easiest money making machine to understand is interest. The basics of interest are easy enough because we deal with them on a day to day basis at the bank (in our favor) and with credit cards (not in our favor).
To turn interest into a money making machine you just need to loan money out much like a bank does. You lend the money out and, with luck, you get your money back plus a little extra with little effort.
This is, unfortunately, incredibly hard to do. If you were to do it on a small scale you’d have to personally vet every person you wanted to lend to and that would turn lending into a job.
Fortunately there are other options, you can lend through crowdfunding sites like fundingcircle.com or, if you’re a high net worth individual you might be able to lend through larger syndications and other options.
For those of us trying to stick to the basics, however, it turns out that investing for interest is quite difficult.
2. Stocks and/or REITs
The easiest money making machine to use is stocks or REITs (the real estate version of stocks). I don’t include bonds in this because, unlike stocks, bonds pay interest. Also, bonds are a money saving machine more than a money making machine.
Stocks make money in two ways, appreciation and dividends.
Appreciation is when the value of the company goes up. If you buy at $10 per share and sell at $20 per share then you’ve doubled your money through appreciation.
Dividends are payments of a portion of the companies profits given back to the investors. It is not guaranteed and it can fluctuate so it is incredibly hard to calculate and rely on.
Both of these sources of income make stocks a reliable source of money making over the long term.
The reason it is the easiest money making machine is because you’re probably already using it in the form of a 401k or other retirement plan.
Please note that for stocks to be a money making machine you have to buy funds such as index funds or mutual funds. The reason is because it spreads out your risk enough that the general stock market growth can make money over time.
If you invest in just one company you could easily lose all of your money.
3. Rental Income
Another great way to make a money making machine is to purchase assets that generate rental income.
The most common form of rental income is real estate. Buying a house, commercial property, duplex, storage facility, or other real estate assets have the potential to generate rental income.
But other examples include renting out equipment such as a car, tractor, or even a bounce house. And renting out space, like on Airbnb. There are many things you can rent.
Rental income is great because it generates cashflow.
Unlike interest and appreciation, rental income puts actual money into your pocket on a regular basis. Having actual cash that you can use, spend, or invest is the power of rental income. It is my personal favorite money making machine.
4. Business Profits
The last money making machine I’ll talk about is owning a business. Please note that owning a business is different than managing a business.
To make business ownership a true money making machine you can’t handle day to day operations.
Here is how it works, you buy a business (a franchise or an online business are both great examples) then you hire a manager to run day to day operations. As the business operates it generates profits which you get to keep as the business owner.
This doesn’t mean you shouldn’t be involved in the business, you definitely need to keep a pulse on things, but if you are managing the business then you bought yourself a job not a money making machine.
Businesses that are run well have a HUGE return on investment meaning the potential amount of money it can make is almost limitless. You just need to understand how to guide the business to that point.
Money Making Machines Take Time
Unfortunately, there isn’t a tried and true silver bullet in finances. None of these money making machines will turn out riches over night.
But with a consistent input of cash and time to grow these can be powerful wealth building tools.
Which money making machine do you want to create? What is another money making machine I didn’t mention? Tell me about it in the comments below.
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A list of definitions used on this blog can be found here.
Income Producing Assets: Assets that increase your net worth on a consistent basis. They are relatively easy to get cash from.
Appreciation: When the value of an asset increases overtime. For example, your home goes from being worth $100,000 to $105,000. That is 5% appreciation. This is not the same as cash flow or dividends which are other ways that assets can pay you directly.
Dividends: Money that is paid back to the people that own portions of stocks (called shares) of certain companies when those companies make a profit. If you own some shares of a company that pays dividends, then you’ll get paid according to how many shares you own.
Interest: Money returned on top of the original amount of money invested. For a very simplified example, if I invest $1,000 at a %10 interest rate than I can expect to receive $1,100 back.
Stocks: Buying a certain percentage of ownership or “shares” in a company. The company uses the money received from selling shares to grow the company then pay back the owners of shares in the company with interest.
REITs (Real Estate Investment Trust): A way to buy stock or ownership in large real estate projects. They operate almost exactly like a stock, but with real property instead of companies determining the value of your shares.
Return on Investment: How much money you get back, usually measured yearly, on the money you invest in something. For example, if you invest $1,000 and receive $100 back from that in the course of a year then you’ve had a 10% return on investment.