The secret to making money can actually be most easily explained visually; at least I’m going to have a go at trying to explain it visually in this three-part series:
The Straight Line Curve
A straight line is actually a ‘curve’ mathematically / graphically-speaking …
… but, financially-speaking it describes a situation where you may have a lump sum just sitting in CD’s and earning you 2.5% and you withdraw the interest to spend. This describes a basic Making Money 301 situation where you may have already reached your Number, want to keep it in the bank (safe, right?), and can afford to just live off the interest.
[AJC: This would be OK, if it were not for the effects of inflation; in reality, your Net Worth would be decreasing as inflation erodes the buying power of your lump sum savings]
This ‘curve’ also describes what happens when you earn money primarily from your own labor: you have a ‘lump sum’ (i.e. the total number of hours that you can apply to your job/profession), which provides a ‘fixed return’ (i.e. the hourly rate that you are paid or charge) that you spend / live off: nice, while lasts 🙂
Given that none of my readers are interested in ‘straight-lining’ their way to certain financial ‘death’, in the next two parts of this series, we will examine ways to accelerate your returns …