Key ways of making money

Before we start to talk in earnest about managing money, we must know where it comes from, how the ordinary person gets it. This is what we call income. You can make money in more ways than one and within those ways from more sources than one! Robert Kiyosaki summarises it in his Cash-flow Quadrant. He proposes that there are four principal ways to generate income, employment, self -employment, business and investment.

Everyone can locate themselves within those four really, what is necessary is to understand that which you are comfortable doing to make money. He defines the four ways, which I customise for the local scene, as follows:

'Employment' is having a job. Everyone in our country understands that. We were groomed and raised for it. People want jobs – the opportunity or platform to exchange your skills and labour for some kind of remuneration.

Most people would rather have a job at an enterprise owned by another than start their own. There is nothing evil in that, in fact; some people are destined to do well as employees and must continue to invest in climbing the career ladder through continuous education, exposure and experience. Ideally, such investment should reward them with promotions and salary/benefit increments.

Many future business owners have leveraged off the experience and financial resources earned whilst in employment and gone on to build great companies. However, there is a limit to which one can build wealth as an employee. Most workers will afford a decent lifestyle buffeted by recurring income. They will have access to credit.

They will also be limited in choices by their level of income, and limited in time by their commitment of working hours. They will often contribute to generation of income for a business but only receive a small portion of it by way of salary (or wage), and thus have twelve opportunities to be rich in a year: on pay-day! (And if lucky thirteen times, including the elusive bonus!)

'Self-employment' is owning a job. This is a situation where one has a job they created and owns it. No-one can hire or fire them, save themselves. They can work for as long or as little as they want and account to no one but themselves. Without a doubt, owning a job will allow you to have the full benefit of whatever you generate in income. A bricklayer working for a construction firm may very likely get less than one who is doing "piece jobs" by themselves and receiving full value as an owner. The clear downside is that one has to keep moving and keep working for income. Once you stop because you are tired, ill, traveling or whatever other reason, the money stops coming in.

The greatest gain is the time flexibility. Self-employed folk are usually described as "arikuzviitira zvake ega", loosely meaning – they are operating independently. More than anyone else, these need to know how to manage money well because they don't know when the next earnings will come. When it does, it must be stretched in a model that ensures it covers the lean months. Many Zimbabweans are currently in this space by default rather than design. Perhaps this has worked out for good for some as we continue to see people in different sectors monetise their gifts.

'Business' is owning a system. This means creating a model where others work for you and you generate income.  Many people erroneously refer to themselves as being in business when in reality they are self-employed. Selling sweets or freezits at a designated corner by yourself is not a business, but once you get two or three others to sell your sweets or freezits (likely in your absence), then you have a system.

A system is the core thing in defining an enterprise because it is a model that has people doing activities that make money for you whether you are awake or asleep, near or far. If you aspire to business small, medium, large or extra-large (with extra topping), then you must aspire to build a proper system and engaging the right people to make it work.

'Investor' is when money makes more money for you. The investor way is quite self-explanatory; you put in money and get out more money. Typically, this speaks to passive income, where you have an initial action and thereafter receive financial benefit. That action could be investing money on the money market, stock market or in property where it will grow and you receive a periodic financial return. Many people progress logically as they gain confidence in generating income.

The average person may start out as an employee, in say a confectionary company, working as a sales representative and selling sweets and biscuits to supermarkets, schools, small retailers.

Their reward will be a monthly basic salary regardless the level of sales, possibly with some commission. The same person may then decide they are really great at their job, pushing major volumes and feel they can do just as well if doing it for themselves. So they will quit the 8 to 5 job and start buying from their former company and supplying to their own clientele. This becomes self- employment and their reward is pretty much self-determined, it can even be everything that they make. Supposing they are doing well, gaining traction and sales are going through the roof; the resultant pressure will require them to bring others on board whom they will deploy to serve clients.

At that point, they have set up a system and brought in people: we can assuredly say they are in business and making profits. From these proceeds of the enterprise they may then purchase some properties which they will lease out, or place some money for investment with a bank and receive rent and interest.

Alternately, it is quite feasible for any individual to simultaneously generate income from all four ways, a living example is a lady we worked with during my banking days. She was a clerk in a department where she captured payments and balanced them daily (employee).

Weekends, she would be braiding people's hair (Self-employment). The same lady ran a tuck-shop at her place of residence in one of the high density locations, and a had brought in a young man to man it daily while she was at work in the bank or braiding (Business). Finally, she happened to own that residence because she had been one of the fortunate ones when banking was still extremely rewarding, and had purchased the home. As a single lady who had no use for the whole house, she rented out rooms to two others and received monthly rental income, never mind the property appreciation over the years. One may generate income from various sources within the same way. You can be self-employed in different ways; as a writer, who makes cakes to order and also raises chickens plus does the occasional poetry presentation gigs.

The fifth way of making money is windfalls – donations, inheritance, gifts, but these one has no real notion of when they may come and so they cannot be part of a financial plan. What matters is to know thyself, then refine your abilities in your area of interest in income generation and increase those streams of income! Thereafter your work will be to manage money well.

Kudzai M Mubaiwa is a financial wellness trainer and author of the personal finance book "Take Charge of Your Personal Finance". She also podcasts on mari.co.zw.  Contact her on kudzi@investorsaint.co.zw or twitter @kedukudzi.