The Transformative States of Money
Picture in your mind, holding a dollar bill. Let’s pretend that you intend to transform this dollar into two. By magic, skill, or science? In any case, before you start, you’ll want to understand the transformative states of money.
Four fundamental actions yield transformation: buy and sell, buy and create, lend, and spend.
Buy and sell —” The merchant”
You can buy something for less than it is worth and sell it for its full potential. There are many examples of this. Think of someone thrifting for luxury items to resell on eBay.
To make this work, there are two main approaches.
One, you can find a discarded item or one that is being sold for less than its true value and resell it at a profit.
Or two, you can buy and hold. Some things become more valuable over time. Collector items come to mind, although I wouldn’t advise this unless you know what you’re doing. Equities are another.
Equities (or stocks) are an example of buy and sell. You can buy a portion of a company, with hopes that the company will grow, to sell at a later date for a profit.
Buy and create —” The artisan”
If you’re the creative type, you might consider this strategy. You can purchase raw materials and produce something new. With this approach, the sum is greater than its parts.
We simply do not have time to make everything we need to sustain ourselves. So, we rely on others to make them for us.
Find a niche, a genre you love, or just something with a high perceived value and put your creativity to work.
Lend —” The shark”
Shakespeare would warn against this one and I have to agree. Nevertheless, lending is a very important economic pillar. If you had the perfect business idea today, would you be able to afford it?
Many business ideas rely on capital from parties seeking not to invest, but to make a return on the money itself. Generally, a percentage of the original loan amount.
This is the concept of giving with strings attached. Instead of building something of your own, you may provide someone else with the means to execute their vision. For a price.
Spend — “The professional”
You can spend money on things that support or improve your existing income sources. This is the art of investing in yourself, not frivolous spending. Remember, the goal is to transform your single dollar into two.
If you cannot get to work without a car, then spending money to keep that car running is not a waste. If a certification or new suit can help you win a promotion, that is an investment well made.
Think of spending as a tool to protect and increase your income. This mindset will give your spending more purpose. When spending, remember to ask yourself, what will be my return on investment?
The goal is the same, whether you identify with the merchant, artisan, shark, or professional. Perhaps you’re a mixture of two or more. In any profession, it takes time and practice to yield positive results. So, keep practicing.