Earning Money vs Making Money: Know the Difference to Create Wealth

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There is a difference between “earning” money and “making” money. Although the words are interchangeably used, they are not the same thing. Knowing the difference helps you understand how to support your financial wellness journey.

Earning money involves exchanging your time for cash, payment, or a paycheck. You earn money by performing work for someone else–a business owner, employer, or client. In the gig economy, you earn money by performing tasks for others, designing logos, or using your car to drive people or deliver packages.

In contrast, making money is done by creating a product or service that earns for you and isn’t dependent on your time. It’s an alternative to earning a paycheck.

I want to note that making money is often associated with MLM (multi-level marketing), get-rich-quick schemes, or other fast-money schemes. But there are legitimate ways to make money, which I’ll discuss later.

Let’s start with the basics and explore the difference between earning and making money.

How Do You Earn Money

Earning money requires exchanging your time and skills for money. You’re paid based on the number of hours worked, whether you’re paid based on the actual hours you’ve worked or a set salary. Your earnings are capped by the number of hours you can work.

Want more ideas on earning money? Read >> 50+ Active Income Ideas to Earn More Money

Here’s the thing: When you earn money, you’re dependent on someone else or another company to earn a living. Your earnings are limited by the number of hours you work, regardless of your hourly wage. There are only so many hours in a day and only so many hours you can physically work before reaching exhaustion.

Remember, time is finite; therefore, the only way to earn more is to become more valuable–getting paid more per hour or with a higher salary. [Read the article I wrote on how to ask for a pay raise and get it.]

Earning money is important because money is central to how our society works.

You need money to pay for necessities like food, housing, and healthcare, as well as some luxuries. Earning money is also important to pay for debt obligations like student loans.

David Carlson, founder of YoungAdultMoney.com and author of Hustle Away Debt, writes about the multiple ways to earn extra money to pay off debt, save money, and build wealth. It’s a great book about side hustling while continuing to earn money with a primary job. (Kindle version)

To achieve your earnings goals, read our article on supplementing your income. I listed 40+ creative ways to earn extra cash, from starting a blog to cleaning homes, selling your stuff, and completing paid online surveys.

How Do You Make Money

Making money is using your time to create a product or service that continues to earn you money. You’re not limited to how much you can make, and how much you make is not dependent on exchanging more of your time for money.

Making money can include income from licensing creative work, rental property, dividends from investments, self-publishing a book, having a print-on-demand merch store, an online course, or any other product that generates revenues.

You can make money by creating a product that people need.

For example, a book or a course can sell repeatedly. Sure, there is effort needed to create the course and book, but these products will continue to earn money for you. Of course, you’ll spend some time promoting the products, but you’re not limited to how many products you can sell.

Want to get more money-making ideas? Read >> 14 Passive Income Ideas

In Chris Guillebeau’s bestselling book, Side Hustle. He defines a side hustle as an opportunity to make money by turning a skill or talent into a business. He describes the process of identifying your skill and making a profit within 27 days. (Audible version | Kindle version)

To start making money with money, check out the side hustle marketplace for opportunities.

Can you make money from an activity associated with earning money?

Yes. For example, you started designing logos and built a large clientele. Instead of designing all the logos yourself, you can hire another designer to do the work for you. With this example, you charge your clients $100 and pay your logo designer $60. You’ve made $40 without needing to spend time creating the logo yourself.

Some people refer to making money as passive income, but the truth is that it requires time and work, too. The key thing I want to stress is that making money isn’t dependent solely on your active involvement or time.

Can you make money from other people’s money?

Yes, you can make money from other people’s money. It’s called leverage. This is when you borrow money from someone else or a financial institution. Leverage is using credit to make a purchase that makes you money. For example, you bought a property using a mortgage for $200,000 and then sold the house to another buyer for $220,000. You’ve just made $20,000.

Passive Income Active Income Portfolio Income phroogal

Why is it important to know the difference between earning money and making money?

You’ve entered financial independence when you make enough money to cover monthly living expenses. Financial independence means work is completely voluntary and optional. When you’re financially independent, your time belongs to you. In essence, you’ve built time wealth.

Your goal should be finding ways to make money to regain your time.

If you believe it takes money to make money, but don’t have any, I want you to shift your mindset about the money you’re earning.

It’s vital to create a plan to use your earned money on money-making activities.

Want to learn more? Tanja Hester’s book, Work Optional, is a practical action guide for financial independence and early retirement to make working a choice. It’s a great read for those seeking to reclaim their time to do more meaningful work. (Audible version | Kindle version)

Further reading on income strategies:

Need more? Visit the financial marketplace to find side hustles to increase your income.

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