Making money often appears to be a daunting task. Too many options cause us to either throw up our hands in frustration or seek the help of those we believe know more.

But, in reality, the essence of making money is easy to understand.

There are only three basic ways to make money. Just three! Every possible means by which wealth is created involves at least one of these basic money-making concepts or some combination thereof.

The most popular of the three is luck. Luck gets all the press coverage. There are the obvious forms: Winning the lottery; pulling the handle on the big slot jackpot; drawing to an inside straight flush.

Other forms of luck are less obvious and often get confused with skill. If you inherit a bunch of money you essentially merely won the DNA lottery. The same is true if you picked a hot stock (as long as you weren’t acting on inside information – see the next way) or bought gold just before it spiked.

Unless you are psychic, you had no way to know that a stock would rise or that gold was cheap. You “took a chance” and made money. Any time you make money by taking a chance, luck is involved. Trying to be in the right investment at the right time is more a matter of luck than anything else.

Many who try their luck at various money-making ideas grow frustrated with the random nature of luck and look for ways to improve their odds. One of the easiest ways to improve your chances of winning by luck is to lie, cheat, or, in extreme cases, actually steal your way to wealth.

This second method of making money is how insider traders operate. This is also one of the money-making tools of some gamblers, a few business people, a marriage partner or two and every thief from the “white-collar” criminal to the most desperate convenience store robber.

The downside of this technique is the extraordinary risk it presents to your future. While some people do get away with their misdeeds, most end up paying an extraordinary price, losing both their money and their freedom.

The third way to make money is “the old-fashioned way” - by working for it. The work involved can be physical, mental, or a combination of the two. This is the path that most of us end up taking for our daily sustenance and our future comfort and security.
 
While it would be nice if there was a fast, easy path to riches, most people realize that the only sure way to create wealth is by working and investing intelligently, which requires some degree of effort. This means making smart choices based on sound research, while diligently keeping your emotions under control.

To make smart investment choices, your best bet is to create a financial plan and stick with it. Avoiding emotional reactions to wild swings in the markets isn’t easy. Research is time-consuming and often tedious. Real investing is real work.

Many of us use some combination of all three methods to make money. There are smart bank robbers who work hard to plan their jobs - and a few even get lucky and actually avoid arrest and enjoy the fruits of their efforts. There are stock investors who do some research on the businesses in which they invest - to hopefully improve their chances of success. Those who count cards work hard to improve their memory skills to improve the odds they will play a winning hand at the casino. Some of the most successful (and wealthy) business leaders in history have been ruthless in their business dealings and have found ways to lie and cheat their way to success.

Shortcuts to making money present dilemmas. We are confused when “opportunity” knocks. A hot tip could be illegal information. Today’s lucrative investment could very well be tomorrow’s disaster. And, to top it off, an active conscience makes it tough for many of us to lie, cheat, and/or steal our way to wealth.

In the end, the only method of making money on which you can rely (without feeling or being guilty) is work. It’s a proven way to make money in both business and investing.