Sunday, October 5, 2008

Your Perspective of Money

You ever wonder what factors change our circumstances and lifestyle?

I'm here to tell you that our income isn't the only major factor that determines our financial situation. The super rich didn't start off making millions of dollars a month. They started right where you and I did. The only difference between the super rich and the average family is their perspective of money. The super rich's perspective of money is vastly different than that of an average person's.

The average person doesn't take time to even focus on how money works. It's not that they don't care, but that when you are placed in a society where there is always a connection to money (meaning there is never a lack of opportunity to earn it), your mind can't help but to take that connection for granted. You don't apply definition or importance to something that is constantly available. In our society, despite the financial storm that we are apart of, there still exists the mentality that there will always be a job, some job, any job, out there for me. (And if there isn't, all I have to do is go to school, learn a trade or a skill, and someone will hire me.) This constant connection to money is crippling to your actual earning potential. Now, a job is not a bad thing. In fact we will always need folks out there who don't mind working. Someone will always have to drive the bus, collect the trash, become a doctor, ect. No matter what financial plateau you reach, you will always need society to function.
The rules of a job are simple. You show up to work, and someone compensates you for your time. Or even if you've got it good and you work from home, make your own schedule, and earn commission and bonuses, you still have to answer to someone else and prove that you are being productive. Your boss is looking for results through the use of you. This is the ideal situation for the average adult because they don't know any better. We're told to grow up and become productive members of society by going to school and getting good jobs. The biggest problem with a job is it takes up your time. It takes time to go to school. It takes time to be productive and earn raises and promotions. It takes to time to retire, if you've prepared for retirement, and by then much of your time is already used up. There is no leverage in working a job.
Leverage is the biggest tool in the world. Leverage is the ability to utilize your time efficiently. If you spend your time working a job for 8 hours a day and in return your boss gave you a $20,000 check, maybe this was very good use of your time. But for most of us, this is not the case. Let's say, you did make $1,000 a day. I'm sure we'd all agree that this is a fairly good salary. Would it not benefit you, the employee, to find someone else to do the same job for a fraction of your salary? If you could hire someone to do your job for say $800, would it not be worth your while to not work for $200 a day, while you went and got another job? The only problem with this equation is your the employee. You don't do the hiring and negotiating. If you could find someone to do your job for cheaper, why would your boss need you? This lack of control of your time is the reason why most people don't live up to their highest earning potential while performing a job. Additionally, the lack of time leftover for everything else, leaves little time to earn money else where.
You would be hard pressed to find many people that have thought even this deep into the process of becoming financially free. Thinking about your income is important, but that's not what gets you to the top. It's the out-come (defense), not the income (offense), that's important. Financially, your defense is the money that you spend. For most people, you give up about as much as you take in. If you earn $1200 a month, you spend $1200 a month. You can get rich just by strengthening your defense. Instead of spending $1200 of your $1200, spend $1000. Saving that $200 would put you far ahead of the pack. How much of your income have you saved in your working career? I didn't start saving until this year (besides my 401k). Does that make the 8 years prior worthless?

How much money do you really make an hour? Ponder this. Could someone prove that your expenses for your car, your house, your clothes, your food, ect. were necessary in order for you to be a productive member of your company? If those expenses are necessary, how much money do you really make an hour? At the end of the month, how much money is left over? If you divide that by the time that you put in at work, you've got your answer. For many of us, our job doesn't look all that savvy anymore. I personally save $150 from every check. I get paid every 2 weeks. So in a good month, I may get paid 3 times. The most that I can save, at this rate, in a month is $450. Suppose I work only 8 hours a day for 21 days out of the month (for a total of 168 hours). That's about $2.67 an hour. I make, ultimately, less than $3 an hour in a good month. In the median month, I make about $1.79 an hour. How much do you make?

Taking this perspective to money is what has brought me here today. I can analyze my situation and see where I can make some major changes. This week I plan on showing you my budget- where all of my money is being spent, and where I plan on making improvements overall.

In the meantime, check out one of my buddies stories of how he went from rags to riches in the DC Metropolitan area. His name is Anthony "Von" Mickle.

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