Why Your Income Is Your Biggest Asset
It all starts with income. No one becomes financially stable if they don’t have an income (with exception for those who were fortunate enough to inherit a large amount of money). It is one of your largest and most important financial assets (if not the most important) in building a successful financial future.
It is the first part of the equation to a well-rounded and successful financial lifestyle. The higher your income, the bigger potential you have to build wealth. If only it was that easy, right? Well, it is…kinda.
The average American household doesn’t have enough money in savings to cover a $1,000 emergency expense. Pretty pathetic right? Why is that the case?
Student loans have now surpassed the total credit card debt in the United States, guaranteeing you with at least your first debt payments right out of college (if not the 50th among your debt payments, along with all those credit cards you probably racked up in college on the weekends).
So what is the secret to financial success and a good income that goes toward paying YOU and not towards those ever so generous bank loans?
What is the big difference maker between a family that brings in an average of $50,000 who has over a $1 million dollar net worth, and the surgeon who makes $300,000 per year, with a net worth of $50,000? Or how about the family that makes an average of $50,000 per year with a negative net worth of $300,000? These scenarios are by no means unrealistic, in fact they’re probably pretty conservative.
The answer: It's what you do with your income, now how much you make, that makes the difference. While the amount you make can have a huge effect on your overall net worth, it isn’t the difference maker. A regular impulse buyer who makes $50,000 per year is still the same impulse buyer when their income reaches $300,000 per year.
There is an equation that is as simple as simple gets, which will guarantee that you have and enjoy a successful financial lifestyle, and in most cases one that will result in millionaire status if followed religiously. That equation is:
- Monthly Income – Monthly Living Expenses = at least 5% of your income left over to save.
Moral of the story, if you can save at least 5% of your money from the time you get your first job until you decide you are retired, you are miles ahead of the average Joe or Jill, and financial freedom is not only achievable, but inevitable.
Take for example Earl. From his own words “stop working so hard and let the money work for you.” Coming from the mouth of someone who has never made more than $12 per hour, or $20,000 per year, yet has a net worth of over a half a million dollars. Yup, I said that right…$500,000+.
Failure before you even start
As previously mentioned, student loan debt has now surpassed the total US credit card debt. To me, that has red flags all over it! Do you see a problem here?
Our culture has taught over decades of time that “the best investment you can make is in yourself.” While I don’t totally disagree with that statement, I do think it’s very misunderstood.
When the many wealthy and successful people made that statement above, do you think they meant go to college and borrow $40,000 to get a degree in a field that has an average income of nearly half of the amount you paid to get that degree? NO!!
This is putting the cart before the horse. What this teaches you is that debt is OK, that $40,000 in loans is normal, and that it’s a requirement and necessity to be successful in life. False, false and FALSE!
The reality is you are setting yourself up for failure before you even start your career. You borrow money to get a piece of paper that has no guarantee in any type of job in the first place, and often times the job you do get after your degree is in a completely separate field.
Not to mention that while you went to college and got a degree costing you an arm and a leg, you saw it necessary and OK as well to pay your power bill, gas bill, weekend dates, and entertainment on your first, second and third credit cards, each with a 24% interest rate. Before you even knew it, graduation came and you now have $40,000 in student loan debt AND $20,000 in credit card debt.
Essentially you took 60,000 steps backwards, before you took any step forward. Does that logic make any sense to you?
An important piece of the equation
Don’t get me wrong here. I’m not disagreeing with anyone wanting to go to college and get a degree, as it can be very valuable, but when done properly.
As financial expert Dave Ramsey advises, it is not uncommon nor unreasonable to go to college paying for your degree in cash, graduating debt free. Not only does this start you in the right direction, it also teaches you basic financial sense as well. You learn the importance of savings, how to budget, how to appreciate the hard work you put in to make that money and pay for your degree.
Not only will you graduate with a degree, but you will have the work experience and background teed up perfectly to land that dream job.
So what’s the right way to build a proper income?
Work hard, save money and pay for your education in cash. Earn a degree in a needed field and graduate debt free. Trust me, you will be way ahead of anyone else financially when carefully thought out and planned. I know from firsthand experience, I made the mistake of falling into debt from day one of college.
What you start doing now, will pay you big time later
If I could go back 15 years and make a plan for my financial future, there are a few things I now know that I wish I would have done then.
You see, the wealthy don’t get that way by simply saving that extra $25 grandma paid you to mow her lawn and investing it into a mutual fund or 5 year CD. They didn’t get that way from spending their weekend entertainment on their 24% interest rate credit card.
Warren Buffet, Steve Jobs, Jeff Bezos, Mark Zuckerberg, and the rest of the billionaires of this world all have a few things in common. Each of them, could probably tell you they have not just one source of income, but multiple. Each of them are creators of some of the world’s largest companies ever to exist. But each of those companies got that way through mass growth and integration in multiple marketplaces. If one source of income stopped, they’d have 10 others that still come trickling into their billion dollar bank account.
Jeff Bezos started Amazon as an online bookstore. Amazon now has hundreds of millions of products selling to nearly every country worldwide. I think it’s safe to say that not only does Bezos have money coming in from the millions of Amazon products, but they also have web services, entertainment services, and he probably has multiple investments personally as well that pay dividends and income from investment growth. Sad thing is I’m probably not mentioning over half of the other income streams.
I think its safe to say that every other billionaire and millionaire out there accelerated to their net worth with more than one source of income.
So what am I trying to say? If I had started saving even just $100 per month 15 years ago, I’d have nearly an extra $40,000 today if invested at a 9% interest rate.
If I had started my entrepreneurial minded ideas and websites 10 years ago, I may have been able to build a web based business like Amazon.
If I had worked my way through college and paid for my education in cash, I’d have graduated with a positive net worth.
If I had learned how to create passive income from high school till now, who knows where I’d be financially. I think it’s safe to say I’d probably be much farther ahead.
This isn’t to say that it’s too late for anyone. After all, Colonel Sanders, founder of KFC, didn’t see his success until his 60’s.
What you do and start now, and stick to consistently will pay you HUGE over the years. Take a deep look at your unique talents and expertise, ask yourself how money is being made in those areas currently, then develop a plan to monetize your knowledge. Time is of the essence, and if you start now you have the potential to impact millions if not billions later.
Your Income is Your Biggest Financial Asset
Utilizing your income to build your financial empire isn’t rocket science. In fact, it’s actually pretty simple. It does take discipline and self-control. And that’s where most people fail. By putting your income to work by saving regularly, paying for education in cash, and using your talents knowledge and expertise now to monetize additional income streams, you are well on your way to an abundant financial future.
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