January 29, 2019 by Dymphna

Truth Bomb Tuesday: The three levels of income. Which one are you?

There are different ways of earning money. Some are definitely better than others.

“What’s wrong with you?” I said. “You look like someone just farted in your elevator.”

“I just did my activity statement for the December quarter,” he said. “I just saw how much I earnt.”

“Ah…” I said. “Less than you were expecting? Less than you needed for your serviceability?”

“Huh? …Oh no, no. I actually had my best year ever. I pulled in close to $180K in 2018.”

“Ah…. So, um, bummer?”

“Yeah. I mean it’s a great result. It was a good year for me. But I work for myself and I charge an hourly rate.

“So I just realised that I sold $180,000 dollars worth of time last year.

“That’s a lot of time. That’s a lot of really valuable time. That’s a lot of really precious time. It’s time I could have spent with the kids or with the wife. It’s time I could have spent out on the boat. It’s time I could have spent working on my forehand.

“But I sold it all away. I put a year of my life on the market and someone else bought it and walked off with it.

And it’s $180,000 worth of time that I’ll never get back.”

“Ah…” I said. “Yeah, that’s a bummer.”

This is something that a lot of people never realise until they really start to look at what is possible. They just buy into the standard story. You get a job, get paid for you time, and that’s it.

But this is something that our mate is recognising. Time is your most precious resource, and it doesn’t really matter if you’re getting an awesome rate or not, you’re still selling time – the most precious resource you have.

There’s a bit of a hierarchy here.

And the bottom of the ladder is your basic wage story. This is where you sell someone your time – when you get paid an hourly rate.

This is the bottom of the ladder because you only have so much time, so if you want to earn more, you have to sacrifice more of your time.

That sucks.

It’s also at the bottom because the incentives are out of wack. If you get a gig, you have an incentive to dick around and for the job to take as long as possible. The longer the gig takes, the more you get paid.

This sounds like you’re getting a good deal, but it’s a cancer that eats at your soul. You want to be hitting your tools with full passion all the time. Life too short to spend any of it mucking around.

The next step up the ladder is selling products or outcomes. Now you’re not getting paid for your time, but for what you achieve. This enables you to expand your earnings and take them to another level. While time is limited, your ability to produce is less so.

It also lines up the incentives. You are incentivised to become efficient and work quickly. This sharpens your mind.

However, there are still physical limits to how much you can produce.

At the top of the ladder is getting paid for your ideas and paid for your creativity. While your time is limited, your creativity has infinite potential. You can come up with great ideas that produce a tonne of value.

This is why I love property investing. It’s at the high end of the hierarchy. When you’re structuring a deal, when you’re figuring out how to renovate or reconfigure a house, when you’re hunting through property records for a bargain, you can strike gold.

Sometimes I have an idea that’s worth $10,000 and it won’t even be morning tea time.  

And I’m incentivised in a way I love. I’m incentivised to bring my creativity, bring my passion, bring my commitment and determination. These are qualities I love cultivating, and I love that my work calls that out of me.

So yeah, I get it. Selling time, getting an hourly wage… it kinda sucks, even if you’re getting a fantastic wage like our mate.

And if you’re looking to move up the hierarchy – if you’re looking to expand your earning potential and incentivize your most awesome self, have a look at property investing.

It could be just what you’re looking for.