Do you want to earn more than a million dollars during your working life? According to the US Census Bureau Report, you can if you complete high school and work for 40 years. For the same period of lifetime work, you can increase your earnings above $4 million, which is more than three times the amount earned with just a high school diploma, by earning a professional degree. In our society, these statistics reveal a unique relationship between education and training and personal income growth. Although not expressed in the above statistics, any relevant education and training opportunities, whether offered on the job, in special seminars, workshops, and during apprenticeships that expand knowledge, develop new skills, and increase productivity, are related to increases in personal income.
I’m sure you’re familiar with many great success stories of people who beat the averages by earning larger sums of money in a much shorter period of time than 40 years. I met with a business owner to introduce him to certain financial products that will allow him to expand and improve his business. He quickly informed me that he has never had a loan. He proudly shared with me that he is debt-free and currently owns a personal residence, rental apartments, barbershops, and Bar-B-Q restaurants. His business transactions are all in cash when buying and selling assets. His model for business expansion or entering a new company is to first buy the necessary equipment and facilities for the business and then open the business debt-free. He was adamant that “a person who needs a loan to start a business does not need to be in business.”
Many may disagree with this business philosophy and speculate that perhaps he could have generated more income and accumulated greater wealth using the concept of leverage, but this businessman has defined his success. He owns debt-free cash-generating assets worth more than $1 million, and has cash set aside for each of his children should they decide to embark on an entrepreneurial path. This gentleman is in his early sixties, does not have a high school diploma, and cannot read or write.
Bill Gates dropped out of Harvard University in his junior year to pursue his vision and became a billionaire in less than 40 years. I am truly impressed with each of these stories and many others that inspire many of us in various areas of our lives. I am also particularly impressed with the data from the US Census which suggests that in this society the masses can also reach an impressive financial milestone. So, whether you fit the profile of the aforementioned business people or are a proxy for US Census data, the wisdom is that being prepared and having the right attitude and courage to act enables the greater opportunity to fully develop your earning potential when opportunities present themselves. here.
Now, just as you expect to have increasing income over a period of lifetime work, at the same time you want to be very aware of how to avoid any erosion of your income, any reduction in your accruals, and lowering of your standard of living resulting in less money. to buy the family home, educate the children, take family vacations, and plan for retirement.
Therefore, whatever amount of money is earned during a period of working for life, you need to be aware of how to spend it and manage it wisely to achieve and maintain a high standard of living. Recognizing that each personal situation varies and may require a different focus of attention, there are six areas where some effort must be made to preserve earnings and enable future growth.
First, poor health, engaging in high-risk behaviors, and neglecting known preventative health and medical advice increase the occurrence of disease, strain personal finances, and reduce income. According to California Health Interview Survey data collected during a period of economic growth (2007), nearly one in 13 Californians had some form of medical debt, and those with debt were twice as likely as those with who had no debts to report delays in medical care. obtain necessary medical attention. The cost of medical care has threatened the finances of many families and has become one of the most common causes of personal bankruptcy in our country.
Being physically active, eating a nutrient-dense diet and reducing caloric intake, avoiding tobacco and alcohol use, coping appropriately with stress, wearing a seat belt, and practicing proper infection prevention and control procedures are good health habits. that will reduce personal risk. for chronic conditions such as heart disease, high blood pressure, diabetes, obesity, accidents and injuries, and infectious diseases. These conditions can create a huge hole in your finances and deplete your lifetime earnings. Good personal health habits can reduce the risk of these acute and chronic conditions and offer effective prevention or control of disease, if present.
Why not practice good health habits and start as soon as possible?
Second, not taking advantage of education and training opportunities can leave you unprepared when opportunity knocks. As a result, an opportunity for increased income, promotion or a move to a higher level, a new job or a new business opportunity is lost. Since the cost of goods and services often rises at rates that exceed the income of many households, it is essential that you remain vigilant and prepared when the opportunity arises that will improve your income, lifestyle, or standard of living.
You can be prepared for the changes that are taking place in the marketplace by taking a course, seeking additional training, and having the courage to explore new opportunities for advancement. To our surprise, cost of living increases often do not keep up with the cost of goods and services. You may need to adapt by seeking promotions, new career opportunities, acquiring new skills, and creating multiple streams of income that are now emerging as a wise strategy in the 21st century.
Third, you pay too much in interest because of expensive personal loans and mortgages. Banks are very effective at accelerating money after encouraging consumers to make deposits and, in return, receive a small interest income. Banks are aggressive in investing deposits to earn money through loans and other financial instruments that produce substantially higher returns than depositors receive as interest income. For short-term loans, interest rates can exceed 20%. Paying high interest on credit card debt reduces your cash or available cash for other family or personal needs. For a long-term loan of $200,000 at a fixed interest rate of 5.32%, the borrower will pay back slightly more than the amount borrowed in interest payments alone over a 30-year period. (Total repayment of $400,714 with $200,714 interest) The interest amount, which is the cost of the loan, is a significant subtraction from personal earnings even after tax adjustment. You, the borrower, should be aware of this significant cost and plan to reduce or offset this significant subtraction from lifetime earnings.
Fourth, each person must pay their fair share of taxes and we must continue to fight for good tax legislation that helps support responsibilities as determined by the constitution. On the other hand, many pay unnecessary taxes due to a lack of knowledge of tax laws and the innovative effort that allows them to take full advantage of tax incentives. The government uses tax incentives and allows tax deductions to encourage or direct activity in certain areas of our society, such as community service, national and international programs, starting a business, local development, locating in certain communities, providing job opportunities, charitable donations and certain investment programs. In some of these areas, you may find that opportunity to partner with the government for the benefit of yourself and others.
Fifth, failure to establish legal entities such as businesses, trusts, retirement programs, asset gifts, and other deferral programs can result in a loss of tax incentives, deductions, deferrals, additional income streams, and increased income. The Internet offers an excellent opportunity to start a business the 21st century way and paves the way for many home-based operations.
Sixth, inappropriate spending: our economy depends on two fundamentals: consumer confidence and consumer spending. During a recession, consumer spending decreases compared to a growing economy where consumer spending increases. Our available money is used to cover expenses, and the rest, if any, is generally left with banks in checking and savings accounts, or other types of bank financial instruments.
The common understanding is that money used to cover expenses or purchases is considered an act of spending, and money left over or deposited in the bank and not used for expenses is considered saving. On the contrary, your deposit or money in the bank is also an act of spending. You have purchased banking services consisting of checking and storage privileges, agreed access, security of principal, and a modest interest income. As clients, we must reorganize our thinking and view all outlays of money and resources, including investments, as an act of spending.
In an up or down economy, you, the consumer, should focus on spending for value rather than buying or spending on impulse, or simply accumulating money (savings) in bank accounts. Spending for value achieves efficiency and compromises self-responsibility by asking obvious reality check questions like: Is it wise for me to spend this money now? Do I get the best value for my dollar? Does this expense help me achieve my goal? Answering these questions is the start of control and the first defense against overspending. A big lesson to learn is how to safely invest my available cash similar to banks by applying Irving Fisher’s (1930s) concept of “The Velocity of Money”.
These six areas, if addressed, will allow you to retain more of your income, add additional growth income over your working life, and help you support and maintain a healthy standard of living.