Most people may realize they are doing this but don't understand how important it is or how it is affecting their future. Trading time for money is actually a very important concept and something that you should avoid at all cost especially if you'd like to be financially independent and free. It is no accident that the top consultants, authors and speakers of wealth and success all agree that trading time for money makes it very difficult to reach and build financial success. So what am I taking about? The typical person goes to work and is either paid hourly, has an annual salary or is paid for a specific project. In return for the compensation the individual is required to spend time in an office, store, company location or maybe even a home office. No matter what you are expected to put in the time to get paid. If you stop working your income stops. If you don't go to work you will no longer have that compensation. By working this way you can only make so much because there are only so many hours in the day.
Its interesting to note that some people have a very high hourly rate (attorneys for example) and they might argue that with all of their efforts they plan to get ahead and be successful. If you factor in the financial burden that they incurred with getting a law degree and the loans they may have and then factor in the hours they have to put in on the job I wonder how they see a payoff in the end. Once again, as soon as they stop working there's no money coming in. Of course an individual would invest their money and use a financial advisor to do so with the expectation that there is a pot of gold at the end of the rainbow (retirement). Don't get me wrong, I believe in diversified investing but I have seen many people get the rug pulled out because the market was in a bad place when they need the investments to pay off, or something drastic happened and there is a big loss. If all goes well then there should be on-going income that the investor can enjoy and at that point ease back on work or stop working all together. All that is assuming that you have a very large salary or hourly rate to begin with.
On the flip side... people often get a second job to "get ahead". I don't understand the logic because that second job usually pays less than the full time job. And, eventually you will have to stop because you can't handle the additional hours without breaking down physically or emotionally. When you stop you're right back where you started. Of course you could just spend more time at your main job but many employers today expect you to put in more effort and they don't pay you more anyhow. If you are an hourly employee you might get over-time but again, once you stop you are not further ahead... maybe more tired and burnt-out.
The opposite of trading time for money is to have assets that create money for you without your presence. Examples of this are owning rental property, stocks and investments and owning your own business. You do have to be careful because many people think they own a business but the reality is that the business owns them. Many business owners cannot get away and are so intertwined with the day to day antics that they can't enjoy life and have no time freedom. What's the point of that? However, the fact is that owning a business is certainly the best way to generate wealth and financial freedom. You will find that most of the financially successful people got to where they are as business owners. The trick is to own the right type of business. There are two things you should look for in a business so you eventually are NOT trading time for money and you can actually enjoy your success and have the time to do so. The two things are leverage and proven systems.
Leverage. Think about what I said previously in terms of how there are only so many hours in the day that you can work. Just for an example lets say you work ten hours a day. If you own a business and you have four employees then you get your time plus their time. In other words you get fifty hours of work done per day. That is leverage. Obviously depending on what type of business you have you do have overhead and compensation to take out of your profits but in general you personally are working X amount of hours but the total production equals much more. One of the things I like about my business is that there is actually very little overhead, I do not personally compensate those that I leverage and in fact we all benefit from our efforts.
Proven Systems. There is another component that goes along with leverage to get to the point where you are not trading time for money... proven systems. Having people follow a system or plan that works will ensure that you can step away. Most supervisors or "bosses" can not step away because the other workers rely on them for supervision or approval. This ensures that it is difficult for the supervisor/boss to step away. Even if they are paid well they must be on the job location or available. Again, trading time for money. An example of how this is handled well is with the typical franchise business. Most of those businesses have a manual that people can refer to and follow a system that has been implemented many times before. At least the business owner might be able to step away. The issue I have with most franchises is the cost upfront... the initial investment is usually high. Look at something like the "UnFranchise". It has proven systems and training, the start-up initial investment is extremely low and the business model is design to work by leveraging the efforts of other people. Proven systems for standardized action plans and work flow are critical to not trading time for money.
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