Laying the Foundation: Income Isn’t Everything
The harsh reality is that most people aren’t taught about personal finances at home or school. That means we are left to figure it out on our own; this looks like buying a car or signing a lease that we can’t afford, getting ourselves into credit card debt, etc. Making poor financial decisions and dealing with the consequences is not an efficient way to learn about establishing personal finances or building wealth as an adult. We are taught to seek out higher incomes, but we haven’t learned how to negotiate salary contracts for those jobs. Making decisions regarding our financial needs becomes problematic when we aren’t taught how to assess and provide for those needs.
We are taught to combat our lack of experience and knowledge by earning a higher income. From high school, it’s drilled into us how important it is to make as much money as we can once we enter into the real world as adults. With that standard set, we are expected to receive a certificate or degree, ultimately giving us a head start to earning a higher income. Culturally we are taught that the higher our salary, the more successful we will be. It is embedded into us that we build and maximize our wealth through our income, which means if we have the desire to build generational wealth, we must first focus on raising our income.
We are in a long-term commitment with our jobs. For many of us, the majority of our day is spent at work; therefore, our income shouldn’t be the only reason we are going to work. Culturally we are trained to focus on income as a sign of success. I challenge you to give thought to the idea that income isn’t everything.
The amount of income you receive from a job is an essential factor to consider because it is our means of supporting ourselves, and without proper compensation, we aren’t able to build wealth. However, many factors determine your success that go beyond your income. Measuring economic success solely on income is a flawed system; it leaves no room for consideration of other variables such as equity ownership, diversification, or quality of life.
Unfortunately, we are not taught to consider these variables, and we are only conditioned to think about income. In order to build wealth, we have to start thinking not only about income but other factors that determine our financial success.
Equity ownership: When searching for a job, in addition to finding a position that offers a competitive salary, it should also be considered what benefits the company will provide you with. Equity ownership or compensation is one incentive that could be included in your company’s benefits package. When a job offers you equity compensation or stock in that company as an employee, you will share in the profits of the business that you dedicate your time and energy to. Receiving equity ownership allows you to earn your annual income with that company but also gives you an opportunity to have an investment for the future.
Security of Revenue: How dependable is your source of revenue? There are many things to consider when looking for a job that offers security. One factor is the frequency of pay. Are you being compensated weekly, biweekly, or monthly? How does your frequency of payment affect your ability to pay for your expenses? If the total of your expenses is equal to or over the amount of income you make, your finances will always struggle. This will hinder your ability to pay your bills on time, save money and establish wealth. It is important to understand income vs. expenses.
Diversification: Diversifying your portfolio means not limiting yourself to one source of income. Finding opportunities to establish multiple streams of income is just as important as having a high-income job. Multiple streams of income can supplement the base income that we earn from our employers and should be something every family aspires to have.
Quality of life: We are taught that our number one goal is to achieve the highest income possible to achieve success; because of this mindset, work often takes precedence over everything else in our lives. Our desire to succeed professionally can push us to set aside our health and well-being. Our quality of life ultimately suffers the most from this work mentality. When considering what makes a good job or career, we must think about what type of work-life balance we will be able to maintain.
It is important that as we develop in our wealth, we genuinely understand how to connect the dots when building our wealth. Building wealth goes beyond making the highest income.
