“In this world nothing can be said to be certain, except death and taxes” – Benjamin Franklin
Whether it is a YouTube Star, Business Mogul, or Actor, it seems like wealth comes through luck or extreme talent. However, that really isn’t the case. Most millionaires aren’t born over night. It takes intentional living and decided action to get to wealth. I know this because of the largest studies of millionaires, spearheaded by Ramsey Solutions, they found 79% of all millionaires never received inheritance from their parents. Almost all had “normal” jobs… The top 5 were engineers, accountants, teachers, managers and attorneys.
Sure some of these people made great wealth through high income. However, Ramsey Solutions found that it took most decades to gain that kind of wealth. Most said “that regular, consistent investing over a long period of time is the reason for their success”.
I know many millionaires. I know for all of them it is the same. However, there is one thing that can guarantee graining your wealth even sooner. It isn’t exotic but it is the best way to build wealth – even more than making money. It is savings.
How is saving better than making more?
Just like the quote, the answer here is two fold. The first is the value of your time and the other is the tax cost on income vs savings.
Valuing your Time
To preface this discussion, we need to talk about time. Time is our most precious resource. Like it or not, our DNA is being damaged day by day. There is irreversible changes going on in our body that we can only slow down but not stop. We won’t live forever. However, as I am not a nihilist, I believe we are made for a higher purpose. There is something real and purposeful we can be doing for others and the world, great or small.
Part of the purpose is unique to yourself. A unique gift within yourself that is there to inspire the world, to show love, to build great things, or to give grandly. We all have a unique calling we are to use our time and resources towards.
That great purpose is often disjoint from a 9 to 5 job. Every hour we work at that job we are making a choice to do that rather than other more meaningful choices. For some that work we devote ourselves to could be the highest calling, others not.
When we work we trade out time for money. It is as simple as that. No matter what our pay per hour is or our pay per contract, we give time for money. That time could be directed to our calling in life. That money is then used to pay for a specific standard of living. Often that standard is higher than we should be living.We buy things we don’t need or even want. Those purchases can be strictly for vanity sake – those items that don’t bring value into our lives. We spend life energy on those. Is that new sweater worth 3 hours of your life? Likely not. In some cases, yes it does and that is okay!
However, when we view ourselves with having purpose that only we ourselves can give to the world, our time and our money suddenly becomes much more valuable. Those purchases don’t look quite so appealing once we realize how much “life energy” we are using up. That new car that costs 8 months of our life doesn’t look so great anymore.
Dollars for Your Life
I learned about this first when I read the book Your Money or Your Life by Vicki Robinson and Joe Dominguez. It really changed how I looked at expenses. In the book, the Authors create an exercise where the reader works through how much their actually hourly wage is. The clothes you buy for meetings, the wear and tear on you car, the gasoline, the time you spend commuting, the time you spend destressing or going on vacations to destress all contribute to the real hourly wage.
Say you work 40 hours a week and make $1200 a month, $30/hr, but you spend $50 a week on gas and commute 1 hour a week. That decreases your pay $200 a month and bumps up your working hours to 45. That makes your real hourly wage $22.22. OUCH. That makes your purchases even more expensive with regard to your time. Say you wanted to purchase a brand new Toyota at $25,000. That would have taken away from your life 833 hours or 5.2 months. But in reality your job only makes $22.22 an hour. That increases the life energy spend to 1125 hours or 8 months of working. That is an expensive car! I realized that those dumb things we purchase every month aren’t worth who I am. Why would I give of my precious resource to purchase a trinket or something flashy.
I still like cool cars don’t get me wrong. But I look at the value they bring to me first before purchasing them. By looking at items intentionally we can realize how we spend our time is most precious and saving money buy not buying something let’s us live that time on our own terms.
A Penny Saved is Better than a Penny Earned
I’m sure we have all heard the saying “A penny saved is a penny earned” but it isn’t true! Say you wanted to set aside $1,000 for an emergency fund. You have two choices, work more to gain that extra money or to decrease your lifestyle expenses to put money into an emergency fund.
Option 1: Increase Income. When you have income, you don’t get all the compensation that you are due. There is a greedy organization that takes from you what it didn’t earn. Yes, yes it is the government. Every American has an income tax that is applied. For every dollar we make the Federal and State Governments take from that earning. The rate depends on the income level but the concept is the same. If your income tax was 20% and you rightfully earned $10 through your hard work, the government would $2 just because it said so. So for you to save $1000 at a 20% tax rate would mean you would need to earn $1250. Because the Gov would take 20% of $1,250 which would be $250, leaving you with $1000. That means you would need to work an extra 25% harder or longer to get that money. In other words, your time is worth 25% less making more money. It becomes even worse if you move up in tax brackets. This makes being more productive punishable, which of course is the thing that is best for our country… People being punished for productivity. Great idea government…
Option 2: Use money you already have. This can be money you have set aside, something you own that could be sold, or refraining from purchasing something you were going to purchase. This money has already been through tax. If you decide to not purchase that new microwave or sell something, that money goes straight to your pocket one-for-one. No questions asked. Not buying a $1,000 microwave means you get $1000. So in this case your time is worth what you put into selling or not spending. Not spending time spending money on a frivolous items means you have an infinite return on your money! I always had a hard time returning items if I didn’t like them. But if I return an item that cost $100 and it took me 20 minutes. I am essentially making $300/hr! Whoa… That is 13.5 hours of working if my effective rate is $22.22/hr. I think I’m going to return that item now…
This Isn’t Deprivation!
This isn’t a rally to deprivation. It is removing the things in life that don’t bring joy or value and substituting things that DO bring VALUE in the now or the future. Deprivation is not a long term strategy but thriving through value based choices is.
In either option, that extra money can go toward investing for your future or your family’s future. This can be said for both financial wealth or time wealth. Either allow you the ability to impact more people. Check out my time calculator on my Patreon page
So I hope you can see the high value in being intentional with what you purchase. It being both dignity and respect to yourself. You are worth a lot more than you know. It also sets focus on growing and making a difference rather than just wasting away as a consumer – one of the worst endings for a human.
To your Freedom,
Slama Llama
Slamas Llamas 