So many people these days are rushing back to school so they can acquire more knowledge to make more money. The only problem is school teaches you nothing about money.
Instead, it teaches you to be dependent on an employer for a paycheck where your taxes are always going to be higher. That’s not very practical, yet it’s what they teach us to do in school.
If you want to become financially independent, then you have to take a different path than the 95% crowd that ends up either retiring broke, or like this guy who, unfortunately, can’t afford to retire.
The reality is, financial freedom is only possible when you can divorce your time from what you earn. To illustrate how this works, let me start off with a simple definition of what income is:
Income = Rate x Time
$20/hr x 8 hrs = $160
So, let’s say your rate is $20 an hour. If you work 8 hours, you’ll get paid $160 bucks.
Simple math, right?
Now, what do most people do when they want to increase their income?
Well for one, they increase their time. So, some people work more hours at their current job or they get a second job and work more hours that way.
The other way people try to increase their income is by increasing their rates.
This is the main reason some people try to get promoted, some pursue better careers, and others go on to earn an MBA or PhD thinking that that’s what’s going to put more money in their pockets.
That can certainly work, but there’s a major drawback with these strategies: all they do is simply increase the rates.
There’s nothing wrong with this type of linear thinking, but there’s a smarter way to increase your income that isn’t taught in school and isn’t dependent on you trading your time for someone else’s dollars.
So, let’s talk about the difference.
Again, the first definition of income is based on your hourly rate multiplied by your time. But, a more enlightened definition of income is this, where income equals your hourly rate, multiplied by time, and then multiplied by leverage:
Income = Rate x Time x Leverage
Leverage is a term that’s often referred to in financial books, but it basically means doing a lot with a little to gain maximum advantage.
Robert Kiyosaki, author the Rich Dad, Poor Dad series says, “Leverage is the reason some people become rich and others do not become rich.”
Now, there are basically 2 main types of leverage that you can capitalize on:
People Leverage
Financial Leverage
You might be familiar with these; but, when it comes to increasing your income, we find that most people aren’t utilizing any of these forms of leverage at all.
So, let me run through these to make sure that you’re clear about what I’m actually referring to here, starting with people leverage.
People Leverage
Let’s face it, we all have the same 24 hours in a day, but we can get a lot more accomplished by leveraging our time through the efforts of others. And, that also includes leveraging other people’s talents, skills, and experience.
A perfect example of this is a business owner who leverages their time through their employees:
Income = Rate x Time x Leverage (employees)
This obviously gives them the ability to multiply their efforts and increase their income without necessarily increasing the amount of time they invest to grow their business.
The thing is, not everyone’s cut out to be an entrepreneur. Not only that, but no matter how successful you become, as a business owner, you’re generally still part of the equation.
Growing a business is a good step in the right direction, but it doesn’t incorporate the most leveraged step, which is to use money (not work) to make more money.
Financial Leverage
And, that leads us to financial leverage, which is all about using money as a tool.
Because, the wealthy don’t work for money; they invest in assets, and assets produce cash flow, not a paycheck.
In the context of what we’re talking about here, it’s all about converting your available cash or even O.P.M. (using other people’s money) into income-producing assets that will continue to pay you without working.
Another example of how financial leverage works is how a typical investor uses it:
Income = Rate x Time x Leverage (money)
An investor leverages his or her money by investing in assets that produce passive cash flow. Of course, one of the most popular traditional assets to invest in is rental properties.
And, on average, the ROI (or, return on investment) for traditional real estate investments like these are gonna range somewhere in the neighborhood of about 5% to 8% per year.
However, after you factor in things like taxes and inflation, you’re net ROI is going to be more in the range of only about 2% to 3% per year.
There’s actually a whole universe of passive money-growing opportunities out there that are producing annual returns of 20, 30, 50%, and even more. But, at the end of the day, the wealthy increase their income, not by focusing on increasing their rates or time, but by increasing their leverage.
Once you really understand how leverage works, it can put you on the fast track to financial freedom. And again, true financial freedom is created when you can divorce your time from what you earn.
If you’re working for someone else, you don’t have leveraged income because your employer is buying your time in order to build their dreams.
And, since time = life, you’re literally selling your life in 40-hour chunks to a company that probably pays you less than you’re worth. So, leverage helps you live your dream and avoid living someone else’s.
But, it really doesn’t matter whether you’ve got a job or you’re self-employed. Because, you’re either using leverage to your advantage, or you’re being leveraged by someone else, and you’re leaving money on the table.
It’s just that simple.
It all boils down to putting your money to work for you instead of just you working for your money and trading your time in exchange for income.
If you’re wondering how you can create leveraged income, and where do you start, then I invite you to pick up a copy of our new report.
It’s not only going show to how to start creating leveraged income, but it’s also going to show you how we and members of our exclusive community have taken this concept of leveraging money to the next level to create multiple streams of passive cash flow.
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