Skip to main content

How do the rich earn money if it’s not exchanging their time for money?


Princess Leia owns an apple farm.
Luke is the CEO of the farm.
A team of one hundred Rebel Troopers works the farm.
Image result for apple trea
Rebel Troopers earn $20 per hour worked.
We use this formula to calculate their income: Paycheck = (hourly pay) x (hours worked)
If Troopers work 40 hours per week, that would be 20 X 40, which equals $800.
Rebel Troopers are commonly encouraged to save their extra money by depositing it into a bank.
Their investment follows this equation: Savings benefits = investment X annual interest
The problem with “the paycheck formula” or the “bank-savings formula” used as mechanisms to wealth is that the variables are limited and out of the Troopers’ control.
·         Troopers cannot work 3,000 hours in one week.
·         Troopers cannot force Luke to pay them $1,000 per hour.
·         Troopers cannot ask the bank to give them a 3000% return.
There are only 24 hours in a day and only a few active years in a lifetime.
Solution?
Young Troopers are told to go to college so they can increase their PER HOUR rate from $20 to, say, $100 or $300.
The problem remains because TIME CANNOT BE SCALED.
So, to answer your question, how do the rich earn money if it’s not exchanging their time for money?
The rich exchange scale able units of value that are not linked to time.
Let’s return to Princess Leia’s Apple farm.
Leia’s income equation is: Profits = Profit per Apple X Apples Sold.
This is where things change.
Princess Leia can SCALE a part of her income equation. There are millions of people on the planet that want/need apples.
Additionally, Leia can CONTROL her farm operations. She can instruct Luke to play with pricing, sourcing, and other operations of her farm.
So if Leia sells 100,000 apples at $0.50 profit each, she just earned $50,000.
1.       If Luke does a good job and improves efficiencies, Leia can increase her profit per apple from $0.50 to 0.60, turning an $10,000 additional income.
2.       If they have a good season and trees produce 10,000 more apples, she just made $5,000 more.
3.       If Leia can buy her neighbor’s farm, she can duplicate her income in a matter of months.
This is a very simple example, but the same scale able variables exist in everything Princess Leia works for which usually come from these three main categories:
·         Owning a Business
·         Real Estate
·         Stock Investing
Notice, these are NOT earned income (job).
There are seven common streams of income:
1.       Earned income
2.       Profit income
3.       Interest income
4.       Dividend income
5.       Rental income
6.       Capital gains income
7.       Royalty income
All of these, except earned income are scale able and controllable in one way or another.

Comments

Post a Comment

Popular posts from this blog

What problems will the next generation face?

This morning I interviewed a lady searching for a job opportunity. " We worked so hard, " she said with tears in her eyes. I listened to her carefully while trying to empathize with her frustration. " You wouldn’t believe how hard we worked to adapt to change, " she said, " but all our efforts were worthless." This lady that I was interviewing had worked for years at one of the local ToyscRUs. She witnessed how the once stable company had slowly gone bankrupt. This was a painful story of our changing economic environment. What problems will the next generation face? Dealing with  unpredictable   CHANGE  will be the number one problem newer generations will face in the decades ahead. Sadly, we don’t know  how  to change, and even worse, we don’t  LIKE  to change.
Post a Comment
Read more

Why do millennial have more student loan debt than any other generation?

The lost generation: Today’s children get prizes and awards merely for participating — this sends a DANGEROUS message to kids: “We’re all winners.” This mindset is repeated continuously at the end of each project, event, or season. As a result, kids grow up expecting awards and praise just for showing up — (by the way, this sounds like socialism.) This mindset leaves kids terribly unprepared for the harsh realities of capitalism. Capitalism is ruthless. It rewards only winners, not just anyone that shows up to ‘work.’ Today, these kids are being offered an irresistible deal: “Go to college, and don’t worry; you can pay the massive college tuition with credit, and whenever you find a job with your ‘valuable’ degree, you can pay it back later.” “I MUST participate!” So, here they go to “participate,” at a mediocre college, to study a mediocre (and outdated) degree, to finally, AGAIN, get a “participation reward,” called a degree... Now, here comes real life: There’
Post a Comment
Read more