Increase your earning potential

In the harsh world of economics, the value of a person is not difficult to quantify. In simple terms, the value of a person at a given point in time is based on future earnings, which is the number of hours the person is able to work for the remainder of their life, multiplied by the hourly rate the person is capable of earning.

There is a common saying that "time is money", and there is no doubt the two are inextricably linked.

The corollary is the income you earn from personal effort is determined by how you manage your time as well as by how you manage the hourly rate you earn.

One of the first things to be aware of is people are more likely to waste time than money. The irony is, because time is money, wasting time is equivalent to wasting money.

Unfortunately, time is limited. If your income comes only from personal effort, there is an absolute limit to what you can earn in your lifetime.

Super wealthy people are those who find ways to make money without being dependent on personal effort, for example by setting up a business which makes money out of other people's effort, from borrowing to invest, or selling intellectual property.

If you earn a high hourly rate, spending your time doing things that someone else can do at a lower hourly rate is not effective use of your time and lowers your potential income.

If you earn a low hourly rate, it is worth spending time to look at ways of increasing your hourly rate through study, training or finding alternative work.

The ultimate winning strategy is to find ways of making income without using personal effort.

Liz Koh is an authorised financial adviser. The advice given here is general and does not constitute specific advice to any person. A free disclosure statement can be obtained by calling 0800 273 847.