The formula for making money is fairly simple. To understand it, it is important to understand what money is in the first place. In its most basic sense, money is a medium of exchange and store of value.
When someone pays you for a job, they are giving you a certain amount of value in terms of dollars, and you are giving them value in return.
In short, if you want to make more money, you should provide more value.
There are two ways to do this. You either increase the quantity of your work and/or improve the quality of your work.
Both have the result of increasing your value output.
A ThinkRich mindset focuses on improving value output by working more, improving the quality of work, or the combination of the two.
A ThinkPoor mindset does the bare minimum to get through the work week.
Improving the quantity of your work
If you are new to the labor market, the fastest way to increase your output is to simply work more hours (increase quantity of work). Not only does this provide you with an immediate boost in your income, but it also provides you with the opportunity to improve at the task you are given (increase the quality of work).
However, every job has some maximum output potential.
If you stock shelves at a grocery store, there is only so much value you will be able to provide in that task, no matter how efficient you become. As a result, there is only so much an employer will be willing to pay you for this job.
This means that you will need to take on a new responsibility or role that offers a new opportunity to produce more value if you want to improve your earning capabilities.
The other way to increase the quantity of your work is through a concept known as “scaling up”. This is typically for businesses or entrepreneurs that want to increase their own earning potential.
Let’s say you open a small corner coffee shop. You can earn a comfortable income with just one coffee shop. However, there is a limit to what that one coffee shop will be able to produce in output. If you want to make more money, you would need to open more locations.
Another example is a real estate agent who has maxed out the number of clients they can take on without additional help. Hiring an assistant to handle administrative tasks can help free up their time to find and work with more clients while still maintaining the quality of the service they provide.
Improving the quality of your work
Improving the quality of your work includes getting better at a particular skill, as well as learning new skills. This can be done through practice and education.
As I touched on earlier, if you are intentional about the work you do, you will improve your skills simply by practicing.
The other way to improve the quality of your work is through education. While most think of education as earning a degree, it isn’t limited to just formal education.
You can learn new skills with a trade school. You can also learn through self education, whether it is simply be reading about a particular topic, or taking an online course or workshop.
Why do professional athletes make more than teachers?
This is a good question. Certainly teachers provide a lot of value and preform a more important task than catching or throwing a ball, right?
While it may seem silly that someone can make millions of dollars by “playing a game”, if you look at the value that is being produced, it begins to make sense.
Whether you like it or not, professional athletes get the attention of a lot of people. At the end of the day, they are entertainers.
Those athletes that entertain the most people earn the most money.
It’s why Lebron James makes $30 million a year but teammates who rarely play make $500k. Fans fill stadiums and watch the game because of Lebron, not the players that very few know the names of.
However, because the bench warmers are good enough to be fill-ins when needed to keep a very lucrative game going, they make a lot more than the players on the practice squad that make $15k a year who are a lot easier to replace.
Similarly, it is why a college professor tends to make more than a primary education teacher. They are producing a higher quality of work, or they are able to teach more students (think of lecture halls).
Life isn’t fair, but don’t let that stop you
None of this is to say that the wage and salary market is 100% efficient, where everyone is paid according to the value they produce. Nothing is that efficient. There are people who make way too much for what they do, and others who don’t make enough, but life isn’t fair.
However, you have two choices, you can either whine about it or you can do what is in your control to improve the value you produce and negotiate for the best return for that value.
You can’t forget to negotiate – maximize the value you receive
While it is nice to think that you simply need to produce more value and everything else will fall into place, that isn’t the real world. It is still your responsibility to maximize the value you receive in return for your efforts.
An incredibly talented artist could create beautiful works of art, but if they simply give them all away they haven’t maximized the value they receive. However, some artists get their start that way. Once they build a name for themselves, they can start to demand more for their work.
Maximizing the value you receive is somewhat of a “marketing” effort. You have to be your own advocate. Whether it is asking for a raise, or finding ways to monetize your value as an entrepreneur. That responsibility falls on you.
However, the most effective way to put yourself in a position to make more money is to provide more value.