Money is misunderstood.
It’s either worshipped as the panacea to every single one of your ninety nine problems or rejected as the evil mastermind who started them all in the first place.
The truth is it’s neither.
It’s simply a method of exchange.
To earn it, you sell a product (ie. a book) or a service (ie. your time) that has perceived value to the stranger buying it from you or the organisation employing you.
In return you are rewarded with a value token (ie. pound sterling) that you can then exchange for the maccies you’ve been craving or the bus ride you need.
The key word is perceived. It’s why…
Your parents will pay an extra £100 to fly premium.
Your mate will splash £3k on a new road bike.
Your cousin will shell out £30k for a new Mercedes.
They hand over their cash because the perceived value exceeds the price.
This perception is in the eye of the beholder. What is deemed a “good investment” to one person can be “an absolute waste of money” to another.
With this in mind, how do you actually spend wisely?
You invest in assets that grow over time, including:
Your knowledge - ie. courses, books & training.
Your mindset - ie. mental models, coaching & counselling.
Your reputation - ie. personal brand, relationships & networking.
Your business - ie. systems, brand & equipment.
Your finances - ie. stocks, property & bonds.
Each one will increase your earning potential.
By paying you a dividend, improving the quality of your work or enabling you deliver more products or services in less time.
Over the long-term their effect is compounding.
This means they increase exponentially, not linearly.
Enabling your wealth to do this:
Now you know the principles.
Let’s explore how to apply them.
Here’s how you master earning.
#1: Build your money habits
Take small actions everyday.
They can be the difference between living off leftovers for the last weekend of every month and going on holiday guilt-free every Summer.
Practice these habits regularly:
1) Spend less than you earn
If you can’t afford it, don’t buy it.
Use credit cards with caution. Stack up your free AMEX points, but always foot the bill at the end of the month. Only take on debt when investing into an asset that you can pay back.
2) Reject getting rich quick
Be sceptical of easy short-term earnings.
It’s either a scam or it comes at some hidden cost to your reputation, business or future earning potential. Invest in long-term assets and trust the money will follow.
3) Stop buying bullsh*t
Don’t confuse necessary expenses with desires.
You need food, water and shelter to live. But, you don’t need the latest iPhone 13 Plus that is 5% faster than your current model. Pay for the necessities, but be wary of the desires.
These daily actions will start saving you money.
Then you can make investments from a position of financial security, confident in your ability to re-invest in what matters without chasing after every penny.
#2: Create your money system
With saving now second nature, it’s time to build a money system, which will free you from the guilt of spending and the challenges of investing.
To do this, you’ll need a bank that:
Is easy and fun to use.
Allows you to create pots to save money.
Gives you full visibility on your spending patterns.
I’d recommend Monzo, Revolut or Starling.
Once you’re all set-up, complete the following:
BILLS - £__ needed to cover bills each month
INVEST - % to invest in financial assets each month.
HOLIDAY - % to invest in holidays each month.
PDEV - % to invest in yourself each month.
CURRENT - Amount for all other purchases.
To see how it plays out, add your income.
Here’s an example of a £3,000 monthly salary:
Allocate these amounts to the pots every time you get paid.
Then cap your spending to the money you’ve assigned.
If you’re a bit of a pro, consider breaking down your purchases into categories and adding more accounts for different items like your weekly shopping or protein shake addiction.
If you find dipping into the pots irresistible, make it harder for you to access them by locking them with a pin or setting them up as entirely separate bank accounts.
#3: Invest in long-term assets
Yes, contribute to your pensions and your ISA.
But, don’t rely on them.
Their success is in the glove of the invisible hand of the market. Taking their past performance as a guarantee of future returns is a fool's game.
Here’s five of the best alternative investments…
1) Your LinkedIn Personal Brand
Spend an hour each day creating content and engaging with other accounts. Do it consistently for a year and you’ll find job offers, new leads and interesting connections in your inbox.
2) Your Sales & Negotiation Skills
Read psychology books and learn high-ticket selling. Then put it into action and you’ll find clients are willing to part with 10x the amount they were before.
3) Your Emotional Awareness
Practice meditation, work with a coach and spend time listening to your mind. You’ll be able to find peace with your past and observe your emotions clearly.
4) Your Home Office Set-up
Buy a bookshelf, a high-quality camera and a crisp microphone. Put them all together and you’ll strike up a great first impression that will 2x your authority with everyone you meet.
5) Your Health & Fitness
Go outside and exercise for an hour each day. It’ll give you a clearer mind, confidence in your body and a longer, healthier life to do more of the things you love.
Each one will exponentially increase your earning potential by giving you the knowledge, mindset and reputation to charge more.
But, the best part? They’re all very inexpensive.
The Summary
Let’s recap; To master earning you need to build your money habits, create your money system and invest in long-term assets.
There’s your 5 minutes. Now take ACTION.
If you want further reading, here’s this week’s list: