Understanding Income

Every day I become even more aware of the fact that while there is much to understand about money, there is even more that we need to understand about ourselves! It is our personal relationship to money and to the things around us that shape our decisions and determine our future in so many ways. That is especially true when we start thinking about our income.

It is extremely vital for each of us to understand our personal thinking about our income if we want to improve our financial future. To help us in this area I want to raise several questions. Spend some time thinking about each question, write down your thoughts, and come back to them on a regular basis.

Question one: do I really understand how getting in control of spending is more important than earning more money?

It is very hard, perhaps impossible, to earn more than you can spend. It is essential to learn how to get in control of your spending as a first step toward financial success. Ask yourself where you stand today, and even more important, how much of a commitment you have made to keep spending in check.

If you received an increase of $500.00 a month starting today could you easily set it aside in debt reduction, savings, and investment without even being tempted to increase spending? What are you doing now to stay in control? How can you improve?

Question two: what kind of income approach fits my personality?

Do some research if necessary to see what personal qualities are required to be self-employed, to run your own business. Do some soul searching. Personally, I cannot imagine not being self-employed. I prefer it for many reasons. But I know that not everyone shares my personality traits. Don't get into something you cannot enjoy.

You really can become financially successful as an employee. Perhaps you can maintain a base of income as an employee and still earn independent income part time. The key is to determine your own lifestyle. Think about it. Be honest in your reflection. Life choices in this area can have long term consequences. You want to get it right.

Question three: how can I increase the number of ways in which I generate income both in the short term and in the long term?

Robert Allen helped popularize the idea of looking for several sources of income with his bestseller, Multiple Streams of Income. But Steven R. Covey (The 7 Habits of Highly Effective People), in his review of Allen's book, revealed one of the most telling points about that approach. He wrote, “The whole idea of Multiple Streams of Income will be a powerful paradigm shift for most people.”

What this means is that it is easy to acknowledge this as an exciting idea but harder to adopt it in practice because of the way we look at work. Separating the idea of total income from your “job” is not easy for most people to do. This whole new perspective, what Covey calls a paradigm, must be internalized mentally before the practice of income diversification can be realized in the real world in which we live.

The key is to think of a job as just one way to get money. Often two or three part time jobs may bring in more money than one full time job. You can make more money as a business owner than you can as an employee. You can make more money from investments than you can from business.

As soon as you separate the idea of income from your job alone and see your job as just one means of generating income you will have a different perspective than most of the people around you. You will then be well on your way to a higher than average income.

Multiply Your Income

It is vital to begin finding more than one way to generate income. But is also important to do it right. Each source of income needs to be directed toward specific goals. Obviously, some investment income needs to be directed toward retirement savings. But think about other uses.