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Radical Personal Finance

978 EpisodesProduced by Joshua SheatsWebsite

Joshua J Sheats, MSFS, CFP, CLU, ChFC, CASL, CAP, RHU, REBC is a financial planner who teaches people how to live a rich life now while building a plan for financial freedom in 10 years or less. He mixes creative approaches to lifestyle design, deep-dive financial planning techniques, and hard-core … read more

1:04:20

152-Measuring Your Biggest Asset: The Lifetime Value Of Your Income

http://radicalpersonalfinance.com/patron

You've probably heard that your income is your biggest and most important tool in your wealth-building toolbox. 

It is. But it's hard to see and feel that when you simply sit down and look at your net worth statement.

Today, I want to share with you a technique that has been useful for me. It's primarily a framing technique: it allows you to actually see the value of your income as compared to your current financial condition.

It's been incredibly useful to me and I hope it's incredibly useful to you!

Notes:

  • Calculate the lifetime value of your income.
  • Then, think about what you can do to increase that number.
  • There are three primary levers to push:
    1. The higher your starting income, the better.
      • Focus on starting from a position of strength (higher wages).
      • Look for high-skill or high-education industries.
      • Focus on a difficult industry. Hard work pays!
    2. The higher the annual increase, the better.
      • Build and apply knowledge, skill, and ability.
      • Be in an industry which will reward your increases.
      • Look for big-jump increases by constantly job hunting.
      • Establish yourself as a leader in your industry.
      • Look for industries where competition is low and you can gain a competitive advantage.
      • Look for exponential growth and leverage opportunities.
    3. The more years of income, the better.
      • Start earlier. Can you simply get started now without waiting for formal credentials?
      • If it's too late for you to start earlier, can you help someone young start earlier?
      • Work longer. But consider if you'll be able to persist.
      • Look for work that you can do for longer. (Be careful of laboring jobs or mandatory retirement programs.)
      • Look for work that you'll want to do for longer. (Does it integrate with your lifestyle? Do you gain satisfaction and enjoyment from the work itself?)
      • Look for work where your age and wisdom will be an advantage. (Plan ahead for ageism and be prepared to overcome it.)
      • Look for work where your lifetime knowledge and experience will be an asset, not a liability.
  • Your homework:
    • Calculate the expected value of your life's income.
    • Is it enough? Play with the variables and see what kind of alternatives you can create.

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