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Run Your Life Like a Business29 04 06 24  19
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This is one of the times in life where the phrase “Think Out of The Box” may come handy! Run your life is a business! The fact that you may or may not be employed at this particular point in time is just a small detail. When you run a business you concentrate on increasing your earnings, more so than you also increase revenue.
As companies do, your ability to generate earnings (savings and investments) should increase over time. Business also tries to increase their margin: the percentage of revenue that becomes earnings. You should also try to increase your personal savings rate as your income increases. There are two ways of increasing earnings. Either you have more income / revenue or you have less expenses. A salary increase is only one way of increasing revenue: Investing money into interest, rent, or dividend producing instruments also increases revenue. Reducing expenses also doesn’t mean that you have to reduce your standard of living: paying down debt reduces interest expenses (after 30 years your mortgage may be paid off, for example). Some people suggest that companies have the advantage of having an ever young workforce, while individuals can’t work forever. At some point an individual ability to generate revenue will decline. That is true, and it is very important that you Run Your Life Like A Business while you can. Companies reinvest some of their money into themselves. Sometimes they spend money to make money: better equipment, more employees. In the case of individuals education is a good example of this kind of investment into yourself. However, good investors learn to watch for cash flow: the amount of money that goes into the bank (or investments). It is good to see that a business invests into themselves, but a business that has a lot of earnings but has to invest it all into the growth of its operations has no cash flow. Positive cash flow is a sign of a good business: even if you have to invest into your own growth make sure you have positive cash flow. Companies also like to show double digit earnings growth. (10% earnings growth, for example). A company that only grows 4% (like the average salary) shows mediocre growth that may not even surpass inflation. Many investors dump these companies unless they show some other reason to keep them. Don’t set for being mediocre. Run Your Life Like a Business |
At school we are taught to be an employee: get some skills, find a stable company, and work for whatever an employer wants to pay you. You are even taught that a 2% raise is bad, a 3-4% raise is normal and if you get something in the 5-7% you should be happy to be considered top talent within a company. You are supposed to do so for 30 years and if you have saved enough money on your retirement accounts you are expected to move to Florida, Arizona, or North Carolina into some “Active Adult” community. If you didn’t saved a dime for retirement you are expected to be on the housing site queue for a couple of years before society helps you make ends meet with your Social Security check.