RPF0152-Lifetime_Value_of_Your

00:00:00.000 | With Kroger Brand products from Ralphs, you can make all your favorite things this holiday season.

00:00:05.200 | Because Kroger Brand's proven quality products come at exceptionally low prices.

00:00:09.920 | And with a money-back quality guarantee, every dish is sure to be a favorite.

00:00:14.800 | ♪ These are a few of my favorite things ♪

00:00:18.000 | Whether you shop delivery, pickup, or in-store, Kroger Brand has all your favorite things.

00:00:24.800 | Ralphs. Fresh for everyone.

00:00:27.200 | ♪

00:00:30.000 | I'm back. I'm ready to go. And I've got a great show topic for you today.

00:00:34.800 | We're going to talk about the lifetime value of your income.

00:00:37.600 | And here's my promise.

00:00:40.000 | By the time we're done with today's show, you are going to not only feel rich,

00:00:47.200 | but you're going to understand why you are rich.

00:00:51.600 | ♪

00:01:07.600 | Welcome to the Radical Personal Finance Podcast.

00:01:09.600 | My name is Joshua Sheets, and today is Monday, February 16, 2015.

00:01:16.000 | Thank you for being here. We're going to talk a little bit about income today.

00:01:19.200 | And since income is what drives every other part of your financial plan, I hope that you are ready.

00:01:26.000 | I'm going to give you a bunch of ideas, and I'm going to give you a framework for how to think about your income

00:01:30.000 | so that you know that you are already rich.

00:01:32.400 | ♪

00:01:39.600 | Sorry to be away for a couple of days last week.

00:01:41.600 | I would like to say that I'm rested and refreshed, but although I am, you know, I'm feeling pretty good.

00:01:46.200 | I certainly wasn't away sitting on -- I guess, what fun things do you do in Dallas?

00:01:49.800 | I'm not sure. I was working, and I'll tell you about that another time.

00:01:53.400 | You'll hear about that later.

00:01:55.200 | But I was -- I'm sorry I was away without shows last week, Wednesday, Thursday, Friday.

00:01:59.200 | I had an unexpected trip to Dallas.

00:02:01.200 | It was a good trip. I enjoyed it, and it was productive for the reasons that I went.

00:02:06.200 | You'll be hearing some of those reasons in coming days with a bunch of interviews that I recorded while I was there.

00:02:12.000 | That wasn't the primary reason that I went, to record interviews, but it was an extra bonus.

00:02:16.200 | I was able to maximize the value or stack the benefits, as I like to say,

00:02:20.800 | and get as much benefits out of an expense as possible.

00:02:25.800 | This show is brought to you free of corporate sponsorship.

00:02:28.000 | Thanks to the patrons of Radical Personal Finance.

00:02:32.000 | As I record this on Monday afternoon at 4 o'clock p.m., we are up to 36 patrons and $375 per month for the show.

00:02:39.200 | Thank you for those of you who signed up over the last few days to support the show.

00:02:43.000 | That makes a world of difference, as it allows me to continue to bring you the show commercials, ad, and sponsorship free,

00:02:50.000 | which means that I'm only focused on the value of the information.

00:02:53.000 | So thank you.

00:02:54.000 | For those of you who are patrons at the irregulars level,

00:02:57.000 | that includes now those of you who are contributing on Patreon at $25 per month,

00:03:02.000 | and it also includes those of you who were contributing prior to the launch of the Patreon page,

00:03:07.000 | I have released for you a bonus episode with details on my recent trip to Dallas, why I went,

00:03:13.000 | and what I'm working on, the new business project that I'm working on.

00:03:16.000 | You'll find that in our Facebook page.

00:03:19.000 | If you don't have access to the Facebook page yet, email me, Joshua@radicalpersonalfinance.com.

00:03:23.000 | I sent it all to you, but if you don't have access, just email me, Joshua@radicalpersonalfinance.com,

00:03:28.000 | and I will make sure to add you to that Facebook page.

00:03:31.000 | If you need a link, go ahead and click on Patreon.

00:03:34.000 | If you are at $25 in a month or above, you will see a link to the Patreon page,

00:03:41.000 | and you'll have all those details of the trip.

00:03:44.000 | If you haven't joined the irregulars yet, you can do that on the Patreon page.

00:03:47.000 | Just go to radicalpersonalfinance.com/patron, and you'll find all of those details.

00:03:53.000 | So let's get into today's show where we talk about income.

00:03:56.000 | I'm going to share with you that what I'm going to share with you today is something that I feel very strongly with,

00:04:04.000 | but I haven't always felt strongly about.

00:04:07.000 | This is actually something that I kind of just bumbled into when I was working as a financial planner.

00:04:12.000 | This is something that I didn't really get, and it was pure happenstance that my financial planning software

00:04:20.000 | would run a sales illustration page for me in the plans.

00:04:24.000 | I started looking at it, and then I looked at it, and then I looked at it every time,

00:04:27.000 | and I realized it was probably one of the most valuable tools that I could use with financial planning.

00:04:33.000 | That page was actually the lifetime value of income.

00:04:37.000 | Now, this page did a couple of things.

00:04:39.000 | Often what it was used for, actually, in the software that I used,

00:04:42.000 | is it was used as a page for establishing the sale of insurance products that would cover the value of your income.

00:04:50.000 | For example, it would take what you're making today, and it would project it forward until the date of retirement,

00:04:55.000 | which I had run in the plan, and then it would usually grow it at whatever rate of inflation that I had set.

00:04:59.000 | Let's assume I'd set a 3% rate of inflation.

00:05:02.000 | It would take that number of your income currently, and it would grow it at 3%,

00:05:06.000 | and it would say what the total value is of that income.

00:05:09.000 | That was great, and then it would follow it with a discounted value.

00:05:12.000 | It would say if the total value of your lifetime income is $2 million,

00:05:16.000 | and we're coming back a certain number of years,

00:05:18.000 | it would discount it and take a present value calculation and say,

00:05:22.000 | "If we had, say, $1.2 million and we could invest it at 6% for income,

00:05:27.000 | we could replace the value of your income."

00:05:32.000 | Now, this was actually for a very long time how life insurance and life insurance agents

00:05:38.000 | calculated the amount of life insurance that was appropriate for you.

00:05:43.000 | The idea would be in the past.

00:05:45.000 | We do it a little bit differently now, but the idea would be,

00:05:47.000 | "Well, if you're going to earn, say, $3 million,

00:05:50.000 | and if I can replace that with $1.5 million of life insurance today,

00:05:53.000 | and if I can invest that and replace your income,

00:05:55.000 | then I've replaced your financial value for your family."

00:05:58.000 | That used to be how planning was done for life insurance.

00:06:02.000 | Today we use a needs analysis approach, which I like a little bit better.

00:06:06.000 | I think it's a little bit more specific, but it's certainly a--

00:06:08.000 | the lifetime value of income approach is certainly a valid way to do it.

00:06:11.000 | I don't have any problems with that.

00:06:13.000 | I prefer it over the multiple of income approach,

00:06:15.000 | which is the way that you hear much bandied about,

00:06:17.000 | which is buy 10 times your income or 15 times your income

00:06:21.000 | or 8 times your income of life insurance.

00:06:23.000 | That is, in my opinion, the worst way to do it, but it's better than nothing.

00:06:27.000 | Better to have some life insurance than nothing.

00:06:30.000 | So, hey, if it gets people to buy life insurance, I'm okay with it.

00:06:33.000 | But what I started to look at it and see the value of that page

00:06:37.000 | is it would actually allow me to understand what somebody's income was.

00:06:42.000 | Now, purely by happenstance, the financial planning software that I would use

00:06:46.000 | would insert this page immediately following somebody's balance sheet,

00:06:51.000 | their income--excuse me, their assets and their liabilities and their net worth.

00:06:56.000 | And when I started going through it, what would happen is oftentimes,

00:07:00.000 | especially with the demographic that I started working with

00:07:03.000 | when I was a young planner, I didn't know a lot of rich people

00:07:06.000 | and I wasn't probably qualified to do planning for them very well

00:07:09.000 | until I learned a little bit more.

00:07:10.000 | And so I was working with a lot of people who were broke.

00:07:13.000 | And their balance sheet would show that they were broke.

00:07:16.000 | And oftentimes, if the number at the bottom of the page, the net worth number,

00:07:21.000 | would either be very low or it would be negative.

00:07:26.000 | And what I learned is I was always a little bit depressed

00:07:28.000 | presenting a number that was negative, and it was usually due to student loans.

00:07:31.000 | Because when I started, I was 23 years old.

00:07:33.000 | I had a lot of young clients who were in their mid to late 20s.

00:07:35.000 | And it's not hard for a mid to late 20 person,

00:07:38.000 | especially if they've gone to college and taken out student loans,

00:07:41.000 | to have a low income number--excuse me, a low net worth number,

00:07:44.000 | a negative number because of the student loans.

00:07:46.000 | There's not a corresponding asset that shows up on the balance sheet

00:07:50.000 | that offsets that number.

00:07:54.000 | So I would lead with the balance sheet, and then I would present next--

00:07:57.000 | on the next page, the lifetime value of their income.

00:08:00.000 | And I would always try to encourage them and say,

00:08:01.000 | "Look, look, look how much your income is worth."

00:08:03.000 | And then finally what I realized is that that was the key number

00:08:06.000 | that was missing on the balance sheet.

00:08:09.000 | After all, the reason somebody's net worth was negative

00:08:11.000 | was because they'd gone to college usually,

00:08:13.000 | and they had $50,000 of student loans.

00:08:16.000 | Well, the hope and the idea and the ideal for most of those people

00:08:19.000 | was that by investing, quote-unquote, into a college degree,

00:08:23.000 | they were going to be able to earn a higher wage.

00:08:26.000 | And so it was actually that next page, the lifetime value of income,

00:08:30.000 | that would demonstrate that they had gotten a good investment.

00:08:35.000 | They'd gotten a good--getting a good return on their money.

00:08:38.000 | So then I learned to change my language a little bit,

00:08:40.000 | and I learned to demonstrate that to my clients and say,

00:08:44.000 | "Look at the value of your income.

00:08:46.000 | If we just do a few things correct, you can build wealth."

00:08:54.000 | And once I cracked that code, I did that with every client,

00:08:56.000 | and what I learned was I loved to do it, and the clients understood it.

00:09:00.000 | Because what it focused on was not where they were today,

00:09:03.000 | but rather it focused on the few simple steps that they needed to do

00:09:08.000 | to make good progress toward their goals.

00:09:12.000 | Let me give you an example here so that you understand more clearly.

00:09:15.000 | Assume that I'm doing planning for a young couple,

00:09:18.000 | a man and a woman are both age 30,

00:09:21.000 | and assume that this couple, each person has $50,000 of income.

00:09:27.000 | So it's about the median income in the United States of America.

00:09:29.000 | I think it's about $52,000 currently. I like $50,000.

00:09:32.000 | So you've got $50,000 of income for each,

00:09:35.000 | so multiply that times two, that's $100,000 of household income.

00:09:39.000 | Now assume that the balance sheet looks like this.

00:09:42.000 | This would be a fairly average middle class, probably a median balance sheet.

00:09:47.000 | Assume that they own a $180,000 house.

00:09:51.000 | They own $30,000 worth of cars.

00:09:54.000 | They have $5,000 in a savings account,

00:09:56.000 | and let's just say they have about $5,000 in a 401(k).

00:10:00.000 | Now that's the value of their assets, about $220,000 total,

00:10:06.000 | primarily in house and cars.

00:10:09.000 | Also assume that there's a $150,000 mortgage,

00:10:12.000 | $20,000 worth of car loans, and $15,000 worth of student loan debt.

00:10:18.000 | So that would put liabilities of $185,000.

00:10:22.000 | Now on paper, this couple has a $35,000 net worth,

00:10:25.000 | but the problem is that that is primarily found in their home, their home equity.

00:10:29.000 | $30,000 of the $35,000 is actually house equity,

00:10:32.000 | and the challenge with having house equity is that most people who have house equity feel poor

00:10:37.000 | because you can't access it, myself included.

00:10:40.000 | Too much money in house equity and not enough money in cash.

00:10:43.000 | So you can't access it, so it doesn't really make you feel that great.

00:10:46.000 | So even though this couple that I've described is probably doing pretty well

00:10:51.000 | and they're doing better than many people in society,

00:10:53.000 | they certainly don't feel rich by any means.

00:10:56.000 | And to have a net worth of $35,000 does very little to make them feel rich.

00:11:03.000 | Now what if I talk about their income, however?

00:11:07.000 | And let's figure out how much their income is worth.

00:11:11.000 | In this scenario, assume that this 30-year-old person has a $50,000 income

00:11:16.000 | and assume that they are going to increase their income by 3% each year.

00:11:21.000 | This is just going to be simple cost-of-living adjustments that are keeping pace with the rate of inflation.

00:11:27.000 | But look at the difference in the numbers.

00:11:29.000 | They start with $50,000 and then a year later they receive a 3% increase,

00:11:33.000 | and so they're earning $51,500.

00:11:36.000 | A year later, another 3% increase, compounding, they're earning $53,045.

00:11:41.000 | And this happens each year.

00:11:43.000 | And fast forward and let's just say it's over a 40-year career from age 30 to age 70.

00:11:49.000 | Do you know what the total value of that income is?

00:11:52.000 | $50,000 income compounding at 3% annually from age 30 to age 70 would be $3,933,164.88.

00:12:05.000 | Let's call it $4 million among friends.

00:12:07.000 | And that's for one spouse.

00:12:11.000 | What about the other? What if they both work?

00:12:14.000 | Well, it's about $8 million, $7,866,000 times two, and that's at a 3% growth rate.

00:12:23.000 | Isn't that amazing?

00:12:26.000 | Now, compare how you would feel in that situation as a member of that 30-year-old couple

00:12:32.000 | when I'm sitting there and demonstrating to you that you have a net worth of $35,000,

00:12:36.000 | of which $30,000 is locked up in home equity, so you really feel broke.

00:12:41.000 | And I'm pointing out to you, however, that you can enjoy a household income of probably about $8 million

00:12:47.000 | between now and the age of 70.

00:12:52.000 | Pretty amazing, right?

00:12:55.000 | Super depressing if you--well, not super depressing.

00:12:58.000 | Moderately depressing if you focus only on net worth.

00:13:01.000 | But if you look at the value of that income, it should do a couple of things.

00:13:05.000 | Number one, it should be encouraging to you.

00:13:08.000 | And that's key.

00:13:09.000 | When you're young, you should be looking forward--well, any time, you should be looking forward

00:13:12.000 | and looking at your income and be encouraged by that.

00:13:15.000 | And two, it should cause you to ask the question of saying, "What do I need to do with that income

00:13:21.000 | to make sure that I have some of it in my pocket in the fullness of time?"

00:13:26.000 | And that's key.

00:13:29.000 | Because when I'm doing planning for a 55-year-old couple or for a 45-year-old couple,

00:13:34.000 | oftentimes that 45- or 55-year-old couple might be in exactly the same net worth statement as that 30-year-old.

00:13:42.000 | That's what statistics show.

00:13:43.000 | When you start looking at what the average person has saved for retirement,

00:13:46.000 | it's not that far off from that age 30 that I explained.

00:13:50.000 | But the problem is they don't have 40 years of income in front of them.

00:13:53.000 | They only have 20 years of income in front of them.

00:13:57.000 | So however many years of income you have in front of you, I want you to focus on that number

00:14:04.000 | and ask yourself, "What do I need to do with that number to make sure that some of it stays in my pocket?"

00:14:14.000 | Now, remember that this client here has $220,000 of assets and $185,000 of liabilities.

00:14:20.000 | Now, how easy would it be for this person to become really, really rich

00:14:26.000 | and acknowledge the fact that they have got $8 million of expected income over their lifetime?

00:14:32.000 | $8 million of expected income over their lifetime.

00:14:37.000 | And all they got to do is pay off $185,000 of debt and pile up a few million bucks for themselves.

00:14:45.000 | It should be pretty doable, right?

00:14:49.000 | It's very doable.

00:14:50.000 | $8 million of income, $185,000 of debt.

00:14:53.000 | We got to pay off the debt and we got to set aside a couple or three or $4 million for ourselves.

00:14:57.000 | That is really doable.

00:15:00.000 | But it's only doable if you don't spend all that money.

00:15:05.000 | It's only doable if you actually set aside some of that income and actually invest it wisely.

00:15:13.000 | But it should be a bit haunting to look at that number and recognize that I'm going to earn $8 million.

00:15:21.000 | It's disgraceful in that scenario, barring catastrophic events,

00:15:26.000 | it's disgraceful to not wind up with at least a million or two tucked away.

00:15:32.000 | In the land of abundance that most of us live in,

00:15:36.000 | we should be ashamed of ourselves if we don't at least tuck some of that money aside.

00:15:43.000 | It's too easy in the land of abundance that we live in to not do that.

00:15:47.000 | Now, I'm not saying that you're going to feel it all up front.

00:15:49.000 | The problem is we don't feel these numbers all up front.

00:15:54.000 | Rather, we see the income numbers.

00:15:59.000 | We don't see the $4 million total income number.

00:16:02.000 | We only see the $2,900 net income number that flows into our bank account each month

00:16:08.000 | from one of those $50,000 jobs.

00:16:10.000 | What I'm doing here, I'm just taking $50,000 divided by 12.

00:16:13.000 | That comes out to be $4,166.

00:16:16.000 | Let's just plug in, say, 70% to account for employment taxes at 7.65%

00:16:21.000 | and account for a net effective tax rate of 7.65% to be--excuse me--of--I can't do podcast math--22.35%.

00:16:33.000 | 22.35% effective income tax rate, state, local, and federal.

00:16:38.000 | I'm just using a 30% total tax rate.

00:16:42.000 | Again, $50,000 divided by 12 is $4,166 times 70%.

00:16:48.000 | Then what's worse is if you divide that by 2, let's say you're paid bimonthly,

00:16:53.000 | you wind up with a $1,500 paycheck.

00:16:55.000 | It's $1,458 paycheck.

00:16:58.000 | That doesn't feel like all that much money.

00:17:01.000 | But if you don't effectively manage the $1,458 net paycheck,

00:17:09.000 | you don't ever get to pile up the money.

00:17:13.000 | So what I'd encourage you to do is to start thinking in terms of the lifetime value of your income

00:17:21.000 | in the context of your financial plan.

00:17:25.000 | First, calculate it.

00:17:27.000 | So sit down and make a spreadsheet for yourself

00:17:29.000 | and calculate how much is your lifetime value of your income.

00:17:34.000 | If you're good with math, you can do this on a calculator.

00:17:36.000 | All you need to do is you need to take the number, inflate it,

00:17:39.000 | and then take the total value of those payments and calculate that.

00:17:43.000 | If you want to do it in Excel spreadsheet, it will be easier for you

00:17:46.000 | because you can just change it and you can clearly see it.

00:17:48.000 | If you don't know how to make an Excel spreadsheet,

00:17:50.000 | I've prepared a very simple short video presentation of me doing that in preparation for this show.

00:17:56.000 | That spreadsheet is free. It's online.

00:17:59.000 | It's available for the patrons of the show.

00:18:02.000 | So if you'd like access to that, just make sure you become a patron of the show,

00:18:05.000 | radicalpersonalfinance.com/patron.

00:18:06.000 | You can do that for as little as a buck a month,

00:18:08.000 | and you'll have access to that spreadsheet.

00:18:11.000 | I've done it with Google Spreadsheets, which is a free online spreadsheet program that you can use,

00:18:16.000 | and I'll just show you how to set that up.

00:18:18.000 | Very simple. Most of you could be able to do it for yourself,

00:18:21.000 | but if you need to know how to do that, just find that on the Patreon feed for that,

00:18:25.000 | radicalpersonalfinance.com/patrons, and then click on "Patron" and then click on "Activity."

00:18:31.000 | So calculate for yourself what is the lifetime value of your income,

00:18:36.000 | and then start thinking in terms of that number,

00:18:39.000 | thinking in terms of what you can do with that number.

00:18:41.000 | Now, there are some bonus things that you can do,

00:18:46.000 | and these are natural corollaries of that lifetime value of number.

00:18:51.000 | Let's figure out how do we get this higher.

00:18:53.000 | Well, I can think of three ways that you can increase your income.

00:18:57.000 | Number one, the higher the starting value of income, the better.

00:19:03.000 | So the higher the first wages that you start with, the better,

00:19:07.000 | because over time that will compound over a lifetime.

00:19:10.000 | Number two, the higher the annual increase on your wages, the better,

00:19:16.000 | because then your compounding will grow more over time.

00:19:19.000 | And number three, the more years of income, the better.

00:19:24.000 | And all of these things are extremely valuable to recognize

00:19:28.000 | because these are the things that are under your control.

00:19:31.000 | Let me give you a couple of examples.

00:19:34.000 | Let's keep my scenario constant,

00:19:37.000 | and let's say we're starting with $50,000 of starting wages

00:19:42.000 | and 1.03%--excuse me, 3% of annual increases.

00:19:47.000 | And let's calculate what the total value of a lifetime wages would be

00:19:50.000 | if we could start at a higher number.

00:19:52.000 | $50,000, our total earning power for a 40-year career from age 30 to age 70,

00:19:58.000 | is $3.9 million.

00:20:01.000 | What if we start at $55,000?

00:20:04.000 | Well, now at $55,000, we're at $4.3 million.

00:20:11.000 | So that's a difference of $400,000 of total lifetime income

00:20:15.000 | for just a measly difference of $5,000 of a starting point.

00:20:20.000 | $400,000.

00:20:22.000 | So if all you did was start at a slightly higher rate

00:20:25.000 | and simply save that extra $5,000 per year,

00:20:30.000 | that will make a dramatic difference in your long-term financial security.

00:20:35.000 | What if you increase the annual growth rate?

00:20:38.000 | Well, I'm going to drop it back to $50,000,

00:20:40.000 | but now instead of increasing wages at 3% per year,

00:20:43.000 | let's increase wages at 5% per year.

00:20:45.000 | Remember, wages at 3% is basically $3.9 million.

00:20:49.000 | What would it be at 5%?

00:20:52.000 | $6.4 million.

00:20:55.000 | So just simply increasing the rate of annual increase from 3% to 5%,

00:21:01.000 | which 5% is extremely doable,

00:21:04.000 | you raise your lifetime earnings from 30 to 70 from $3.9 million to $6.4 million.

00:21:14.000 | That's an extra $2.5 million of earned income.

00:21:18.000 | That's dramatic, isn't it?

00:21:21.000 | What if you extend the amount of years?

00:21:23.000 | Let's drop this back to 3%.

00:21:25.000 | And let's just say you're starting at $50,000,

00:21:27.000 | 3% annual increases,

00:21:29.000 | and now instead of working over a 40-year career,

00:21:32.000 | you work over a 50-year career.

00:21:34.000 | So whether this is from 30 to 80 or from 20 to 70 or something like that,

00:21:38.000 | you're starting at $50,000.

00:21:40.000 | The difference between age 70 at $3.9 million to age 80 is $5.8 million of earnings.

00:21:49.000 | Working an extra 10 years, you earn an extra $1.9 million by working an extra 10 years.

00:21:56.000 | It's amazing, huh?

00:21:58.000 | Now the key--and I'm going to talk about how to do each of these things--

00:22:02.000 | but the key to wealth is by focusing on your income

00:22:06.000 | and then doing intelligent things with it.

00:22:08.000 | But all three of those things are adjustable, and you can impact them.

00:22:14.000 | So as an example here, let's assume--

00:22:17.000 | so let's start with starting with an income.

00:22:20.000 | We all know about, "Well, hey, if you can earn more money, then that's even better."

00:22:24.000 | So that's initially why college degrees have become so important in our culture

00:22:29.000 | is because the idea is if I go to college,

00:22:31.000 | yes, I'm deferring my income for a number of years,

00:22:34.000 | but now when I get out, I'm going to start at a higher wage.

00:22:36.000 | Let's say you start at the age of 30, and you earn $60,000 instead of $50,000.

00:22:43.000 | And let's say that instead of earning a 3% annual increase, you earn a 6% annual increase.

00:22:51.000 | And do you know how much that is at age 70?

00:22:56.000 | It's $9.9 million.

00:22:59.000 | So just changing that, starting at $60,000 instead of $50,000,

00:23:03.000 | increasing wages at 6% annually instead of 3% annually, that's $9.9 million.

00:23:08.000 | Now here's what's intriguing about this.

00:23:11.000 | A, multiply that times 2, that's $20 million of earned income.

00:23:15.000 | For an average median earning--that's slightly more than median income.

00:23:20.000 | For a mostly average, almost median earning household

00:23:24.000 | that's just simply working over a 40-year career,

00:23:27.000 | starting at a slightly higher wage,

00:23:30.000 | and increasing annual income at double the rate of inflation

00:23:34.000 | through the application of skill and intelligent career advancement.

00:23:39.000 | It's $10 million for an individual and $20 million for a couple.

00:23:43.000 | What if you did it over a 50-year career instead of a 40-year career,

00:23:46.000 | and you worked from 30 to 80?

00:23:49.000 | Well, now for an individual starting at $60,000 per year,

00:23:56.000 | increasing income at 6% per year over a 50-year career,

00:24:00.000 | that's $18.5 million of earnings.

00:24:05.000 | Couple, $37 million of earnings.

00:24:10.000 | Massive numbers. Massive numbers.

00:24:15.000 | Now, I recognize that many of you don't necessarily have a desire

00:24:18.000 | to work for a 50-year career, and that's fine.

00:24:21.000 | I recognize that many of you aren't earning $60,000 per year

00:24:24.000 | or aren't compounding your income at 6% per year,

00:24:27.000 | but all of these things are doable,

00:24:29.000 | and I'm going to cover some reasons why you might choose to do it

00:24:32.000 | or not choose to do it as I go through them.

00:24:34.000 | But my point is these numbers get massive,

00:24:38.000 | and the starting point of any wealth plan is commanding a high income,

00:24:44.000 | increasing that income steadily and substantially,

00:24:47.000 | and earning that income for as long a period as possible.

00:24:52.000 | That's it.

00:24:54.000 | So how can you do this?

00:24:55.000 | Because I want to give you some tools.

00:24:56.000 | So these three things, number one, the higher the income, the better.

00:24:59.000 | Focus on starting from a position of strength

00:25:02.000 | and focus on earning higher wages from as early a point in time as possible.

00:25:09.000 | So again, college degrees is the most common way,

00:25:11.000 | but that is not the only way,

00:25:13.000 | and that's becoming an increasingly less effective way.

00:25:16.000 | But as a simple example,

00:25:18.000 | consider the starting income of a neurosurgeon versus a general medical doctor

00:25:24.000 | versus a frontline fast food worker.

00:25:27.000 | Their starting incomes are substantially different.

00:25:30.000 | Why?

00:25:32.000 | Because they have to invest more up front,

00:25:35.000 | and their income is higher because of that earlier investment

00:25:38.000 | because if they weren't able to get the higher wages,

00:25:40.000 | it would be foolish for them to make the longer investment of time,

00:25:43.000 | so they have to earn it out over a lifetime period.

00:25:46.000 | So anytime you can start at a higher rate through education,

00:25:49.000 | that can be valuable,

00:25:50.000 | and a college degree might be the ticket.

00:25:53.000 | Advanced college degrees might be the ticket.

00:25:56.000 | Also, I say look for a high skill or high education industry.

00:26:02.000 | Skill matters.

00:26:04.000 | Skills matter.

00:26:06.000 | We're paid for skill and skills.

00:26:09.000 | We're also paid for knowledge.

00:26:12.000 | The work that I do in creating this show is a combination of knowledge,

00:26:15.000 | where I need to demonstrate and apply specific financial planning knowledge.

00:26:19.000 | It's also a combination of applied skills,

00:26:21.000 | where I need to learn and apply interesting skills

00:26:25.000 | to create interesting and entertaining content that the audience will respond by listening.

00:26:30.000 | It's the same in your business.

00:26:32.000 | You need to apply skill and knowledge,

00:26:35.000 | and natural ability is important.

00:26:37.000 | Knowledge, skills, and ability is what we get paid for.

00:26:39.000 | Another way to earn a higher income is, I would say,

00:26:41.000 | focus on a difficult industry.

00:26:44.000 | Hard work pays.

00:26:46.000 | I learned this, thankfully, when I was a kid,

00:26:48.000 | and my dad said, "If you do hard jobs, you get more money."

00:26:52.000 | The older I've gotten, the more I look around and realize

00:26:55.000 | that by doing hard jobs, I get more money.

00:26:58.000 | Now, when I was young, I learned this doing construction,

00:27:00.000 | and I realized at a time when I was doing construction work

00:27:03.000 | and I had friends that were doing retail work,

00:27:06.000 | they were earning minimum wage,

00:27:09.000 | and I was earning far more than minimum wage.

00:27:11.000 | But when I looked at the difficulty, and not even necessarily a skill level,

00:27:15.000 | because I didn't have any major skills,

00:27:17.000 | I just looked at the difficulty of their job versus mine.

00:27:20.000 | They were working in an air-conditioned store,

00:27:22.000 | hanging out, folding clothes at a clothing store,

00:27:25.000 | and I was sweating and carrying boxes of tile to a tile job

00:27:28.000 | and mixing up buckets of mud,

00:27:30.000 | and I realized hard work pays.

00:27:34.000 | So Joshua's tip, if you want to make more money,

00:27:37.000 | look for the hardest job you can find and learn how to do it.

00:27:40.000 | You'll make more money.

00:27:42.000 | Always look to start with a higher income amount,

00:27:45.000 | and that will result in a much higher total lifetime earnings.

00:27:51.000 | That's step one. Start at higher wages.

00:27:54.000 | Number two, the more you can increase your income each year, the better.

00:27:59.000 | There are a couple ways to do this.

00:28:00.000 | Number one, you could start with steady increases.

00:28:03.000 | So going from 3% to 6%, if you do that every year,

00:28:07.000 | that can be fantastic over a lifetime.

00:28:11.000 | Assume that you're just going to get 3% increasing,

00:28:14.000 | because in order to keep all things being equal from a technology perspective,

00:28:20.000 | in order to keep employees,

00:28:21.000 | an employer is going to have to maintain their wages with inflation.

00:28:25.000 | Now, generally, this is why human costs are the biggest expense line item

00:28:31.000 | in most companies' budgets.

00:28:34.000 | So anytime an employer can automate you and outsource you,

00:28:38.000 | that's going to be very much in their interest for their own profit.

00:28:41.000 | So we can't necessarily control for that.

00:28:43.000 | But assuming that is controlled for,

00:28:46.000 | in order to retain employees over time, not every year,

00:28:49.000 | they're going to have to maintain wages with at least inflation.

00:28:52.000 | So there's probably going to be a pretty good, consistent way

00:28:56.000 | for you to maintain your wages just with inflation.

00:28:59.000 | But you can get over inflation by building knowledge and applying it,

00:29:04.000 | and by gaining and applying skill, and by enhancing your abilities.

00:29:09.000 | And that is very doable and very controllable.

00:29:17.000 | Just look for saying, "What is the knowledge that I need?

00:29:19.000 | What are the skills that I need?

00:29:20.000 | What are the abilities I need to develop?"

00:29:22.000 | And stay current with those things and improve them.

00:29:25.000 | Work hard, do a great job, be productive.

00:29:28.000 | Look all the time you're at work.

00:29:30.000 | There are studies that show that the average worker,

00:29:32.000 | when they're at work, works drastically less than the amount of time

00:29:35.000 | that they're actually being paid for.

00:29:38.000 | I'm hedging just a little bit because I don't remember the average numbers,

00:29:40.000 | but my guess is that it's probably less than 50%.

00:29:44.000 | That the average person at work spends less than 50% of their actual time

00:29:49.000 | on the job actually working.

00:29:51.000 | I don't know that number.

00:29:52.000 | I didn't look it up in preparation for this show, so I could be wrong.

00:29:55.000 | But my guess is probably around that number.

00:29:57.000 | If any of you can show data one way or the other,

00:30:00.000 | prove me wrong or prove me right, put that in the show notes for today's notes.

00:30:03.000 | But if you only did one thing, I'm convinced if you only did one thing,

00:30:06.000 | the entire time that you're at work, you work hard,

00:30:10.000 | you're probably going to command double the rate of inflation of annual increases.

00:30:15.000 | Because the average worker simply does not work while they're at work,

00:30:18.000 | if you just work, that sets you apart.

00:30:21.000 | So if you start at 8, get there at 7.50 so you can be prepared to start work at 8.

00:30:26.000 | And if you finish at 5, finish at 5 and leave at 5.15 so you can work till 5.

00:30:32.000 | Instead of spending time talking, browsing ESPN.com or whatever your version of your--

00:30:39.000 | whatever distracts you, work.

00:30:41.000 | Focus on actually working.

00:30:43.000 | Easier in some jobs than others.

00:30:45.000 | If you have a job where you're paid on a piece rate,

00:30:48.000 | whether you're a driver and you're driving per mile

00:30:50.000 | or whether you're producing something, then it's easier there to measure your work.

00:30:53.000 | I just think of many offices that I've worked in,

00:30:55.000 | I just noticed that it seems like the average person doesn't spend that much time working.

00:31:00.000 | Even if you do spend time working, work on the things that are most important.

00:31:04.000 | So congratulations by working when you're at work.

00:31:07.000 | Number two, work on the things that are most important.

00:31:10.000 | Focus on the highest value-added activities first, not on the lowest.

00:31:15.000 | And that could do a whole show on that.

00:31:17.000 | I won't do it, but I just say that.

00:31:19.000 | Focus on building steady increases.

00:31:21.000 | Then you've got to make sure that you're in an industry or a position

00:31:24.000 | where you will be rewarded for those increases in output or increases in production.

00:31:30.000 | Joshua's pro tip, avoid working in a government bureaucracy.

00:31:34.000 | I've-- all of the friends of mine who are government workers,

00:31:38.000 | there's not really much point in working in a government bureaucracy,

00:31:42.000 | at least if you expect your income to be affected by your work.

00:31:46.000 | The income is legislated, and because it can't be unfair,

00:31:50.000 | it has to be within a certain range.

00:31:52.000 | And so there's very little incentive for you to increase your output.

00:31:55.000 | So if you-- that can be a great move from a lifestyle perspective.

00:31:58.000 | If you want to have a lifestyle where you don't do much work for more money,

00:32:01.000 | then look for a government or a bureaucratic position.

00:32:05.000 | But if you want to be paid for your output, look for a position where that's rewarded.

00:32:09.000 | That's why I loved sales.

00:32:11.000 | That's why I love sales still, is I want to be paid not for--

00:32:14.000 | I want to be paid for results, not for time.

00:32:16.000 | I want to be paid for making things happen.

00:32:21.000 | I want to be paid the true value of my work.

00:32:23.000 | So I'd like that work to be measured in a way where I can know that.

00:32:26.000 | So 2A, 2 is higher the annual increase the better.

00:32:30.000 | A is make steady increases and increase those over time.

00:32:33.000 | 2B is big jump increases.

00:32:36.000 | And this is one of the biggest un-pursued forms of action

00:32:41.000 | that people don't really think about.

00:32:43.000 | Constantly be job hunting.

00:32:45.000 | Constantly be job hunting.

00:32:48.000 | One of the useful little metaphors that I think of is I'm self-employed.

00:32:52.000 | All of us-- I run my own business.

00:32:54.000 | All of us run our own businesses.

00:32:56.000 | It just happens to be that the current high bidder,

00:32:59.000 | your one and only contract is the company that you're working for

00:33:01.000 | if you're working in a salaried position.

00:33:04.000 | That came out clumsily, but hopefully you get my point.

00:33:06.000 | Don't see your employer as XYZ corporation.

00:33:12.000 | See yourself as your employer.

00:33:14.000 | You're running your own business,

00:33:15.000 | and you're just hiring out your services to whoever the highest bidder is.

00:33:18.000 | Employers are constantly bidding against each other for employees.

00:33:25.000 | The most difficult thing that employers have to do is find and attract

00:33:28.000 | and develop quality human talent.

00:33:31.000 | That is tough.

00:33:34.000 | So you need to be constantly looking and marketing yourself

00:33:37.000 | to different employers and figuring out

00:33:39.000 | are there some opportunities to change.

00:33:42.000 | If you've been stagnant and your income has just been increasing

00:33:45.000 | by small percentage points for a few years,

00:33:48.000 | be hunting and be looking for saying,

00:33:50.000 | "How can I make a 20% increase?

00:33:51.000 | How can I make a 50% increase?

00:33:53.000 | How can I double my pay?"

00:33:55.000 | If you are effective at your job,

00:33:57.000 | it might be possible for you to go in and tell your employer

00:34:00.000 | while negotiating salary that you would like a 50% increase,

00:34:05.000 | and you might be able to justify it such that your employer

00:34:07.000 | will pay you that money.

00:34:09.000 | But it will be far easier if you can go to another job

00:34:12.000 | or another position at another company

00:34:14.000 | and speak to a different employer

00:34:15.000 | and negotiate for a salary or a pay structure

00:34:19.000 | that is 50% higher than what you're currently doing.

00:34:22.000 | So constantly be hunting for a better opportunity

00:34:25.000 | and look for those big jump increases.

00:34:28.000 | I think it would be silly to transition from one job

00:34:31.000 | where you're earning X amount to another job

00:34:34.000 | where you're earning X amount plus 5%.

00:34:36.000 | And the reason would be because now you have to go

00:34:38.000 | and you have to build out your reputation,

00:34:41.000 | you have to build out your history,

00:34:42.000 | you don't have any seniority,

00:34:43.000 | you don't know who the people are that you're working with,

00:34:46.000 | you don't know those things.

00:34:47.000 | So you have to start that process all over again.

00:34:50.000 | But if you can go from X to X plus 50% at another opportunity,

00:34:54.000 | that would be tremendous.

00:34:56.000 | So be constantly on the job hunt.

00:34:58.000 | Be constantly building and developing a network of people

00:35:01.000 | that you can work with, that you can be connected with

00:35:04.000 | so that you find out about the jobs

00:35:06.000 | long before they're ever posted.

00:35:07.000 | I'm convinced at this point in 2015

00:35:09.000 | that companies only ever post jobs

00:35:11.000 | to cover their butt legally speaking.

00:35:13.000 | Or if they do post a job, it's probably the last of the last.

00:35:17.000 | That's the last--like they're desperate for somebody

00:35:20.000 | so they've got to post a job.

00:35:22.000 | Because the challenge of figuring out how to wade through--

00:35:25.000 | how on earth do you--

00:35:26.000 | put yourself in the position of a hiring manager.

00:35:28.000 | Let's say you post a job

00:35:29.000 | and you get 300 applications and resumes.

00:35:32.000 | How on earth do you have any chance

00:35:34.000 | of wading through those 300 applications

00:35:37.000 | and feeling confident with your decision?

00:35:39.000 | Wouldn't it be better to be able to fill the position

00:35:41.000 | before you need to advertise for it?

00:35:44.000 | I can't prove that data.

00:35:45.000 | If any of you know of data that would demonstrate it,

00:35:47.000 | but from my knowledge and understanding of

00:35:49.000 | even the job hunt world,

00:35:51.000 | that's probably a pretty accurate guess.

00:35:54.000 | So the best jobs are never going to be advertised.

00:35:58.000 | You need to build a network.

00:35:59.000 | Let me give an example for myself.

00:36:02.000 | There are a number of jobs that I could probably

00:36:04.000 | advertise for right now for my show,

00:36:06.000 | things I need help with.

00:36:07.000 | I need a podcast producer.

00:36:09.000 | I need somebody who can help me

00:36:11.000 | by actually listening to the show,

00:36:13.000 | editing my audio,

00:36:15.000 | helping to edit some of the content

00:36:16.000 | which gets too long-winded,

00:36:18.000 | where maybe I ramble or a guest rambles.

00:36:21.000 | I need somebody who can splice things together,

00:36:23.000 | who can handle the technical aspects of

00:36:27.000 | actually going out and putting the audio files together,

00:36:30.000 | who can upload stuff.

00:36:32.000 | I need a writer who can write my show notes for me

00:36:34.000 | because that gets in my way.

00:36:36.000 | I need somebody who can help me with my website,

00:36:38.000 | with my marketing development,

00:36:40.000 | with the technical side of some of the businesses

00:36:42.000 | that I'm working on.

00:36:43.000 | I can provide the content,

00:36:44.000 | but I need someone who can help with that.

00:36:46.000 | I need somebody who can help me

00:36:47.000 | just with my daily schedule,

00:36:49.000 | who can help me connect with guests,

00:36:51.000 | who can help me handle my email.

00:36:53.000 | I need somebody who can help me with my bookkeeping

00:36:58.000 | and my accounting.

00:37:00.000 | I need some--

00:37:01.000 | I probably need more than that.

00:37:02.000 | I need somebody who can help me with all of these things

00:37:05.000 | because, frankly, for me,

00:37:07.000 | the only things I should be doing

00:37:09.000 | is reading, writing, recording, and speaking

00:37:13.000 | because that's what I do better

00:37:14.000 | than anyone else in the world does,

00:37:16.000 | and I should be able to hire those other things done.

00:37:18.000 | The problem is that it is so incredibly difficult

00:37:22.000 | to have any idea of how on earth

00:37:24.000 | I could find and vet the right people

00:37:27.000 | that I make the classic mistake

00:37:29.000 | that most entrepreneurs make,

00:37:30.000 | which is just bumbling along doing it all myself

00:37:33.000 | because I don't--

00:37:34.000 | it's having done it before

00:37:36.000 | and having been forced to do it again.

00:37:38.000 | I have to go and, you know,

00:37:40.000 | I have to advertise for a job.

00:37:43.000 | I've got to put a listing out there.

00:37:44.000 | I've got to make it public in some way,

00:37:46.000 | and then I've got to collect enough applicants,

00:37:48.000 | and it's very tough to feel confident

00:37:50.000 | when you're just going to, you know,

00:37:51.000 | pick the first one,

00:37:52.000 | so that means I've got to interview

00:37:53.000 | a certain number of people,

00:37:54.000 | and there's no way to gather from somebody's interview

00:37:56.000 | and just from a thing on paper

00:37:57.000 | if they're actually going to work with it,

00:37:59.000 | work with you.

00:38:00.000 | Then I've got to establish the paperwork,

00:38:01.000 | and I've got to go through,

00:38:02.000 | and I don't want to do that multiple times,

00:38:03.000 | blah, blah, blah, blah, blah.

00:38:04.000 | It is a major hassle,

00:38:06.000 | and so in some ways it's easier,

00:38:08.000 | although it is short-sighted,

00:38:10.000 | it's easier to just keep bumbling along

00:38:12.000 | doing it myself and doing it poorly.

00:38:15.000 | But if I came across the right person

00:38:19.000 | or I were recommended the right person

00:38:21.000 | who knew, even if that person knew nothing,

00:38:25.000 | but if that person were highly recommended

00:38:27.000 | for the quality and the content of their character

00:38:29.000 | and for their skill base,

00:38:32.000 | hired immediately.

00:38:34.000 | That's what has been the most effective for me.

00:38:37.000 | Now, I'm just one tiny entrepreneur

00:38:39.000 | with a barely starting business,

00:38:41.000 | but I don't know any entrepreneur

00:38:42.000 | who's any different.

00:38:45.000 | I'll tell you, one of the best things

00:38:46.000 | about being in sales,

00:38:47.000 | like I was in full-time professional sales,

00:38:50.000 | I got offered more six-figure job opportunities

00:38:52.000 | than I ever would have dreamed of

00:38:54.000 | simply because the people that I was selling to

00:38:56.000 | said, "Joshua, man, you're doing a great job.

00:38:59.000 | Can I hire you?"

00:39:00.000 | And I've had a list of backups for a long time,

00:39:03.000 | backup plans.

00:39:05.000 | You know, if I ever get fired, call this person.

00:39:09.000 | And that is so valuable,

00:39:11.000 | but that only happens through exposure,

00:39:13.000 | through building that network,

00:39:14.000 | through doing it proactively.

00:39:15.000 | Harvey McKay wrote that book,

00:39:17.000 | "Dig your well before you're thirsty."

00:39:20.000 | So if you want big jump increases,

00:39:22.000 | be out and available and be known.

00:39:25.000 | Establish yourself as a leader

00:39:26.000 | so that opportunities come to you.

00:39:30.000 | Simple example I would say to you is be recruitable.

00:39:33.000 | I always like to joke about this with financial advisors

00:39:36.000 | because--and you talk to and ask a financial advisor

00:39:39.000 | and see if this isn't true.

00:39:40.000 | I think the majority of us experience this.

00:39:43.000 | When we get into the industry,

00:39:44.000 | we have to go out and make phone calls

00:39:46.000 | and find out who we're going to work for.

00:39:48.000 | So we start interviewing all around,

00:39:50.000 | and what you find is all of a sudden,

00:39:52.000 | you've got to get in here, you've got to get in there,

00:39:54.000 | you've got to test an interview here,

00:39:56.000 | you've got to see if this one works,

00:39:57.000 | if that one works.

00:39:58.000 | And so you're just--it's a lot of work,

00:39:59.000 | and you're trying to figure out,

00:40:00.000 | "Where do I get established?"

00:40:01.000 | And depending on your qualifications,

00:40:03.000 | sometimes you get offers and sometimes you don't.

00:40:06.000 | But if you're starting with no industry experience

00:40:07.000 | and no credentials,

00:40:10.000 | no--just qualifications other than I'm willing to work,

00:40:14.000 | it's tough to get started in a good position.

00:40:17.000 | It's really tough.

00:40:18.000 | But I'll tell you, as soon as you put the letters CFP

00:40:22.000 | after your name on your LinkedIn profile,

00:40:25.000 | it's like your phone doesn't stop ringing,

00:40:28.000 | and you'll start to get at least one call a month--

00:40:30.000 | excuse me, one call a week from a recruiter.

00:40:32.000 | Your email fills up with options,

00:40:34.000 | with your LinkedIn inbox.

00:40:36.000 | I can hardly ever go in there anymore

00:40:37.000 | because it's so scary,

00:40:38.000 | and I just kind of ignore the whole thing

00:40:39.000 | and I pretend that the inbox doesn't exist.

00:40:42.000 | And everybody is out to get you.

00:40:45.000 | Now, this is--it gets you in a good way.

00:40:47.000 | They want--you're about to be recruited,

00:40:48.000 | and it becomes exhausting to deal with the recruiting calls.

00:40:52.000 | Now, I think they're valuable.

00:40:55.000 | I think they're incredibly valuable

00:40:56.000 | as far as the potential of working with a recruiter.

00:40:58.000 | But a simple thing I would say is be recruitable.

00:41:02.000 | Be the kind of person that the recruiters are looking for,

00:41:04.000 | and then when the timing is right

00:41:06.000 | and the opportunity is right,

00:41:08.000 | they'll help you out.

00:41:10.000 | I had a rule.

00:41:11.000 | I tried to take--I didn't--

00:41:12.000 | I never take LinkedIn things

00:41:15.000 | because that requires too much effort for me,

00:41:16.000 | but I took all the phone calls

00:41:18.000 | because you never know.

00:41:20.000 | So get yourself into a position where you're recruitable,

00:41:23.000 | and then take the recruiting calls.

00:41:26.000 | You never know what kind of deal you might be offered.

00:41:29.000 | Just tell the recruiter--

00:41:30.000 | I've had a couple of recruiters as clients.

00:41:31.000 | It's a tough business,

00:41:32.000 | but it's also a very rewarding business.

00:41:34.000 | Just be straight with the recruiter.

00:41:35.000 | Tell them what you want.

00:41:37.000 | A lot of times what you can do,

00:41:38.000 | if you have a recruiter

00:41:39.000 | who doesn't have the right opportunity,

00:41:41.000 | just tell the recruiter,

00:41:42.000 | "Here's what I'm interested in.

00:41:43.000 | "Here are the parameters that I would be willing to accept."

00:41:46.000 | And that recruiter,

00:41:47.000 | when they come up with another opportunity,

00:41:48.000 | will turn around and share that opportunity with you.

00:41:51.000 | It's tough to be a matchmaker in the recruiting business,

00:41:53.000 | and so they want to have files of people that need workers,

00:41:55.000 | and they want to have files of workers

00:41:57.000 | depending on what they need,

00:41:58.000 | and that's where the best choices are.

00:42:02.000 | So be recruitable.

00:42:03.000 | Establish yourself as a leader in your industry

00:42:04.000 | so the opportunities come to you.

00:42:06.000 | Another example would be be an entrepreneur.

00:42:08.000 | An entrepreneur's skill sets

00:42:09.000 | will often transfer from one business to another.

00:42:12.000 | So once you've established yourself in one business

00:42:17.000 | and you know how to do that,

00:42:20.000 | then there can easily be a transition to another business.

00:42:24.000 | Next, look for industries where competition is low.

00:42:29.000 | For the life of me,

00:42:30.000 | I can hardly figure out

00:42:31.000 | if anybody wants to be an attorney or a doctor.

00:42:36.000 | And there's others too,

00:42:37.000 | but why does anyone want to be an attorney or a doctor?

00:42:40.000 | Because the competition for those scenarios

00:42:43.000 | is so incredibly high

00:42:45.000 | that you have no chance of getting in

00:42:47.000 | unless you are an extremely bright,

00:42:49.000 | dedicated, focused person.

00:42:52.000 | And then as an extremely bright, focused, dedicated person,

00:42:55.000 | you're going to face a lifetime of competition

00:42:58.000 | for extremely bright, motivated, focused people.

00:43:01.000 | Why don't you just turn and go where competition is low?

00:43:06.000 | As an example, years ago I read about --

00:43:11.000 | I keep these lists of jobs,

00:43:12.000 | and there are a couple of the ones that come to me.

00:43:15.000 | Years ago when I read Tom Stanley's books on millionaires,

00:43:20.000 | I read all his books.

00:43:21.000 | I read Millionaire Next Door,

00:43:22.000 | and then I went and read his Marketing to Millionaires

00:43:24.000 | and things like that.

00:43:25.000 | One of the things that he pointed out to me in those books

00:43:27.000 | -- the Millionaire Mind, I think, was another one --

00:43:30.000 | is he talked about how many low-class, so-called low-class,

00:43:34.000 | industrial jobs have millionaires that are running them.

00:43:38.000 | Take somebody who would be the average graduate

00:43:41.000 | from a high-end medical school

00:43:44.000 | and put them into an industry

00:43:47.000 | that is probably not known for very smart, focused, intense people.

00:43:52.000 | Rather, it's more known for people

00:43:53.000 | who are just simply doing the next thing

00:43:55.000 | and working and looking to make another buck.

00:43:58.000 | And, man, the success potential is massive

00:44:01.000 | compared to competing in this highly competitive field.

00:44:05.000 | I read in his books years ago about junkyard owners,

00:44:09.000 | and I've proved it here in my town.

00:44:10.000 | I started trying to figure out a way

00:44:11.000 | to network in with junkyard owners.

00:44:12.000 | I started asking the incomes, "You know what?

00:44:14.000 | The average well-established scrap dealer

00:44:17.000 | or junkyard owner in your town

00:44:19.000 | makes over a million bucks a year,

00:44:22.000 | and you'd never know it."

00:44:24.000 | Now, that might be an industry

00:44:25.000 | that's saturated with competition,

00:44:27.000 | but what's another industry that you can look at

00:44:29.000 | where your competitive environment

00:44:30.000 | is not very professional,

00:44:32.000 | where your competitive environment is low?

00:44:34.000 | Another one, an example, years ago,

00:44:36.000 | I called on an executive

00:44:38.000 | in Wayne Huizenga's operation down in Fort Lauderdale,

00:44:42.000 | and this person had been with Wayne Huizenga as the guy.

00:44:46.000 | He was most famous for, I think, waste management

00:44:48.000 | and Blockbuster, a billionaire down here in South Florida,

00:44:50.000 | well-known, owns the, what are they called now,

00:44:52.000 | the Miami Dolphins or Miami Marlins.

00:44:55.000 | Anyway, big shot down here in South Florida,

00:44:58.000 | and I was just interested that

00:45:01.000 | one of the foundational companies

00:45:03.000 | that he grew and built was waste management.

00:45:05.000 | Blue-collar industry, grew this company,

00:45:08.000 | had a family background in it,

00:45:10.000 | and built it and made a lot of money on it.

00:45:12.000 | Another one that I've always had on my radar screen

00:45:15.000 | was daycare centers.

00:45:16.000 | Years ago, I read a manual for how to start

00:45:18.000 | and build daycare centers,

00:45:20.000 | and one of the major points of the manual was

00:45:23.000 | that there's little need for,

00:45:25.000 | there's not a lot of competition in that field.

00:45:27.000 | A lot of the organizations were small, local,

00:45:32.000 | a lot of them were run by ladies

00:45:34.000 | who weren't focused on it as a massive business,

00:45:36.000 | but were rather focused on it as a

00:45:38.000 | sideline way to make some income.

00:45:41.000 | That's the type of scenario where you can bring

00:45:43.000 | some hardcore entrepreneurial talent and focus

00:45:47.000 | to that industry and have some massive growth.

00:45:53.000 | I would always rather be a junkyard dealer

00:45:54.000 | than an attorney myself,

00:45:56.000 | at least if that were my plan to get rich.

00:45:58.000 | If I'm doing it for other reasons, fine,

00:45:59.000 | but if it's my plan for getting rich,

00:46:01.000 | then look for a junkyard and run a junkyard business.

00:46:06.000 | Don't go be an attorney.

00:46:08.000 | Look finally on this section here of big jump increases,

00:46:11.000 | look for exponential growth and leverage opportunities.

00:46:16.000 | Usually this is going to be found in

00:46:17.000 | leveraging other people's work.

00:46:20.000 | If you are making widgets,

00:46:21.000 | you might be able to get better at your widget making over time,

00:46:25.000 | but it's probably going to be a linear growth,

00:46:28.000 | and if it is a geometric growth,

00:46:29.000 | over time it's going to slow because there's going to be

00:46:32.000 | some limit somewhere on your ability to make widgets.

00:46:35.000 | But if you can build the widget making machine,

00:46:37.000 | and then you can make more machines

00:46:38.000 | so that widgets are made all night while you sleep,

00:46:41.000 | or if you can build the organization

00:46:42.000 | that hires people to make the widgets,

00:46:45.000 | now you have the exponential growth

00:46:48.000 | and leverage opportunities.

00:46:50.000 | That's where the serious growth is.

00:46:53.000 | Go back to my income.

00:46:54.000 | Let's say that you were doing something like

00:46:56.000 | following the 1,000% formula that I've talked about

00:46:59.000 | in past shows, which is going to play a role

00:47:05.000 | in actually tomorrow's interview.

00:47:06.000 | Let's go back to my starting income,

00:47:08.000 | and let's just say this person is making $50,000 per year

00:47:12.000 | over the course of a 40-year career,

00:47:14.000 | and they go from 3% annual increases,

00:47:17.000 | and remember that's $3.9 million,

00:47:19.000 | to 20, let's go with 25% annual increases

00:47:23.000 | because they can apply it to a business.

00:47:25.000 | You know what that number comes out to be

00:47:27.000 | at a lifetime earnings of 70?

00:47:29.000 | It goes from $3.9 million to $1.8 billion,

00:47:35.000 | billion with a B, billion.

00:47:40.000 | You say, "That's impossible." Is it?

00:47:46.000 | Aren't there people who have started

00:47:48.000 | earning $50,000 a year at their first job

00:47:51.000 | and who've earned over $2 billion

00:47:56.000 | during the course of their working lifetime?

00:47:59.000 | There's not many, but there are some.

00:48:03.000 | How did they do it?

00:48:05.000 | Leverage, business leverage.

00:48:11.000 | And that leverage can be found in,

00:48:13.000 | you know, the big, just can be found

00:48:15.000 | in leveraging other people and building large businesses.

00:48:17.000 | It can be found in finding a unique market opportunity

00:48:21.000 | and capitalizing on it.

00:48:22.000 | There's lots of ways to do it.

00:48:25.000 | So look for those not only big jump increases,

00:48:28.000 | but those shoot for the moon increases.

00:48:31.000 | Look for the big ones with big leverage.

00:48:34.000 | Look for the, even the risky long shot opportunities.

00:48:37.000 | Some of those risky long shots pay off.

00:48:40.000 | Some of them don't.

00:48:42.000 | Be careful, but some of them do.

00:48:45.000 | And remember that 1,000% formula.

00:48:47.000 | If you're interested in that, you can find that.

00:48:48.000 | It was one of the early episodes of the show, episode 10.

00:48:51.000 | RadicalPersonalFinance.com/10/10.

00:48:54.000 | You'll find that one where I go over

00:48:57.000 | Brian Tracy's 1,000% formula that just totally impacted me

00:49:01.000 | when I first heard it when I was in high school or college.

00:49:03.000 | I can't remember.

00:49:04.000 | It made a massive difference in my life.

00:49:06.000 | The idea is that you can increase your income by 1,000%

00:49:09.000 | over 10 years simply by increasing your effectiveness

00:49:13.000 | and productivity by 1/10 of 1% every day.

00:49:18.000 | That's a formula that works.

00:49:20.000 | I've actually got an interesting example coming on tomorrow's show.

00:49:23.000 | I'm going to share with you an interview with Michael Kitsis.

00:49:27.000 | He is a financial planner extraordinaire.

00:49:30.000 | One thing you'll hear in that interview, listen for it,

00:49:33.000 | I actually trapped him into answering the 1,000% question.

00:49:37.000 | In that interview, I talked to him about his history with conferences,

00:49:40.000 | and he kind of bumbled his way into it, as you'll hear in the interview.

00:49:42.000 | Then I asked him how much he reads, how much he writes,

00:49:45.000 | how much time he spent doing these things.

00:49:48.000 | Then I trapped him and I asked him about his 1,000% formula.

00:49:51.000 | I asked him if he was making 10 times more income

00:49:53.000 | than he was making 10 years previously.

00:49:56.000 | Tune in tomorrow to hear the answer.

00:49:58.000 | I think you'll find it interesting.

00:50:00.000 | Look for ways to increase your annual income.

00:50:03.000 | That's step two.

00:50:04.000 | Step three, finally here, the more years of income, the better.

00:50:09.000 | Now, this might have impact on either end of your career

00:50:13.000 | and probably on both.

00:50:16.000 | If you can start earlier, that's better.

00:50:21.000 | The question, can you start earlier?

00:50:23.000 | If it's too late for you to start "earlier,"

00:50:26.000 | can you help other people start earlier?

00:50:29.000 | I have this dream, as you know from listening to the show,

00:50:32.000 | why on earth do people wait until the age of 30 to get their careers established?

00:50:35.000 | Why don't young men and women have their careers established at 15?

00:50:41.000 | Why are people only earning $100,000 through entrepreneurship at the age of 30?

00:50:44.000 | Why aren't they earning $100,000 through entrepreneurship at the age of 15?

00:50:50.000 | If it takes 10 years to learn a business and they start at 12 or 10,

00:50:53.000 | then why can't they be learned and be the leaders in their business by 20 or 22?

00:50:58.000 | Why not?

00:51:00.000 | Some businesses you can't, some businesses you can.

00:51:02.000 | But why not start earlier?

00:51:04.000 | So can you help your kids get started earning as quickly as possible?

00:51:07.000 | Why is 22 the magic age at which you graduate from college?

00:51:11.000 | Or 23? Why not 18?

00:51:13.000 | Go back and look, I challenge you,

00:51:15.000 | go back and look at the academic achievements of past generations.

00:51:18.000 | If you heard that your great-great-grandmother graduated only from the sixth grade,

00:51:22.000 | go back and research what the sixth grade exam was that your great-great-grandmother graduated with,

00:51:28.000 | or the eighth grade exam that your great-great-whichever,

00:51:31.000 | however many greats your grandmother, your ancestors, graduated with in eighth grade.

00:51:35.000 | And I'll tell you, I'm not sure I could have actually passed that exam at the age of 18.

00:51:41.000 | Go and look at what the age-banded and age-based achievements are today

00:51:49.000 | and compare them to the past.

00:51:52.000 | Now, certainly many students can succeed in today's environment.

00:51:59.000 | Many students can start at 18 or start at 22 and do extremely well.

00:52:05.000 | But if you care about the ones that you're in contact with,

00:52:08.000 | that you're helping and that you're mentoring,

00:52:10.000 | do you think you might owe it to them to challenge them a little bit?

00:52:14.000 | I wish I'd been challenged a little bit more.

00:52:15.000 | I wish I'd been challenged to, by the time I was 18, to have my college degree done.

00:52:20.000 | And if nothing else, and I could start at 18 or 20, let's say I finish my college degree by 18,

00:52:25.000 | then I went on a walkabout around the world for two years,

00:52:27.000 | and then I came back and started at 20, even that would make a difference in my career.

00:52:33.000 | So can you get started now without waiting for formal credentials,

00:52:37.000 | and can you help your kids or other young men and women that you care about

00:52:41.000 | get started with their earning and their learning as quickly as possible?

00:52:46.000 | On the flip side, you can work longer.

00:52:48.000 | And this is a powerful thing that most people don't realize.

00:52:51.000 | And in fact, this is the number one way that most people will,

00:52:55.000 | depending on the United States of America and probably the world,

00:52:58.000 | to be able to sustain their lifestyles.

00:52:59.000 | They're simply going to have to work longer.

00:53:02.000 | It is not possible for the average person to retire in comfort at the age of 65.

00:53:06.000 | So what you see, working longer.

00:53:08.000 | The AARP in the United States has this whole program of redefining your life's goals

00:53:13.000 | and redefining your life's vision at the age of 65.

00:53:17.000 | So I say if that's the case, then why don't we just plan for that?

00:53:20.000 | Remember, back to my example here, let's assume that someone is just earning this $50,000

00:53:26.000 | and they're making 3% annual increases.

00:53:30.000 | The difference between working from 30 to 70, that's $3.9 million of income,

00:53:35.000 | and 30 to 80, that's $5.8 million of income.

00:53:40.000 | It's a big difference.

00:53:41.000 | That's an additional almost $2 million of income that you can earn from 70 to 80.

00:53:48.000 | And the reason for that is because those are the years at which you're at the highest paid, maybe,

00:53:56.000 | because there are some substantial problems with this model.

00:53:59.000 | And you need to be thinking about them in advance if this is what you're going to do.

00:54:04.000 | Most people aren't at the highest years of their earnings from 70 to 80.

00:54:11.000 | Sadly, many people are in very low earnings at that period.

00:54:17.000 | You've got to make sure that if you're going to plan on this or if you're going to consider this,

00:54:22.000 | you need to be looking for work that you'll be able to do for longer.

00:54:27.000 | This can be a real problem for people like laborers or any job where physical strength is a factor.

00:54:34.000 | I've worked in a fair number of construction environments,

00:54:38.000 | and you very rarely see an 80-year-old construction worker.

00:54:41.000 | There's a reason for that.

00:54:44.000 | If you're in the construction trade, you better be working.

00:54:46.000 | If you're going to plan to be working longer than, say, 50 to 60, you either better,

00:54:50.000 | A, be in incredible health, B, be running the company, or C, be focusing on finding a new opportunity.

00:55:00.000 | So make sure you're doing work that you can do for longer.

00:55:03.000 | This can also be a problem if your industry or your company has some kind of mandatory retirement program.

00:55:09.000 | I've had a couple people close to me face this.

00:55:11.000 | Their company has a mandatory retirement program at 65, and they're forced out, like it or not.

00:55:17.000 | It can be a major problem because at many times, men and women who are 65 years old are in the prime of their life.

00:55:25.000 | They've accumulated the knowledge, the wisdom, the experience, the education that they need to be extremely successful.

00:55:31.000 | Physically, they're doing great. They've got a broad network.

00:55:33.000 | They're respected and admired as a leader in their industry.

00:55:36.000 | If at that point in time, you face mandatory retirement, that can be a real problem.

00:55:41.000 | So make sure that's not staring you down.

00:55:46.000 | Look for work that you'll want to do for longer.

00:55:50.000 | If you hate your life and hate your job, you're not going to want to do it an instant longer than you have to.

00:55:55.000 | You're really not.

00:55:58.000 | So challenge.

00:56:00.000 | Can you find work that integrates with your lifestyle, that doesn't compete with your lifestyle?

00:56:05.000 | Can you find work that gives you satisfaction and enjoyment for its own sake, a sense of purpose, a sense of mission,

00:56:11.000 | and still allows you to do well by doing good?

00:56:16.000 | Make sure that you're thinking about that.

00:56:18.000 | Because if you hate your job, hate your business, hate your life, you're not going to want to do it.

00:56:22.000 | You can't reap that extra $2 million of earnings.

00:56:24.000 | But if you love it, it can make a massive difference in your wealth.

00:56:30.000 | That can be set out much earlier than age of 70.

00:56:34.000 | Look for work where your age and your wisdom will be an advantage to you rather than a disadvantage.

00:56:41.000 | Ageism is a real thing.

00:56:43.000 | It's severe.

00:56:45.000 | I had the privilege of working with some clients in their mid-60s, and I've learned just how severe it can be.

00:56:51.000 | All the laws in the world don't do any good.

00:56:54.000 | Maybe they do some good.

00:56:55.000 | All the laws in the world do little good.

00:56:57.000 | I'll hedge my statement a little bit.

00:56:59.000 | It doesn't matter if there's a law against ageism.

00:57:01.000 | If somebody doesn't want to hire you, there's always a way around the law.

00:57:05.000 | Now the question is, can you find a scenario where your age is a real benefit for you?

00:57:12.000 | This is one of the things that I loved about the field of financial advice.

00:57:14.000 | The older you get, as long as you can satisfy your retirement succession plan, where if you die,

00:57:20.000 | your clients have the confidence that there's a whole team of younger advisors that they know and they like,

00:57:25.000 | the older you get, the more benefit you have, that you have more white hairs and you can give more wise counsel.

00:57:31.000 | Now that's probably not always true, but it certainly can be true.

00:57:35.000 | So think about that.

00:57:37.000 | If you face the potential for ageism in your industry, you need to be planning ahead to make sure that you overcome that.

00:57:44.000 | Look for work where your lifetime knowledge and experience will accumulate and deliver great dividends of value in your older years.

00:57:53.000 | Probably the most famous example of this in our society is Warren Buffett.

00:57:58.000 | It's his lifetime knowledge and investment experience give him a real edge over people.

00:58:03.000 | As long as he surrounds himself with a team of young, current people, he can bring that wisdom

00:58:10.000 | and they can bring the perspective of a different generation and they can make a powerful team.

00:58:16.000 | And his grandfatherly image is a real benefit to him in his marketing efforts as compared to somebody who's just that young, brash, unproven person.

00:58:29.000 | When you get into the depths of the financial crisis and good old Grandfather Warren walks in with his checkbook out ready to write checks,

00:58:36.000 | people are glad that he's there and they're glad that he's got some white hair.

00:58:40.000 | When good old Grandfather Warren writes something in his letter, everyone takes it as their gospel.

00:58:45.000 | That's different than when someone who's just equally smart, it doesn't have the experience and the platform that he's built.

00:58:52.000 | Some 30-year-old hot shot investment person writes it, doesn't have nearly the same weight that it does for him.

00:59:00.000 | So plan ahead if you're going to work longer.

00:59:04.000 | Plan ahead because it can be a real benefit for you.

00:59:11.000 | Those are the primary thoughts that I wanted to share with you.

00:59:13.000 | So your homework, here would be what I would say is your homework.

00:59:17.000 | A couple of things.

00:59:18.000 | Number one, what is the expected value of your lifetime's worth of income?

00:59:23.000 | Simple to do this.

00:59:25.000 | Look at how old you are, look at how long you expect to work, and then calculate in how much you expect your income to increase each year.

00:59:33.000 | Again, you can use a financial calculator for this, you can calculate it by hand, you can use a spreadsheet.

00:59:38.000 | The spreadsheet is the simplest way.

00:59:41.000 | And then look at that number and say, "Is it enough?"

00:59:44.000 | Are you encouraged by that number?

00:59:46.000 | Let's say that you're $200,000 upside down, you have a negative net worth, but you have millions of dollars of expected income.

00:59:51.000 | Be encouraged by that and recognize that all I've got to do is throughout the course of my lifetime, make some simple steps and some simple changes,

00:59:59.000 | and I'll be able to apply this income to this scenario and it'll change over the coming decades.

01:00:06.000 | Or if it's not encouraging, then figure out, "What do I need to change in this situation?

01:00:11.000 | What are the variables that are going to make the difference for me?

01:00:13.000 | Maybe I'm making $30,000 a year."

01:00:15.000 | Well, guess what?

01:00:16.000 | You can make more.

01:00:18.000 | Might require some planning, might require some job hunting, might require some all kinds of things.

01:00:25.000 | You need to learn a whole new skill set, find a whole new industry, get established to move to another place.

01:00:30.000 | But you can go from $30,000 to $60,000 in reasonable time.

01:00:34.000 | Maybe your problem is you're just stuck in a place where there's not really much increase.

01:00:39.000 | Speaking with somebody that's recently, loves teaching, is a teacher in a government school, loves teaching.

01:00:46.000 | There is zero chance whatsoever that he can make enough money to support his family going forward,

01:00:53.000 | simply because of the mess that it is, and he's riding on the wall.

01:00:58.000 | In that situation, he's got to get out of that profession.

01:01:00.000 | He's got to have the ability to keep current in a world where demand is going down and wages are stagnant.

01:01:06.000 | So what variables should you focus on?

01:01:08.000 | What's going to make the biggest difference for you?

01:01:11.000 | Figure that out, write it down, and you'll be able to get started with your own unique plan.

01:01:17.000 | I hope this has been useful for you.

01:01:19.000 | Did my best.

01:01:21.000 | Income makes a big difference.

01:01:23.000 | Income is the biggest driver in your financial plan, and I hope these thoughts are helpful for you.

01:01:29.000 | Check back tomorrow for the Michael Kitsis interview.

01:01:31.000 | I think you'll really enjoy that.

01:01:32.000 | And listen, now that I'm giving you a heads up, listen in advance for his journey to increasing his income,

01:01:39.000 | and listen for the application of that 1,000% formula.

01:01:42.000 | What you might want to do is go back and listen to episode 10 before actually listening to that interview tomorrow

01:01:46.000 | so you're refreshed on the details of that 1,000% formula.

01:01:49.000 | You can find that at radicalpersonalfinance.com/10.

01:01:53.000 | If you need help actually sitting down and calculating the spreadsheet,

01:01:57.000 | remember that if you are a patron of the show, there's a simple video that I've set up for you,

01:02:02.000 | and you'll find it on the patron feed.

01:02:04.000 | You can find that at radicalpersonalfinance.com/patron.

01:02:08.000 | Just go right there and click on "Activity," and you'll see the video set up for you.

01:02:11.000 | That's a screen capture.

01:02:13.000 | It's me showing you how to actually set this up for yourself using a simple, free Google spreadsheet.

01:02:18.000 | You can do this in Excel.

01:02:19.000 | It's very simple and straightforward, but that should help you to actually be able to see the lifetime value of it.

01:02:25.000 | If you'd like to become a patron, follow that same link, radicalpersonalfinance.com/patron,

01:02:29.000 | and you'll find all the extra goodies that I've been setting up at different levels.

01:02:34.000 | For example, if you're in the $10 a month amount and up,

01:02:38.000 | I'll be scheduling our monthly Google Hangout before the end of the month.

01:02:41.000 | Those of you who've gotten in now, you're getting an awesome deal

01:02:44.000 | because you're getting a lot of access to me with small numbers of people.

01:02:48.000 | Currently in the future, I expect those numbers to go up,

01:02:51.000 | but you're going to have tons of time to ask me anything you want,

01:02:53.000 | and I'll give you any answers that I can do.

01:02:55.000 | If you're an irregular, make sure you check the Facebook page for that bonus episode that I posted today

01:03:02.000 | with the details of why I actually went to Dallas.

01:03:06.000 | And then for those of you, John, my single, at the moment, $200 and up supporter,

01:03:12.000 | I'll be getting you information on the details of our mastermind call this week,

01:03:15.000 | and John's got a great deal. It's just him and me, and he gets a ton of time.

01:03:19.000 | If you'd like to join him, I've got room for four total people at the $200 and up level,

01:03:24.000 | so I've room for three more people at this level, and you'll be able to have access to me.

01:03:29.000 | I'll be catching up on all your private questions in the Facebook group today.

01:03:32.000 | That's it for today's show. Thank you so much for listening.

01:03:34.000 | Check back tomorrow for the Michael Kitsis interview, and thank you for being here.

01:03:38.000 | Thank you for listening to today's show.

01:03:43.000 | If you'd like to contact me personally, my email address is Joshua@RadicalPersonalFinance.com.

01:03:50.000 | You can also connect with the show on Twitter @RadicalPF and at Facebook.com/RadicalPersonalFinance.

01:03:57.000 | This show is intended to provide entertainment, education, and financial enlightenment,

01:04:04.000 | but your situation is unique, and I cannot deliver any actionable advice without knowing anything about you.

01:04:12.000 | Please, develop a team of professional advisors who you find to be caring, competent, and trustworthy,

01:04:21.000 | and consult them, because they are the ones who can understand your specific needs,

01:04:27.000 | your specific goals, and provide specific answers to your questions.

01:04:33.000 | I've done my absolute best to be clear and accurate in today's show, but I'm one person, and I make mistakes.

01:04:40.000 | If you spot a mistake in something I've said, please help me by coming to the show page and commenting,

01:04:45.000 | so we can all learn together.

01:04:47.000 | Until tomorrow, thanks for being here.

01:04:50.000 | Unwrap the holiday savings at Citadel Outlets.

01:04:53.000 | Shop the Early Access Black Friday sales for the best deals of the season.

01:04:57.000 | The all-night shopping party starts Thanksgiving night at 8pm.

01:05:00.000 | Visit CitadelOutlets.com for more information.

01:05:04.000 | you

RPF0152-Lifetime_Value_of_Your_Income