Your income is your rate-limiting step

Your income is the rate-limiting step to building wealth, investing in experiences, and giving.

Yes, cutting expenses to free up cash flow has an important role, but objectively speaking, it will eventually reach a limit.

You can only cut so much.

Income, on the other hand, has no limits.

We often spend much time and effort to trim expenses within the parameters of our income accepting that income is relatively fixed over time.

But what if we shifted our focus more to the income side of the equation?

Opportunities exist all around us to grow income.

I didn’t say it was easy or that it wouldn’t come without failures along the way.

I said it has no limits.

My experience tells me that if you have a solid financial base to work from, you see more of these opportunities because you are in a position and mindset to take calculated risks.

So, what opportunities exist to earn more income?

I’ll speak only to those I have experience with and let you chime in with your own experiences by commenting below.

Compensation

If you are working a W2 job, is your value being compensated appropriately?

Are you advocating for yourself?

Is there potential for a raise or a new position internally or externally that can boost your income?

My experience tells me that transitioning from one employer to another is a good opportunity to right-size compensation and negotiate (if you have the leverage to do so).

In 2018, I transitioned from an academic role at NEOMED to one at Ohio State. In addition to having Timothy Baker, CFP®, RICP®, RLP® in my corner coaching me through the negotiation, there was one thing that allowed me to jump my compensation by more than $30k/year during that transition.

Leverage.

I didn’t have an urgency to make the move and I applied for the position with a mindset that, if it works out, great, if not, that’s okay too.

That led me to approach the interview with an abundance mindset.

I casted a bold vision for the position I was interviewing for, one that I knew would either be a home run or a strikeout.

Not only did that lead to leverage when it came time to the negotiation, but it also allowed me to hit the ground running when I started because I had already laid out all my cards for the changes I wanted to make in the position.

Real Estate Investing

Outside of investing in the purchase of our office building and doing some hard money lending, I don’t consider myself a big real estate investor. Including my primary home,

But I do personally know several pharmacists (check out our Your Financial Pharmacist Real Estate Investing podcast for many great examples and stories) who have been successful in this space.

There are lots of flavors of real estate investing and, while it's not for everyone, it has potential upside in the form of diversifying income, appreciation, tax benefits, and creating leverage.

Business Ownership

I’ll be the first to say that starting and owning a business is not for everyone.

It’s really hard and the data shows a high failure rate.

There’s certainly risk, but there is also much upside.

Depending on how you build the business, similar to real estate, there is potential to uncouple your time from compensation.

When owning a business, there are a few avenues of ‘compensation’ that open up.

Depending on the business's success, this compensation can be small (and less than what you could earn in a traditional W2 job), or it could be significant without a limit so long as the business continues to grow.

• Compensation (in the form of salary for the role you are serving within the business)
• Profit distributions (based on ownership percentage and ‘compensation’ for taking the risk/reward of owning a business)
• Equity (value of the percentage of ownership that can be cashed in later if the business is growing such that it becomes a sellable asset)

Here's the kicker...

This is not where real wealth-building potential happens.

Real wealth-building potential happens when you take income from these streams and have that money growing and working for you.

What does that look like?

Again, there are lots of ways you can do this. For me, it has included turning income from these sources into:

• Compounding ‘traditional’ investments in the forms of equities inside of 401(k)s, IRAs, HSA, brokerage accounts, etc.
• Interest earned via hard money lending for another real estate investor
• Purchasing a cash-flowing appreciating property
• Equity (via starting another business)
• Investing in other businesses
• Growing an existing business (and increasing the value of the equity)

I'm curious to hear from you:

• Do you believe the potential of your income is, for the most part, fixed? If so, why? Where does that mindset come from?
• If you work a traditional W2 job, are you being compensated fairly? If not, what has held you back from asking for additional compensation?
• What other opportunities exist for building wealth, investing in experiences, and giving beyond those I mentioned?