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Why $40K/year is better than $100K/year

Consider two individuals, Jim and Mark. Jim is a doctor who earns $100,000 per year while Mark is a Customer Service representative who earns $40000/year. Who earns more? Jim obviously! It’s a no brainer!

What if I told you that Jim works 40hrs/week while Mark works only 15hrs/week. Who do you think earns more? This is getting interesting. Why not do the calculations. Let’s calculate the hourly rates of Jim and Mark:

Jim earns $100000 in a year. He works 40hours in a week, thus a total of 160 hours(40x4) in a month(given that a month has roughly 4 weeks) and 1920 hours(40x48) in a year; since a year has 48 working weeks. Therefore, Jim earns roughly $52/hour

Similarly, Mark earns $40000 in a year. He works 15 hours per week, which totals 720 hours (15x48) in a year. Thus, Mark earns roughly $55/hour!

Isn’t this amazing! Mark has a higher hourly rate. When considering their yearly salaries, Jim is richer than Mark. This is known as the Absolute Income since as it considers a single dimension; the amount they both earn in a year. When we factor in the time they each put in to work, it’s a different story. We see that Mark is richer than Jim. This is called the Relative Income. Relative Income considers two dimensions: the amount earned and the time take to earn it.

The implications of this are profound: Relative income is better than Absolute income because time is our most valuable resource. Employees sell their time for money. You can always make more money, but you will never have more time. What’s the point earning $500000 in a year, if you barely have time to use it. Money is just a tool and it’s worth depends on how much time and mobility you have.

Take note that Mark works from home; he can make all his calls from the comfort of his home which can be anywhere he chooses to be. Jim however must go to the hospital for work; his mobility is restricted. Freedom is the new currency. The value of your money depends on how many of the W’s you have control of in your life: What you do, When you do it, Where you do it and with Whom you do it. Tim Ferris, author of “The 4-hour Workweek” calls this “the freedom multiplier”. The more Ws you control, the more freedom you have. Freedom to live your best life; freedom to pursue your purpose. Instead of being stuck in a 9-5 job that you hate.

That is why a 40hour/week, $100000 per year doctor has less “power” than a 15hour/week, $40000 a year Customer Service representative. The latter has more freedom of how, when and where to live. That my friends is the real currency, freedom! Freedom is the ability to choose; the ability to say “No” to things you don’t want. Real power is the ability to choose how to live your life. Think twice before selling your time for money.

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