What I Learned Today 005: Relative Income

by | Jun 30, 2013 | Personal Development

Today I was reading about the ‘New Rich’, which is basically the idea that time and freedom is worth just a much or more than actual money.

It starts with looking at the difference between absolute and relative income. Absolute income would be taking a view that someone makes $100,000 a year for example, and not taking into consideration the fact that they might be working 80 hours a week. Relative income is thinking about it terms of time. So if someone is making $100,000 a year but only works 20 hours a week, they’rein a significantly better position because of the energy expelled to create that income.

The idea of the New Rich makes the argument that it is more worthwhile to make say $50k a year working 20 hours a week, than it is to make $100k a year if you have to work 80 hours. As long as $50k will support the lifestyle you want. Most people want the ‘freedom’ that is associated with making more money, but if you can create even more freedom by working less then you’re coming out ahead. In our example the 50k person makes roughly $50 an hour, where as the 100k person makes only $25 an hour.

This type of lifestyle mind shift can have an incredible impact I your happiness and can get you to move away from the ‘spend all my time now to retire later’ mindset. Instead you will be enjoying life as it goes by while you are young and having freedom because what you do doesn’t tie all of your time to simply make you more money now.

This is an interesting point that is made in the ‘4 Hour Workweek’ book by author Timothy Ferris. I’m interested in digging further.

– Joel

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