What’s the most scarce (and hence precious) resource in the world?
And what do we do with it? We trade it for money so that we can run our home and earn a decent living. We trade our time with employer in lieu of monthly salary. But isn’t it a shitty trade?
Of-course it is!
In-fact this is the worst kind of trade anyone can do and yet we do it daily. The opportunity cost (and hence utility) of our time is very high whereas the opportunity cost of money is just the prevailing interest rate. (one could argue that money brings in happiness but then money can be borrowed, at-least theoretically)
So what’s the way out?
This question has always plagued me. How do I become the master of my own time? How do I ensure that the money required to run the house doesn’t come at the expense of my time?
Thinking about this question led me to define hierarchy of money making; different ways by which people make money. So here it is –
Hierarchy of Time & Money
So at the base of the pyramid is a situation where we trade our time for money. Essentially this means working for someone else. You get paid for the time. Some might be earning less while some making a moolah but essentially you get paid for your time. Therefore if you don’t work for say a month, you don’t get paid. All the professionals (like doctors, lawyers etc) who are running their solo practice also fall into this category.
The irony is that most of us who eagerly await for yearly appraisals don’t change the levels in this hierarchy. We still belong to the lowest level of the pyramid. All we do is make our time more precious for the employer but make no mistake, we are still trading our time.
Next (and higher) level in this time & money trade-off is when you create an establishment where other people work and earn money for you. Now you belong to the other side of the table and other people trade their time with you for monthly salary. All the businessmen, entrepreneurs fall in this category.
However a scenario where the individual is running his own shop and no people are there to help will not be categorised as Enterprise Level. For example a jeweller who runs a small jewellery store with his sons will not belong to this level. However a jeweller who has expanded through franchisee will belong here.
As can be understood, the key here is to create robust processes which enables people to work and allows the entrepreneur to free up his time.
Once you are at this level, you will be able to earn without committing your entire time to work thereby freeing up your time to do something that you want. However you will still be required to devote some time to your business so that you get to take home enough dough to feed your family. It is far better than the base level (employee level) but still you will not be 100% master of your own time.
Put Money to Work (Financial Independent) Level
At the top of the pyramid lies true financial independence where your money works for you and earn you your monthly bread. Essentially you reach a stage where your savings are big enough to earn you not only a decent living but also any increases in it on account of emergencies and inflation. Here is a piece on hierarchy of financial independence which explains this well.
At this financial independent level, one need not invest even a single moment in earning bread for the family; your money does.
So what’s the crux of it all?
The moot point of sharing this pyramid is that one should strive to move up the hierarchy and free up your own time, the most precious thing in the world.
- By no means I am trying to say that you should leave your high paying job to start your own business which yields nothing. All I am implying is that conscious effort should be done to move up the hierarchy so that you can free up your time.
- What you do with your time is upto you. Put differently how much value do you put to your time is upto you.
- Currently I am at second level (enterprise) where I have created an establishment which gives me enough to run my house and sufficient time to indulge in activities I enjoy.