3 Golden Reasons Why You Should Think of Your Dollars as Employees
Most people think of what a dollar can do in terms of what it can buy. Today, I’m asking you to consider shifting your thinking and begin to look at your dollars as employees. In this post, I’ll give you three golden reasons why you should.
Image Credit: Andrew Magill (Andrew Jackson’s eye on the $20 bill)
I know it sounds kind of kooky to think of each dollar as your employee, but it bears some consideration. Here’s why…
#1: Each Dollar Has the Power to Earn an Income for You
The term “earning power” doesn’t just relate to how much you can earn at a job, it also applies to how much your dollars can earn for you. If you spend every dollar you earn, you kill the chance of putting those dollars to work.
There’s already a lot of great information on the Web about the power of compounding interest so I’m not going to try to convince you of that. Instead it’s the mindset I’m interested in discussing in this post.
Give this some mental energy if you will. When you go to work for an earned income…
- You incur certain costs just for the privilege of showing up to a job. Consider the cost to maintain and fuel your car, purchase work-appropriate clothing, buy gifts at holiday time, eat out more often, etc. That’s on top of your portion of the required Federal unemployment insurance tax, Medicare and Social Security Tax.
- You’re limited on the income you can generate because there are salary grades and caps to earning potential.
- You might be required to pay for a college degree for certain jobs.
- Finally, your employer has to suck up certain costs for the privilege of keeping you on the job. Costs like a portion of the Federal unemployment insurance tax, Medicare and Social Security Tax, Disability, healthcare, paid time off, etc. You can play with this Benefits Calculator to get an idea of what your employer pays to keep you on board.
Now, compare those costs to what it costs to put your dollars to work earning an income for you. It’s mind blowing how much more you get to keep. That in turn means more earning power. Let’s compare. Here’s what changes when you invest your dollars instead of going to a job…
- The only taxes you pay are income taxes, which you have to pay either way. HOWEVER, depending on where you invest your money, you can avoid some taxes all together or defer them until your earning less in retirement.
- Your dollars don’t need special clothes or a car to go to work.
- Your dollars never sleep or go on vacation; they work the entire time you have them as your employees!
- You don’t have to pay for a college degree to get your dollars to earn a better income!
- You can change where your dollars work and therefore make them earn more as you become a better investor.
- If you are a business owner, when you put your personal dollars to work for you, you avoid all of the employer costs associated with “real” employees. Nice.
That alone should be reason enough to start hiring your dollars, but here are two more reasons that you should.
#2: The More Dollars You Have Working for You, The Faster You Become Wealthy
Each dollar in and of itself has value (let’s not worry about the effects of inflation here…we’re working on mindset!), therefore, it stands to reason that the more of them you have the wealthier you become. The problem is that most of us think of saving as saving for something, which means that the money will eventually be spent for that “something.” That thinking erodes wealth.
Of course you need to have an emergency fund and money set aside to pay for expected expenses that don’t show up every month, like auto and homeowner’s insurance, property taxes, auto replacement, etc. I address how to make sure you’re covered for those expenses in this post.
When you shift your mindset to seeing your investment dollars as employees, your wealth will grow. Here’s why…
- You wouldn’t fire a great employee, would you? That’s what you do when you spend your dollars earmarked for investment/retirement.
- You would protect your awesome employees by making sure you didn’t put them in harm’s way. Meaning you wouldn’t put them in an investment you knew nothing about or knew was risky beyond your tolerance level.
- You wouldn’t turn over directing the work of your employees to some stranger and never check in for performance reports. In other words, you wouldn’t blindly trust some financial advisor because you are too afraid or disinterested to learn as you go.
- When your employees have babies, you’ll protect them as you would the original employee. They’ll grow up to be awesome earners, too.
If I haven’t sold you on making this mind shift by now, here’s one more golden reason to rename your dollars.
#3: Once Your Dollars Are Earning Enough to Replace Your Income, You Don’t Have to Work
If you view your dollars as tools to buy stuff, you’ll likely have to work a job for an earned income the rest of your life. I don’t know about you, but that sounds terrible to me.
Besides, there is no guarantee that you’ll be fit for work as long as you need it or that jobs will be available. The sooner you build wealth, the sooner you have choice and choice makes it easier to handle whatever comes your way.
Here’s the beauty of carving out some of your income and turning those dollars into your employees—over time, their earnings will replace your income. The day that happens, you have given yourself the gift of choice. You can choose to continue earning an income or to stop working for someone else.
Whatever you do from that point forward is a matter of personal choice and that is a crazy awesome place to be. I’m only part way there myself, but once I made this important shift in thinking, the changes started happening fast. I’m sure it will for you, too.
What are Your Thoughts?
Is this way of looking at savings new for you? Do you think this change of perspective would help you achieve your goals? Your voice is an important part of making this blog useful to others so please share your thoughts and/or experience in the comments below.
Update: A reader pointed out that I didn’t cite the reference for where I originally heard of this concept. The idea of thinking of your dollars as employees has been around for nearly a century and probably longer. My mentor first introduced me to this way of thinking about 35 years ago. She discovered it while reading George S. Clason’s book The Richest Man in Babylon (affiliate link), which was first published in 1926, has been reprinted at least 10 times and is still a very popular book.
In that book there are Five Laws of Gold. The second law reads: “Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.”