In the first year as a software trainer, I was the second highest customer-rated trainer in the global organization. In the second year, I nosed into first position. In what is coming toward the end of my third year...
I am average.
Well, I don't even know if I will scrape into average status, as I haven't yet delivered any individual events since I had a stroke a few months back, but going on my performance in shared events as a facilitator, I don't hold my hopes very high. While this has many organizational and personal implications surrounding my job, it takes a heavy economic toll on my future within the company. After all, what are the chances of getting a payrise when performance has dropped?
It doesn't matter if the reason is through no fault of my own, the fact is that higher performance generally gets rewarded with higher income and while I am not exactly earning the "big bucks", I have managed to get bumps in salary based on my trainer feedback alone. Essentially I am salary capped, as being average doesn't inspire additional reward, which means that if that is my new normal, I can expect to no longer qualify for the additional yearly salary increase based on my performance, which while isn't much, does cover an additional grocery trip a month.
Long-term though, this can have profound effects on my future economic position, as I don't need another grocery trip each month, nor do I use it to increase my current living standards. This means that it is additional income that can be used to invest and over the space of the next decade and with the level of risk and reward I am willing to expose it to, that can be quite a significant amount. Small amounts mount up and they can have significant effects on our future possibilities and wellbeing.
A lot of people waste small amounts of investment potential because it isn't a significant amount, but often when talking to people about this, they compare it to the wrong reference point. For example, if the average monthly income is 3000 and a person invests 10% of that, they can do 300 a month. If the disposable income after all costs is actually 450 dollars and the 150 is spent on random whatever, it doesn't seem very significant as it is only 5% of the total income. However, it is 50% of the investment potential and that can have massive effects on the outcome of the investments over the space of a couple decades.
Even if a person restricted their "disposable" income spending down to 100 and pushed 50 into the investments instead, they are still increasing their investment rate by 16% per month and that compounds with the investment capital for years on end to make a very large difference.
So, while the extra 50 can buy whatever over the space of a month, in 25 years (not thinking about inflation here) it would amount to 15,000 worth of 50 purchases. However, compounded into the investment (at 10%) it would be worth 52,000 more than that. While inflation plays a part here, payrises tend to follow suit too, which means that over the space of this time, it wouldn't be 350 monthly, it would be 11.6% of whatever the salary is (the 10% + the 1.6% on top of it). So, that way as the salary climbs, so does the investment amount in order to cover things like inflation.
That is part of the problem with these simple calculators, as they put it in terms of a set figure invested monthly, rather than a percentage. This means that many people focus on a static number of some sort and the end amount, without thinking too much about their own changing salary levels or how inflation is going to affect that final total that seems like so much, compared to the present moment costs. Most end up saving less relative to their increasing salary and the inflation rate.
For example, using the rule of 72, if the inflation rate averaged 3%, the cost of everything on average will double in 24 years. This means that the value of the 468K is actually worth less than 234K relative to today's prices. That is quite a difference. However, if income increases in line with inflation (it is generally below these days) and the investment percentage is used instead of a static amount, the future value of that 468K will be 468K in respect to todays prices. In reality though, the number will be closer to the million mark. But as you can see, even using simple calculations, it is possible to visualize what kind of affect small amounts can have on our future wealth positions.
Not getting for example, a 100 monthly increase every year, isn't losing just 1200 a year, it is losing 1200 the first year, 2400 the second, 3600 the third, 4800 the fourth and 6000 the fifth, for a 5 year total of 18,000 dollars. After 5 years, that would account for six full months of the starting 3000 salary. As an investment amount this is a huge volume to lose and over the space of 25 years (I can't do the math in my head) this is astronomical, especially once it is getting compounded with interest on top of it.
While a lot of people don't seem to think these small amounts really matter, they really do matter a great deal, which means that spending those small amounts now comes at a future premium cost. Also, these little trickles of income that people think are insignificant, for example Hive earnings, if used wisely, can make extreme differences to future wealth positions, but in order to do so requires thought and planning.
The formulas and details are available online to make accurate calculations, but that is not the problem that most people face in making the decisions on what to do with their income. It is the mindset that matters and that is driven by these simple stories that we can visualize, understand and apply to our daily routines.
Too often we see the extra we get as a way to increase our lifestyle, but we do not simultaneously increase the "static" saving percentage to account for it. Also, when we increase our lifestyle spending, we do not consider the value of what we buy each month, meaning it gets soaked up without even having the chance to generate anything extra and benefit from compounding. While it takes dedication and practice to build generative habits, I believe that in time, the initial investment of time and effort to learn and hone skills is paid back several times over, as our habits are affected by compounding too, in both directions.
So while I might be able to come to terms with being an average trainer and even be happy as one from a work satisfaction standpoint, economically it is going to likely have profound effects on my wealth potential, as it limits my ability to increase my positions percentage-wise. While money isn't everything, it does have profound effects on our lives and it also impacts on our relationships, so pretending like it doesn't matter is going to lead to a spectrum of suffering, no matter how we justify why we can't or didn't do differently with the resources we had available.
This helps me visualize my personal economy, hopefully it helps you too.
Taraz
[ Gen1: Hive ]
