Have you heard the saying “work smarter, not harder?” This is essentially what the concept of Leverage is all about. When we go shopping, we use the trolley to make life easier. With a trolley, we don’t get sore arms and we don’t break out in a sweat, but we can get the shopping done, and quickly. This is Leverage in action.
Now, more specifically to business owners: imagine that you’re going to employ a skilled member of staff that loves doing accounting or social media posts, and they’re much better at it than you. Its leveraging your money because you will pay them a wage that is less than yours and employing them is a better use of your time; it’s leveraging their time on your behalf!
This is because:
- They’ve got the skill and the passion to do a job that you have half the skill and very little passion to do, and
- You can earn more by doing what you’re skilled to do and pay the employee and still make a profit.
That is how business owners can get more jobs done, more easily, by employing the right members of staff. And they can then focus on managing, coordinating bringing in business. This arrangement generates more money than if they were there on the shop floor, in a factory or in an office.
Once you’ve employed your staff, you can take the profits that you make from outsourcing all that work, and either have more profit in the business or choose to have more time. Suddenly choice is there on the table for you.
You are now in a position where you have more choice. And once you understand Leverage, you will see positive choices everywhere.
Now, the next point is about Resources; it’s now about using your assets, your resources, wisely. And this is another skill; from advanced strategies, like making sure that you are utilising your tax benefits, to simply understanding interest rates–both on how you spend your money and how you save your money. As a practical exercise, you need to be thinking about that when you make a resource list. You also need to be asking yourself whether you have any money that is a debt on a credit card that is incurring interest, because that’s an example of something that will detract value from the collective resources that you have.
With time as an example, it’s a finite and precious resource. You could ask someone to lend you a pound, and they could lend you a pound. But if you asked them to lend you an hour or five minutes, they can’t. No-one can give you time or make you have more time; they can only share the time they have with you.
What is your focus, and is your time supporting you to achieve the Wealthy Life you want to live? Do you understand what you have, what you can control, what do you own? Is there any weakness in your asset list, like any debt that is incurring interest, that you can deal with?
Once you have taken inventory of what you have, you can start to step back and take a bigger picture resource allocation. Ask yourself: “what of the assets that I have–my time, my money, my knowledge contacts, experience–what are they doing to support me to achieve the life I want?” And ask yourself if there are any resources, for example, some of your money as a debt on a credit card, that’s pulling you back the other way? And so, you can start to look at your resources and make sure that they’re all facing in the right direction, that they are all supporting you on this journey.
Then start to look at what assets could be Leveraged to create more cash flow in your family, and therefore ultimately give yourself more time. And at that point, choice is on the table—hang onto that extra money or take some extra time out for your other goals.
So, Leverage is a skill. And we understand the term “to lever,” if I need to lift something heavy and I can’t manage on my own, I could ask a friend to help. And I could leverage their strength, use their strength, to join with my strength and make it so that there were two energies pushing together to lift up something that was heavy. This is what you can do with your assets; you do not have to be the only one working toward your goals—your money and skills and network can be right alongside you pushing you forward on your path to A Wealthy Life.
Do listen to this week’s episode of my podcast A Wealthy Life with Vicki Wusche here and here. And as always, we would absolutely love to hear your thoughts!