Leverage

This will be of interest to people who want to earn at a rate higher than is possible working for an hourly rate, or an agreed annual salary. Do you ever wonder how some people seem to earn far more than others, and yet don't work so hard?

Rich Dad, Poor Dad, by Robert T. Kiyosaki answers this question extremely well, arguing that few people are ever taught how to make money, and the traditional ethic of work hard at school, get good grades may be poor advice for your children seeking financial success.

John Paul Getty said that he'd rather earn 1/100th of the efforts of 100 others, than from 100% of his own efforts. Leveraged income does not depend on how many working hours there are in the day. Many people today exchanging time for dollars don't understand why their standard of living is so low, and why they are having to do several jobs just to make ends meet.

An insurance salesman earns accruals year after year from an insurance policy, so long as the premiums are paid. This money comes whether he is in the office or on the beach. (Unfortunately the accruals are very small, but the principle of leverage is there nevertheless).

A sales manager earns a percentage of the earnings of his sales team. He receives the override as compensation for training and leading the team.

A company owner leverages the efforts of the employees for much of his income. In the majority of companies, the owner is the only member of the firm with the leverage for sizeable income (the employees are often paid at a level just sufficient to induce them to stay). There are a few exceptions to this, such as Microsoft, where really high compensation is achievable to numbers of leaders within the firm.

Getting your money working for you is a form of leverage. It could be said that an investor in mutual funds leverages the efforts of fund managers, and the resources of co-investors in the fund, to earn a return without effort once the fund selection is made. Professionals such as lawyers, doctors and teachers have almost no leverage. The day they stop working, the income stops. Many specialists have educated themselves into niche positions where they are totally dependent on their own efforts.

If you are selecting a career and a company to work for, take the element of leverage into account, if you want to earn above the average. Failure to understand this principle in our future economy could lead you to join the growing numbers of people working harder and harder for less and less pay.

The network marketing concept depends entirely on leverage to produce fairytale incomes for people who develop large multi-level networks, and earn a percentage of the value of the products sold in the network. Here, the challenge of the network marketer is to train those in their downline to train those below, duplicating themselves. Done well this produces a permanent income stream for all in the network with a large enough network below them. Permanent income can't be stopped even if you stop working. Only a few network marketing companies have been able to design a combination of products, compensation plan and quality of management to outlast more than four or five years of growing pains, but those few are driving a true revolution in business that is not yet widely recognized.