What is Your Money Mindset

Now let’s delve into a straightforward yet effective approach to viewing your money and enhancing your financial situation. By adopting this mindset you can improve your financial life attract more money start saving effectively and make your money work for you.

To illustrate this consider an organization or factory with 1000 employees each earning an average of Rs 50000 per month. Do you think the owner of this organization also earns Rs 50000 every month? Not. The owner's income is likely much higher possibly in the lakhs or crores. Why is this? The answer lies in the concept of ‘Leverage.’

Understanding Leverage:

So what exactly is leverage? If a worker puts in 8 hours a day their salary is Rs 50000. This is the perspective of an employee. For the owner, however, 1000 employees working for 8 hours each amounts to 8000 hours of work per day (8 hours x 1000 employees). This leveraging results in a significantly higher income for the owner as the total output is 8000 hours per day. Thus leverage is fundamentally about the number of people working for you.

Applying Leverage to Personal Finances:

Now imagine if one of these employees decided to take a nap at work. Within a few minutes, someone would likely come and wake them up reminding them that they are paid to work not to nap. This is because the owner has implemented a system and hierarchy to ensure that each employee is productive and contributes to the overall output.

Translating This to Your Finances:

In your own life, you cannot hire others to directly leverage your income in the same way.  Think of each rupee from your Rs 50000 monthly salary as an employee. Every rupee that comes into your pocket should be viewed as a worker who needs to be productive and efficient.

Current Financial Practices:

Most people fail to leverage their money effectively. They often spend it quickly or it ends up in low-return investments such as fixed deposits (FDs) or public provident funds (PPFs). These investments typically offer returns of around 6.5-7.5% while the average inflation rate over the past 35 years has been approximately 7.5%. Consequently, your money is not growing as it should. This situation is akin to having employees who do not work effectively.

Improving Financial Leverage:

To improve your financial situation start viewing your money as employees. Create a system and hierarchy to ensure that each rupee is working efficiently for you. Just as an effective organization uses systems to maximize productivity you should ensure that your money is working hard and growing rather than sitting idle or underperforming.

It will help to grow your wealth with the improvement of your financial life.