One of the things we need to understand about money is the concept of absolute and relative income. Learning the basics of these things will open a wider perspective how to earn money and will help you in establishing your cash flow.
If you were to choose between these two situations, which one would you prefer? Somebody who is earning P600,000 annually while everybody else is earning P800,000 OR somebody who is earning P800,000 annually while everybody else is earning P600,000?
In this kind of decision making, typically, people will simply look at the figures and chances are they will choose the latter, right? However, what seems to be bigger is not always the better option.
Think of this carefully..
If we’ll do a simple calculation, P800K annually is around P67K monthly and P600K annually is P50K monthly. Just divide the annual income by 12 and you’ll get these monthly figures.
You might say that 800K is still the better option. In a glance, yes.
However, things might change if you dig a little deeper.
It’s P67K monthly vs P50K monthly.
What if you we’re told that P67K monthly is 40 hours work per week..
and the P50K option is a 20 hours work per week..
Now you’re going to start thinking..
If there’s roughly 4 weeks per month, your working hours for the P67K income will be 160 hours monthly.
For the P50K income, it will be 80 working hours monthly.
The rate for P67K income is P419/hour for 40 hours weekly..
The rate for P50K income is P625/hour for 20 hours weekly..
Now asking the same question again, which one would you prefer?
That’s the basic concept of Absolute Income and Relative Income.
Absolute income is how much money you make regardless of any other circumstances and Relative income is the rate of how much money you make every hour.
You might also want to read: Building Passive Income – The Right Perspective.
There are many things you need to consider in choosing a job or business. If you want more time with your family and you want high income, this will take a lot of skills and is typically longer to achieve.
If you want high income but has no skills, your time for other things in life will be compromised because you need to put more hours in the workplace.
If you have low income and still don’t have time for other things in life, this is the worst situation you can ever be in. This situation can only be found to those people who are bedridden.
If you’re a normal person and you’re in this worst situation, you better start thinking now, my friend. You better start looking for opportunities and start taking action now to enhance your skills.
So that’s it for now in this short article and hopefully you’re able to get something new to think about. If you’re enjoying these kind of posts, please share it with your friends. Thanks!
You might want to read:
- The Importance of setting SMART Financial Goals
- Financial Literacy Philippines – Awareness 101
- 10 Signs That You Are Currently Having A Poor Financial Life