The Real Source of Your Money

When I ask people in my workshops, “Where does your money come from?” Most of the times I get an answer “my job”, “my occupation” or “my profession”. And I am sure most of us reading this, would agree to it and believe it to be true that their organisations or business pay them salary every month, right?

Let’s delve into a math puzzle together: imagine A=B and B=C, then naturally A=C. Now, applying this logic to life, if my survival equals my income, and my income equals my occupation— be it a job or a self-owned business, it seems like my survival equals my occupation. Mathematically, that make sense, right? However, when it comes to real-life situations, it’s a different story.

We often aim to be rational thinkers, yet reality doesn’t always align with logical equations. While it might seem logical that my occupation equals my survival, this notion doesn’t hold true in the real world. If it did, those without a job or who are retired would be facing constant survival challenges, which isn’t always the case.

Generally, when it comes to thinking about income, we often stumble upon some basic misconceptions. Thus, let me share an alternative viewpoint to it:

One of the most common errors we make is visualising our income as arriving from a distant source like our organisation. We put a ‘psychological distance’, a gap between our income and ourselves, leading to a lack of control and more negative money experiences. Dr. Sarah Newcomb, in her book ‘Loaded’ highlights this phenomenon, which might resonate with those who perceive their income originating externally. Contrary to the popular belief I just discussed,

Our money doesn’t simply flow from our ‘jobs’ or ‘professions’; it emanates from our unique skills and talents:

Dr. James Grubman, a psychologist and a financial expert who had spent several years counselling people through challenges of managing great wealth, stresses that those who sustain wealth, they transition from considering money in terms of income to viewing it as ‘assets’. Your skills and talents are the true generators of income. When you lend your skilled labour to your employer— your time, energy, and intelligence— this amalgamation creates value. Moreover, possessing specialised knowledge or experience amplifies the value of your assets, offering substantial potential for income generation.

Shifting this paradigm of thinking empowers a sense of control over ones financial journey, fostering positive experiences and emotions with money. Therefore nurturing ones assets, like upskilling oneself or learning a new skill altogether becomes crucial. Also, skills lose their value if left stagnant, making continuous learning imperative to safeguard the worth of your assets. A recent survey conducted by PGIM in knowledge partnership with Nielsen, indicate a rising trend in Indians allocating a portion of their household income, approximately 5% towards enhancing their human capital – towards education including skill development. This trend is undeniably motivating.

The survey also underscores Indians’ pursuit of additional income streams by monetising their passions, their hobbies and acquiring new skills, both pre and post-retirement and they feel better prepared for their retirement if they have a secondary source of income— 36% of respondents reported to have an alternate source of income, where 39% of Indians reported that they are planning to start it in near future, highlighting the fact that Indians acknowledge this as to be an important aspect of planning for now as well as future. Out of 36% of respondents, who reported to have secondary source of income, a significant percentage of respondents (on an average around 70%), also reported that they are prepared towards retirement, enjoy their profession/work, feel financially free and secure and have a secured job.

Bearing the above insights in mind, PGIM has curated a comprehensive compendium of 50 gigs- a practical guidebook for those seeking secondary income sources pre and post-retirement. This book delves into a myriad of enjoyable gigs that offer a regular income, ranging from landscaping to call specialists, from on hire CXO’s to launching advisory services or event management companies. It outlines the steps one needs to venture into these fields, associated costs, where to learn and more, serving as a valuable resource.

Now, let’s tackle the second common mistake we make when pondering the origins of our money: focusing solely on the income flow rather than its source. However, flipping this perspective equips us to make wiser financial decisions. Here’s how:

Beyond skilled labour, there exist three primary assets from which we can derive income:

From our early days, we have often been asked, “What do you want to be?” Our responses to this question tend to fluctuate until we settle on a course or a career path. Our choices to the same often resolve around one critical query: “How will I earn a living, and what’s the best means to do so?”

The good news is that income isn’t sourced from just one avenue but from three: labour, land and capital. Labour translates into income when we exchange our time, energy and skills for monetary compensation. Land can yield income through renting, mining, farming, or even through appreciation in value if left untouched. Then there’s Capital, essentially our savings— investments, cash, bonds, gold— that can generate more money by accruing interest when we lend it to others such as individuals, banks or governments. Alternatively, capital grows through profits obtained from investments like mutual funds or company shares. Surprisingly, capital can extend into the social sphere as well – i.e. nurturing relationships, building networks, and maintaining a sterling reputation often yield favourable financial outcomes. Leveraging social connections for job references, recommendations for promotions or bartering services with friends significantly impacts our financial standing. Therefore, utilising ones social network wisely opens the doors to financial advantages.

Understanding the bigger picture is the key to control of our financial wellbeing, yet this marks just the beginning. The real game changer comes when we widen our view a bit more, by redirecting our focus from reliance on a single occupation, think about growing your own income from stuff you control- like land, capital, or even skills you are passionate about turning into a side hustle pre-retirement, if your current employer allows or a full time gig post-retirement. We are not talking about a sneaky extra job here, but rather fostering hobbies or planning ahead for a gig that adds to your income. Maybe even setting up something that your family could handle to boost the household funds. It is all about consciously and holistically choosing your options for a more secure financial future.

*This article was originally published in LiveMint on 24th March 2024.