If you are the business owner or investor, you probably hear the word “Leverage”. However, most people don’t really hear the word leverage and it is foreign word for most people. Actually, leverage is everywhere and can be utilized by anyone. Many people are already utilizing leverage without knowing it. For example, going somewhere far with your car is the one form of leverage. You are using the technology as leverage so that you can go much further with much less time than walking to the destination. Other example can be using cellphone. You can call your friends from anywhere by using your cellphone instead of physically visiting them for the conversation.
Although many people are very successful by using those leverages to make their life easier, unfortunately most people only know how to use the leverage to make themselves comfortable. They fail to use these leverage effectively enough to make their financial life easier. In my opinion, learning how to use leverage and utilizing it to your advantages are critical in order to survive in this current economy.
There are mainly three kinds of leverage: use someone else’s money as leverage (Other people’s money also known as OPM) and use other people’s time as leverage (Also known as OPT). And I want to add one more form of leverage: utilizing technology as leverage. In order to be financially wealthy, I think it is essential to learn to fully utilize both OPM, OPT as well as technology as leverage.
First form of the leverage is OPM (Other People’s Money). OPM can be bank’s money, investors’ money or other form of the money which is not yours. Especially, real estate investors use these leverage. You can borrow most of the money to invest in particular form of real estate to get constant cash flow. Because you put very little money, you can magnify the return and due to current inflationary environment, your debt will be destroyed as inflation kicks in.
Second form of the leverage is OPT (Other People’s Time). Most of the companies are using one OPT or another. Company hires employees and let them do the work for the company because they know that one person can do only so much as they understand we only have 24 hours a day. If we leverage employees’ time, it will allows company to increase their profit dramatically.
Final form of the leverage is utilizing the technology. Many companies or even individual use this leverage to make their financial life much easier. Typical example is usage of internet. Many people utilize technology of the internet to increase their income. Successful people can magnify their income more than 10 times. Successful example can be Mark Zuckerberg founder of the facebook. According to the Wikipedia, he dropped out from Harvard university. He is now 29 years old and his net-worth for 2013 is $16.8 billion.
Actually, all of 3 leverages have something in common. That is: by successful use of the leverage, you can earn income automatically in much easier way. You can make most of your income generating activity automatic so that you can do much more stuffs in much less time. Most of the wealthiest people in this world use any or all of the leverages mentioned in this section. Most of the people can’t get ahead financially because he or she only work by themselves. It is impossible to be wealthy by physically working by yourself. Time has only 24 hours a day and 168 hours a week. No more and no less. What you can do by yourself will ultimately very limited because you only have limited time. Besides, Fed’s printing press can print much faster than how much they can earn from job (possibly 2nd and 3rd jobs …). My heart is cringe every time I see the person believing working hard for their job will solve their problem…
In today’s world, it is absolutely essential to use any of the leverages (or all of them) to get ahead financially. Now, I always ask myself about question as Robert Kiyosaki asked in his book
“Am I building a pipeline or hauling buckets? Am I working hard or am I working smart?”
Which person you rather want to be: the person who building a pipeline or the person who hauling buckets?
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