Educational Psychology Interactive: Personal Finances

Citation: Huitt, W. (2008, November). A successful lifestyle: The relationship of time and money. Educational Psychology Interactive. Valdosta: GA: Valdosta State University. Retrieved [date] from http://www.edpsycinteractive.org/topics/citizen/finances.html

A major concept of the Becoming a Brilliant Star framework is that successful adulthood requires the development of competencies in a variety of areas. In the post-modern world of the 21st century, the relationship of time and money must be given ample attention. Not enough of either leaves something to be desired.

There is a general formula for achieving a successful lifestyle in terms of time and money:

Simply stated, this formula proposes there must first exist an opportunity to generate income. A person must then acquire the knowledge, attitudes, and skills necessary to see and take advantage of the opportunity. Next, one must expend energy or work to apply the knowledge and skills with the correct attitude. If the correct effort is made consistently, long enough, and with the right attitude, the opportunity will produce the expected (although not necessarily the desired) results. A lifestyle will then be developed in terms of time and money.

When considering opportunity, there are four common ways to develop income (Kiyosaki & Lechter, 2000a). The first two require investing time for dollars as either an employee or a self-employed professional or business owner. This is the traditional method most people use, at least to get started (Bridges, 1994). Either people have a job or own a traditional business where a product or service is developed that is made or sold using one's time. Unfortunately, as most people find out, the more successful one becomes in terms of money, the less successful the person becomes in having free time. In addition, most people are finding that the rapid pace of change means they have to constantly invest in developing new knowledge and skills just to stay in business or a job.

A third method of acquiring financial wealth is to take some of the money one earns and invest it. This allows money to make money and if successful, this will provide both time and money. There are a wide variety of companies that have been developed to help people make wise investment choices. While this can work, most people are not taking advantage of this opportunity. Recent figures show that the average 53-year-old in the United States has only $2300 in savings and investments (Kiyosaki, & Lechter, 2000a).

A fourth method for developing financial success is to duplicate one's time and money. J. Paul Getty, the great oil magnate, said he would rather have 1% of a 100 men's efforts than 100% of one man's effort. If one owns a business that operates on a system rather than one's own efforts, it is possible to expand one's net wealth rather substantially as it increases in value. This method has been used by Bill Gates (Microsoft) and Sam Walton (Wal-Mart) to become billionaires in just a few short years. Paul Zane Pilzer (1990), an economist and entrepreneur, believes the most lucrative business opportunities during the next several decades will be in the area of distribution rather than in acquisition of raw materials or manufacturing as was the case during the first half of the 20th century. Successful franchisers such as Ray Kroc (McDonald's) and Dave Thomas (Wendy's) used this approach to achieve financial success. Entrepreneurs such as Rich DeVos and Jay Van Andel (Amway) and Blake Roney (Nu Skin) used network marketing to catapult themselves to the top of the list of wealthy people in the United States.

John Maxwell (1993, 1993, 1995) provided several important observations related to the issue of time and money. In The Winning Attitude he stated that the most important factor in personal achievement is "attitude." Others have made this point with the statement, "Your attitude determines you altitude." It is his belief that with the proper attitude, one can eventually acquire the necessary knowledge and skills in order to be successful. With the proper preparation one can achieve much, but unless one advances to the next level, that success will come through the process of trading time for dollars. Any opportunity that will not allow an individual to go beyond this level is, therefore, somewhat limited.

The next level is leadership. Maxwell pointed out in Developing the Leader Within You that the most important factor at this level is the ability to "inspire," to motivate others to do what they would not ordinarily do. By developing leadership skills one is taking the first step towards cutting the connection between the amount of time one spends and the income one generates. Again, however, if the opportunity under consideration stops at this level, the potential income remains somewhat limited.

According to Maxwell, the most productive level is in leadership development. As he stated in Developing the Leaders Around You, one can significantly increase one's productivity by empowering others to become leaders. As the leadership skills of others are developed, one's time is then freed up to empower other leaders. It is at this stage that one's ability to generate income can increase exponentially. As one considers opportunities that will be used to develop a desired lifestyle, it is important to consider the limits that may occur at later life-stages because of the limited possibilities in personal achievement, leadership, and/or leadership development in the chosen opportunity.

Education is seen by many as the key to success in the information age It can be acquired in three forms: formal (often referred to as schooling), informal (by attending workshops, seminars, etc.), and non-formal (through reading, listening, watching, discussing). And while it is true that incomes generally rise and unemployment rates decrease as one gets more schooling, it is more likely to generate free time and income in the average, rather than highly successful, range. This is because schooling is more likely to prepare one for personal achievement, which means trading one's personal time for income. One can increase one's pay per hour up to a limit; it is then necessary to learn to cope with that level (which may be in the six-figure range) or choose another alternative to generate additional income. However, because money is earned by giving up time, increased money quite often means less free time and vice versa. If the schooling prepares one for leadership or leadership development, it has the potential of pushing one's income beyond the "average" level.

Informal education, on the other hand, is much more varied in nature, and, therefore, provides more opportunity for an individual to acquire the exact knowledge, attitudes, or skills needed at a particular time and place. This places an increased burden on the individual to determine exactly what will be beneficial and what will not. It is my experience that finding a mentor or group to guide one's development is quite often essential. This is especially important if one desires to move from one source of income to another. This generally involves a change in mindset or perspective that is quite difficult to acquire without direct experience. Being able to discuss alternatives with someone who has already acquired the proper mindset reduces the time it takes to acquire it, thereby increasing the likelihood that one will continue the effort needed to do so.

William Bridges (1994) stated that at the turn of the century over 60% of the workforce in the United States worked for themselves. As the nation became industrialized, more and more of the workforce turned to jobs to earn a living. The high-water-mark of this approach was in the early 1970s where 94% of the workforce had jobs, with only 6% owning their own businesses. More importantly, he suggested that everyone today must consider him- or herself as the CEO of one's own business that provides goods and services to a particular market (Bridges, 1997). This might temporarily be as an employee for a particular firm, but one must expect that is only temporary.

During the past 25 years this trend has been reversed, mainly because of the downsizing of the workforce. For example, the number of people employed in the manufacturing sector in 1988 was equal to that of 1968, even though output had increased. The result is that some 25% of the workforce now owns their own business, with predictions that by the early part of the 20th century 50% of households in the US will have a home-based business.

Meredith Bagby (1996) cited US census figures showing that the average male today works 62 hours per week; women average 36 hours per week at work. This is a far cry from the 30-hour workweek predicted in the 1970s. In addition, the majority of mothers with children less than 5-years-old participate in the paid workforce (AAUW, 1992). The median family income in 2007 was $50,233, up from $34,445 in 1989 (U.S. Census Bureau, 2008). About 47% of those over 65 live on less than $25,000 per year, while 77% live on less than $50,000 per year. And the gap between the wealthy and the poor continues to increase as some people take advantage of the changing economy quicker than others (Johnston, 2007). More time at work for less money with a significant chance of having a below average income in retirement is probably not what most people see as an ideal lifestyle. However, that is where most will wind up by seeking advice on creating a lifestyle from the "average" folks in their lives.

Kiyosaki and Lechter (2000b) stated that in terms of lifestyle, there are 4 different categories:

The first category of little money and a lot of time represents people who are in poverty. There may be no opportunity for these people to work or they may not recognize an opportunity that is available. There may be an opportunity that requires more knowledge and skills than they currently have or they may just be unwilling to expend the effort to get an education or go to work. The first reason may be true in many underdeveloped countries, but it is certainly not true for most people in the United States. This country admits more than 650,000 immigrants each year (more than all of the rest of the world combined), each one desiring to take advantage of the opportunities this country provides (Naisbitt & Aburdene, 1990). More often people are not prepared or are unwilling to take advantage of an opportunity that at least would get them out of poverty.

The second category of little time and little money represents the majority of the workforce. Most workers have just enough money to live from paycheck-to-paycheck, but spend all their time earning it. Likely, this is a result of having focused on getting a formal education (by going to school) and getting a "good" job or developing a traditional business and then accepting whatever lifestyle that work will provide.

The third category of enough money but little time represents those people who are financially successful, but time broke. These people most likely focused on a desired level of finances and found an opportunity that would provide it. Unfortunately, taking advantage of the opportunity to produce the desired material wealth often leaves little time to enjoy other aspects of life. A financially successful physician confided, "I'd just like to have the lifestyle of my wife and children."

The fourth category represents those few people who are truly financially independent. They have both the money and the time to enjoy it. They were able to define their desired lifestyle, select an opportunity that would provide it, develop the knowledge, attitudes, and skills that would allow them to be successful, and then worked consistently with the right attitude for long enough to achieve their dreams. In addition, the selected opportunity allowed them to duplicate their time and/or money, so they have time to enjoy life.

Denis Waitley (1997) suggested that the key to developing an ideal lifestyle is to first imagine it. He suggested taking the time to brainstorm what your life would be like if time and money were not issues. That is, if you had all the time and money you could imagine and you knew that more money was available if you needed it, what would you do with your free time? Where would you live? What kind of car would you drive? Where would you travel? Where would your children be educated? What would it feel like to be debt free? What charities would you support? What "toys" would you buy? The critical factor is to write these down and begin to look at ways to make these dreams and desires come true.

Stephen Covey and his colleagues (1994) believed everyone should develop a mission statement that can be used to guide his or her life. This mission statement should be compared to a list of items in an ideal lifestyle, eliminating any that conflict with one's values and principles. People will simply not work to reach a goal that is inconsistent with their most deeply held values and principles.

The key to a successful lifestyle is to first imagine it and write it down. Then check to see if this desired lifestyle matches your most deeply held values and principles. You will never be successful at something that violates these.

Next look for opportunities that can provide this desired lifestyle. Most people receive the advice of finding out what they enjoy or what they are good at and then doing it for a career. Oftentimes this puts them in a position of having to accept whatever lifestyle that type of work will provide. Most individuals who have developed a desired lifestyle get good at, and learn to enjoy, those activities that will provide that lifestyle.

One of the most important factors in identifying opportunities is the selection of a paradigm of wealth and success. For example, the following list summarizes what most middle-class Americans probably believe related to attaining financial success.

How To Retire Early Source: Pre-Paid Legal Services, Inc.
1. Make a budget now	Make sure you know where your money's going.
2. Be frugal	Avoid impulse buying.
3. Pay off the credit cards	High interest rates drain cash.
4. Put away your savings	At least 10% of gross income each month.
5. Invest aggressively	Put money in stocks and bonds.
6. Move to cheaper housing	Move to areas of the country with lower costs of living.
7. Take a higher-paying job	Put extra income into savings and investments.
8. Plan to work forever	Expect to earn income from part-time employment.

However, Kiyosaki and Lechter (2000b), author of Rich Dad, Poor Dad, had a different list. Their basic position is that the advice given by most "experts" is designed to move people from "poor" to "middle class." It is their contention that there is a different paradigm that is taught by those who are rich.

How To Retire Rich Source: Robert Kiyosaki & Sharon Lechter
1. The rich don't work for money	Their assets work for them.
2. Know financial literacy	Learn the basics of finance, especially mathematics.
3. Mind your own business	Have your own business; use income from a job to finance it.
4. The power of corporations	Incorporate your business for tax purposes.
5. The rich invent money	Look for a product or service that is in demand.
6. Work to learn, not for money	Develop the knowledge, attitudes and skills necessary for success.

In other words, it is the paradigm one accepts that is the driving force when acquiring knowledge, skills, and attitudes and then selecting and working on opportunities. If one's paradigm is wrong, no amount of knowledge, skills, or hard work will produce extraordinary results. Therefore, it is critical to select a paradigm that will most likely achieve one's favored outcome. This point was made in a conversation I had with a financial mentor. He asked my how long it would take me to drive to Europe. I replied that I could not drive to Europe; I would have to fly or take a ship. He smiled and said, "Your car is a good vehicle for driving to a nearby city, but the wrong vehicle if you want to go to Europe. The same is true for financial success and a desired lifestyle. Some vehicles will work for some situations, but not for others."

The next step is to acquire the knowledge, attitudes, and skills that are necessary to be successful with the desired opportunity. This may mean going to school, but not necessarily. It might be more effective to work with someone who has the lifestyle to which you aspire. On the other hand, the credentials one earns in a school setting are sometimes required for success in the chosen opportunity. It's important, though, to remember that one is going to school primarily for the knowledge, attitudes, and skills and not just the credentials.

The fourth step is to work consistently with the right attitude for a long enough period of time for the opportunity to come to fruition. It is important to review one's dreams and goals daily and to stay focused on where one is going. It is very easy to be drawn off focus even though you are still staying busy. But like a dog chasing his tail, you're not likely to get very far.

Finally, remember that a successful career and financial wealth are only two aspects of true success. The Brilliant Star framework proposed there are additional desired outcomes such as emotional heatlh, spiritual strengths, and character development that are central to true success from a holistic or integral perspective.

A Successful Lifestyle: The Relationship of Time and Money