Who Else Wants to Make $5,479,452 an Hour?

How much money would you like to make per hour? $50? $100? $200?

Well… how about $5,479,452 an hour? That’s how much Carlos Slim made last year. His net worth increased by $20 billion in 2006, which is over $5 million per hour, working 10 hours per day.

Sure beats minimum wage, right?

Of course, he wasn’t actually being paid an hourly wage. The companies he owns were making him money 24 hours a day.

But it’s an interesting perspective. Your hourly wage is the most important factor for determining both how wealthy you become and how fast it happens. It addresses the one factor that constrains us all.

Time.

The Ultimate Constraint

No one can beat time. It doesn’t matter how smart, rich, or famous you are. You have exactly 24 hours a day, seven days a week, 365 days a year. Nothing can change that.

All you can do is optimize it. The wealthiest people in the world are the ones that use their time most efficiently in the process of making money. They make more money, faster than everyone else.

Let’s say you want to make $1 million. Your hourly wage is $12.95 an hour, and you work 40 hours per week. How long will it take you?

$1,000,000 / $12.95 / 40 / 52 = 37 years

We’re not taking into account living expenses, taxes, or compounded interest from investments. If you saved every single penny of your income, that’s how long it would take you to accumulate $1 million.

Now let’s say you’re making $120 an hour, and you’re working 40 hours per week. How long would it take you?

$1,000,000 / $120 / 40 / 52 = 4 years

As you can see, it’s much easier for someone making $120 an hour to become a millionaire. We’re still not taking into account expenses, but assuming they are the same four both people, the person making $120 an hour will get there much faster.

So, am I saying that everyone needs to get a job paying more money?

It’s not a bad start, but the point is not to get a better paying job. It’s to make more money in the same amount of time, no matter where that money comes from.

Sources of Income

You can generate income from lots of different places:

  • Salaries
  • Commissions
  • Stock dividends
  • The sale of assets
  • Money borrowed against assets
  • Interest from bonds, CDs, etc.

Based on what you’ve heard from others, you might think that some of them are superior to others. For instance, traditional wisdom says starting your own company is a better way to earn money than getting a job.

Statistically, that might be true. You have a higher probability of earning millions of dollars from your own business than from working for someone else.

Scientifically though, it’s false. There are lots of people earning salaries that are higher than the income derived from many small businesses. In theory, no source of money is superior to another one.

So how do you decide which one to choose? Figure out what has the best ratio between the amount of money it makes you and the amount of time it takes away from you.

The Myth of Passive Income

You might say, “Wouldn’t that be passive income like interest from CDs?” It’s making you money, and it’s not taking any time, theoretically making the hourly wage infinite.

Or is it?

In my opinion, passive income is a myth, or at least a misleading concept. Nothing is completely passive. If you spend one second thinking about it, then you’ve made it active.

The key to figuring out if something is a good investment is not to judge the amount of time it takes, but compare the time it takes to the amount of money it earns.

Take the stock market, for example. Many people think of stocks as passive income, and it certainly takes less time than getting a second job. The question is, is it worth the time?

It depends on how much money you’re making, and how much time you spend on it.

If you invest $5,000 and earn $500 (10%) for the year, you might think you’re doing pretty well. Only, how much time did it take you?

Add up the time you spent watching financial news, looking for stock tips, analyzing different companies, and organizing your portfolio. When you add it all up, how much time are you spending? Two hours a day? More?

If you spend two hours a day, five days a week on stocks, that’s 520 hours for the year. $500 / 520 hours = $0.96 per hour. You’re much better off buying a CD and forgetting about it, or just leaving it in your bank account and focusing on better uses of your time.

The Secret to Making More Money

Would you like to double your income next year? Here’s how to do it:

1. Add up all of your income for the year

2. Divide it by the time you spent making that income

3. Multiply by two to create your hourly wage objective

4. Spend more time on activities with wages greater than or equal to your target

5. Slowly eliminate activities with wages less than your target

For instance, let’s say you add up your salary, dividends from stocks, interest from CDs, and everything else. It comes to $52,563 for the year. After thinking about it, you guess you spend about 63 hours per week on the activities that produce this income.

What’s your hourly wage?

$52,563 /52 weeks / 63 hours = $16.04 per hour

To continue the example, let’s say your job brings in the vast majority of that income, earning you approximately $17 an hour. You also have some investment income, and after doing some circulations, you figure out its earning you $12 per hour.

You’d like to double your income, making $32.08 per hour. What should you do?

First, you might consider looking for a job that makes you an hourly wage closer to your objective. For instance, you might find one that pays $28 an hour. That’s still not quite up to your objective, but it’s much better. So you take it.

You might also start doing some consulting work on the side, charging $60 an hour. In the beginning, you might not get much work, but the hours you do work should continue to bump up your hourly wage.

Finally, you might start reducing the time you spend on your investments. Check on them less often, outsource the work to a financial adviser, or choose different investments. Either way, try to move the hourly wage as close to $32 an hour as you can.

Do you see how this works? Increasing your income is not a one-time event like hitting the lottery. It’s a process by which you methodically raise the value of your time.

How to Become a Billionaire

From the examples we’ve used, it still seems rather slow though, doesn’t it? Guys like Bill Gates, Carlos Slim, and Warren Buffett didn’t become the wealthiest men in the world by getting a series of better paying jobs

No… but I guarantee you they follow this thought process, at least subconsciously. They’re not going to waste their time on anything that’s not making them a substantial amount of money when compared to the time it takes. They just look for sources of leverage that make them exceedingly high hourly wages.

Two of the most common are other people’s time and other people’s money.

Just for a quick example, let’s say you are the sole owner company with 100 employees. You’re paying each of those employees $15 an hour. Through various means, they are bringing in an average of $30 an hour of revenue. How much income are you creating from leveraging their time?

($30 – $15) X 100 = $1500 per hour

Of course, you have to subtract expenses from that number, but it’s easy to see why the owners of companies with 100,000 or 500,000 employees become billionaires. They are leveraging the time of so many people that it skyrockets their hourly wage.

The same thing can happen when you’re leveraging other people’s money. Warren Buffett is a master of this. It’s true that he makes excellent returns on his investments, but the real source of his wealth is all of the money that is invested in Berkshire Hathaway.

But please don’t miss my point. It’s still not about how much money they’re making. It’s about creating systems that allow them to make billions of dollars in a short amount of time. You have to consider both the profits and the time it takes to make those profits.

Taking It Too Far — Over-Optimizing Your Time

Should you apply this principle to everything, using it to make every hour of your life as profitable as possible?

No.

Once people get this idea, sometimes they make the mistake of cutting out activities that don’t produce any income, such as spending time with their family or having fun. They justify it by saying it allows them to earn more money.

And they’re right. It does. But they are also missing the point.

I’ll go back to this over and over again, but the purpose of increasing your hourly wage is not just to create wealth. It’s to be able to buy the freedom you need to do whatever you want in life.

You’ll never be able to get entirely away from working to produce income. It’s almost impossible. You can, however, make as much money as you can in as little time as possible.

For instance, let’s say you want to dedicate your life to a particular charity. You’ll still need to do activities that make you money, but you might limit those activities to four hours per week. The key is making sure those four hours per week produce an adequate amount of income.

This is what people do in their retirement years. They may have investments that bring them several thousand dollars a month in income, but they’re only working a few hours to produce that income. Technically, that means they’re making hundreds or even thousands of dollars per hour.

The path to financial freedom is not spending more time on making money. It’s optimizing your time, so you can dedicate less of it to making money and more of it to the things you really want to do.

That’s how you become financially free.