Give yourself a raise!
I had an interesting discussion the other day with a client. She was not happy with her job or her daily routine. She was also complaining that she was underpaid at work. We suggested she take income from an investment account to give herself a raise, but her immediate response was “I don’t want to pay more in taxes.” Our immediate thought was, well then, how do you expect this rat race to end? Her answer was to continue working and doing what she had always been doing and then at some point in the future, take social security and income from her investment account.
A week later the client called with great news, she had received a raise at work. She was super excited that she was being recognized for her efforts in the form of a pay increase. Again, we were immediately perplexed and asked the obvious question. “Aren’t you going to pay more taxes?” She responded yes but somehow receiving a raise from an employer was different than using her own assets to give herself a raise.
I followed up with a question for my own investigative purposes. I asked her, “What if your boss came to you and doubled your salary. Would you take it?” She responded, “Absolutely, why wouldn’t I?” I said I was just curious since her taxes would go way up in this scenario as well. She felt that was okay because the taxes are taken out of her paycheck, she never sees them. I asked what was different about taking income off of investment accounts if we withheld taxes? She felt like that was giving away her own money versus giving away her time to her employer and feeling underpaid.
As a business owner, my goal each year is to make as much as I possibly can, legally, ethically and morally. As business owners, we have the unique opportunity to give ourselves a raise by working harder and seeing the fruit of that hard work.
One’s income is based solely on their internal and external vision of the money with which they could deploy. It has been interesting to see the difference in the mindset of business owners versus the mindset of employees.
I often wonder if there were no social security and there were no qualified money, would there be a difference in mindset if we only had one kind of money. Right now we have two. After-tax (now) money and pre-tax or qualified money (later) money. I will not argue the power of not being able to touch the qualified money. The penalty for a withdrawal before 59.5 acts like a shock to a mouse. The employer match, taking a small piece of every paycheck and deferring it is powerful over time as people cannot steal from themselves.
Could we achieve the same discipline that a qualified model provides, by achieving our goal of time freedom faster?