The active income equation

Hourly Wage x Hours Worked = Active Income

This simple equation can be used to demonstrate the importance of understanding the value of your own time. As you can see, Active Income is directly affected by either how long you work, or by how much you're paid; increasing each of these will increase your total Active Income.

The first way to increase your Active Income is to increase the number of hours worked. This is probably the easiest to achieve, as your job might allow you to work additional hours, work overtime, or have a second job. However, there is only so many additional hours you can work, firstly, everyone needs time away from work to relax and enjoy, and secondly, it's impossible to work more than 24 hours in a day. because of these 2 constraints, increasing hours worked will only ever yield small improvements in your Active Income.

The second, and better approach is to increase your hourly wage. Unfortunately, many people greatly underestimate the value of their time. The sky is the limit when increasing your hourly wage. However, achieving a higher hourly wage is obviously harder to achieve, as this will require you to learn new skills and be willing to progress your career, or even change your career entirely. A quick method of increasing your hourly wage is to simply change companies. This can be hard, as you may have loyalty to companies, but in this game, you have to look after yourself, and if you feel there are better opportunities at another company you can often negotiate a higher salary and expectations of promotion.

Active Income will always be constrained by these 2 factors. If you're really interested in boosting your total income, you'll need to start making your money work for you. And this is called Passive Income.

About the Author

Phil Balchin is a full-time software developer at Zendesk, previously at Heroku/Salesforce, and Kyan, as well as a part-time photographer living in Guildford, Surrey, UK. | | | | |
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