Rich people understand profitability. That’s why their rich. They know how to invest some of their resources (time, energy, money, real estate or other assets) in a way that gives them the biggest possible return.

Warren Buffet who is arguably the most savvy investor alive makes his decision on what stocks to invest in mainly after evaluating opportunity costs. Opportunity costs are the values of what is foregone in order to have something else.

Yes, you may put your money into a portofolio that gives a 4.7% return. However, if there’s another portfolio that’s just as save with a 5.1% return, you’re actually not making 4.7% but loosing 0.4%. Now this is enormously oversimplified, but you get the picture.

Another more common case of the power of profitability is simple things like doing the dishes, washing laundy, buying groceries. Do you do all these things yourself? Well, if you get paid 50$ per hour then every time you buy groceries you’re loosing $40 – cause you could just pay somebody $10/hour for buying your groceries and spend that time earning $50. This is common sense, and you should apply it to your life.

Are you getting the most monetary value out of the things you do for any OTHER reason than pleasure? Sometimes when I introduce people to this concept they react negative. They say I only care about money, I’m obsessed about it. And I always tell them that’s not true: I want to spend as much time of my life doing purely pleasurable things, spending time with the people I love and care about. That’s why I allocate my time organize my life in a way that allows me to do just that. If I’d be obsessed about money, I’d find somebody whom I’d pay only $5 per hour to do the groceries and spend the “free time” I now share with friends and family to make more money. And in fact, the people who complain about me being obsessed by money are often people who are stressed out and feel they don’t get what they deserve, that they’re being paid unfair. And I think that’s just a flaw in their thinking: they’re paying themselves unfair! I know to some people with a strong work ethic it seems high-society-like to have someone buy your groceries, but I’d rather put an hour of work in (which I enjoy just about as much as buying groceries) and get $40 for it that I later can use for pleasure-activies.

Categories: Living Profitable
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