Luke Milholland CFP®,ChFC®,CLU®

Expense Planning

Have you ever thought to yourself,

“If I could only earn a little more money, then I could finally get ahead.”  

If so, you are not alone.

It is an easy trap to fall into. Thinking that earning more money is the answer to solving your problems and achieving financial freedom provides a sense of hope for the future and (momentarily) relieves personal responsibility for the here and now.  

We find hope in the thought that someday we will realize our full earning potential, and when we do, things will be better.

Allowing ourselves to think that more money will make our problems go away provides a sense of relief from personal responsibility because it leads us to believe that what we are currently experiencing is beyond our control.  

This is a potentially ruinous way of thinking, because in most cases it is a false assumption.  


I’ll give you two reasons:

Reason #1 is that earning more money may not be the answer to achieving financial freedom...

Money simply magnifies what is already there

For most people, it is likely that more money will add zeros to whatever problems they are currently facing. Maybe not immediately, but over time.

The truth is that the only thing more money does is shine a bigger, brighter light on what is already there.

If I find myself in a cycle of financial stress, I must first ask myself why.  

Is it really an earning problem or is it that I lack contentment? Do I really need a bigger house? Do I really need a new car? Do I really need the latest gadget?

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Sure, I can justify those things and tell myself a compelling story about why they are “needs” and why I need them now!  But therein lies the danger.If this is my mindset just think of the bigger/nicer things I could buy with more income! See where this goes?

It’s a vicious cycle, and is the reason why I sometimes see people who, no matter how much they earn, somehow find a way to spend more.

The good news though is that just like money can magnify bad habits, money can magnify good habits too!  

In that case, earning more money can be a real difference maker. It ultimately comes down to habits and your mindset around money. So before you fall into the trap of thinking more money will save the day, make sure you have these two things that are more important - good habits and the right mindset.


Reason #2 is that earning more money may not be the answer to achieving financial freedom...

Earning more requires more time and higher taxes

There are three types of income, with earned income being the one that puts the greatest demands on your time and is also most highly taxed, especially as you climb higher up the tax bracket.

When you go to work for money, there is an inherent requirement on your time. This doesn’t really appear to be a problem, until you run out of time.

Yes, you can find ways to become more valuable and increase the earning potential of a unit of time, but invariably there are only so many hours in a day.  

What’s worse is when a young professional who has fallen into the vicious cycle described above, now has a growing family and greater time demands on the home front.It is so sad that in the season of life when they need it the most they have next to zero margin or flexibility.

Beyond time, there are taxes. Earning more sounds great and it really is, but the more you earn the more you pay in taxes until you cap out around 40% (in 2019).

In conclusion, it is for these two reasons that we find many people are not making the progress they would like with their finances. If the fundamentals (habits & mindset) aren’t strong, all more money does is add zeros to problems. From there, most of us run into capacity limitations with our time and our ability to go earn more money.  Not to mention, that earned income is highly taxed which leads to a kind of diminishing return experience.


So what can you do?  

First, start by developing a healthy mindset around money and learn good habits. This will increase your likelihood of experiencing success with the use of money. You can do this by reading books on the subject and/or by building relationships with folks who can help you.  

Second, focus on building the other two kinds of income: portfolio income and​ passive income.  By all means, don’t shy away from opportunities to increase your earned income. However, learning to create streams of portfolio and passive income will be the key to achieving financial freedom, not earning more.

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