LIVETo better define how can you achieve your financial goal (earn cryptocurrency), we will use this simple equation:
Salary + Capital Changes = Assets and Liabilities
Salary (Real Economy) – money contribution given in exchange for your time in the real economy (for most people is just a job)
Capital changes (Financial Economy) - your capital can be decreased by wrong investment decisions or specific market situations. It’s also decreasing over time due to inflation. Successful investment by the other way is increasing your capital
Assets – Real and financial things that increase your capital over time (we just added them to portfolio)
Liabilities - Things that do not generate your interest or are illiquid (due to your decision or nature)
So, in order to increase your wealth (assets and liabilities), you can increase your salary or income from wealth. Let’s dive deeper into this.
To increase salary, you can get a promotion or change job, etc. The main KPI here to consider is salary/h. This is not part of this article, but you can find more details on the 80000 Hours website.
To increase the rent from the capital, you need to have more assets, as liabilities don’t produce cash flow and you can’t sell them for a higher price in normal market conditions, or get a better return from them.
We also need to consider an additional measure which is time. You can also automate what you are doing now (maybe just buy ETF instead of spending time finding the best stocks) to decrease time, and ultimately increase financial income/h.
Now the questions arise:
Should you invest to increase your capital rent vs focusing on your job to increase your salary/h?
This is a hard question. We can compare and simulate changes in your salary or capital rent, but you should also consider less quantifiable factors. Again, 80000 Hours is the best source to start.
If you think that investment is better for you, check my other posts.
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