Leverage is a springboard for wealth creation. If you’re working hard and feel like you’re not getting anywhere, then you need outside help. Leverage is a concept that creates more wealth and time by capitalizing on other people’s resources. A lot of people think that leverage only means borrowing money. While this is one avenue, there are many more, such as using other people’s time, network, skills and the systems they’ve created.
Leverage goes beyond business. You may not realize it, but you’ve already been using leverage in everyday life. If you’ve ever hired a babysitter at $12 an hour so you could stay at work longer, where you get paid much more than that per hour, then you’ve used leverage. If you have a 401(k) or IRA and have a money manager overseeing the account, then you’re using leverage. You also may leverage other people’s skills and time when you have someone else wash your car, clean your house or groom your dog. Basically, you’re using another person’s skills or time so that your life is a little easier.
We can apply leverage beyond a dog groomer or the basic money manager. The beauty of leverage is that, when engaged properly, you will find that you have more money with less work. And isn’t that what we all want?
Rock Your Relationships
Who you know can make a huge difference. They may be able to help you directly or introduce you to someone who can. In other words, you can leverage the connections they already have. If you have a business, you can use other people’s contacts and exposure to market yourself. Let them connect you to other “movers and shakers” as well as get the word out regarding your work.
Another person can help you reach your goals by recommending you to an employer, give you more customers, train you in the skills you need or buy all the products off of your shelf. Knowing the right people can escalate your career—and not knowing them can keep you from reaching your goals.
Networking—either in person or online—is one of the best ways to meet the right people. You can check out networking events in your area through sites like meetup.com or Facebook groups. LinkedIn is the go-to site for business connections but these days, you can also connect with people through Instagram, Facebook, Pinterest, YouTube, Twitter and more. Your goals will determine whether you should focus on connecting online, in-person or both.
For example, let’s say you’re on the lookout for a management position with a tech company in your area. You go to a networking event and meet a person who works for an exciting startup who happens to need someone to oversee their marketing department. She likes your sparkling personality and offers to mention you to “the powers that be.” Just like that, you have the potential to land the job of your dreams. However, if you’re wanting the same type of job but in a different city, then obviously reaching out to people online who live in your desired city would be much better time spent.
I talk a lot on this site about how becoming an expert can earn you top dollar—and you can read more on this in my article 5 Steps to a More Exciting and Lucrative Career. Part of becoming an expert is connecting with other experts in your field (or a similar field). As the saying goes, we become who we associate with. When you surround yourself by these experts, the public in general starts seeing you as an expert, too.
Find Financial Freedom
Financial leverage is associated with financing; it involves getting money from other people so you can “expand your reach.” There is an acronym for this used in the business world—OPM, which stands for “other people’s money.” The idea is that you access outside funding so that you’re not limited to just your own funds. This allows you to buy things that you normally wouldn’t be able to afford–things that make you more money like starting a business or buying rental properties.
If you’ve ever purchased a home and borrowed money to do it, then you used this type of leverage. Without the bank’s financing, you wouldn’t have been able to buy the home. The same goes for if you have borrowed money to purchase a car, go to college etc. (Consequently, I’m against borrowing money to buy a car since it’s a depreciating asset. For more on how to pay off your car loan, read Never Have a Car Payment Again (Even If You’re Middle Class.)
Financial leverage is used all of the time in the business world. Companies issue stock shares in order to raise money. They then use that money to grow the business. If you own or want to grow a current business, you can use financial leverage by:
- using bank loans,
- getting grants
- accessing crowd funding on sites like kickstarter.com and indigogo.com
- ask for donations on sites like gofundme.com
- borrow from family and friends (Careful with this one! If you fail, they could hate you.)
Without the money to grow a business, it can be hard to get it off the ground.
Personally, I’m debt-averse. Debt can weigh you down and keep you up at night, as I wrote in How to Free Yourself From Debt and Live a Better Life. But if you do your homework and have a solid business plan in place, it can be the best thing that happened to your business. You’ll be able to expand much more and at a much quicker rate since it can give you the funding to hire outside help.
Trade Time for Top-Dollar
If you want to maximize your wealth creation, you will need to use other people’s time to get more done. The biggest example of time leverage is hiring employees and contractors to do work that is at a lower rate than what the total job is worth. Your job as a business owner (or manager) is to focus on the bigger picture and oversee the project.
Steve Jobs did this when starting Apple. Jobs never wrote a line of code but instead, led the programmers in the right direction to create top-notch products. To make more money, you will need to be the leader and let others do the grunt work.
Leveraging other people’s time goes beyond our careers. When we use other people to clean our houses, mow our lawns, detail our cars and more, we are leveraging their time. Allowing someone else to do it frees up our time to do other things.
Seek Skills and Knowledge
What do other people know or what are they good at that you can access? You can hire people who are good at what they do in your field of work—employees and contractors. But you can also hire financial advisers, attorneys, insurance agents and more to help with your finances. You can also use YouTube videos, books, podcasts etc to learn a new skill that will help you in your own career.
Leveraging other people’s skills and knowledge involves having standards and searching for quality. If you want to get more done in less time, then you need to have the right team of people in your life.
This isn’t just about finding the right team for your work or finances. It’s also about finding the right people to do those everyday things mentioned above. I discuss how to find the right team for everything in my article Get the Right Team to Achieve Your Dreams.
Finding quality people for the right price can sometimes be a challenge but the upfront work is worth it because once you find them, you can use them over and over again. This makes your life easier for you in the long run.
Save Time With Systems and Technology
Apps, platforms, software, procedures, manuals and other preformatted systems help save us time by automating processes that would otherwise take longer to do. All of us use systems and technology in our everyday lives to save time. For example, using the web to research a problem or connect with others is accessing technology; enrolling in an online class that will help you further your career is accessing both a system and technology.
The role of utilizing systems and technology for wealth creation is huge and depends largely on your personal goals. You can use them to educate yourself so you’re better informed when making business and financial decisions; create automation in your own work and personal life and more.
Two ways I’ve capitalized on systems and technology that others have created is through this blog. When I first built this website, I used a template that was already formatted—that a team of other people created. Although I have since customized the site to better fit the needs of you (the reader), having the template saved me lots of time. I also use the system that WordPress (the host of this site) has created for automatic billing, site updates and more. This saves me the hassle of doing it manually each time.
How can you use systems and technology to make your life easier and your work more productive? The world is constantly coming out with new options for all of us. If you’re not sure where to look for the latest in what can help you, check out business and tech magazines, and also look at the websites of other successful businesses in your field. What do they use? You can also watch YouTube videos on the topic of your business. A lot of YouTubers will mention tools they use. (Just be aware that sometimes they are getting paid by another company to do so!)
Leverage Gives You a Life
The real payoff of implementing leverage is that it frees up your time to focus on the things that are going to give you the biggest pay-off—whether that’s personally or financially.
In one of my favorite books, Wealth Secrets of the Affluent, authors Christopher Jarvis and David Mandell, wrote, “Leverage makes your life easier. Leverage frees you up to do the things that are most important, most profitable, or most enjoyable to you.”
Leveraging other people’s time and skills, for example, can give you the gift of spending more time with your loved ones. Leveraging other people’s money (OPM) can give you the gift of finally starting the dream business. (For more on how to start your dream business, check out my post How to Launch Your Dream Business.) Reaching out to others, and leveraging their network, multiplies your reach and can bolster your image.
I wrote this article because I feel like not enough people truly understand or utilize leverage. But, as I’ve outlined here, leverage and wealth creation go hand-in-hand. No one has become wealthy without it.
What big action can you take this week to engage in the concept of leverage? Try finding a new use of leverage that you haven’t used before: such as looking into getting a business loan, hiring a contractor to do some of the work you’ve been doing, or finding an app that will automate a business or financial process for you. There will be upfront work involved but the payoff can be huge.
Please email me at email@example.com and let me know what action you took! I always love to hear from you. I hope that you will remember the concept of leverage as you move forward on your financial journey. The more you use it, the easier your life can get:)