What Determines A Person's Income?

Before you can increase your primary source of income, you must
first understand what determines a person's income. Why is it that
one person is paid $3,000 a month while another person is paid
$30,000 a month?

Every time I ask this question to people, I get standard answers
like, 'age, qualifications, experience, luck, title, special
skills, specialized knowledge, intelligence and so on'. Well, none
of this is really accurate.

There are so many examples of people who are younger, less
academically qualified with less experience who are earning much
more than a 45 year-old Harvard MBA graduate who happens to be a
member of MENSA. It is also not uncommon to see people with less
experience in a company earn much more than someone who has been
there for the last twenty years. So what does determine a person's
income?

A person's income is determined by the amount of value he/she
creates multiplied by the time he spends creating value multiplied
by the scalability factor. In other words,

INCOME = VALUE X TIME X SCALABILITY

So, in order to increase your income, you must increase the amount
of value you create, the time you spend creating value and your
scalability factor.

Your Income is A Refection of the Value You Create

Let's first focus on how your income is determined by the value you
create. Well, let me give you a metaphor. Recently I went to the
mall to buy a new mobile phone. When I found the mobile phone shop,
I saw all kinds of brands and models on display - the price tags
they carried all differed widely.

I saw a Sony Ericsson 910i model that had a price tag of $1,400 and
a Nokia 2600 with a price tag of $238. Now, why is one mobile phone
priced seven times more than another? The answer is simple. It's
because one phone has a lot more functions and can hence create a
lot more value to the user.

The Sony Ericsson 910i is able to make calls, send & receive SMS,
send & receive MMS, record and edit videos, play & edit music, take
high quality pictures, surf the internet, entertain with games,
send and receive emails, has word processing and spreadsheet
capabilities, has Bluetooth technology and has an in-built personal
digital assistant.

In short, it is not just a phone, it is a mini computer! It does a
lot more than expected. It creates a lot more value for the user by
allowing him to achieve his goals more efficiently.

How about the Nokia 2600? Well, it's just a standard mobile phone.
It makes calls, sends and receives SMS, has entertainment games and
a calendar. It creates a lot less value, and is hence priced lower.
If the Nokia 2600 had a price tag of $1400, would you pay for it?

Of course not. It's just not worth the price. But if you had the
money and needed to surf the net, manage your time, check emails
and record images on the go, would you pay $1400 for the Sony
Ericsson? Of course! I did!

So let me ask you a question. Which mobile phone do you represent?
What is the price tag that you carry? If you want to have a higher
price tag and have people pay for you, then you must create the
necessary value!

What allows the Sony Ericsson 910i to create so much more value?
The answer is that it has a lot more software installed. How does
this translate to you? Well, in order for you to create a lot more
value to your company and your clients, you must keep upgrading
your knowledge and skills, your intellectual capital!

When you create more and more value for your job, business or customers, your
income will rise tremendously. Create more value!