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What Determines A Person's Income?

Aug 17, 2007
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,


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 and 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!

Now you may say to me, 'Adam, I am not a mobile phone, I am a person!' Absolutely! But the same thing applies. When you create more and more value for your job, business or customers, your income will rise tremendously. Create more value!
About the Author
Adam Khoo is an entrepreneur, best-selling author and a self-made millionaire by the age of 26. Discover his million dollar secrets and claim your FREE audio CD program '7 Steps To Financial Freedom' here.
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