Components of a Financial Plan
February 12, 2025
Personal finance is defined in such a way that it is supposed to be linked with the financial decisions of an individual or their family. Any decision which is taken at a higher level is not considered to be a part of the personal-finance domain. However, it is important to realize that decisions related to […]
The high indebtedness of the United States of America is well known. However, USA is still considered to be an economic superpower and its economy even in the faltering state is better than many countries. However, of late Puerto Rico, an American state in the Caribbean islands has revealed information that communicates financial distress. The […]
The money market is a full-fledged financial market. Hence, there are many investors who are keen to hedge the risks which emanate from the money market. The need to hedge these risks has led to the creation of several money market derivatives. There are certain exchange-traded derivatives that are a part of the money market […]
The field of commercial banking is undergoing many technological changes simultaneously. Open banking is one such technological change. Open banking is unique in the sense that this change has been initiated by regulators in most parts of the world. Generally, technological changes are adopted by commercial banks themselves with a view to increasing their productivity […]
In the past module, we concentrated on calculating the returns part of the project. All our articles were focused on calculating cash flows and we saw the various special cases that arise while determining cash flows and determined how we must deal with them. This module is all about the other component i.e. risk. The […]
The United States of America is full of people who have huge student loan debt, credit card debt, and mortgage debt. There are many reasons which can be attributed to this massive increase in personal debt. However, the inability to completely understand and apply the concept of earnings power is also an important reason which has caused this debt. In this article, we will understand what the concept of earnings power is and how it can help people make better decisions related to personal finance.
Simply put, earnings power is the ability of a person to sell a product or service and then generate earnings from the sale. However, it must be noted that different people have different earnings power. The example of a grocery store can be considered to better understand this concept. There are several people who work in a grocery store. For example, there are people who work as cashiers and stockists. On the other hand, there are certain employees who manage certain departments and even the entire store. Lastly, there is the CEO of the grocery store.
It is important to note that all three types of people work for the same company. Yet, they get very different monetary benefits in lieu of their efforts. This is because they have different earning powers. The balance of this article will explain the concept of earning power in more detail.
The earning power of a job is determined by several factors. Some of the important ones have been listed below:
It is ironic that we teach young people how to manage their money once they have earned it. However, we do not teach them much about how they can earn more money by making the right choices.
The bottom line is that earnings power is an important concept of personal finance. It should be taught to young people before they begin their careers. It should serve as a guide for them to make effective decisions.
Your email address will not be published. Required fields are marked *