Earnings Power in Personal Finance
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.
What is Earnings Power?
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.
Components of Earnings Power
The earning power of a job is determined by several factors. Some of the important ones have been listed below:
How Earnings Power Helps in Decision Making
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.
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