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Corporations are people…

Once I realized that the conventional financial wisdom had some obvious flaws, I decided that I needed some new role models.  I started to understand how corporations functioned, and why they consistently had crazy profits.  Let me be clear, I still don’t know how I feel about massive corporations as a whole, but there’s certainly something to be learned from their efficiency.

The following can be said of all successful corporations.  They provide a desired service a price others are happy to pay.  They spend a significant amount of time figuring out how much money they are earning, and where that money should be reinvested.  And finally, they form solid relationships with other smart people and businesses.

 

Provide a service

When it comes to earning money, I try to consider what service I am providing for others.   When it comes to our own careers, we tend to have a belief that we deserve our current salary, or maybe more.

When I listen to sales guys talk about their salary, it sometimes sounds like their employer is standing in the way of them and their proper paycheck.  I believe that we don’t “deserve” a specific salary, instead we can increase our salary by providing more services and more value to customers and employers.

This is top of mind at corporations because without providing effective service, they will soon be rendered unnecessary.  You never hear CEOs complaining about how their customers aren’t willing to pay for the service their company provides.  If customers don’t want to pay for it, the business must adapt and provide a better product.

Adapting this philosophy to my job has helped me to adapt to the changing needs of my employer, and anticipate further services that I could provide.  It’s remarkable to me how easy it is to seek out unmet needs, and then fill them.  So far, that’s all I have been doing at my job, and it seems to make management very happy.  Everyday I focus on what I am able to provide for them and the overall business, instead of what power I can grab onto for myself.  The compensation seems to take care of itself.

Where’s my money going?

Corporations have legions of employees focusing solely on how much money is coming in, where it is being spent, and where to reinvest the money that’s left over.  I have tried to model my finances more closely to the inner workings of a successful corporation.  A successful company concerns itself not only with sales (Revenue), but also maintaining their Operating Earnings (Revenue – Expenses).

Most of the smart people I know seem to worry a whole lot about their salary (or their personal revenue), but not as much about what their Operating Earnings are.  People love to ask, “So how much money do you make?”, when that doesn’t really tell you anything.  The question should be “What are your operating earnings?”.  In the long run, it is your operating earnings, not your salary, that will define how long you have to work.  (I’m still figuring out my master plan, but this is a core feature.)

After I determined that my operating income was high enough, I needed to figure out where to put it.  This is where businesses truly excel.  They know what parts of their business will provide higher investment returns than others.  Every investment they make must be justified with a substantially high ROI.
When I say every time, I mean EVERY time.

This is the strategy that I have tried to apply to my spending and investing.  For example, I need to look presentable in order to perform well at work.  This means that I need to invest in some moderately nice business casual attire.  It is difficult to calculate the ROI, but it is certainly still there.

I could buy my work clothes at goodwill (and risk coming off as uninterested), or I could buy all the latest fashions (and spend much more than I need to).  Finding the balance between those two extremes is where my ROI comes in.  Thinking about all of my spending like this has helped me cut out the low ROI parts.

Relationships built to last

Corporations are also great at building strong relationships with smart people and trustworthy companies.  This gives them buying/leveraging power, as well great customer service and a speedy response whenever they run into a problem.  They pay their employees what they deserve, and become even more profitable in the process.

This principle can easily be applied to my financial relationships.  Before I started my personal cash rebellion, I chose to do business with whoever was convenient, instead of who might offer me the best product.  A corporation wouldn’t allow this to happen, they’d go out for bid for each service and determine the right partner, saving them lots of time and money in the long run.

I have decided that I only want to do business with companies that lay out their fees ahead of time, so we can all understand how they are making a profit, and what I am truly paying for.  This is how corporations deal with each other.  They are open and honest, and they allow negotiations.  That’s why I reject companies that have secret fees and restrictions.

Not properly vetting my own relationships has lead to a fair amount of headache.  I used to do all my banking with a large national bank that didn’t treat me very well.  By seeking out businesses like Ally Bank and Vanguard, I’ve been able to save time, money, and trust that we have a relationship of mutual benefit.

The Wrap-Up

Now, I’m not saying that corporations are perfect.  In fact, a lot of corporations are responsible for some pretty terrible stuff.  All I’m trying to say is that they seem to be pretty great and filling a need, growing their money, and building relationships that last.  And my personal finance skillz definitely benefited from looking at my cash from this perspective.

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