Happy Wednesday, Wise Owl Nation!

The Gap of Opportunity is a concept I have been playing around with for a few years.

It started as a personal finance concept I would use to illustrate the gap that could exist between the money you make and the money you spend each month. If you make more than you spend, you have a gap of opportunity to improve your wealth. If the money you make each month is less than what you spend, then you have a gap of sorrow that you need to fix immediately.

Lately I've been thinking about how the Gap of Opportunity exists in many aspects of life, and so I decided to write about that today.

Let's get into it.

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Quote of the week:

Wisdom Tip of the Week: Equality of Opportunity vs Equality of Outcome

I've seen these two topics debated over the last few months as our western culture grapples with the social issues we are facing this year in 2020.

The debate is around equality of opportunity and equality of outcome. These are two concepts of equality that are very, very different.

Equality of Opportunity: This is the philosophical concept that everyone has the same opportunities to improve their station in life, regardless of who they are. As a society we are not there yet, but there is no doubt that we are getting better at it.

In present day there is still a Gap of Opportunity that exists depending on where you started in life. For some people it is so much harder to find success than it is for others.

Equality of Outcome: Another philosophical concept that is core to some political ideologies. This concept argues that you can create a better society by forcing everyone to have the same level of material wealth by distributing all assets equally among the society.

When governments in the past have tried to force Equality of Outcome millions of people have died. The 20th century was one of the most devastating centuries in history with regard to failing experiments on forcing equality of outcome.

To further illustrate the difference in these two concepts, I am going to use a poker example.

In a poker tournament everyone starts with the same amount of poker chips at the beginning. They are all given an equal opportunity to win poker hands, increase their chip stacks and eventually win the tournament.

Just like in life, there are factors that can either improve or reduce someone's chances of winning a poker tournament.

• Knowledge of the game
• Self-control in situations of stress
• Experience playing the game
• Luck
• Management of one's chip stack

But none of these factors guarantee an outcome. They merely increase or decrease the likelihood of someone winning if they played in many tournaments.

Imagine starting a poker tournament with almost no chips. Imagine being sat at a poker table against several people who started with a ton of chips. Your chances of winning at this point are extremely low. This is the struggle in some parts of the world. This is the inequality that is worth fixing.

But what if your chip stack never mattered to begin with, and that playing the game was a useless formality?

If equality of outcome was forced, at the end of the tournament, everyone would be given their money back, because no matter how well or poorly you did in the tournament, the financial outcome is the same.

In life, just like in poker you can't force humans to have the same outcome. In that kind of world hard work, luck, patience, and strategy wouldn't matter. There would be no point in playing the game of life. Happiness in general would slowly erode away.

People need challenges to overcome, goals to pursue, and a purpose to their life.

These are my thoughts on these two concepts. Do you have thoughts of your own? If so, let's discuss!

Health Tip of the Week: Join a group that is healthier than you

This tip comes from the book "Atomic Habits" by James Clear.

The idea is that "the key — if you want to build habits that last—is to join a group where the desired behavior is the normal behavior." - James Clear

This idea could have fit into any of these sections, but for me it is much harder to take massive action to become a super fit person. For whatever reason it is much easier for me to be consistent with big money moves than it is for me to be consistent with big health moves.

When you surround yourself with people that eat poorly, never exercise, and have no desire to improve themselves, you are setting yourself up for massive failure.

If you were to surround yourself with people that all cooked healthy food for themselves, exercised regularly, and helped you do the same, it would be monumentally easier to become healthy alongside the rest of the group. When you and those you are around have normalized excellence, your boat will rise with the tide alongside their boats.

There is a huge Gap of Opportunity that exists between these two examples of groups, because if you don't learn to control your environment, your environment will control you.

Do yourself a favor and at least give yourself the opportunity to find that success.

Wealth Tip of the Week: You can't be taxed on what you save

When I talk to people about building wealth, the conversation tends to move towards "how do I make more money?"

For whatever reason, increasing income seems to be the default we all get ourselves into thinking about. Today I want to remind you all that increasing income, while helpful, is not the first action you should take when getting your personal finances together.

The problem with increasing income is that it takes a lot of time and effort to make happen, and that new income of yours is taxable. I've known many entrepreneurs whose business' made over a million a year, while they still had mountains of debt.

A millionaire is not someone who earns a million dollars, a millionaire is someone who keeps a million dollars.

My point here, is that you should start your personal finance journey by getting a handle on your spending. After all, you can't be taxed on what you save.

If you can find a way to cut your spending by $500 a month, that is the same as earning an addition $6,000 a year tax-free! That is serious business.

The more you can cut your spending, the more tax-free money you keep.

The less you allow yourself to spend, the greater your Gap of Opportunity becomes.

Don't let this image fool you. The income column in both of these pictures can be the exact same amount.

What can you do this week to lower expenses?

Here are a few examples of some of the easiest ways to reduce monthly expenses:

• Reduce your rent by living with roommates or by moving to a less expensive area
• Cook instead of eating out (I am super guilty of DoorDashing all the time)
• Pay off your car and own it outright
• Spend as little $ as possible in areas you don't care about, so you can spend lavishly in areas you do care about (i.e. I never buy new clothes, so I can instead eat out more)

I've written a few articles on the topic of reducing expenses, and they take slightly different points of view.

• How Cutting Specific Expenses Can Lead to Massive Wealthy
• Do You Actually NEED a Budget?
• How Much Money is "F*ck You" Money?

More Resources

I will be adding to this section over time as we find resources that will help you all.

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