The first piece of the financial equation that people often address is; how to make more money? Naturally this is where people start when making career choices and planning their futures. So, lets take a look at how we can influence the “money in” side of things. How can we bring more money into your situation?
There are two main approaches to this question.
- Increase the amount of your income source.
- Increase the number of income sources.
It really is that simple. Any organization that wants to increase its sales numbers will either increase their sales price or find more customers. Your situation is much the same. The one caveat that I will mention is that you likely will not be able to increase your earnings without adding additional value. What I mean by this is don’t expect to make more money by doing nothing. According to the interweb many seek to make more money without doing work and I can tell you that is simply lazy and stupid. Ask yourself: who do you want to give money to, the person that did something for you or the person that does nothing for you? Now, there are ways to achieve passive income but that is for a later discussion.
Increasing The Amount Of Your Current Income Source.
For many that work full time they have a single income source in the form of a job. Many working professionals in this situation put in a lot of hours with a single employer and live off of those earnings. These W2-preneurs show up, add value, and help their employer build their bottom-line profits. If an employee doesn’t allow an employer to make more money, or possibly minimize the loss of money than they are not a good hire and won’t be working for very long. Each employee in an organization must contribute to the end goal of the company making more money now and in the future.
Understanding this reality can position you as an employee to negotiate a better income. I have seen firsthand individuals critical to a company coast along and make at or below market average pay. This happens because some people are either happy with what they are earning or don’t realize they should be getting paid more.
My first salary negotiation was much the same.
When I started as an engineer I began as a part time intern, then moved to full time hourly, and finally to a full-time salary position. This process was not one that the company initiated however. I had to push this along. How did I do it? In short, I simply added value and demanded commensurate pay. As promotions occurred, I likewise negotiated offers and counteroffers. What I didn’t do is simply say: “Hey Mr. boss, I want more money!”.
Get An Offer From Industry Competitors.
If you want to find out how much you are worth, get a few offers from others in your industry. This is similar to finding comps in real-estate. How much am I worth? Well, how much is company A willing to pay? What about company B? You will find out quickly what others are paying for you position. I found myself asking this same question. Here I was with two undergraduate degrees, two minors, and sneaking feeling that I was worth a bit more than what I was being paid. So, I interviewed with another establishment and was provided a very generous offer. I didn’t take the offer however as I wanted to stay with my current employer. What I did do is inform my current employer what others said I was worth. Guess what, I got the raise. It also boosted my confidence. Having others say they will pay more for you is a good feeling.
Quantify your value.
If perhaps you don’t have the above option, go the route of quantifying your value to your organization. This can be a bit tricky as people seem to think they are worth more than they truly are. Remain objective when assessing your worth. Asking hard questions like: if I leave tomorrow what will it cost for them to not have me? How quickly will they find my replacement? How long will it take for someone to get up to my level of training? Hopefully you can nail down some hard numbers and put your value in black and white.
If you can objectively communicate the additional value that you bring above your current job duties it makes it a lot easier for your manager to grant you a raise. Remember, who the decision maker is and make it easy on them. Do not use “I think I should get a raise” or “I feel I deserve more” this fluff will not work to your benefit. What does work to your benefit is: “My efforts in project X netted the company an additional $2,000.00” or “When I instituted and enforced policy Y the fall out has dropped 10% which conservatively saved the company $3,000.00 this year”. Hard facts and hard numbers will make it much easier for your employer to justify paying you more.
Increase The Number Of Income Sources.
If you have already maxed out your current income source the next option to increase your income is to find other sources of revenue. Your additional income sources will likely be service based and not capital intensive. By this I mean you will be working, not renting out assets. As your asset base grows you will get to that point but in the beginning the hard truth is that you don’t have much more than your skills and time to offer.
You need more people willing to pay you for the value you offer. Assuming that you are working full time this will mean you have to find other part time jobs or alternative side gigs. These nighttime or weekend gigs can be a very quick and effective way to earn more money. I would put overtime into this same bucket.
If you can offer what you are currently offering your full-time employer to others part time this will likely be your greatest return on your time. After all you spend the majority of your time doing what you do, you better be good at it.
If perhaps you are limited by non-compete or conflicts of interest, then take your skill set to another industry. Someone that makes cabinets for example may not be able to work for a competing cabinet company, but they could use their wood working skills to make other furniture. The point here is don’t limit yourself to only the domain of your nine to five job.
Finding Your Work Life Balance, Why You Work
All of this extra income is great but at some point, you have to ask what it is all fore. Unless you simply love to work all of this extra time sold to others will begin to wear on you. You will need to find the balance that works for you. For some this will mean a comfortable 9-5 position and having their nights and weekends free. For others it could mean a period of time focused on earning so as to afford additional expenses or to eliminate debt. Having the reason for your money known and establishing your financial goals will help make these decisions. In subsequent articles we will discus this balance and ways in which you can work to the appropriate end.
Wherever you are on your income journey be sure to check out The Four Stages Of Wealth Creation; From Clueless To Capitalist. We put this together as a guide for those looking to grow their financial acumen and take their next step towards financial independence.