Updated: Aug 16, 2020
There are two actions you can take to immediately begin improving your financial position.
Saving more of the money you currently have
Make more money.
That is personal finance in a nutshell. If you can continue increasing your income while not giving into lifestyle inflation, you will have a successful relationship with money. Once you understand that concept, the natural follow up question is how to make more money?
There are three simple ways to make more money.
1. Earn more per hour worked
2. Work more hours
3. Start a business
If that sounds simple, it's because it is. Personal finance is not very complicated. All you need to do is learn a few simple concepts and have the discipline to follow through and do the work every day.
Why increasing your income is important
Ask yourself a simple question. If the amount you cleared on every paycheck were to double, would you be less stressed about money? Of course, you would.
The higher your take-home pay, the more breathing room you would have in your monthly budget. The average family spends two-thirds of their income on "the big 3" expenses; housing, transportation, and food. That does not leave a lot of money left over for things like saving for retirement, paying off debt, and spending money on things they value.
If you are like a lot of people right now. You can cover your living expenses each month, but there is not much left over to save and grow your wealth. The simplest solution to that problem is to earn more money while maintaining your current level of spending.
Earn more per hour
Let's not overcomplicate things. The two most valuable assets in life are time and money. Most people trade their time in exchange for money. We go to work, spend 40+ hours a week doing something we may or may not enjoy, in exchange for a paycheck every two weeks.
If you're going to trade your time for money, you should maximize the amount of money you receive in exchange for the time you give to your employer. Put simply, you need to earn more per hour.
How do you earn more per hour?
There are two ways to begin earning more money per hour worked.
Ask your boss for a raise.
Find a new job that pays more per hour.
The simplest solution is to ask your boss for a raise. Here's a quick tip on how to go about doing that. When making a case for a raise to your boss, avoid phrases that start with "I."
Your boss is likely to reply with another phrase that starts with "I"; "I don't care."Instead, focus the conversation on the value you provide to your employer. Your employer isn't paying you for your time, they are paying you for the value you provide during that time.
Your employer needs to believe that you provide more value to the organization than whoever they could find to replace you. If they believe that you should have no problem giving you a raise. If they think you are easily replaceable, odds are they won't feel the need to pay you any more than they currently are.
Don't make it about what you need, make it about what your employer needs and how you can help provide those needs. If you can make the case that your salary is the best bargain your company is receiving, you'll be in good shape to ask your boss for a raise.
Start keeping track of all the things you do throughout the workday that add value. Everything from refilling the coffee pot to closing a big sale adds value to your organization.
Above all else, look for ways to make problems go away for other people in your organization. The more often you make someone else's life easier, the more valuable you become. If you can find ways to make your boss's life easier (without being a suckup), that is even better.
If you've already hit the earnings cap for the current role you are in, then asking your boss for a raise might not do you much good.
If you've maxed out in your current role, start looking at jobs that pay more within your organization. Most companies put out internal job postings that display the description of the job, the compensation provided, and the credentials and experience required for that job.
I would start by having a look at the job postings and see what experience and credentials are required for the job you want and begin working towards meeting those requirements.
If you can't get a raise from your current role and there is no opportunity to move up the ladder within your organization, perhaps it's time to start thinking about switching companies or careers.
Work more hours
Once you've exhausted your options for making more money per hour of work, your next best choice is to make more money is to simply work more hours.
The wrong way to work more hours is to take online surveys and engage in other activities that pay next to nothing, or even worse, pay you in gift cards. Working more hours to make more money does not mean you should devalue your time. If you're going to trade even more of your time for money than you currently are, make it worth count.
If you are already working 40 hours per week, are you really going to trade even more of your time in exchange for a gift card?
I hope not.
There are three ways to work more to increase your income.
Work overtime hours.
Pick up a side hustle.
Get a second job.
Again, let's not overcomplicate things. If you work at a job that allows you to pick up overtime hours, that is the simplest solution. The added benefit of working overtime hours is that depending on your local labor laws, you may be entitled to increased pay if you cross a certain threshold of hours worked.
An easy way to make extra money on the side is to pick up a side hustle or a second job.
I prefer a side hustle to a second job.
If you have a side hustle like driving for Uber, you can pick when you work and when you don't. When you have a second job, that will likely come with set hours at a particular location, which may make it inconvenient or impossible to fit in your already busy schedule.
Another aspect of trading time for money is flexibility. Don't underestimate the value of being able to choose how many hours you want to work and when you want to work them.
Start a business
The final way to generate more income is to start a business. What constitutes a business can almost mean anything from starting a blog to investing in real estate to starting a brick and mortar store.
Starting a business is the embodiment of the risk vs. reward trade-off. You are not guaranteed to make any money when you start a business. Many people who start businesses lose money.
When I started my first online business a few years ago, I worked hundreds of hours and invested thousands of dollars and never made a dime. I don't say this to discourage you, but if you start a business, you need to do so with full knowledge of the risks.
Starting a business also provides an unlimited upside to your income potential. The richest people in society are business owners.
Starting a business used to mean you would be required to have a ton of money to cover startup costs. Depending on what business you want to start, that may be true.
However, there are plenty of ways to create an online business that can generate additional income without high startup costs.
Selling on Amazon
Setting up an online store on Shopify
Turn your knowledge into an online course
These are just a few examples of ways you can create online businesses.
In my online business, I have two products.
Creating both of these products can be done on my schedule. There is no set time or location I need to do this work. All I need is my laptop and inspiration.
The flexibility of an online business allows you to dip your toe in the water and work on it part-time. That means you do not need to quit your job. You should not leave your job for an online business that isn't profitable.
If your willing to work on evenings and weekends, you can maintain the income from your day job and add the income from your side business. It's a win-win.
If you're looking to increase your income, it's best not to overcomplicate things. You have three basic options.
Make more money per hour.
Work more hours.
Start a business.
How are you planning on making more money this year? What if anything is holding you back from implementing any of the three ways to make more money discussed in this article? Let me know in the comments.
If you're ready to master your money, don't forget to enroll in my video-based personal finance course, "Millionaire In The Making: The 30-Day blueprint" Click here to enroll.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.