How to Make More Money

How to Make More Money

Cutting expenses is often easier and has a larger long term effect on financial health, but has it’s limits.  At some point, you do reach a point where you can’t cut anymore without also significantly reducing quality of life.  This is where making more money can help.  Doing both = even bigger results.

Five Ways to Increase Your Income

Invest

Investing your money is a great way to increase your income. If you start early enough, income from investments can eventually outpace your job income!  However, investing usually requires some money to start with.  We’ll cover investments in more detail in this post. For now, focus on other ways you can increase your income in the more immediate future, so you have more time and money to invest.

Negotiate a Raise

Think about it this way – you’re not just making more money next year – you’re getting it every year for as long as you keep working.  Even a one time $5,000 salary increase can add up to almost $1.4 million invested and compounded over 40 years. 

According to PayScale’s 2020 Compensation Best Practices Report, 82% of companies gave increases to base pay in 2019—but two-thirds of those companies gave raises of 3% or less.  For reference, an annual raise around 2.25% helps you keep up with inflation. 

To beat the average raise, this guide by Ramit Seithi would be a great place to start. It’s one of the best I’ve seen (complete with negotiation scripts). Otherwise here is a quick summary of the best tips from a variety of sources:

Click to expand raise negotiating tips
  • Prepare – most of the work involved in getting a raise is about more than that 30 minute conversation with your boss.
    • If possible, find out what pay raises at your company are based on
    • If you’re not already, talk with your boss about expectations, performance goals, and how you can excel at work.  Do these things and track your progress.  Document areas where you’re beating performance measures and examples of how you’re adding value.
    • Look at comparable jobs/salaries/experience levels.  You can use sites like salary.com, PayScale, levels.fyi, or GlassDoor.  If you feel comfortable, you may also reach out to friends or coworkers with similar positions.  Use this data and your performance to determine your target salary.  Also consider what, if any, concessions you’re willing to make (i.e. working more hours, position change, team transfer, etc.)
    • Practice your conversation
  • Timing can have an impact, so plan accordingly.  The best times are when company is in a good financial situation, when you’ve been performing well, when your current salary doesn’t cut it, and/or when you first receive a job offer.
  • Schedule the meeting – this should be done in person
  • During the meeting
    • Keep emotions out of it, but be confident (not cocky) and have a good attitude.
    • Don’t compare yourselves to specific coworkers – keep any comparisons relative to the general field/position.
    • Keep personal expenses out of it. Focus on what you prepared for: how you’ve added value, and how you can continue to add even more value.
    • Be ready for a no and practice “no factors” – what you’re going to say if the boss says no.  Here are some examples:
      • If the boss says “we have no money for a raise,” what about more vacation, stock options, change in title, flexible hours, etc.  At a minimum, get acknowledgement that you are dropping your request for a pay raise temporarily to help company in a tight situation.
      • If the boss says “now isn’t the best time,” aim for an agreement.  I.e. how about if I meet these measures by this date – can we commit to a raise then?
    • Here’s another good list of dos and don’ts.
  • Follow up
    • If you got the raise, send a nice message to your boss thanking them and letting them know how excited you are to keep helping the company succeed.
    • If you didn’t, thank them for their time. Let them know you look forward to following up at your agreed upon time and helping the company continue to succeed in the meantime.

Change Jobs

There is some data showing those who switch jobs may grow earnings faster than those who stay at the same one, but the real answer is that it depends.  When the economy is booming, switchers may have a slight edge.  During and after recessions, it looks like stayers come out ahead.  More importantly, it depends on your individual situation.  If you are at a company that offers personal and financial growth and you are performing well, appreciated, and regularly rewarded, then you may not benefit from a job switch.  If you’re not happy at your current job, or raise negotiations have stalled and you’re confident you can find a better job elsewhere, then it could be a big way to boost income and job satisfaction.  At the very least, as long as you follow this advice, it may not hurt to look. 

If you do get an offer but are still willing to give your current company a chance, you might be able to use that as leverage.  If you let them know you’re quitting, they may try to keep you.  For many businesses, it’s cheaper for them to retain you than it is to train someone new.  However, in either case, be ready to walk once you give your notice.  Unfortunately, some companies may take it personally or want you gone immediately to protect intellectual property, customer info, etc.

Increase Your Level of Education

On average, people with more education make more.  According to data from the U.S. Bureau of Labor Statistics, those with a bachelor’s degree earned about $26,000/year more than those with only a high school diploma.  An extra $26,000/year x 40 years = an $1,040,000 in lifetime earnings.  If you invested that extra $26,000/year instead (assuming a 7% return), you’d have over $5.5 million more 40 years from now.  A master’s degree offers similar benefits over a bachelor’s, and a professional degree even more so relative to a masters.  College can be expensive, but it can also be worth it.  Some companies will even pay for your schooling as long as you stay with them for a certain number of years afterwards.

It also doesn’t have to be college – there are plenty of industry specific certifications you can also get to increase earnings potential. Trade schools are another good option that often lead to high paying jobs. Check out these 50 jobs from MMM that make over $50,000/year and don’t require a college degree: part 1 and part 2.

Get Your Side Hustle On

Do a Google search for something like “how to make more money” and you’ll find all sorts of ideas.  I once worked a summer as a carny.  Some of the ideas are pretty mediocre and usually not worth the effort (i.e. online surveys), while others can rack up some decent cash.  Be sure to weigh the opportunity cost when deciding what to pick up.  For example, Uber and Lyft might seem like decent income, but when you factor in the extra time, wear and tear on your car, and accident risk, you’re earning a lot less than you think.  Here are some of the better ones:

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