Increasing your income
So far, we have discussed Saving and Investing: spend less than you earn and invest effectively.
You earn a salary, control your expenses by budgeting and watching how you spend, and save as much as possible. You then invest this passively into low cost global index funds within a pension and ISA for the long term growth of wealth – buy and hold.
Controlling spending is a big part of reaching Financial Independence, but there are a limited amount of things you can cut. What if, instead of spending less than you earn, you earn more than you spend? There is no limit to how much you can earn, and every extra ££ can go straight to your savings.
There are 4 strategies for increasing your income:
Increasing your income in your current employment.
Increasing your income by moving employment.
Take on additional part-time employment or a ‘side hussle’.
Build a passive income.
Increasing your income in your current employment
Getting a promotion or raise in your current employment is one of the easiest ways to earn more money, but it can be daunting to ask your boss. The first thing you need to do is get into the right mindset, people ask for raises all the time. Ask in the right way; go into the meeting with the attitude of negotiation – not conflict. You are not demanding more money, you are starting a discussion on what you can do to earn more and to show your value.
Step one: Be prepared. Explore the job market and understand your market rate. Research what others are making in your position; use sites like Glassdoor for third-party information.
Step two: Make a case for your promotion/raise. Start by letting your boss know how much you enjoy your job and show how you helped the company increase profits or expand its mission. You should track your wins at work and measure them where possible so you can unfurl your scroll of achievements when it's time to talk about promotion.
Include compliments from clients, customers, supervisors, and peers. Having an engaged network of advocates is very important; other senior employees who know you and are willing to go to bat for you. Build these relationships before you ever come to a negotiation by laying strong groundwork for yourself over time.
It's about how you do your job when you are not negotiating that typically impacts the negotiation the most. Everything that you do has impact; if your camera is always off in meetings where everyone else has their camera on, if you are consistently late or you are reactive when things don't go your way, that's going to impact. It doesn't mean that you have to be on email on Saturday mornings or doing the best work of anybody in the office, but going the extra mile makes a difference in other people's perception and trust.
The bottom line is that you can be the best negotiator in the world, but if you're not a good employee, you won't be successful. So much of the negotiation happens before you even come to the table, making yourself indispensable is the best way to guarantee that you will get more money to stay.
Step three: If your request is denied, ask what you can do to earn a raise in the future. Leave the meeting with concrete actions you can take to earn the raise. Write them down, refer back to them, and when you have met the requirements, ask again.
Take advantage of any mentoring or training programs. Not only will this help you land that promotion it will also show that you are serious about your career with the company. If your company doesn’t provide training, find it on your own.
The negotiation tip to end all other negotiation tips…if you enter into a negotiation willing to walk away if you don't get what you want, you suddenly have all of the leverage. That is easier said than done as most people care about maintaining their employment, but operating from a position of, I don't need this, shifts the perception of power to your side. That doesn't necessarily mean you would actually walk away, but being willing to, increases the chance that you will get what you want.
Increasing your income by moving employment
If you keep getting denied a raise or promotion at work, it may be time to switch jobs for a company that will appreciate your efforts. Also, you tend to be able to gain bigger jumps in salary if you are prepared to move rather than stay put.
Leverage sites like LinkedIn; make sure that your profile is optimised by describing your position in such a way that you will be the search result for the types of jobs you want. So if you need to massage the verbosity of your current role a little bit - do it! Remember it’s a numbers game, the more you do the better the odds that you win!
Identify some companies that you would like to work for and find the email addresses of the people you need to contact. Email them and introduce yourself, let them know why you are excited about the company and its mission. Work to get a call or meeting.
If you aren’t getting anywhere with email, see if you have any mutual contacts and ask them to reach out on your behalf. If you get the opportunity to speak with them directly be prepared with a presentation on why they should hire you.
Before you start this process you will already have researched the job market and be aware of your value. Some of the jobs you apply for will give guidelines upfront about the salary, others may ask you what salary you are looking for - to make sure that your expectations are on the same planet as what they can actually offer you, so that they don't waste your time and vice versa.
Let's say you're only willing to leave your current company for £40,000 or more, but you would be thrilled with £50,000. If you give a range between £40,000 and £50,000, they're probably going to give you £40,000.
If you're going to give a range, you want your bottom number to be something that you want. If you give them the range of £45,000 to £55,000 (always pad), but their cap is £40,000, you can either walk away or discuss the potential for future increases or additional benefits.
Take on additional part-time employment or a ‘side hussle’
Maybe you really enjoy your job and there is no opportunity to increase the salary – the next alternative is to get a part-time job or a ‘side hussle’ as our American cousins like to call it.
Most part-time jobs will pay for your time i.e. the more hours you can work, the more you get paid, but there are only so many hours in a day. Try to increase the rate of pay by marketing any expertise or skills you already have. If you know how to speak Spanish, find Spanish tutoring gigs. If you know how to make apps, look for app development gigs.
Choosing a side hustle is not easy. Some have start-up costs, some don’t. Some can be done at home and some can’t. Picking the right side hustle means aligning your financial goals with your lifestyle. If you have kids and a full-time job, driving for Uber probably isn’t a good idea, but pet-sitting a couple of times a week may work.
Some side hustles are faster to start than others. If you want to drive for Uber, you can get started almost right away. But if you want to become a freelance writer, it can take months to get your first paid gig, and even then, you may have to spend hours doing unpaid work to build up your portfolio before you turn a profit.
Don’t be afraid to think outside the box! What can you help people with? It can really be as simple as that.
Most of us have clothes, jewelry, accessories, books, unused electronics, etc sitting at home. Instead of having these items cluttering your home, you can sell them online. All you need to do is take some photos and upload them to one of the numerous websites.
Build a passive income.
Passive income is money you earn in a way that requires little to no effort. You deploy time and/or money to develop something that will then deliver income with little further work.
You can build passive income using 3 key asset classes:
Business - Working in your own business, part-time or full-time, is the traditional route to wealth. Aim to develop an appreciating asset, for example; sell an eBook online, selling stock photos, create an App, create a Utube channel, write a blog, design T-Shirts….etc. many of these ideas require some initial work, but will eventually become passive sources of income.
Property – Rent or hire out an asset that you have bought. Renting out real estate or housing is the traditional route to a passive income. Airbnb and similar services have revolutionised where people stay when they travel and it has opened up serious passive income doors.
Consider renting out a spare bedroom you're not using. It means hundreds of extra ££ in your account, and it also means you have someone else living in your home - that's not for everyone!
Consider renting out other items you’re not using regularly, or at all. You can rent almost anything – your bicycle, car, truck, boat, garage for storage space, even a parking space you don’t need.
Investing - Investing is the number one way to earn passive income. It involves very little to no time allocation on your part, especially if you follow The Grad Rags to Riches path of long term passive investing in low cost global index funds – buy and hold.
You invest your money in a global index fund, turn your chair to the window and do nothing. In return, you get to share in the growth of businesses across the world with both dividend payments and appreciation on the investment - without having to do anything at all!
Alternative assets or investments include bonds, hedge funds, private equity, real estate, infrastructure, commodities, and collectibles like art, wine, and even luxury watches.