“I’m a young professional and I want to earn some more money. Where do I start?”
I get a question like this pretty often from young people getting started in their careers. Hungry to apply themselves, get started on their investments, and creating the path to financial security and financial freedom, they want to set up an extra set of cash every month for breathing room and investment room.
My response is always the same:
How much do you want to earn?
Why do you want to earn it?
In what time frame do you want to earn it?
What are you willing to give up in order to earn it?
Each of these play an important role in understanding our own personal psychology of motivation towards increasing our earning potential.
How much do you want to earn?
“I want to earn more money” is a pretty useless phrase.
You could earn an extra $20 by going and cutting somebody’s lawn and achieve that goal.
“I want to earn more money” usually is coded language for, “I want to do something that requires me to have money I don’t have right now.”
Whether that’s a specific thing (i.e., set up an IRA and get investing or afford to take a vacation to the beach or afford to buy a new course that will help you close more deals and earn even more money) or a bucket of things (i.e., improve your skills, move to a better part of town, etc.) doesn’t really matter. What does matter is knowing how much you have to earn.
Get specific. What it takes to earn an extra $500/month is completely different than what it takes to earn an extra $5,000/month.
Without knowing how much more you need to earn, you have no way of figuring out which of the many options available to you now you should pursue.
Should you do guitar lessons on the side?
Should you do consulting?
Should you launch your own business?
Should you be an Uber driver?
You can only know the answers to these questions once you have an idea of how much more you have to earn every month.
Why do you want to earn more?
To answer how much more you want, it’s useful to ask why you want to earn more. What do you want to do with the money? How will it improve your life?
At the end of the day, you acquire more money to do things with it. You do things with it in order to get the feeling that doing that thing with that money allows you to do. If that’s go to a nice gym regularly, you’re looking for the feeling of health and vitality without the tradeoff of a janky gym. If that’s driving a nicer car, you may be looking for the comfort in knowing your car is less likely to break down or the pride of knowing you can afford to drive a nicer car.
Identify why you want to earn that money and then ask yourself, “are there other, more effective and efficient ways of getting these feelings besides the obvious?”
I know a young man who wanted to earn more money because he wanted to be able to afford a nicer apartment closer to work. Cutting out commute time is a good psychological motivator, but finding a new lease and moving in takes time and a lot of energy. He found that he was able to get a lot of the psychological benefit he was going for without having to earn more money by negotiating the ability to work from home two days every week.
The other caution here is to know what you are going for so that in your pursuit of earning more, you don’t undermine the very thing you’re trying to get.
Tim Ferriss makes an important distinction in his book The Four Hour Workweek about the differences between the old rich and what he calls the New Rich. The New Rich can live wherever they want, work whenever they want, and, essentially, do whatever they want. Importantly, they often earn less than the old rich but have more time to spend the money they earn. You earn money to spend it, invest it, and use it. What happens when you earn all the money you want to earn but do not have the time to use it?
There’s an added benefit of knowing why you want to earn more money: inspiration. When you have a clear idea of what you’ll do with the money and how it will positively impact your life, you have a clear why and something to keep you focused while things get tough. I am consistently surprised by the number of people I know who got their first real spike in earnings after discovering they had a child on the way.
Know why you want to earn more. This helps you think more creatively and avoid the pitfalls of getting trapped in your own wishes.
In What time frame do you want to earn this money?
Once you know how much money you want and why you want it, give yourself a timeframe for earning it.
Earning an extra $500 in a month requires you to do very different things than earning an extra $500 in a week or in a quarter.
Doubling your income over the length of a year is actually pretty feasible. Doubling your income in three months requires you to focus and add monumentally more value in a shorter period of time.
What are you willing to give up to earn this money?
Life is full of trade-offs.
There’s no such thing as a free lunch.
If you want to earn more money, you will have to work more. The question is just how much more you are wiling to work and how.
Everybody wants to earn more money, they just don’t want to give up certain things in order to do so.
What most people really want is to earn more money for the same or less effort.
This is why you’ll meet people who are obsessed with earning “passive income.” What they don’t get is that there’s no such thing as passive income. To set up an income stream that requires less work for every dollar than your day job still requires you to put in energy. You may need to front-load that energy more or you may need to put in maintenance energy to make sure that things are running smoothly, but all earnings require some kind of trade-off.
The question just is, what are you willing to give up to earn more money?
I set an earnings goal at the beginning of the year. I wanted to earn more money in a month than I would have earned in a quarter at my old job. I hit that goal several months early but it was far from sustainable. Without throwing on the right positive constraints, I had given up more time and energy to earn the money than I really wanted to put in and could have spent that time setting up systems that would have created longer-term sustainable income.
Another way of thinking about it: if you want to earn $75,000, you could do that working a near-minimum wage job. You would just have to work a lot. Most people don’t want to work that much to earn that money, so they look for ways that they can earn more per hour.
If all you need to do is earn more money and you have the time to do so, earning more is easy. What’s not as easy is finding ways to earn more per hour. That requires you to invest in yourself and find and create new opportunities to create value for other people.
In a future post, I’ll cover some options for earning more money based on your answers to these questions.