Increase Income: 6 Legit Ways You Can Build Wealth
In the first part of this series, I explained why grandmaâs money advice is hardly applicable to you anymore (we canât buy government bonds at 15%). She lived in a completely different time, and the rules of the game have changed since then.
So many bloggers and personal finance gurus talk about defense (spending less, getting rid of debt, etc.) yet so few talk about offense. But if youâve ever dreamt of becoming a millionaire, I can almost guarantee you it wonât happen unless you can find ways to radically grow your income.
In this second part of the series weâll dive into some principles of wealth creation, with practical steps you can take to increase your income immediately. And donât worry, Iâm not going to tell you to take online surveys.
(Side Rant: I have no idea why some bloggers are telling their readers to waste their precious time taking online surveys. If you EVER come across a personal finance blog that recommends you take a crap ton of online surveysâŚ RUN. That person doesnât care about helping you. They want to help themselves.)
4 Basic Principles
DONâT TRADE YOUR TIME FOR MONEY.
This principle is fundamental to wealth creation. Time will always be your scarcest asset. There are only so many hours in the day and you only have so many hours to live. If you always trade your time for money, you may become rich (if youâre highly skilled) but you will never become wealthy. You will always be a slave to whoever your master is.
Understand that being rich and being wealthy are not synonymous. Doctors, lawyers, even celebrities are really just highly paid employees. If something were to happen to them and they could no longer perform their job, their riches would disappear. For their wealth to last, these high-earners need to buy assets or create systems that produce income even if they were to lose an arm or become paralyzed. The truly wealthy own systems, businesses and assets that produce money for them while they sleep.
Every hour spent on leisure, is time you could have spent building a system or creating an asset. Your time is valuable. Itâs time to start treating it that way. If you spend all your free time watching TV or playing video games you are not valuing yourself.
BECOME MORE VALUABLE.
In capitalism, the market generally pays you what youâre âworthâ. Itâs supply and demand in action. Minimum wage earners make just that because anyone can perform a minimum wage job. Itâs not hard to train someone on how to flip a burger. But how many people can perform brain surgery? That person is much more scarce, and they get paid accordingly. How many Lebron Jamesâ are there? How many people can do what he does? The market always pays you according to how valuable you are.
So hereâs the key: become more valuable.
Are you unhappy with how much you are currently making? Then itâs time to learn new skills, and acquire new knowledge that will force the market to price you appropriately. It wonât be easy or happen overnight, but if you stick with it, trust me, old dogs can still learn new tricks.
HAVE A WEALTH MINDSET.
Stop thinking âI canât afford that.â and start thinking âHow can I afford that?â
A wealthy mind is focused on growth, not excuses. Having a wealth mindset means youâre always a student. The moment you consider yourself a master is the moment you stop growing. Realize that thereâs always new ways to become more valuable, always new skills you can learn, always things you can do to grow your earning potential.
StartÂ tracking your net worth.Â Become obsessed with the process. Get creative, and think of ways you can make that number grow.
A poverty mindset is the mindset of limiting beliefs. Itâs the âmake the best of what you gotâ. At itâs core, the saying doesnât encourage change, growth, or problem solving. It encourages laziness and complacency, playing hours of video games and binge watching Netflix.
BUY ASSETS NOT THINGS
If you followed just this one piece of advice, youâd be far better off than the majority of people.
Buy assets, stop buying âthingsâ or worse â liabilities.
An asset is anything that generates you income. It could be a business, it could be a website, hell it could be a vending machine; as long as itâs putting cash into your pocket â it is an asset. A liability is anything that takes money out of your pocket. A car, a home that doesnât cash flow, bad debt, etc. âThingsâ are everything else in between. If you take all the money you earn every month and find assets to invest in rather than things or liabilities, youâll quickly be on your way to financial freedom and early retirement.
6 Legit Ways
1. Negotiate Your Salary.
I wonder how many people are currently underpaid because theyâve never asked for a raise? The power of asking is incredibly underrated and a strong +EV (expected value) move. Itâs the definition of high upside, low risk. If they agree, awesome! If not, letâs be real â youâre probably not going to be fired. Worst case scenario you are exactly where you started.
Just remember, the key to effective negotiation goes back to simple economics. You need to show your boss that you are both valuable and scarce. Instead of just walking into the bossâ office and asking politely for a raise â how about walking into their office with a higher written offer from a competing company? Now weâre talking.
2. Get a Better Job.
Thereâs no way to sugarcoat this. If you have a bachelorâs degree and youâre working at Starbucks, get out now. Go get a job with higher upside. If you canât see yourself radically increasing your earning potential at your current job, why are you still there? If you can see the ceiling and thereâs no where else for you to go, why are you still there?
When I first got out of school I worked a commission-only sales job and made 25K my first year. It sucked. It had nothing to do with what I studied and I didnât like my managers, but the experience was still valuable. After a year there I received an offer for a new job at a different company. I went on to make 40k the first year at that new job. Thatâs a 60% pay raise.
After a year at the second job, I felt like I had no more room to grow. So, I scoured the job market for different opportunities and eventually found a new job where I made ~$100k my first year. Thats over a 300% increase from my first job in just a matter of a few years. What if I had never moved? What if I had stayed where I was?
3. Start A Blog.
Itâs another high upside, low risk proposition. Itâs cheaper than a gym membership, and you can get a basic site up and running in as little as 15 minutes. Whether you do it at night after work, or on the weekends instead of brunching, blogging is still one of the few real ways left to make money online.
Some bloggers make millions of dollars a year running their site. And while that is obviously not the norm, I truly believe that anyone who starts a blog and sticks with it has the ability to generate a passive side income from it. Whether thats $5,000 a year or $50,000 a year â that totally depends on you and your efforts. Amazon has taken a huge bite out of the eCommerce market, but one thing that will always be valuable is quality content. If youâre interested in starting a blog;Â check out my in-depth guide on how to start.
4. Start A Business.
The overwhelming majority of millionaires are business owners. Not many W-2 positions offer you the kind of upside to make 7 figures. Know what your goals are. I knew that I wanted to make 7 figures and I couldnât imagine a scenario where that happens for me while working for someone else.
Entrepreneurship can be scary to some, and I will admit that every situation is different. When I quit my job to go out on my own, I didnât have any financial dependents and I had a years worth of expenses saved up. My decision making might have been different if I knew other people would go hungry if I failed.
You might be in a different boat, but I believe anyone can start a business on the side. Itâs a matter of how bad do you want it? Would you rather spend your free time keeping up with Game of Thrones, or looking for ways to increase your income?
I have a friend who started selling popsicles at the local farmers market on weekends. It provides great supplemental income for his family and heâs now built up enough success to even sell the business to someone else if he wanted to get out of it.
5. Start A Side Hustle.
Whether you drive an Uber or rent out an empty room on AirBnB â starting a side hustle is an immediate way to increase your income. Side hustles probably wonât make you rich, but it could be a great way to convert leisure hours to profit-hours. (Note: Iâm talking about real side hustles here, not the âget paid to take surveysâ BS.)
Just remember side hustles are always contingent upon principle #1. Your time is your most valuable resource, so donât waste your time with side hustles that donât pay you what youâre worth.
Be honest with yourself, what is the current market value on your time? If youâre making $30,000 a year the market is roughly valuing an hour of your work at $15. If youâre worth at least $15 an hour, why in the world would you side hustle online surveys at $3 a pop? Find side hustles that you can do effectively and efficiently.
6. Make Your Money Work For You.
I saved my favorite one for last. If you can discipline yourself to use your money to buy assets, itâs only a matter of time before you become financially free. Itâs an exponential growth model that will snowball if you stick with it. Itâs the reason why Iâm a landlord and own rental property (I love real estate). And also the reason why instead of going out for a weekend of drinking, I spent $200 and started this blog instead. Become obsessed with making money work for you, not the other way around.
Itâs not gonna be easy. It usually takes some sweat equity up front to create these systems. But the good news is the work is typically front loaded, and you get to reap the dividends long after your hard work is done.
I.E. â It takes time and effort to set up a blog, write good content, and market your posts â but once you get things set up correctly, it can keep generating you income long after youâre done.
Guys, this was just a primer on wealth creation and playing offense but hopefully itâs sparked some great ideas within you. Iâll be diving more in depth on each principle and practice in the near future, so be sure to check back for more content.