As the astute math wizards have already figured out, the formula behind our finances isn’t a complicated one. Spend less than you make, and save enough to realize your goals. It makes sense then that the first area we look at is that of income. You may find that most of these ideas don’t apply to your situation, and that is okay. Truthfully, most of our ideas to build income aren’t “quick and easy”1If you’ve got a cousin who is selling you a plan for quick and easy cash you may want to hold on to your wallet for the duration of that conversation! , but no less worthy of consideration.
As I see it, you can break these income ideas into two groups. The first looks at ways to make additional money with your time (skills, efforts, etc.). In the second, I touch on ways to make money with your money. If you are just getting started on your financial journey (or have hit some financial potholes on the road of life) not all of these may apply to you right away. That’s okay too – as you make wise decisions with your resources additional opportunities will become available.
Checklist #1: Making Money With Your Time
Seek raise/promotion
People are often worth more than they are paid. Most organizations are poorly equipped to identify, reward and promote their best producers. Nearly all organizations, however, have some latitude to adjust pay upward for their best producers if those individuals can make the case to do so within the company’s rules and policies.
Work more hours
Hourly employees typically have the option to work more hours or undertake an additional part-time position. Retaining part-time work in retirement or delaying retirement are commonplace today because people live longer (and therefore need more resources) and have not saved and invested adequately to sustain full retirement.
Change employers
Employees rarely look for better jobs until circumstances require it, even when major pay and work life benefits would result. Company cultures and incentive systems vary markedly, however, making this a rich opportunity for the best workers (especially in a tight labor market). Before exploring this path, we strongly recommend an updated resume and engagement in networking (e.g. LinkedIn, professional societies relevant to your ideal job, etc.). Before joining the so called “Great Resignation,” we do encourage you to consider the full cost of the transition (longer hours and added stress during the transitions).
Change careers
Changing careers is longer-term strategy because it typically requires additional education, training, and possibly moving. This is something to consider in conjunction with your long-term goals.
Supplement your income with a “side hustle”
Salaried employees can also often supplement their incomes through consulting or part-time employment. It has also become increasingly common for employees to work an extra job (Uber driver, Etsy shop owner, etc.). What skills or interests do you have that others may value?
Checklist #2: Making Money With Your Money
Set an appropriate savings target
This is a short-term trade-off that can have massive long-term effects. A small increase in savings at a young age can have enormous impacts on your long-term savings for things like retirement. It is important to note that “appropriate” targets will depend enormously on your own long-term goals. It is too much to get into in a “check-list” but some good principles to follow are:
- Start as young as you can. A few years (even at modest savings levels) can make an enormous difference in long-term savings!
- Don’t miss the match. Many employees match 50-100% of your retirement savings up to a certain level. You won’t find a better guaranteed return than this, so don’t miss taking full advantage of this benefit!
- Plan ahead. Setting clear long-term goals (like retirement) allows you to take steps to effectively meet those goals.
Invest for higher returns
Generally there are two paths that can be taken here… Some invest their savings into privately-controlled entrepreneurial activities such as buying and developing real estate or becoming self-employed. It is wise to seek external advice if your savings is heavily connected to your own business. Others save using public investment instruments Stocks (ownership in companies), Bonds (loans to companies or Governments), Cash Equivalents (CDs, money market, savings accounts, etc.). Here again there isn’t one single right answer for all (and way more content than a check-list can get into). We recommend that everyone:
- Inform decisions based on your personal goals.
- Understand your own risk appetite (you can’t live in constant stress of the stock market moving up and down)
- Have a clear time frame (you can accept more volatility for long term returns since you have more time to wait…you have less ability to accept ups and downs if you are going to need the money soon!)
- Diversify …no matter your goals, it is financially beneficial to diversify vs. putting your eggs in one basket. One helpful tool to diversify is to use Index Funds or Exchange Traded Funds (ETFs) which aim to deliver the average return of the portfolio they are indexed to.