This is a guest article by Ramit Sethi, author of the best-selling personal finance book, I Will Teach You to Be Rich. He recently launched a new program, Earn1k, to help people earn more money on the side. To get a free mini-course on earning more, sign up here. Ramit will also be our guest on the Consumerism Commentary Podcast this coming Sunday.
Last year, when I went on book tour for my book, I Will Teach You To Be Rich, I asked my readers to share the number one thing they wanted me to write more about.
I was surprised. The number one reason people wanted to earn more money wasn’t paying off debt, or investing, or money and relationships. Almost universally, people wanted to know how to earn more money.
I initially believed people wanted to earn more so they could buy a $2,000 handbag or fly to Vegas for the weekend. Again, I was way off.
Most people are simply unsatisfied with the limits of their 9-to-5 job and want the option of eventually quitting and working for themselves. In fact, some of them don’t even want to work themselves…they just want the option of doing SOMETHING else.
Have you ever met people who are a few years out of college and feel like, “Huh…is this it?” We all have dreams of living a certain lifestyle, and it can be disheartening when we realize we’re going to have to save, scrimp, and pinch for 40 years. For many of us, $1,000 to $2,000 a month would make a huge difference in our lives.
We want to earn more now more than ever, and it’s not just about the money itself. We want to be independent from our corporate jobs (even if we end up staying at them, we want the option of doing something else). We want to work from home or from the beach. Here’s a picture of my brother’s office in Mexico:
Money isn’t the end goal. But we want it to help us achieve our real goals to live a rich life. And you can’t out-frugal your way to rich.
Earning money isn’t easy
But it’s not easy. People immediately see how challenging it can be to consistently earn more money and end up fantasizing about their independent lifestyle dream without taking action — forever. They come up with delusional ideas like “passive income” or create psychological barriers like “I could never earn money… I don’t have an idea.” After all, if you’re a regular person (i.e. someone who has a busy job, and still wants to have a life), your available money-making options start looking really limited. These options usually either:
- take a lot of time and money to start (Brick and mortar businesses),
- are spammy and dumb (“The latest secret money-generating trick!”), or
- have zero growth potential (Donating plasma, taking paid surveys, etc.).
There’s a better solution. It’s not sexy, but it will help you lead a rich life: Turning your skills into income using freelancing.
Freelancing, as opposed to productization, is the easiest way to earn more money. It costs virtually nothing to get started, you can start earning money right away, and you can rapidly test and refine what you offer to earn even more.
Compare this to building products, which excites people due to the kooky idea of passive income… but requires multiple skill sets that few people have.
With freelancing, you can get started immediately and be earning money within one week. Freelancing also gives you practice running your business, without all the risk typically associated with entrepreneurship. It dispels the most common myths and excuses people make about why they could never work for themselves.
Common excuses about earning more money
We hear these all the time:
“I don’t have an idea.” The mistake is believing that you need one magical idea that will rain down from the sky and give you a profitable business. Not true! Instead, the critical part is building a system to rapidly test ideas to find a profitable one. Here are some ideas that my students have turned into profitable income: Personal organizer, music instructor, tutor, freelance writer, personal chef.
“I’d rather make passive income.” For delusional people dreaming of thousands of dollars in passive income being deposited into their PayPal account all while they sip coconut juice on the beach is just that — a dream that keeps them far away from the reality of earning more. The people who are serious about earning money realize that, to earn money passively, you have to start out actively doing work actively.
“Are you crazy? I don’t want to work an extra 60 hours every week.” Nobody wants to take on a second full-time job. You can actually freelance as many or as few hours as you want — even as little as five hours per week. If the client work piles on and you start getting too busy, you can increase your rates to bring the hours back down. (I did this, raising my rates over 1,000% in a few years.) There are dozens of other strategies like this that professional freelancers use to balance a high client load, or to balance freelancing with a full-time job. My friend Ben is a senior product manager at a very well-known web company, and still manages to freelance on the side — not because he needs the money, not because he hates his day job (he actually loves it) but simply because he wants to. How does HE manage the workload? We interviewed him to get the inside scoop here.
“Wait, first I have to set up my company Facebook and Twitter accounts!” PLEASE READ THIS CAREFULLY. If your goal is to earn money, social media is a waste of time for the vast majority of people. Social media can be fun and useful, but its greatest utility comes when you’re already well-established. For those starting out, it’s a distraction and a risky pitfall. You don’t need an audience; you need customers. If you’re spending time optimizing 20 social media profiles or doing other feel-good things before you’ve gotten your first client, just kick yourself in the face. Then start talking to some prospects.
“I’m just not a big enough risk taker to just quit my job like that.” Most people aren’t, and you don’t need to be either! I want to expand on this last point, because it’s common for people to get tripped up about having a job. Actually, if you want to work for yourself one day, you should use your job to your advantage. Here’s how:
- Develop your skill set. Learning new skills for free is great, but getting paid to do it is awesome. Make sure your job has you doing high-value work that you can potentially use elsewhere. If not, you may want to think about finding another job first.
- Build your network. People love to hire and recommend people they know. Get to know the influential people in your industry so that when you quit (on good terms, of course), you can reach out to them for help.
- Finance yourself. Treat your employer like your own venture capitalist — let them put food on your table while you experiment with business ideas. Be sure to build up a comfortable cash fund (at least six months worth of living expenses) before quitting.
Earning more is as much about changing our mindset as about the actual tactics of getting clients and refining a business offering. The best approach to earning more builds you a track record a client base long before you even quit your job (or make whatever next transition). When — and if — you’re ready, you can hit the ground running because you’ll already have built the foundation for the lifestyle you truly want.
Updated May 5, 2014 and originally published July 28, 2010.