Increasing your income is one of the most important tools to achieving a high savings rate and in turn, being able to reach financial independence sooner. There is only so much money you are able to save if you are earning a salary of 60K per year. Everyone still needs to live and pay their expenses. The difference in savings rate when earning 100K per year as opposed to 60K is stark. You can still live the same modest lifestyle that you were when you earned 60K, but now you are dramatically able to increase what you can save & invest. Unfortunately, not everyone will ever earn 100K per year from their full-time role alone (I don’t at the moment). But there are other ways to make up for the shortfall and increase your yearly income.
Ways to increase your income?
- Move to a competitor offering more money. Working in most fields there are going to be opportunities to move around different employers. It is time to start focussing on the fact that you as an employee will rarely be afforded the same level of loyalty from your employer that you might be willing to offer. Don’t be so loyal to a company that you are missing out on salary increases purely because they know you feel comfortable where you are. Keep your eyes peeled for new opportunities within your industry. If you really love your job and don’t want to move companies, it doesn’t mean that you are unable to use higher paid opportunities as leverage for pay increases. Especially if you know that you are valued to the company and would be difficult as well as costly to replace.
- Negotiate for a pay increase in your current role. This step ties into step one. Employers have realised (Especially big business) that it is expensive & takes time to replace good staff. Factoring in the advertising & recruiting process as well as all the time it takes to train someone in the role, companies are much better off financially keeping their current performers happy. They know this, especially if you work in a field where your role directly correlates to earning income for the business. This means that, if they see what you are bringing in for the company, they are going to be more inclined to accept your requests for a salary increase. Negotiating salary can be extremely daunting however you have to remember that the worst possible outcome is that they say no. They can not fire you for asking for a salary increase in your yearly review. A good manager understands that it is just business and that people go to work to get paid and not for any other reason.
- Take up a part time work or side hustle. This is especially important if you are working towards some kind of large goal, such as a house deposit, or your first 100K in the share market. This kind of income additional to your full time role could increase your overall yearly income by 5-15K depending on the type and amount of extra work you do. You could do odd jobs on airtasker, drive for delivery services, start your own cleaning/lawn mowing etc on the side. I personally joined the Army reserves to be my weekend side hustle (might be a bit extreme for some people) but my reasoning was because any money earned there is tax free. I could earn an additional 10K a year and it all goes straight to the bank, definitely worth it in my books. Doing extra work alongside your regular full time job, family life, social commitments etc can be extremely taxing on both physical and mental health. That is the reason why I mentioned the ‘goal aspect’. I personally don’t want to work myself to death for an extra 10k per year for the rest of my life. However, I am prepared to put in some extra work to coincide with my goals at the moment. Short term pain for long term gain but ensure that unless you are enjoying the work, once you hit the goal you take some time to enjoy a well deserved break.
- Utilise your assets. If you have a spare room, consider renting it out. If you have multiple young kids consider getting an Au pair as opposed to expensive child care costs. In this day an age you can rent out just about everything that you own. Rooms, pools, cars, parking space, tools, whatever you have there is probably someone who has a need for it. Even if the renting is just a temporary method of additional income.
- Start an online business. The reason I say online is due to the limited amount of initial investment required to get started. Anyone can purchase a domain name & web hosting and start a website. It might be a blog, ecommerce site, dropshipping, youtube channel etc. Have a think about what your strengths, skillset & passion areas are. If you are teacher during the day could you make a website with some of your teacher resources or a blog about teaching. I am sure there would be a lot of topics that could be covered. A hairdresser could start a youtube channel teaching other women about products and how to cut and style their own and other people in their families hair. Everyone has some sort of skill and something to offer in the online world of content creation. You just have to be consistent, passionate and you might find yourself tapping into additional income that you never thought was possible.
- Invest your savings into things that pay you money. You should be using all this additional money that you have been making now, to invest. Invest in things like ETFS or blue chip shares that are proven profitable and established companies. You will most likely receive quarterly dividend payments if you invest in these as well as long term growth. Keep in mind that the market will have downturns and some years their will be heavily reduced dividend payments or none at all. The same for growth, in a stock market down turn like we might experience in 2022 you will see that your initial investment may have decreased. It is important to understand the risk and to understand that perceived loss is not the same as a loss you will actually incur if you are forced to sell in a bad market. That is why it is important to only invest money that you will not need to access for an ideal minimum of 10 years. When investing make sure you are doing your research and have a full understanding of your personal risk tolerance.
- Sell your stuff. I don’t just mean the old things you have lying around your house that no longer get used. But start selling your skills. Could you provide some sort of service that people would pay for like tutoring or social media marketing etc? If you are crafty you could start an Etsy business selling masks, stickers, home made cards whatever it might be there is usually someone out there with money in their pocket who is williing to buy it. Loads of people have made plenty of cash finding products to resell on ebay or market place.
- Buy an investment property...if in a position to do so. My investment property is a fantastic cash flow positive income producing asset. However I bought it nearly three years ago. In the current property market with the interest rates on the cusp of rising tread cautiously when purchasing a rental property. There are many benefits of course and a well thought out property investment plan can and has set many people up for wealth. It certainly has done well for me. However you need to research carefully in this current economic climate where house prices in Australia are at an absolute all time sky high.
There is no real secret to increasing your annual income, mostly it is through hard work. Whether that is in your full-time job, an extra part-time job, or some sort of online hustle that you start. All of these things will take a lot of work. However, if increasing your income is your focus you can achieve it. Even an extra 5K-10K per year can really make a difference to your savings balance and it is achievable if you do a combination of the steps above. During the accumulations phase of your wealth is when you should be hustling hard and finding ways to make more money. If you do this right it will set you up for financial security & eventual financial freedom in your future.
