Saving money is important. So is not spending more than you earn. And so is understanding the implications of big financial decisions like taking on student loans or a mortgage. All of these are crucial for long-term financial sustainability.
But one huge piece of the equation that not a lot of people focus on is the earning money part. As you can imagine, I spend a lot of time thinking about this concept.
I also spend a lot of time thinking about you. Yes, you - the person reading this.
Through the years, I’ve learned a lot of you struggle with the same things. It’s something along the lines of: I live in an expensive city and I struggle with figuring out how to allocate all the beans I earn. From normal life expenses, to unexpected things that pop up, to student loans, retirement and what about an emergency fund? Oh yeah, I hate budgeting too. Sound familiar? Yeah. Same, dude.
Observing this alongside America’s totally eff’d income inequality has pushed me to shift my focus from being frugal and keeping a meticulous budget to figuring out how to earn more.
I Was Focused on the Wrong Thing Too
When I entered the workforce it was 2008, just as the ass was falling out of the housing market. With my degree in finance, I felt lucky - no, I felt downright #blessed to have landed a job that was in the financial service industry. The pay was fine for an entry level position, but what happened over the next 7 years was discouraging. By the time I decided to leave traditional employment in 2014, my base salary hadn’t grown more than 5% since entering the workforce. That’s despite the fact that I was positively impacting the bottom line of the companies I worked for.
Yes, circumstances were at play here, but that’s exactly what the problem was. Up until then, I just blindly accepted my circumstances. I wasn’t focused on earning. I was tremendously focused on reducing my expenses and trying to save the little money I had. I was focused on the wrong thing. It’s easy to do that when you think the only thing you can control is what you spend and not what you earn.
Then one day, I realized that if I wanted to live a drastically different life, I needed to do something dramatically different. I needed to seriously increase my income. I needed to f*ck up the equation.
What is F*cking Up the Equation?
The equation is as follows:
Expenses + Savings + Investments = Income
or it can be expressed this way:
Income = Expenses - Savings - Investments
There are limited to how much you can decrease the non-income side of this equation . Expenses will be fixed at some point and over your lifetime, they’ll probably slowly increase.
That’s if everything goes well. If you have been unfortunate in any way, like a chronic illness, death of a close family member or perhaps you have crazy student loans, your expenses may increase at a greater rate and by a greater amount than your income does.
Or perhaps you’re like me, a marginalized person that society has collectively agreed should be paid less than my equally-qualified counter parts.
There are a multitude of ways you can be unfortunate. And that’s why I say you need to f*ck up the equation and not quietly hope that you’ll get paid a lot more or live an insanely frugal life where you eat canned beans for the next 30 years so you can max out your retirement contributions.
How to F*ck Up the Equation?
It’s simple, but might not be easy at first.
If you’re employed, you need to get a raise. You can also start a side business or a main business. Of course there is always winning the lottery, marrying into wealth or getting a large inheritance, but those aren’t strategies I've focused on so I don’t have much input there.
Get a Raise
Your boss or the company you work for won’t suddenly and significantly increase your salary out of the goodness of their hearts. Sure, you’ll probably get annual raises, but those likely hover in the 3-6% range. If you don’t have a large base salary, that kind of raise nets you a hundred to a few hundred bucks a month. If your base salary is $65,000, a generous 6% raise is $3,900 for the year, or $325/month. That’s better than no raise at all, but when you sit back and think about trying to do big things, like getting out of crazy student loan debt, buying a house in a major city, starting a family or living a life less centered around your job, it starts to feel impossible.
You have to position yourself so that your bosses can see that you have earned and deserve a raise.
You have to add value and/or be valuable to the company.
The most persuasive ways to do this are to increase the company’s earnings, solve problems rather than cause them and reduce costs.
You understand the business you’re working in. What problem does the business solve? How does the company earn money? Where does it lose money? Are there inefficiencies that can be addressed? Can you make your bosses life and job easier? Can you help the company do a better job at solving the problem for it’s customers? Is there a problem within the company you can solve? Can you help the team you’re on be more effective? Yes, depending on what you do for work, these might be stupid, meaningless ways that you use your time, but if you aren’t focused on increasing your income, you’ll have to be focused on decreasing your expenses. What set of problems do you want to deal with?
Make sure you know the market well.
When you’re applying for job, make sure you know what the going rate is for the position. If you grossly underbid a job, you’ve just negotiated against yourself.
You might need certain credentials, education or skills for a certain job. Make sure you understand the cost of acquiring these things and how it will impact your earning power.
You have to learn how to negotiate.
Even if you aren't straight up saying, “I think $10k is more appropriate for the what I’m bringing to the table", you should ask what you need to do to get closer to that number. Can you have a performance review in 6 month as a condition for accepting the offer? Can you have more time off or additional benefits to bridge the gap?
Start a Side Business or a Main Business
If you haven’t started a business it might feel really daunting. But it’s just like getting good at anything else.
Think about something you used to suck at, but now you’re good at. It could be anything - painting, cooking, Brazilian Jiu Jitsu, whatever. You learn what you need to learn in order to get started. For example, you learn about what tools you’ll need and where you’ll take some lessons. And then you just keep building and learning as you go. You experiment with things and learn more about what you’re good at, what you like and your place in that world.
So what are the first few things you need to learn about starting a business?
Solve a problem.
First, you need to figure out what problem you’re solving. It could be a problem that you have encountered or a problem that you keep hearing about.
That’s how I ended up starting my bookkeeping agency. I just worked with so many small business owners who kept asking me for referrals for bookkeepers. A lot of the time they were looking to find a new bookkeeper to replace one who wasn’t meeting their needs. So I just kept asking the seekers what is it that they weren’t getting.
After I all that research, I realized, given my work experience, education, and approach that I could solve that problem. I knew exactly how to solve the problem for a specific group of people because I had spent so much time listening to them tell me all about the problem. That was a huge part of my market research.
Solve a problem for a specific group of people.
It’s important to solve a problem for specific group of people or a niche. Having a niche allows you to get good at solving a problem for a specific person or group of people because you’re focused on their specific issues. For example, a web designer who focuses specifically on e-commerce businesses knows the specific pain points and issues an e-com business faces when it comes to web design and building their business online.
You can’t be everything to everyone. If you try to do that, it just gets weird. Your marketing message will be unclear because instead of speaking to a specific group or person directly, you’ll be trying to reach everyone and the result could be that you reach no one.
Make sure you don’t suck at what you’re doing.
If it’s directing or making ceramics or horticulture. Whatever it is, put in the time to not suck at it.
Try to find people to pay for your solution.
First try to find one person. Then try to find two. Then three. See where I’m going with this?
Write cold emails, make cold calls, post in Facebook groups, put up a website, talk about your offering on Instagram, ask your mom for referrals, talk to strangers at parties.
If you are really trying and nobody pays you, maybe you need to re-evaluate some things. Maybe it’s that people won't pay for the problem you’re solving because it isn’t that much of a problem. Maybe you’re charging too little or too much or maybe your marketing is super wack.
Run experiments and focus on what’s working.
So much of business is just hypothesizing, running experiments, collecting data and then re-hypothesizing.
Stay connected to the outcome.
It’s easy to get discouraged. It’s easy to protect yourself from failing by never trying. It’s easy to give into distraction. But stay connected to what the outcome is. Is it providing for your family? Or not being crushed by debt? Or trying to end the poverty cycle with your generation? Whatever it is, stay connected to the outcome; stay connected to the feeling you’re seeking - freedom, joy, relief, power.
My endless optimism makes me believe that we all have the power to impact our lives. But I realize sometimes circumstances are powerful waves that can take you under and I’m sorry if you’re reading this and you're feeling that way.