Earn Extra Income
My objective here is to help each reader achieve financial independence, however that gets defined for them.
There are typically three planks to figuring out how to reach that goal. Controlling your spending, understanding your own personal financial escape velocity and finding ways to earn extra income to accelerate your path to that moment when you’ve broken free of the employment economy.
For a longer discussion of what I mean by financial independence, you can read What is Financial Independence? and for a discussion of what that might look like in terms of savings, you can take a quick look at How Much Money Do You Need To Be Financially Independent?
The first thing you need to look at if you’re trying to gain control of your financial situation is your spending – that’s where all the easy wins are and it’s where you can have the most immediate impact. However, there are a number of things you can do to help increase the amount of money you earn. Over time, this can have as much, if not even greater an impact on your overall financial situation.
Before we jump in and discuss these things, there’s an important caveat. You will read blogs and stories of how someone made thousands of dollars in only 20 minutes a day. You’ve seen the pins on Pinterest and you’ve read the headlines in the blogs. While there may be one or two anecdotes that happen to be genuine, the fundamental truth of earning more money is that it’s work. It doesn’t happen on its own, there is no secret formula and there are no easy millions just out of reach of people who haven’t been told that one secret. I’ve made a committment to honesty on this website and won’t suggest that any of what I’m talking about below is easy. It is, however, possible, and one key difference between those who succeed and those who don’t is that one group tries and the other doesn’t.
Types of Extra Income
It’s worth splitting this into sections, because there are lots of different ways of getting additional income and you need to decide where you’re going to put your focus.
The most obvious source of income is a full-time job. The money you earn by having a contract with an employer and putting in the hours. You’re building someone else’s company and it involves committing most of your productive hours to a single project, but there’s a lot to be said for the security, side benefits (health insurance, paid holidays, training, social circle, etc) that comes with traditional employment. The first area to look at is therefore whether you should get one, and if you have a job, how you get the most out of it.
A second area of potential income is side hustles. This is a massive subject because there are so many possible things you could do with your spare time. The overarching issues are: Can you make money at what you do? Are you able to self-motivate and self-organize to the point where you can run a small money-making enterprise on the side? Which side hustle should you pick? How much time can you commit? Where will you learn how to do it? There is a growing body of work on this website on potential side hustles and how much you can realistically make.
There’s an income-earning project you might call exchanging time for money. I’m not a great fan but you’ll see lots of people suggesting this on the internet and it’s worth mentioning if you have lots of free time and want to try just a little thing on the side that might make you a very modest amount of money. In this category I put things like filling out surveys online. I’ll talk a little about this below and I have a few articles (both published and in the works) on this area of income.
Finally, there’s downsizing your stuff. Over the years, we accumulate a lot of things, and if you’re able to control your hoarding instincts, you can sometimes sell some of it for real cash. This is beneficial in a number of ways, because not only do you get some value out of things that you no longer use, but you clear your personal space of distractions. Minimalism can be taken to extremes, but the fundamental premise is very valuable: things take up more than physical space, they occupy mental space and they tie us to amaterialistic pursuit of objects that distract us from what is truly valuable in life. Enough moralizing!
The Full Time Job
We can’t call this one extra income, because it’s really most people’s primary income. What’s trus is that the “job for life” is a thing of the past, and job security is more of an illusion than a reality. Years of dedication and loyalty to a firm can be repaid with abrupt redundancy as soon as the firm no longer needs you, because its purpose is not to be loyal to you, but to make money for its owners. Relying on this for your income can work if you’re very good at what you do and in an industry where your labor and skills are always going to be of value (if you’re a computer scientist specializing in AI, then you’re golden).
Unfortunately, this source of income gets a bum deal in the financial independence community because it’s the opposite of the end goal. We want extra income so we can get to the point where we can ditch the job.
That said, it’s worth checking your emotions at the door and thinking about your financial situation impassively. If you’re in a position to negotiate a 10% pay increase in six months time if you really invest yourself in your job, that may be worth more than six months of investment in a side hustle in a field you know nothing about. You need to do the math and make an informed decision.
In many cases, the quickest way to extra income is a promotion.
It’s also dangerous to focus on a side hustle to the exclusion of your day job. Your performance could suffer and you could find yourself becoming less valuable and putting your primary source of income at risk because you attach more value to the extra £5,000 than you do to the £50,000 you already have a handle on.
There are a number of ways to optimize your position at work, and these include negotiating pay increases, asking for transfers to higher-potential parts of the business, getting another job in the same industry, asking for performance-related pay increases or bonuses, working additional hours or taking on additional responsibilities and downsizing your job to make room for a hustle while increasing your per-hour or per-day pay.
The Side Hustle
Earning extra income through a side hustle isn’t a simple matter of exchanging hours for additional pay. It’s hard to achieve the same pay rates as you get in a day job when you’re just starting out, and a proper side hustle requires investment up-front before it gets rolling.
The breadth and variety of potential side hustles is astounding, and you should take real time to think about everything available to you before you decide. When you first start looking, everyone seems to be doing the same thing, and your choices boil down to start a blog, do Amazon FBA or fill out surveys. Take a closer look and you’ll find those are not the easiest ways to make money online (although two of them can be very successful if you put in the work), but the people who sell these ideas to you often make money from selling them.
For side hustle ideas, I recommend listening to the Side Hustle Show, by Nick Loper. The format (interviewing successful hustlers) means you get a real sense of how things worked for these guys and girls who are now either at, or approaching the point where they can declare independence from the day job. It takes things a long way beyond the “start a blog” or “sell stuff on Amazon” starting point you’ll get from most advice.
A future project on this blog is the side hustle laboratory, where I’m going to try my hand a few of the more common side hustles. The purpose is to determine just how difficult it is to get started, how much luck is involved and how tough it is to learn the necessary lessons to get past the tough early stages of a new business. Ultimately, the question I’ll be asking is, is it worth it? From a time and cost point of view, in my own experience.
Exchanging Time For Money
There are things you can do that allow you to make small amounts of money in return for tasks that don’t require much in the way of investment on your part.
I’m not a huge fan of this category, but it’s a good short-term solution for many.
The most obvious example of this is online surveys. These firms send you surveys to fill out as part of a marketing research campaign and you get points, which have a pseudo-monetary value, for completing them.
You will have to answer an awful lot of surveys and invest a great deal of time for this to add up to any meaningful amount. It will, however, provide you with enough for perhaps a birthday gift, or a discount in a restaurant. In return, you will have provided a company with intimate personal details which will have been used to enhance marketing efforts for whomever requested the research in the first place.
I’ll write more on why I’m not a huge fan of surveys as a source of income in a dedicated article.
Other money-for-time gigs, which are perhaps more up-front in what they give in return for your time, are things like the Amazon Mechanical Turk, which pays you for completing work units, which are small pieces of work (like data entry) requested by their clients.
Downsizing (or re-sizing)
Extra income can also come from changing the way you think about your personal belongings.
The core philosophy here is minimalism, but you don’t have to take it that far to make a little money with a slight adjustment to your attitude.
If you think about the purchases you make as obtaining temporary use of various items, you change the concept of ownership of those items into something more like a lease.
If you purchase something for £100, use it for 2 years and then dispose of it, then you’ve paid £100 for 2 years of use and the right to chuck it away.
If you purchase a nicer version of the same thing for £150, use it for two years knowing you’ll sell it later, taking good care of it at all times, and then sell it for £80 after two years, then you paid £70 for the use of a nicer object for the same period of time.
Obviously this doesn’t work for every kind of object. A mobile phone, for example, is something that doesn’t age well as it becomes redundant, but even here it’s worth calculating the cost of chucking something in the bin versus inserting it into the aftermarket after a set period of time.
To get started with this, you can selectively adopt the in-a-box-for-30-days approach to minimalism and see what you can sell when you dispose of things. Pick a set of drawers (the kitchen, for example), empty them into a box and put the box in another room. When you need something, get it from the box and then when you’re finished with it, put it back in the drawer. Anything still in the box after 30 days gets sold, gifted or trashed.
Selling old items won’t make you much money if they’re low value, and it can take a lot of time to manage the logistics of mailing out little things, so you have to decide for yourself where to draw the line. Getting rid of items you don’t need, however, will train you to not purchase the latest gadget or gizmo just because of the once-a-year moment when it comes in useful.