The majority of personal finance advice in the world covers ways to save money and invest your savings. While both of those are important and will build personal wealth, too often they distract from the biggest wealth builder of all; your personal income. That means job compensation, earnings from a business, or any other way you actively earn money.
There are two ways to build personal wealth: increasing your income or decreasing your expenses. Why do most personal finance “experts” focus on cutting expenses? Because it’s easy to give that advice and they know you can expect concrete results if you follow it…
If you stop buying new clothes, only eat home cooked meals, and don’t go on any big vacations, you will definitely save money and boost your net worth.
The problem with only taking that approach is that you can only cut your expenses by so much. At a certain point life becomes unpleasant, and even after that, you still have basic human needs.
Your personal income is a completely different story. It’s harder to give advice on it, AND it’s harder for people to take advice. Everyone’s career is different, and no single instruction is guaranteed to make you more money at your job or business.
But on the other hand, you can boost your personal income by a lot more than you can cut your expenses…
Let’s say you secure a 10% raise at work. How much money is that worth to you, every year?
$5,000? $8,000? $10,000?
And those gains compound year over year. A single big raise can be worth hundreds of thousands of dollars over a lifetime for someone in the beginning or middle of your career. $10k raise at age 35, and you work another 20 years? That’s an extra $200,000. And that’s if you never get another raise (wouldn’t be the case!).
It’s a lot smarter, more efficient, and ultimately faster to build personal wealth by increasing your personal income.
But it often feels hard or too uncertain to do that… Many of us see our job compensation as something only slightly within our control, if it at all. And employers like it that way!
On top of that, we’re risk averse; it’s human nature. We’d rather spend energy on something that we know has a 100% chance of success, like cutting an expense with absolutely certainty that the money will then stay in our pockets…
If I stay disciplined and don’t drink Starbucks this whole month, I’m guaranteed to save $100!
Spending time on career building is a riskier proposition, so too often we often tend to avoid it…
Even when we know what should be done, our mind tells us: Even if I work hard, spend time documenting my accomplishments at work, researching competitive compensation, study and practice negotiating, and then ask for a raise this year, there’s only a 50% chance I’ll get it, so it’s not worth it!
Except it IS worth it. Even if your chance for raise is only 20% (it’s almost certainly much higher, especially if you’re a Personal Wealth Basics reader ), and your raise is $5,000, then your expected return is $1,000 ($5,000 * 20%) per year. For the rest of your career, without counting future raises.
Now compare expense cutting vs personal income again… Which wealth building area makes the most sense to work on?
And those personal income figures and chances above are conservative. With the proper preparation and work, yours will likely be higher.
Below I’ve outlined some initial strategies for boosting your personal income as it relates to your career. These are more complicated, thought provoking, and labor intensive than advice to “budget every day and cut all expenses by 25%!”
But the rewards are worth so much more. Working on these is hands-down one of the best investments you can make in building personal wealth.
Personal Income Boosting Strategies
A) Negotiating Salary
1) Introduction to Salary Negotiations (Free, Short online class)
2) Secrets of Power Negotiating (book)
B) Finding Your Dream Job
1) Free promotional material from well renowned career/business author Ramit Sethi: Find Your Dream Job
C) Goal Setting and Planning Long Term
1) Carve out 1 hour of time by yourself, sit down, and type out a map of your potential career path(s) for the future (1, 2, 5, 10 years from now). Be ambitious with your goals. These aren’t set in stone, just the current goals to provide a focus.
2) Once you established the goals, work backward and think of the steps you’ll need to take to get there. Promotions? Move groups in your company? Move to a different employer? Go back to school? Write the steps out too, in a road map
3) Identify the absolute very next step you would need to take to start the journey on that road map. Research salaries of a different or more advanced position? Update your resume? Research a new company? Email an old coworker or someone in your network?
4) Execute that action! Then identify the next one. And execute! Keep goal oriented and always ask yourself if what you’re doing is a concrete step towards meeting your goal.
5) Set aside time each week to execute on your plan. And watch the results and progress add up.
D) Self Educate
We live in a fast changing world; technological advancements and overseas competition are reducing demand for some jobs, and creating demand for others. To stay competitive you need to constantly ask yourself how you can add value in your workplace. Usually that involves bringing knowledge, skills, and expertise to the table. One of the cheapest and best ways to build those is through online classes. Check out these online course websites to see if anything might relate to your career or job position:
You can also seek out certifications in your career field, which usually require workshops to complete. A fair number of employers will sponsor employees to get certificated in relevant areas. Take advantage of that!
Continuing education is a great way to invest in yourself and boost your value as a contributor to current and future employers.