ABC Good Money - Turn Your Ideas Into Income, with Ramit Sethi

Hello, everyone. Welcome to Good Money, your trusted source for personal finance advice. I'm Tanya Rivero in New York. Last week we touched on a topic many of us overlook in our quest for financial freedom. Actively earning more money. And while you may have the best intentions to make more money, you might be stuck on how to actually get started. How do you find an idea that can bring in that extra 300, 500, $1,000 a month? Even more? Well, joining us here on Good Money for tips on finding your next money making idea is Ramit Sethi, our personal finance contribut and author of I will teach you to be rich. All right, Ramit, great to see you again.

Nice to be here.

Let's dive right in because I imagine there are a lot of people out there who could use a little extra cash in their checking account. But a lot of people may think to themselves, you know, I've got one or two great ideas, can't really figure out between them. These people are not alone. Is that right?

No, they're not alone. Everybody wants to earn more money. But I did a survey of over 1000 people and found that the number one reason people are not earning money is they're just not sure what to do. So it's not that you're alone. There's many people like you.

So you've got these ideas. A couple of them are floating around in your head. How do you take these ideas and do something concrete with them?

Well, the first thing you, first thing to understand is that there's a couple types of people. One type of person has no ideas. They've got all these skills, but they're not sure what people would pay for. Right. And then on the other end, you've got people who have 20 ideas and they're just overwhelmed with them. So you really want to set up a process for how do you find an idea? And this is the most important part. You have to test it to make sure that people would actually pay you before you spend nine months of your life working on an idea that would never pay.

Okay, so before you get to the point of testing it, how do you whittle down your ideas? Do you recommend just writing them down on a piece of paper?

Yeah, it's a great question. I think there's three parts to it and anybody can do this in 15 minutes. It's not a huge process. The first thing is to ask yourself, what do you pay for? Now we all pay for tons of stuff. Think about it. We go out to restaurants, we pay someone to cook for us, we. We get our car repaired, we pay for maybe a cleaning service, maybe a tutor for our son. These are all things that people had skills and they turned it into income. So that's 1, 2. Write down all your skills. Maybe you speak Spanish really well. Maybe you can assemble IKEA furniture. Just write them down. And then the third part, this is the key. What would people pay for in terms of your skills? What do they have the ability and willingness to pay? Most people just write down any idea. But you want to think about what people would actually pay for, because that's how you're going to earn money.

And when it comes to sort of identifying your skills, is it useful to sometimes ask other people? Because we're not always the best at recognizing our own strengths.

No, we're terrible. I mean, for example, you might be really organized, but it's just second nature to you. Maybe you've been organized since you were, you know, just a kid, and you.

Assume everyone is organized and they're not.

I mean, like somebody like me, I am not organized, and I would kill or I would pay for someone to come in and help me get organized. So your friends can be a great judge of skills that you have, and.

They can help you identify your own strengths?

Absolutely. They can just say, hey, did you know, Tanya, that you're actually really good at xyz? Oh.

And so then once you've identified your strengths and you figured out your skills, then what?

Okay, so now you want to apply something I call the pay certainty technique. And what this means is you want to find ideas that are certain to pay. And how do you do this? You take an idea. Let's say that you want to help nonprofits fundraise. Okay, now that's a nice idea. It seems pretty good for the world. But your goal is to earn money on the side. Now, do nonprofits have the ability to pay? Maybe not. They don't necessarily always have a ton of money. However, let's think about. Maybe you can help busy executives assemble their. Their furniture. Do they have the ability and willingness to pay? Certainly. So what you do is you basically eliminated half your ideas, and now you're stuck with just a few that are pretty good.

It's too bad that some of the ones where there's willingness to pay are not necessarily the most lofty, idealistic ones. But that's. That's the way the world goes Now. Now you say also, then once you've determined that you still need to do a little bit of digging, a little bit of testing, right?

You do. You can't just take your idea and done. I got a thousand bucks a month. So what I'd recommend is by this point you've applied the pay certainty technique. You've whittled it down to two or three ideas. Pick one, just pick one. And we all know, you know, we have an uncle who's been waiting for that mythical idea to fall down from the sky. And it's not about that. It's about taking an idea and systematically testing it. So you'll go out there, let's say for example, that I want to help elderly people with their computer problems. Good, great idea.

Is that one taken?

So I might go out and say, you know, is anyone else doing this? And actually, counterintuitively, competition is good. That means there's a market. Then how do I test it more? I'd go find some elderly people and I would say, hey, is this actually a problem for you? Have you ever hired someone? Would you consider doing it? And now you've starting to test your idea and you'll know before you ever get started if it's going to pay or not.

And how do you set your price point? How do you know how much people are willing to pay?

One good way is to look at comps or what other people are charging. Don't try to compete on price. That's a big mistake that first time entrepreneurs make. They'll say, oh, he's charging $50 an hour, I'm going to charge 30. But you don't want to do that. You want to say, how can I charge the same or more and offer more value. Maybe you can offer more services like delivering the computer to the elderly person or doing whatever they want.

So you don't recommend cutting your prices to get a whole bunch of new customers?

Never. Almost never. It almost never works. And you get the worst types of customers. Keep your price point as competitive as meaning as high as possible. And offer the most amazing services that you can.

But isn't that hard to break in? Because if someone is searching for a service, let's say they see you with no experience, your brand new, new kid on the block and company B, that's been around for a while, they're both charging the same thing. You're going to go with company B, that's been around.

Great, great, great question. You want to ask these potential customers, the people that you're talking to, what are their pain points? What are they not being served when they're dealing with the other company? And then you find the hole you exploit it, you offer that service and, and you can charge as much or more, and that's a quick way to earn a lot more money.

Sounds great. Now, do you recommend doing these sorts of services rather than starting your own company?

Well, when people think about starting their company, a lot of times they think, I gotta quit my job and I gotta start the next Google. And that's not true. I think a lot of that holds a lot of people back. I like to advocate that people keep their jobs and try to earn a little bit on the side. When you've got 1, 2, 3, 5 paying clients, then you have the option if you want to quit your job, but you don't need to quit right now, you can start just on the side.

It's not exhausting to have your job and this on the side. You need to drink a lot of coffee.

Five hours a week.

Five hours a week.

Five hours a week. You can earn money. You can earn hundreds or even over a thousand dollars a week. With five hours a week.

Really that little.

You start reading some material, you start doing a little bit of research and then you start. When you get your first client, it Snowballs onto your second and third. This is not 50 hours a week on the site, it's five.

Fantastic. I love it. I love it. Ramit Sethi, thank you so much, so much.