ABC Good Money Week 1 Earning More Main Segment

Hello, everyone. Welcome to Good Money, your trusted source for personal finance advice. I'm Tonya Rivero in New York. When you consider personal finance, so many of us think it's about cutting costs by clipping coupons, living frugally at times, maybe even being cheap, skipping that latte and picking safe investments and savings accounts. But there's another side to personal finance that you might not have thought about, and that is putting more cash in your pocket by earning more money. So how do you do that? Well, here to talk with me today about that very topic is Ramit Sethi, ABC personal finance contributions and author of I will teach you to be rich. He's here with tips on how you can make more money on the side while keeping your day job. Hi, Ramit. Great to see you again.

Hey, nice to be here.

So isn't personal finance just about spending less than you earn? That's what we're told our whole lives.

Yes, it is. And isn't it annoying? People are constantly telling us, no, no, no, no, you can't spend money on lattes. No, you can't afford those jeans. No, you can't go on vacation. And truthfully, we could probably all do with a little bit of restraint. We. But they always forget the other side of the equation, and that is earning more. Remember, there's a limit to how much you can save, but there's no limit to how much you can earn.

That sounds lovely, but isn't it easier said than done?

It is, but, you know, it is difficult to earn more money. But once you can start doing it, once you can earn $100 a month or $200 a month, you can quickly turn that into 500 and then 1,000. And then your finances take a totally different role.

Well, there are some areas then where frugality doesn't quite cut it. Is that right?

That's right. I mean, let's take the classic example of lattes. Everyone saying, don, buy those things, it's $3 a day. You know, by the time you're 89 years old, you could save $50,000. Well, guess what. First of all, you're gonna hate your life every morning if you don't buy the thing that you love. And second of all, it's only $3. There's so many other options for keeping that thing if you love it and actually earning more. Let's say you figure out how to earn $500 a month, you could pay for those lattes eight times over and still be happy when you wake up.

I love it. I'M sold. I'm convinced. Now let's get down to the nitty gritty. What do we have to do to actually earn more money?

Alright, so you have two options. The first opt increase your salary at your job. That's a good one because all of us have jobs and we can typically do it if we try hard and we're a little lucky. The second option is to take your skills and turn them into side income.

So let's start with, let's start with our current jobs. How do we go to our boss and say, hey, you know what, I need a raise.

Okay, so it sounds unlikely, especially in tough economic times, but I've been coaching students on how to do this and the average amount that they're able to get from a raise is $8,000,000. So it's pretty significant. And here's the general technique. The first thing that I recommend is they go to their boss and they say, look, I really want to become a star performer. Can you help me do that? What would it take? What specific things would it take to do that? And for most of us, as much as possible, it is either helping the company earn more money or cut costs. Then what I do is over two months I have those students check in with their boss, let them know the progress, make sure everything's on track, and at the end of those two months you can ask for a compensation review.

Ah, very clever. So you don't bring up the raise in the first conversation?

No, you to become a star employee. And by the time you've become a star employee, of course they have to give you a raise, right?

Ah, very, very clever. I like that. Now how about making money on the side? How do we do that?

Okay, this is what I love because almost all of us have a full time job, but we never stop to think, hey, if I could put five hours a week into earning more money on the side, what would I do? So the basic framework is we all have skills that we can use to earn more money on the side. We all have something we know how to do that somebody else will pay for. If we can figure that out, we, we can earn 100, 200, 500. Some of my students are earning thousands of dollars a month.

But are you telling people then that they need to be entrepreneurs? Because I don't think everyone is cut out to be an entrepreneur.

I don't think so either. I think when people think of being an entrepreneur, they think they have to quit their jobs and start the next Google. But that's not true. At all. You actually just need, you can keep your job, keep doing most of your lifestyle and simply say, what skills do I have that somebody else would pay for? Do I know how to cook? Can I tutor in math? Even something as simple as being a dog walker, There are people who will pay for that and pay significantly.

So what is the right choice for most people then if they're interested in doing this? Just a skill that they alone possess.

Yes. So a skill that they possess that other people would pay for. Now let me ask you, what do you think the following have in common? A violin instructor, a freelance writer, a fashion designer, and an IT guy. All those are people who are now earning money on the side taking their skills like a fashion designer or a freelance writer and they're having people pay them for it. And I'll give you an example. I had a guy that had a full time job he didn't really like, but what he loved to do was cook. He loved cooking. So he found somebody who was really busy, didn't have a lot of time, and my friend made $1,000 a month being a personal chef for this other guy.

Fantastic. Now where do you carve out the time for this though, if you already have a full time job?

So this is tough. I mean, I'm not going to lie, it's going to be tough. But I say five hours a week, you can do it. With five hours a week, you can figure out what your skills are. You can go out and figure out if people will pay for it. That's key. Will people pay for it? And then you can start marketing it. You don't need to waste time. There are a lot of things that people waste time on, like creating a Twitter page or creating business cards. All a waste of time. I like to focus on stripping it down and just focus on getting your first three paying clients. That's it.

It sounds fantastic. But what if I rack my brains and I just can't come up with a skill that I have that people will want to pay for? Should I take a class? How should I develop this skill?

I would actually ask your friends. Go out to your friends and say, what do you think I'm good at? Your friends often have insight, surprising insight into you that you don't have. They might say, for example, you know what you are really good at? Organizing rooms. Like your closet is always super organized. Well, guess what? Personal organizers can make thousands of dollars a month because there's always someone who would pay for that skill.

Very good point. I like that. It is True that our friends often notice things in ourselves that we do not notice. Now, what if I am a student, stay at home, mom, how can I earn some cash on the side?

So very, very much the same principles. But let me give you an extra framework. A lot of people will come up with these ideas of something they're good at. Let's say they're really good at scrapbooking. Okay. Well, you have to ask yourself, are there people who have the ability and willingness to pay? In other words, is there someone who even. Do they even have the money? And if they do have the money, do they want to pay me for that? For scrapbooking, for example? Would someone pay you to do that? Maybe, maybe not. For being a personal organizer, you better believe that there are lots of people who would pay for that.

And what is the going rate these days for being a personal organizer?

Quite a bit. You know, here's the clever thing. You can charge an hourly rate, upwards of 50, sometimes over $100 if you're really good. But the beautiful part is that when you find someone who wants to hire you, you can then say, you know what? I'm going to come in once a month. And they pay you in an ongoing fashion.

Nice. Get those clients and keep them all. Right. Now, there must be some pitfalls or warnings that you think we should know about.

Yeah, I mean, the biggest thing is that people sometimes come up with an idea that they're really passionate about that has no chance in business of succeeding. And the classic examples of this are, I want to start a coffee shop, or I want to help nonprofits. Now, those are. They sound great, but they're very unlikely to produce revenue for you. So you want to ask yourself again.

What'S wrong with coffee shops? I have, like, three cups of coffee a day.

You have three cups of coffee, but you're not the business owner. The business owner hates those people with laptops like me, who sit in those coffee shops all day and take up his tables. Those are. Those are examples that are very high capital costs, and it's really difficult to succeed as a business person in those areas.

All right, Ramit, are there any final thoughts we should be aware of as we go out and try to earn more?

Just ask yourself, you know, why are you earning money? Are you doing it to pay off debt, live a better life? Ask yourself that and know it, because you don't want to just blindly keep up with the Joneses. You want to be strategic in why you're earning money.