“31 Days to Financial Independence” is an ongoing series that appears every Thursday on Money360. You might want to start this series from the beginning!
Last time, we finished off the “cost-cutting” portion of building your path to financial independence by examining how exactly to incorporate the many frugal tactics shared in this series into your life.
Now it’s time to move onto the other half of the “spend less than you earn” coin: earning more money, and we’re going to start with your job.
Most of us work for an income, and most people in that group have someone who is their primary employer – an ordinary job, in other words. You work, you do what your boss says, you get paid, then you use that income to make ends meet and save for the future.
We’ve spent most of the series thus far really focusing on how to get maximum value out of the income you already have. Those strategies do an effective job of increasing the gap between how much you spend and how much you earn so that you can do effective things with that remaining money, but that’s only part of the story. The other powerful way to increase that gap is to raise your income.
Improving your income is a tricky thing to consider because it doesn’t have the immediate results that frugality has. You can’t do a certain thing and immediately get the positive results from it, as you can with frugality.
However, improving your income has several major advantages, one big one being the fact that there’s really no cap on improving your income. There’s only so much spending you can cut before you really can’t cut any more; there’s really no ceiling on how much you can earn if you make good choices.
As with spending less via frugality, the more you earn, the more money you’re going to have left over for achieving your big financial goals, such as financial independence. So, no matter what your situation is, finding more income is going to be helpful.
I’m going to use myself as an example here. When I first began my financial turnaround, I recognized that no matter how much I scrimped and saved, there was only so much I could cut from my spending. You can only extract so much water from a rock, after all.
As I began to realize how important additional income was going to be in terms of paying off our debts quickly and getting us ready to buy a house as fast as possible (as our second child was on the way and we needed more space), I started to really bear down on my options for additional income. I not only talked to my boss about how I could move up on the pay scale at work (she suggested a lot of performance-oriented methods), I also spent my spare time launching several side businesses, one of which eventually grew into this very website you’re reading right now.
Without that increase in income – which, honestly, was nice but it wasn’t life altering amounts of money – it would have taken much longer to pay down our debts. I threw every dime of that extra income at our debts and then at our savings for our house and, thanks to the acceleration provided by that additional income, we were able to move in before our second daughter was born without being crushed by debt.
Cutting back on your spending is key, but taking steps to improve your income is a big key, too. You’re going to need both sides of the coin on the road to financial independence.
What follows is a list of strategies that focus entirely on increasing your income at work without increasing your work hours. Obviously, working more hours is going to result in more income, but the goal here isn’t to just add to your already overburdened life. Instead, the focus is on improving your true hourly wage – the amount of money you get to keep for every hour invested in work and work-related activities like commuting.
Let’s get started with a central principle you’ll always want to keep in mind.
Never forget that both you and your employer want to get maximum value for your time and money. It’s easy to see the employer-employee relationship from your perspective. You want to get paid, right? We all want money in our pockets. The thing is that many people lose sight of the employer’s part in that equation, and it’s when you lose sight of what your employer is bringing to the table in this exchange, it becomes very difficult to ever see an increase in your salary or in your hourly wage.
Your employer basically wants to get the most value they can out of each hour that they pay an employee. If you’re not doing anything more than a newly-trained person off the street can do, there’s no reason for an employer to pay you more than an entry-level employee. If you want to be paid more, the question to ask yourself always is how can I make my hours here more valuable for the employer so that it makes sense for him to pay me more to keep me, because switching to an entry-level person would be a loss? In other words, what value are you adding to deserve more pay?
Don’t ask for a raise until you have clear evidence of sustained strong performance. This follows right along with the previous strategy. If you don’t have any evidence that you’re doing anything better than someone they could pull in off the street, your employer has no reason to give you a raise of any kind. They’re not going to pay you more just because you’re a special butterfly. That’s not how the world works.
If you’re thinking of charging into your boss’s office to get a raise, make sure that when you do, you have some clear-cut evidence and things you can point at as proof that you’re doing your job well and providing much more value to your employer than someone fresh off the street. If you can’t do that, you’re not giving your boss a reason to say “yes.”
Know what’s realistic. Almost every job comes with a pay range that an employee can expect from that job. No matter how good your performance is, you’re not going to exceed the high end of that bracket very often.
However, knowing where you land in the range of reasonable wages is very important, as it gives you a sense of what you can ask for and shoot for in terms of raises in the future. If you have a lot of room to grow, then many of the strategies below make sense. If you don’t have a lot of room to grow, you may want to be considering a job switch or a career switch or moving to the next rung up on your career ladder.
Have a sit-down with your supervisor about job performance. This is where you start. Just ask for a few minutes of your supervisor’s time and ask about your job performance. Remember, you’re not really looking for things that you’re doing well, but things you can improve on that will set you apart from the crowd.
Go in there with a notebook and take notes when your supervisor is talking. Write down every single action you can possibly take that is mentioned by your supervisor as a way to improve your performance, even if it seems trivial.
Ask about extra steps you can take to maximize your job performance. Is there any training you can take that would make you more effective at your job or make you eligible for better pay? Can you take some evening classes that might contribute to better performance? Maybe there are online tools that your company provides that can help.
Devoting some of your spare time to improving your job performance now can often improve your true hourly wage down the road, making every hour you work more valuable than before. That’s usually a great investment.
Take your performance reviews seriously. Many workplaces have a regular performance review where you sit down with your supervisor and go over your workplace contributions over the past few months or the past year. It’s easy to just blow them off when you’ve been there for a while. Don’t.
Performance reviews often amount to a supervisor going through a checklist of things that basically describe optimum performance for your position. If you can make a case for all of the things on that checklist, you’re going to have a glowing performance review, and if you have a glowing performance review or two under your belt, you have a great case for getting a raise.
Use feedback from your performance reviews as a checklist for future work. Whether it’s a meeting with your supervisor or a performance review, you should be using it as an opportunity to come up with a list of things you can improve on and things you can do to be seen as a great performer in your job. If you’re not coming up with things, ask questions. Ask what you can do better.
In the end, you should walk out of there with a list of things you can do to improve. Take that list seriously. Use it as a checklist over the coming months to become a stronger employee, one that will sit down next time and have an absolutely glowing review which you can then use as leverage to make your case for a pay increase.
Build and maintain positive workplace relationships. Unless you have the personality of a saint, you’re not going to strike up a great relationship with every single person in your workplace. You don’t have to. Just make sure that your relationship with everyone is positive.
One great technique that always works is to make sure you know everyone’s name and a few things about them and then ask them about those ongoing concerns whenever you see them and listen to the answers. If you know that the new guy in accounting is just gaga about his kids, learn their names and ask about them and listen, and then eventually ask about how they’re doing. You’ll naturally be thought of in a positive light if you have lots of conversations where you let other people have the floor, listen to what they say, and remember a little bit.
Avoid negative talk about coworkers like the plague. Every workplace has office talk, and that office talk is often the home of negative gossip. You can listen if you’d like, but avoid spreading any yourself. Resist any and all urges to speak negatively about any coworker unless it is directly to their face in a one-on-one environment.
Negative talk does nothing but inflame negative feelings. Even worse, word of your negative talk often makes its way back to the person you were insulting and damages that relationship. If you talk negative about people behind their back, it’s very likely that others are doing the same to you and it’s going to damage your workplace relationships. A damaged workplace relationship is one that you’re not going to be able to rely on as you try to raise your performance level and it’s one that’s likely to reflect poorly on you to the supervisor that you’re trying to impress.
Don’t waste downtime. When there’s downtime at work – and there’s at least a little downtime at almost every job – it’s tempting to just burn that time goofing around, talking to coworkers, looking at your phone, taking a nap, or almost anything else that you could possibly do on an extended break.
Instead of looking at downtime as a chance to slough off, look at it as an opportunity to take care of some of those things on your list of suggestions from your performance review. What things did your supervisor tell you would lead to great performance? Fill that downtime with those things.
If you have downtime anyway, find workplace problems that need to be solved and solve them. Again, almost every workplace has workarounds to handle ongoing problems that no one has invested the time to actually fix correctly. If you find yourself with a block of downtime, use it to address that problem.
Doing this shows several very powerful things. It shows that you’re observant in the workplace and are able to identify problems. It shows that you’re able and willing to figure out how to solve those problems. It also shows that you have the initiative to carry through that solution to make things better for everyone.
It’s generally a good idea to talk through workplace problems like this with coworkers and even your supervisor just to make sure that it really is a problem and not just something you don’t understand.
Volunteer for challenging tasks. Often, there will be situations where a challenging task comes up and someone needs to take it on. These are often challenging tasks or else tasks that no one else wants to do.
While you shouldn’t volunteer every time, raising your hand and stepping up to the challenge some of the time is a great way to build your reputation at work. It gets a difficult task done, which is something that will please your supervisor, and you can simply tell your coworkers that someone needed to step up to the plate and you didn’t mind taking it on this time, which can help with your relationship there as well.
Document your work. As you work through all of the suggestions from your performance review and also occasionally volunteer for extra challenging tasks, document those efforts. Keep a little pocket notebook with you and take note of the extra efforts you’ve put in to make things better at work.
Don’t document your ordinary work responsibilities. However, you should document significant extra tasks that you take on and anything above and beyond the normal call of duty that you did, particularly anything related to suggested improvements from your performance review.
Before your next review, use this documentation to come up with a report on yourself listing the things you did to address your performance as well as all of the significant extra tasks you’ve taken on, with dates. This is easy if you’ve been noting the extra tasks and extra effort along the way. If you can say “I stayed late to help close 17 times in the past six months,” that really helps make your case, especially when you can back that up with dates.
When you ask for a raise, stay focused on the workplace. Believe it or not, branching off into the multitude of reasons why you need a raise often hurts you, because it takes the conversation away from your job performance and into areas where your employer can “get away” with offering general life advice without having to give you a raise.
Focus on what you actually achieved within the bounds of the workplace, how that exceeds the standards of performance that your boss has laid out for you in the past, and use that alone as the basis for why you deserve a raise. Don’t give your boss an opportunity to reroute conversation away from the question of a raise or why you deserve it.
If your boss can’t give you a wage raise, consider asking for other benefits that can help you in other ways. Maybe you can simply ask for more flexible hours to help you with some of your other life demands, such as being available for your children or having time to take on another job or start a side gig. Perhaps you can ask to work from home a day or two a week, or you can try for something that one of my coworkers used to utilize, a schedule of nine 9 hour days followed by a Friday off, which amounted to him working 9 hours a day with every other Friday off, giving him regular three day weekends.
While these things won’t help you directly make more money, they will free up time for you to do other things in your life that you might not otherwise be able to do. You might have time to start a side business or work at another job or simply reduce your dependence on expensive child care. These things don’t cost the company money, but they do save you money, so it ends up being a functional raise for you.
Next time, we’ll talk about strategies for getting promoted within your current workplace so that you can earn a higher income.