Last week, Ramit from penned nearly 4000 words on 5 surprising insights on earning more money. When I saw that it had A) surprising insights and B) earning more money, I rushed to read the article. In fact, I don’t know anyone who isn’t interested in those two things.
Before you can get to the 5 surprising insights on earning more money, there is a lengthy introduction. Included in that is over 900 words on why one would want to earn more rather than cutting back. If you read Ramit’s site, that shouldn’t surprise anyone. He’s never been one to parade around about how frugal he is. While I appreciate the attitude of earning more, I’m often confused when it’s pitted against saving money (hint: click that link for about 1,000 ways to save money). The two concepts are not at war… they are not mutually exclusive. You can do both.
Ramit makes some good points for earning more verses saving money. Here are the ones he points out…
- For instance, he correctly points out that saving money gets harder and harder. For example, once you cut something out (let’s say your daily latte), you can’t cut it out again. Ramit then points out that as you make more money it gets easier to earn more money. His example is a 10% tweak in pricing negotiations can lead to hundreds of dollars per month. His main point here is “There’s a limit to how much you can cut back, but no limit to how much you can earn.”
My take here is that the later isn’t necessary true. Some of the ways he suggests earning more include dog walking, organizing, utilizing your high school math skills (I’m going to assume tutoring on that one). Each of these do have limits on how much you can earn. Are you going to walk dogs 24 hours a day 7 days a week? Are you going to be able to convince someone to pay you much more than the going rate for someone who walks dogs? How much is your time worth at your chosen career? Is it better than what dog walkers typically make? If not, could it be better if you put more time into it?
(Side Note: As a dog owner, I’ve spent a lot of time thinking about dog walking business. It seems to me that if you get a bunch of small dogs who don’t pull too hard, you can do well. If you get a few dogs like my 70-pound Husky-Labrador mix, you are likely to have a long day.)
- The other point he makes is that “cutting back on everything [is not fun]”. His language was a little more creative than what I like to use on this blog. His example was that to save an extra $1000 a month you’d have to go through and make major cuts including “No eating out, cancel gym, cancel cable, no going out, reduce cellphone minutes – etc.” But to earn an extra $1000 you spend a little more time tweaking your business in minor ways to get 50 more leads and one good client that will give you $1,000/month. He suggests that tweaking will be 5 hours a week. I have no problems with that idea, but unless your businesses are high-earning, the couple of dog-walking clients aren’t really going to add up to $1000/mo.
The flip-side of the saving money argument is that it often doesn’t take any more time to save money. I reach for generic aspirin instead of brand name and that’s saved money in my pocket. Did one reach of my arm take any more time than another reach? I may have had to scan a couple of prices, but that takes mere seconds. I’ve written about cutting cable television in the past, but that’s largely because I don’t watch a lot of cable. I dislike paying for things that I don’t use.
The biggest argument that I have against the earning more philosophy (and I’ve been a huge proponent of it since the start of this blog), is that it typically does take time. Dogs don’t walk themselves. Garages don’t organize themselves. Kids don’t tutor themselves in math. At the end of the day, earning more in these ways require trading your time for money. That, in my opinion, isn’t exactly earning more, but earning differently. It may not be much fun to save money, but coming home from work and walking a dog or organizing a garage, doesn’t sound like my idea of fun either. If your grand plan is to quit your job and just do these side jobs, I fear that you won’t be earning more for a little while.
I understand Ramit’s perspective though. To some degree I live in that world. We both have blogs. We can spend a little time tweak our blogs and producing more earnings. He has a best-selling book. He can spend time promoting it and see earnings multiply. That’s just leveraging the existing hours of work we’ve put forward in more efficient ways. However, even those avenues of growth are limited. If I make $40 a day from Google AdSense, I may be able to increase that, but chances are that I’m going to be limited by the amount of traffic I have. At some point, I need to reach bigger audiences or look into other forms of monetization.
In the end, I’m not 100% sure what the answer is. I think it lies in the 80/20 rule. If you can cut out the expensive things that have little impact on your life, you should do it. If you can build a business in your spare time without making it feel like you are working 100 hours a week, perhaps that’s worth looking into as well. Where the two concepts collide is probably the sweet spot of having more money and having the time to enjoy it.
[Note: I realize I didn’t even get to the 5 surprising insights… perhaps another day… for now I’ll celebrate that I wrote around 1000 words, even if that leaves me 3000 shy of Ramit’s article.]
[Note 2: Check out some tips from Reader’s Digest on how to save money.]