Living Freely: Increasing Income

July 27, 2019 Living Freely Series

Last updated on September 10th, 2019 at 03:48 pm

Disclaimer: I am not a professional financial adviser, and this series in not meant to provide individualized financial advice.  I am just one guy who did well enough to become financially independent at age 35.  This series simply shares the lessons I learned for your entertainment.

By The Pointer

Let’s congratulate Travis!  He’s done three of the most important things on the journey toward gaining control over his finances and his life: deciding what he wants, setting a financial independence target and cutting his costs to make it possible earlier.  While this seems trivial to some people, his new 14% savings rate puts him significantly ahead of most of the United States.  As of May 2019, the average savings rate was 6.1% according to the Bureau of Economic Analysis...and that’s just an average.  In other words, Jeff Bezos is averaged with a factory worker.  If you take out the households representing the top 10% of wealth in the US, the savings rate is close to zero, and was negative for quite a while.

Source: National Bureau of Economic Research, Emmanuel Saez and Gabriel Zucman, Wealth Inequality in the United States Since 1913: Evidence from Capitalized Income Tax Data, October 2014.

What’s Next?

Let’s not get too far ahead of ourselves!  If you’re following along at home, cutting expenses isn’t just about mobile phones and cars.  Truly figuring out what you need in life, and what has real value for you takes time.  Way too many people call around to reduce the auto insurance by a few dollars, pat themselves on the back and go on to spend that money on something else.

I recommend focusing on cutting expenses first because it forces you to decide what you need and what you don’t.  That way, if you earn more money, you won’t piss it away, and end up back where you started.  However, I’m going to assume we’re all normal adults that can walk and chew gum at the same time.  In other words, let’s discuss increasing income while you and Travis continue to work on cutting costs.

Your Income Has Unlimited Potential

Increasing income has to be part of any financial independence equation.  If savings = income – expenses, income is the variable with the most potential.  Remember, the lowest your expenses can possibly go is zero, and most of us will never get there.  Income can continue to rise with no barrier.

Let’s talk about different ways to increase income in the real world.  Unlimited income sounds nice, but how does one go about it?  How do you get more money while recognizing that your time is limited?

Method 1: Making the Most of Your Current Job

We never really talked about Travis’s job before.  He’s a marketing analyst at a consumer goods company.  In other words, he analyzes sales data to identify sales trends.  Travis is the guy who sees that’s sales are up way beyond expectations in Walgreens because the company tried a new type of promotion so he recommends doing similar promotions in Rite Aid and CVS.  With that background, let’s look at ways Travis could earn more in his current job:

  1. Just Ask For A Raise – For a good chunk of my career, I had people reporting to me, and I don’t think anyone ever asked me for a salary increase outside of year-end reviews, and even then it was rare. If you think you’re being underpaid, and you can make a reasonable case for why you should earn more, just ask.  What makes a reasonable case?
    • Showing you earn the company much more money than you cost – In a role like Travis’s, he can point out that if the success of the Walgreens promotion he identified is replicated in Rite Aid and CVS, the company profit will go up $200,000/year, which is far more than the $10,000 raise he wants.
    • Benchmark your salary – With a reasonable comparison point, Travis can show he deserves more. He can ask other marketing analysts in the company what they’re making.  He can go to a website like to see what others in similar roles report making.
    • Look at the market – Like any other market, the labor market works on supply and demand. After the 2008 financial crisis, jobs were disappearing.  Employers didn’t have to give their employees a raise because there was someone else who’d quickly fill that role for the same salary or less.  In 2019, employers are having a hard time finding the people they need so employees like Travis have a lot more bargaining power.  Not every sector or region follows the same trends, but knowing what’s going on in the markets gives you an idea of how much power you have in a salary negotiation.

When you do ask for a raise, don’t worry about offending your boss.  If you have a reasonable case for a raise, you have every right to ask.  Keep in mind:

    • In an office, your boss is usually not the one paying you out of their own pocket. They don’t care how much you make as long as they have a happy, productive employee.
    • Your boss will probably have to make a case to someone else as to why you deserve a raise, and you’ve already given them that information.
    • In a good organization, most managers (and their managers) will be evaluated based on how well they manage their teams, and this includes turnover. When it comes time for their review, they don’t want to have to explain why they can’t retain employees.
  1. Set Yourself Up for a Promotion – In my career, I also saw a lot of people who expected promotions to happen to them, but part of the process is showing you have the skills for that next role. Travis, for example, is an analyst, but in the next role up, he’ll have to manage a team of coworkers.  The best way for him to set himself up for a promotion is to volunteer for projects where he can demonstrate or hone these skills.  Maybe he’ll recommend to his boss that he work with the sales and R&D teams to determine where competitors are succeeding with products his company doesn’t make, and recommend how they could create new products to compete.
  2. Get That Bonus – If you’re in a job that pays a bonus based on performance, look at ways you can optimize it. Often times, the outcome is out of our personal control (ie. it’s based on total sales for a company with 50 divisions and 1,000 employees), but there are ways to have an impact or it wouldn’t be much of a performance bonus:
    • Sandbag That Forecast – Raise your hand if you’ve had a manager that promised an unrealistic outcome to please their boss and look like a go-getter. I’m sure that’s nearly everyone who’s worked in an office job.  I had far more respect for managers who were willing to have an uncomfortable meeting and be called unambitious, but come out with an achievable target that put their team in a good position.  If you’re in a position to influence your own target, remember that being called unambitious in one meeting hurts, but it’s great to be a hero all year when you’re meeting or beating your targets.
    • Know the Politics – In every company, some divisions or areas are more important than other. At one of my jobs, I knew I’d get a better bonus if I worked on bigger, more profitable brands.  That’s because targets are usually set for each brand at the beginning of the year, but the resources you have to reach those targets change throughout the year.  As the year goes by, the executive team cuts budget from some brands (usually smaller, less profitable brands) to fund initiatives on other brands (usually bigger, more profitable brands).  Those executives that control the money and resources have their own bonus targets.  You want their fate to be tied to yours.  They could easily make their bonus target if a small brand performs poorly, but they’re going to have a tough time earning a bonus if a big brand is failing.  All else being equal, I often suggested to my bosses that my next role should be on larger brand because…you know…it’s good experience.
  3. Keep an Eye Out for Extra Earning Opportunities – Every company has special incentives of some sort: best new product idea contests, rewards for referring someone you know for an open position, etc. The trick is just making sure it’s worth your time.  At one point, a company I worked for offered 1 year’s salary as a prize for the best new product ideas.  I can tell you 99% of the company didn’t bother, but when you think about it, that’s an incredible ROI for a few hours of time putting together some data to defend an idea.  Admittedly, I did not win (although I still have a bone to pick because they’re making the product I suggested a year later).  Still, it was worth trying.

Method 2: Start a Side Hustle

Side hustles are basically part-time earning opportunities that don’t require you to quit your full time job.  There are tons of flexible side hustles out there including tutor, babysitter, blogger, swim instructor, etc.

No, I won’t suggest that you drive for Uber or Lyft like half the world seems to.  Mr. Money Mustache already covered why that’s not a great use of your time.  Just make sure your side hustle is something you don’t mind doing after a day of work, and it pays enough to justify the time it consumes.

One thing I’ve been doing for years is credit card piggybacking.  That’s where someone trying to build better credit (eg. a recent graduate trying to rent their first apartment, an immigrant who wants to buy a car, etc.) pays an agency a fee.  Then, that agency pays me a fee to add the person to one of my credit cards as an authorized user.  Their credit improves because their credit will now show a card with a high credit limit, excellent payment history and good credit age.  However, the risk to me is minimal.  The authorized user doesn’t know who I am, and they’ll never get a card (the card is mailed to my home address, and I just destroy it).  Also, I don’t inherit any of the authorized user’s credit history. 

What I like about this side hustle is that it doesn’t require much time, and I can take advantage of an idle asset (the great credit I’ve built over the years).  The process is very simple.  The agency sends me an email to log into their system and see the user’s personal details.  I go online or call my bank to add the users, then, two months or so later, the user is removed and I’m paid.  The prices vary based on the card’s credit limit and age, but the whole process takes maybe 30 minutes of my time for $75 or so.  At about $150/hour, I’ll do that side hustle all day.  In fact, I still do it even though I’m post-FI because it’s such a good payoff for such a limited amount of time.

Just think about your skills and assets.  What would make a good side hustle for you?

Method 3: Get a New Job

While earning more shouldn’t be the only reason to change jobs, it can certainly be a component.  In the same ways I suggested backing up your request for a raise (showing you earn the company more than you cost, benchmarking your salary and looking at the market), you can probably tell if another company is likely to offer you better compensation.

Remember, money isn’t the only form of compensation to consider in this job search.  If you’re pursuing Financial Independence in order to travel more, you may be willing to take a similar salary with more vacation time.  Maybe the new company has better benefits that give you more options for pursuing financial independence like a great 401k match, a bonus for getting a health savings account, etc.  We’ll talk about these perks later in the series so you know what to look out for.

Even if you’re not 100% certain you’d leave your company, it’s worthwhile to look around from time to time.  No one needs to know you’re looking around, and even if they find out, they’re not going to fire you for disloyalty.  It’s to your advantage if your employer knows that other companies want you.  The best way to make a case that you deserve a raise is to have a credible offer from another employer.  It not only proves your market value, it shows them they could lose you if they say “no.”

What will Travis do?

Since Travis is an amalgamation of people I’ve known, I can tell you what he did.  He decided to start by asking for a raise supported by three facts.  We already spoke about this first fact: that he earns more money for his company that he costs.  Remember, that Walgreens promotion that he recommended repeating with CVS and Rite Aid?  It netted the company more than double his annual salary.

Second, he asked around, and he found out that his peers who were hired directly out of college (like him) were paid less than people who were hired from graduate school.  He was making $80,939 (gross salary), and his peers with graduate degrees were making $90,500.  At first, it made sense to him that someone with more qualifications would make more money, but then he realized that he’d been in his role for two years and was consistently told that he was a high performer.  In other words, he was performing as well as or better than people with higher degrees, but being paid less.

Third, he knew his company was shorthanded, and other companies were looking to hire marketing analysts.  He called one of those companies to inquire about the salary range, and they told him they’re offering $88,000 - $95,000 depending on the candidate.  This was good.  He knew his company couldn’t afford to lose him, and there was a healthy job market for him.

He approached his boss, and asked for a raise to $92,000 based on all of the information laid out above.  He didn’t directly say he talked to another company, but he did say that he did his research to see what the market rate for his job was.  Drumroll…Travis got the raise that he asked for!

How does that change Travis’s FI timeline?

With that raise, Travis’s new stats are…

Savings Rate: 24%

Years to FI: 28 years (he’ll be 58 years old)

Don’t F**k It Up!

Remember, all of this new math depends on a key assumption: that Travis will save and invest the extra money he earns.  This is where a lot of people get tripped up.  They succumb to lifestyle inflation.  In other words, they shop for that BMW or Chanel hand bag because they’re making more money. 

This is why it’s so important to start your Financial Independence journey by looking at your expenses, and what is “enough” for you.  Travis knows he already has enough so this raise is better spent buying his freedom than more stuff. 

If he decided that fitness is important to him, and he wants to spend part of his raise on a gym membership that he believes will help him meet his fitness needs, I won’t argue with him.  No one is saying you have to save 100% of every raise, but when you already know what “enough” means for you, the decision is much simpler.

3 Replies to “Living Freely: Increasing Income”

  1. I’ll have to thank you for the success today

  2. Thank you from the bottom of my heart for everything

  3. Ivan Wakley says:

    I’ll have to thank you for the success today

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