This is such an ongoing issue with my readers. I ran this post on August 09, 2010 and the topic continues to come up week after week on my Radio Show questions. Again this week: “Dan, I’m making $40,000 a year working for the state. How can I significantly increase my income?” Here it is again – just add to the comments below.
In challenging times I see people managing their money better. And I commend them on getting involved with Dave Ramsey’s Financial Peace University as thousands of you have done. But here’s an important principle — Not only is it important to manage your money better; it’s also important to realize that now is a great time to figure out how to make more money.
Wealth isn’t made by the hour – it’s made with ideas and a plan of action.
If you make $15 an hour, you’re making $31,000 a year. A cost of living increase of 3-4% is not going to significantly change your financial position. Yes, you can do a great job and ask for a 10% raise each year and in 8 years you’ll double your income to $62,000. But that’s 8 years from now. And doubling your pay in an hourly position is not going to happen – unless you bring new skills to the table.
A better question is how can you make an extra $2600 a month starting now – to make that doubling of your income be a reality this next year? What would that do to your debt snowball? Here are some ideas to get your own thinking started:
- Mow 10 yards weekly at $60 each
- Spend $1300 on old silver at garage and estate sales; clean it up, know the market and double your investment selling on eBay
- Create a sports themed sticker package for golf carts and sell 100 at $26 each
- Buy a fixer-upper in this wild real estate market – do the repairs and make the entire $31,000 in one carefully orchestrated transaction
- Be the graffiti removal expert in your town. Get 10 contracts for $260 monthly to keep a building graffiti free
- Set up to sell kettle corn at local fairs, festivals, fund raisers and church events. Book 3 events a month were you could reasonably expect to net $850 each
- Explore the list of my 48 Low-Cost Business Ideas
Nothing here requires another degree or a waiting time. But making an idea work for you does require a break from a paycheck mentality. If you can do that, the sky is the limit in where your income can go – this year.
I absolutely believe that one should take charge of their financial future, however your calculus is deeply flawed. For example, 10 yards weekly at $60.00 each will only GROSS $2400.00 every four weeks. Self-employment taxes will eat at least 30%, and then there is this little thing called “overhead.” So, after the chunk for the government has been set aside, the mower (or anyone else for that matter) is left with $1680.00. Overhead will vary, as will tax obligation, from state to state and municipality to municipality. Realistically, a $2400.00 gross will result in at best a $1200.00 net, unless one is cheating and lying.
Please be honest–a lot of people are clinging to thin threads of hope, and deserve a realistic–not an inflated–picture of the return on their labor and investments.
Jackie is correct in her analogy. The taxes (which will be going up substantially) and overhead, will eat a large chunk of this income. However, if each lawn job took only 1.5 hours (for a total of 15 hours), you would still have plenty of additional hours in the week (depending on your level of ambition), to earn more.
I am trying to find a way to generate income, to replace my lost jobs. I have faced layoff twice in 2 years due to the economy. I am going to start a carpet cleaning business, and plan on supplementing that with some freelance accounting work (my former employment). I know that it takes a while to build a business, so this is what may be required to pay the bills. I am also considering some publishing, and possibly some consulting. I put in 70-80 hours per week on my salary, and I believe I can reduce some of my stress and only work half that number of hours. My previous work was destroying my health. No more. I intend on crating my own future.
Best wishes to others facing my same dilemma!
Darren
Remember there are 52 weeks in a year Jackie. 52 x 600 = 31,200. Also you do not have to lie or cheat to not pay 30% in taxes. Especially in this tax bracket. All overhead costs are deducted before you pay taxes as well. From that 2400 – 300 for over head and 25% taxes the result = 1575. This equals 20,475 a year in income. Remember there are thirteen months in a year =)
Hummm….. Jackie, math is not my strong point but 10 yards times $60 = $600 a week times 52 weeks = $31,200 divided by 12 months = $2600. Whether you work for yourself or work for someone else, you still pay taxes and bring home less than your gross pay. So, what if you pay your taxes and only make $1800 a month. That’s still more than ZERO extra a month.
Dan, thanks for always getting me motivated!
Jackie,
Even if you compare gross to net pay. With Dan’s example you would still increase your income by 50% versus 3-4%.
Thanks Dan, I like the way you think.
Carol, I don’t know where you live, maybe Hawaii – but grass doesn’t grow in my area 52 weeks of the year, so your numbers are not realistic.
In this job market, the hope that Dan holds out is that you can do something to improve your picture even if you cannot find a job right now. It is better than waiting for someone else to come and dig you out, you know? The real flaw in the calculations, as I see it, is the absence of benefits in the calculations. Especially if there are health problems, you may need to work for someone else to bring that in.
How about a bucket and a squeezee and a roll of paper towels? Come to my house and I’ll pay you $3 a window. A quick $50 bucks!
I have worked blue collar hourly jobs for 28 years… how much money do I have?
about $1,400… hourly jobs will not make you financially independent, that’s for sure.
Dan,
I loved the 48 Low Cost Business Ideas piece of this story. I printed the intro story and selected ideas that I thought were age appropriate for a 14 yr old. (Ones she could understand) Dovetailed your ideas with my past and current low cost business ideas for my daughter. I have demonstrated with my own examples the way to make $75 to 85 per hour. She makes about $5 to 6 sitting. It didn’t take but a second for her to see where she wanted to be on the income scale. The wheels turned quick.
I ended the lesson with one question: On what side of this income equation do you want to be? People will pay you lots of money for a great idea. Be creative.
I can’t get the link to work to the 48 ideas. When I click it only comes up with the post it note and nothing else happens.
I am off work with an injured foot and have put my time to work on this website. I am tired of the hourly job so now I am going to get started on trying to make extra to get us out of our dead end jobs. Life is looking up just by investigating options
Dan,
After reading your post I sat for a few to think about all of the things we do/use in a day. I have heard you say more than once if you do something 10% better or add 10% more value to something you can make money from it. Suddenly, there are possibilities all around me. Thank you for your 48 Work ideas. Even if I don’t find a perfect match in those 48, there are principles in all of them that can be transferred to other things. I am going to put the title of your blog post on my wall as a reminder to not get too comfortable. God bless!
Jackie makes a good point and I wish Dan would explain this to his audience. It’s easy to get discouraged when you look at what you gross vs. your net. Not to mention the liability you expose yourself to the IRS for being accountable for every dollar you earn. There’s also a difference on earning a profit and generating cash flow. Dan has a lot of great ideas on making some quick and easy cash. Earning a profit, running a business and having enough cash leftover to make a living is a different subject entirely.
However it is better than zero dollars coming in. Regardless of the money, working will keep your momentum going and you’ll continue to learn. Which is better than sitting at home waiting for someone to give you a job.
The tax laws in this country are set to crucify “employees.” That’s the very worst status to have in regard to taxes. Being self-employed I get to deduct most all of our travel, entertainment, the utilities and improvements on my office/barn, all my books and magazines, computer equipment and gifts to all my friends. I don’t “lie or cheat” and I pay a ton of taxes – but the benefits of being self-employed are amazing. To stay in the role of an “employee” to avoid the taxes of being self-employed is like pulling the engine out of your car so you don’t have to deal with buying gasoline.
Dan,
I have to admit I steel your business ideas all of the time to share with my clients. It helps me to express my version of creativity which is problem solving.
Josh Bulloc
Kansas City, MO
While you’re out cutting those lawns, you meet lots of people. You let them know you also do some landscaping, snow plowing, pet sitting, handyman projects, etc. You begin building multiple revenue streams and a steady base of clients, who ask you to do more and more because you are reliable. People pay for convenience. As you get busy, you hire a kid to do the $10/hr. work while you focus on the $35/hour work. You focus on a neighborhood and dominate it. Then you’ve got a couple kids/retired people working for you, while you keep finding new niches and building. But you have to start with that first lawn, that first dog you walk. If you never even try because you’ve calculated it’s not worth it in the beginning, then you’re missing a big opportunity later.
I know being self-employed is a little bit of a hassle. But my husband was laid off for a year and a half before getting a job for $11 per hour in a factory. He just started a painting business on the side and makes $20-$25 per hour painting. The factory job provides our health insurance, living expenses and mortgage payment. The painting job is providing the money for us to get out of debt. I am also self-employed, and I don’t ever want to go back to being an “employee”. If you set aside your tax money each week, you’re making out so much better to work for yourself!
One thing I haven’t seen mentioned here is that every dollar you earn OVER your fixed employee income is worth a lot more than every dollar before.
For example, if you earn 31,000 p.a. Gross, here in the UK (I’ll use this cause I know the numbers, but the principle is the same) that amounts to 20k net. Take off 750/mth for rent/mortgage and bills, 200/month for travel costs and 400/mth for groceries, and other essentials, leaving just under 317/mth disposable income.
This is not far off my actual budget for the few years leading up to 2009 except that the disposable income went towards credit card debt and I earned commission, potentially doubling my gross.
If you want to look at the tax and overhead of working for yourself then its only fair to consider the overhead of working as an employee, nearly 90% !!
To double my disposable income in this example, I would only have to earn an extra 5706 p.a. as most of my overheads don’t change. That’s just 2 lawns a week for an income increase of 18% and a net effect of doubling my “discretionary spend.”
That additional money can go towards anything you want… nice stuff, fun experiences, personal development, investment, trust fund, emergency fund or starting a business.
I realise I’m just playing with numbers here, and you may want to improve your standard of living in a way that increases your overheads but I wanted to make the point that a bit more can be a lot more than you think.
Dan,
Folks, I don’t think the point here is that Dan wants you to go mow lawns. The point is to get us thinking about ways to increase our income outside of our jobs. Here’s one, do you have a recipe that every time you make it, someones says “you should market this stuff!” Well, maybe you should! I have a client to whom I said this, and she did, and now instead of wondering how she is going to pay her bills, she is enjoying a great lifestyle. If you live in Michigan, this just got easier. The new Cottage Food Law allows you to sell from your kitchen, direct to the consumer, up to $15,000. per year in food, without setting up a commercial kitchen! Man oh man, the opportunities are great! I am taking a candy item that I make to market on Sept. 18th due to this law. I will save every penny and when I have sold $15,000 worth, I’ll have the money to open the commercial kitchen required to get my Organic certification and go national! Here’s the info on the Cottage Law.
http://michigan.gov/mda/0,1607,7-125-50772_45851-240577–,00.html
If you don’t live in Michigan, and can’t afford to set up a kitchen, google incubator kitchens. Incubator kitchens allow you to ‘rent’ their kitchen for a small fee, like $10.- hour. Great way to get started. Sell at farm markets, fairs etc.. (Like Dan’s kettle corn idea).
Have Fun!! Thanks again, Dan!
Rick
The problem is not so much a lack of cash, but a lack of creativity.
The title of this blog says so much. Often, when you are stuck in an hourly job, it seems as though your creativity is drained.
Recently a friend of mine who is an hourly worker wanted to start a business. The cost to get it going was $325. He had 2 choices. He could wait until he had an extra $325 laying around, if that should ever happen. Or he could find a creative way to immediately make the extra money to get started.
We talked about it and found a solution. The Atlanta Falcons were doing a scrimmage at the local high school. I have another friend who has a big yard directly across the street from the school. We decided to set up some paid parking. We charged $5 for the first few cars. Then when we saw a bigger demand we put the price at $10. We made over $1000 that evening.
Bottom Line: Just freakin’ Do It!
Those of you whining about gross v. net are missing the point! You are not bringing home your whole paycheck either. Think about it.
Even if you only net an extra $1500 or $1000/month after expenses & taxes, you will increase your income by 25%+ if you have an average income! Out of that, you could get out of debt, cash-flow your kid’s college or build up your savings!
Stop whining, start mowing (or whatever)!
Running 4 businesses & loving every single minute,
Dee
The article on 48 ideas inspired me to expand my consulting company. I have one employ …..me, opportunities are plentiful and I have already started the wheels turning. I have had employment being paid by the hour and have been paid a salary and it seems to me my value and worth was always determined by someone else. A persons worth and value is always worth more then what is generally determined for us. I have been self employed since 1994 and have no desire to ever go back and work for someone else. Taxes are an issue anytime you are employed you just deal with it and keep on working. As slow as the economy is I will have a record year this year over last year.
Dee has a point about paychecks. After taking out taxes, FICA, Medicare, SS, insurance, etc., I take home about a couple hundred bucks less per pay period, but it’s still enough to cover the bills and feed me. I don’t stop working just because my employer claims a chunk of my paycheck.
When I recently discovered your website and started following along, I was thinking I’d post my first comment. I don’t know just what to say except that I really liked reading through. Nice writings. I will carry on visiting this website far more often.
Genuinely unique. Keep these reports pouring in.
know I am a little bit off topic, but i just wanted to say i really like the page layout of the web site. I’m new to the blogegine platform, so any suggestions on getting my own blog site looking nice would be appreciated.
That is a very true statement hourly pay will keep you poor, if you dont believe it then why are you on this site lol.
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It is very important that we can find ways on how to augment our financial situation. We need to read great resources.
I have seen and learned that when a person works for someone or a company your worth and value is always determend by who ever you work for. So I work for my self, not getting wealthy by any means, but I choose my value and worth with some degree of increase.
I have seen and learned that when a person works for someone or a company your worth and value is always determend by who ever you work for. So I work for my self, not getting wealthy by any means, but I choose my value and worth with some degree of increase. Your worth and value is and always will be more then what someone else determines, so don’t let them make that determination.
So very true! You need at least enough income that you can live on 60-80% of what you make.
Well not so fast on the first one, I know some Fitness Trainers make $75- 1500 per hour, and that increase when they have unlimited clients they can’t train, so they give them to another trainer and get a percentage of each referral.