2

The Best Way to Make Extra Money: 5 Steps

If you like this, please share!

This post may contain affiliate links. Please read my disclosure for more info.

At some point, we all start wondering how we can make some extra money. After all, making more money makes it easier to achieve our real goal: freedom.

Depending on your personal values, freedom can mean a lot of things. It might mean having the ability to travel much more often. Or the freedom to take a job that pays less but that you would enjoy more — a very tough choice to make if you’re just barely scraping by.

There are lots of ideas on how to make more money. And the best way to make extra money depends a lot on you and your existing skills and passions.

But the number one way I know to earn some extra money is to add value. You add value by offering a great product or service to others. And offering a great product or service comes down to constantly improving your skills and solving problems for others.

Getting to the point where you’re maximizing current options and making extra money is a journey. This journey can be broken down into 5 steps:

  1. Make the best use of your current cash
  2. Optimize your day job
  3. Take inventory of your existing skills and interests
  4. Start making money on the side
  5. Put your dollars to work

 

Related

1. Make the Best Use of Your Current Cash

I know you’re interested in earning more money, but please hear me out.

Before you spend time and energy making extra money, you want to first ask yourself if you’re optimizing the money you’re already making.

Do you save at least 20% of your take-home pay? If you currently save little (or nothing), 20 percent probably sounds like a lot. It may sound impossible. But no matter your current income, it is possible to increase your savings rate by cutting unnecessary spending and using options that may be available to you.

Does your job offer a 401k with an employer match to your contributions? If your employer matches 5%, and you put 5% of your annual income into a 401k, you’re already effectively saving 10% of your income.

Now, look at your spending. If you aren’t already tracking your income and expenses, do it. Start today. You can do it for free using tools like Mint and Personal Capital. There are also paid options like Tiller Money. I use all 3.

Related: The Best Budgeting Apps for Couples

Are you eating out too much? Are you overspending at happy hour? Do you have too many monthly subscriptions? Are you being charged interest on credit cards? Do you have a huge monthly car payment? (You can save lots of money using public transportation.)

All of that spending is destroying your ability to save and invest money now, which means you’ll have to work more in the future to make up for lost time and opportunity.

Cut your expenses. Destroy your debt. Making extra money can help you pay down debt faster, but if making extra money just means you’ll spend extra money, you may want to rethink your strategy.

After taking advantage of a 401k and reducing your spending, you’ll see that increasing your savings rate is very possible.

Related: 11 Spending Habits That Keep You Poor

2. Optimize Your Day Job

Your best bet for increasing your income is to increase how much you make at your day job.

Do everything you can to earn a raise at work. Show up a little bit earlier, work a little bit harder, and stay a little bit later. Do great work for your team. Build skills that increase efficiency and your value to the team.

Related: The Importance of Building Your Skills

You should absolutely advocate for yourself and ask for a raise every year if you aren’t given one or if the raise is less than 3% of your salary. If you aren’t increasing your salary by at least 3% annually, you’re basically losing money to inflation. This means that making the same salary for 2 years in a row means you’re actually making less money in the second year because the costs of living — housing, transportation, and food — increase over time.

If you aren’t making more money each year and your employer isn’t willing to give you a raise, then you should start looking for other work while you still have a job. (This is why consistently building skills is important. Skills give you options and leverage.) When you get an offer for another job, you can try to negotiate with your current employer for a raise or just take the better offer.

In an article on the reasons people start a side business, CNBC quotes Nick Loper of Side Hustle Nation:

“Think of your day job as being your biggest client. It doesn’t have to be your only client.”

Absolutely do a good job for your employer and your team. Also, have respect for your own time and energy and needs. Always advocate for yourself.

Any extra money you make now means you’re likely to make more money in the future. If you increase your salary by $1,000 this year, your salary has potentially increased by $1,000 for every future year you’ll work.

3. Take Inventory of Your Existing Skills and Interests

After optimizing your day job, the next step is to take inventory of the skills and interests you already have that you can do in exchange for money. You have a unique combination of skills and interests that you can use to make extra money.

The goal is to identify how your skills and interests are marketable. Find out how people make money with the skills you already have. What are people already paying for?

If you think you don’t have any useful skills, which is false, I recommend 3 things:

  1. Write a list of all the things you can do without any special training — driving, cleaning, walking dogs
  2. Write a list of all the special skills you have — photography, video editing, web design
  3. Using those two lists, choose which skills you can perform in exchange for money

In How to Make Money With Side Hustles, I list several side hustle ideas. Each idea falls into one of two categories: unskilled and skilled. Both categories offer great options for making additional cash. Some common ways to make extra money include:

  • Walking dogs
  • Mowing Lawns
  • Washing cars
  • Babysitting
  • Graphic and logo design
  • Setting up or building websites

Look at the skills you already have and enjoy doing, then offer those skills to family, friends, and businesses in exchange for money. Start contacting people and offering your services. Start with your family and friends. If they don’t need your services, ask them to refer you to others who may benefit from your work.

This will take time, so just decide to spend 30 minutes a day contacting people and finding clients.

4. Start Making Money on the Side

Your time is valuable. Your skills are valuable. You can and should charge money for your time and skills.

People often undervalue their own skills.

One of the best ways I know to avoid undervaluing your skills is to stop worrying about the skill itself and think of value in terms of time and energy.

Almost everyone can walk their own dog. Almost everyone could walk someone else’s dog in exchange for money. Walking dogs isn’t some rare skill.

So why do some people make money walking dogs? Because the value of walking dogs is in the time it takes you to do it, and the time you’re saving the dog’s owner. The owner is busy with their job, their family, and their desire to relax after a long day of work.

Whether you’re offering unskilled work like walking dogs and mowing lawns or skilled services like graphic design and website creation, your time is valuable and the time you save others is valuable.

Figure out a fair market rate and set your prices near it. Increase your prices over time until people start saying it’s too much. And keep finding new clients.

If you aren’t making any extra money right now, set a goal to make even $5 as soon as possible. Then keep going.

united states five dollar bill front

5. Put Your Dollars to Work

After you’ve optimized your primary source of income and you’re making some money on the side, the easiest way to keep your money growing is to invest your dollars so they keep working for you. You worked hard to earn your money, so put your money to work.

Once you find a way to make even an extra $20 a week, that money adds up over time. If you save an extra $20 every week for 10 years, that’s $10,400 dollars saved. And if you invest that $20 every week for 10 years with an average 7% return, compound interest gives you a total of over $15,000.

Compound interest puts your dollars to work so they consistently make you more money. Remember that everything compounds. Anything you start building today — a side hustle or an investment account — will grow over time.

The Best Way to Make Extra Money

The best way to make extra money is to increase your skills and abilities so you can add value to others.

Before you go out and start a side hustle to make more cash, start by making the best use of your current income. Spend less and save more. This builds good habits for when you increase your income. I recommend tracking your finances using a free option like Personal Capital or a tool like Tiller Money.

After getting your current finances in order, start to optimize your day job. Build your skills, work better and smarter, and advocate for annual pay raises. Be sure to use your 401k if your employer offers a percentage match.

Once you’re maximizing the benefits of your day job, start taking stock of your skills and interests that you can turn into money-making ventures. Once you have some ideas, reach out to people and start making money in exchange for your services. This doesn’t have to start out big to become something big. Start small, and just get the ball rolling.

Now that you have some extra money coming in, make sure you put those dollars to work for you. Invest as much as you can in a variety of accounts — retirement, index funds, REITs, and bonds.

For a fantastic book on building side hustles, investing, and retiring early, check out  Financial Freedom by Grant Sabatier.

And if you enjoyed this, please leave a comment or share this post with a friend.

Read More

 

If you like this, please share!

Lyle

2 Comments

  1. By far I have to say that your suggestion made the most sense out of all the blogs I have read. I think what we all lack of nowadays is financial literacy which I am still confused why we do not get to learn this in school. Once you managed your money then you can invest your money and multiply them. 

    I have been investing in the stock market. Currently, I am exploring the affiliate marketing world. 🙂

    • I’m confused about why we don’t learn financial literacy as well. It seems like somewhere between family and school, we’d all have a better understanding of how to manage our finances. Making extra money is great, but it’s just wasted energy if you don’t have a plan to save and invest your cash.

      Good luck with your stocks and your side business!

Leave a Reply

Your email address will not be published. Required fields are marked *