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Seven ways to get richer
Tuesday, 25 April 2006
Most of us could use a little extra money in our pockets, but sometimes we feel stuck on to get it. Here are some simple suggestions to increase your income and wealth. Not all of them will make you "rich", but they should make you "richer".
Change jobs
For an immediate increase in income, few acts have as big an impact as simply finding a better-paid job. I've used this tactic quite a few times to increase my income. Two years ago, I got a 20% pay-rise simply by changing jobs. Just recently I changed again for a 10% increase. That's thousands of extra dollars a year in my pocket for very little effort.
It's unlikely you're working in the best-paid that you could be. All you have to do to find out is test the employment market for your worth. Send out a few resumes and see what happens. This is an obvious statement, but short of looking through the wanted ads, many people just don't bother.
The standard operating procedure of most people is to find a job - any job - and just stick with it. Shifting employer just seems like too much effort - they have to work on the resume, go to interviews, wear a suit and so on. It's so much easier just to stay where they are.
Worse, if they apply for a new job, there's a possibility they might not get it. Why set themselves up for rejection and a possible blow to the ego? And what if the new job is terrible? Of course their current job isn't that great, but what if the new one's worse? Besides they're fairly comfortable where they are and their friends are all there etc. etc.
All of these sentiments are fine, but if they're costing you thousands of dollars every year in lost wages, then they're extremely expensive. If rather than losing the potential to gain money, these people had thousands of dollars deducted from their bank account every year unless they were willing to move job, I wonder if they'd feel the same way.
If you need some extra money, making a genuine effort to test the employment market is a great way of getting it.
Change careers
This isn't as easy as the last option, but is still worth looking at if you think you can get more money and satisfaction in another field. The salary in some vocations can be multiples of that in others. If the opportunity is there for you to go for that bigger money, why not take it?
Of course, changing careers can take years of effort. But considering that most people have a working life of about forty years, a few years investment to extract more income isn't that big a deal.
Part-time courses are widely available these days. Taking them may require effort, but if you work out what you're likely to be paid once you're qualified, you can tell yourself that your effort is earning money that will be paid in the future.
I changed career a few years back, and it was a lot of work. Getting a foot in the door was difficult, but not impossible. If you look around for opportunities, they usually present themselves after a while. Within three years of changing career, I quadrupled my income. That means I could earn in one year what would previously have taken me four. What an excellent investment in time and effort that was.
Find sources of income outside your job
A few years back, my wife was looking on the internet to find out how much she could buy handbags for direct from China. She was amazed how cheaply she could get them. Instead of just ordering a few, she ordered hundreds, took them down to the local market, and sold them at a nice profit.
Also a few years back, I decided to start a website on a topic that interested me and didn't seem to be being served properly. It seemed a lot of other people were interested in the same topic and I was soon making $2000 a month from advertisers. This wasn't going to make me rich, but it was a nice little bonus for a few hours work a week.
If you look around for opportunities to make extra income they're everywhere. All you have to do is give it a go. Experiment a little and be prepared to invest a little money to begin with and see what works.
Build yourself a money-making system
This is a long-term investment with no guarantee of payoff, but if you manage to get it to work all your financial dreams could come true.
Most people make money by selling their time either as employees or consultants, because it's easy to do. Some people's time is worth more than others. But no matter how much someone makes per hour, all time-selling systems have one fatal flaw - there are only 24 hours in the day.
The truly rich usually don't bother selling their time. Instead, they work on building a money-making system that will generate income whether they continue being directly involved or not.
Ebay is a money-making system for running auctions at a commission. The founder doesn't even work there anymore, but he still gets millions of dollars every year from the system he designed and others improved on.
McDonalds is a money-making system for selling food. Rather than cooking the hamburgers and taking each customer's money himself, its founder designed a way of doing it that didn't require his direct supervision. He's now dead, but the system he designed still makes huge amounts of money.
Of course, you don't have to build a global company to make money from a system. Many small, local businesses follow the same principle. Their owners designed a system that would make them money whether they were directly involved in the day-to-day running or not.
This is a wonderful way of making money, but it requires a lot of up-front effort and risk.
Start following a savings plan
Back when I was 17, I read a book of financial advice. The main point made, which has stuck with me ever since, was to save at least 10% of every dollar I earned for the rest of my life. It was excellent advice, and has helped me build up a nice nest-egg.
Having some money stashed away brings quite a few benefits. Firstly, you can invest it to give you an income requiring no work. If you save that income, it starts to generate income too in what's known as compound interest.
Also, being a saver helps you avoid consumer debt, which is a sure path to becoming poorer. If you train yourself to buy something only when you have the cash, you're well on your way to wealth. The "save 10% of your income" rule is one of the best pieces of financial advice around.
Pay off your debts
Debt is a big drain on most people's income. Not only that, it's usually compounding, so yesterday's interest adds to today's interest. Consumer debt, in particular, for goods like cars, furniture, and holidays, is a good way to get poorer fast.
If you have a debt that's charged out at 10% a year, every dollar you put towards paying it off gives a guaranteed, tax-free 10% return. Get rid of that debt altogether, and your money will stop walking out the door.
Improve your financial literacy
Most people don't want to spend too much time learning about financial matters. They like spending the money, but they don't want to have to find out about better ways to make it. This is usually a big mistake.
Making money is like any other activity - extra knowledge provides extra competence. Tennis lessons can be boring, but the payoff is that you play better. Music lessons are dull, dull, dull, but you'll have trouble improving your piano-playing without them. The same goes for making money.
Go down to your local bookstore and pick up a few books on personal finance and economics. Then make the effort to read through them and follow their advice, boring or not. This investment will probably pay off in hundreds of thousands of dollars, if not more.
So there they are, my seven ways to get richer. I hope they prove lucrative for you.
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