Income

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Income is a very different topic than expenses and investing. One that is as diverse as it gets and as difficult to give recommendations as it goes. This letter will show you how to increase your income through three different paths.

For expenses, the concept and advice is simple: Increase your savings rate by tracking your expenses and cutting out everything which does not add value.

Investing the same: Invest in low-cost index funds and set a ratio of stocks vs bonds depending on your life stage (accumulation vs conservation).

I have no simple advice for increasing your income, except to be hard-working, pro-active and true to yourself.

In my opinion, there are three main buckets of how to increase your income and all of them have their advantages and disadvantages.

The Normal Path: Getting Promotions and Salary Raises

This falls within the general career advice parents, teachers and friends would give you. Work hard, be a team player, show leadership skills. Promotions and salary increases will follow.

This is not bad advice and will get you far in life. My advice in this regard is:

Set targets– at the beginning of each year, sit down with your boss and decide on quantifiable objectives. For example, “increase sales by 5%”, “train 35 people”, “reduce consumer complaints by XX%”. It is important that you agree on these objectives with your boss and that you write them down and send them to him / her as an e-mail for documentation.

Track your targets– Once every two months, send your boss a progress report of your targets. Show him / her where you are on-track and where you are over-achieving. For the goals where you are below target, make sure to highlight what you need to achieve them. It can also mean asking for help. 

At the end of the year, sit down with your boss and discuss your achievements. It goes without saying that it is the best to overachieve on all targets. This will show him / her that you are a high performer for the company and deserve a promotion or a salary increase. 

Without documenting your targets and your achievements it is much more difficult to show that you are an asset for the company and therefore deserve to earn more or be promoted.

Ask for a salary increase– Many people think that their company will give them a salary increase based on their performance, without them having to actively ask for it. My experience is that this is not true. People who ask for salary increases get them much more often. 

People who just wait by the sidelines often get overlooked and are just the more frustrated when the salary increase does not come by itself. A boss might be thinking: “We are short on budget this year and Ms XYZ has not asked for a salary increase. So, I guess she is happy with her salary and does not need an increase.” 

When you ask for a salary increase, the worst thing that can happen is that your boss will say “no”. But rest assured, they know about your wish and might already include it in the budget for next year. Asking for a salary increase is not a comfortable conversation. Do not be afraid to have it. 

Plan your next step– Always make sure that you know what you would like to do as a next step. If you are a sales rep, a next step might be a sales manager. If you work as a brand manager, maybe your next step would be to become a senior brand manager. 

But it could also be a lateral move into a completely different position, such as moving from financial controlling into sales or marketing. Always have an idea and a proposal at hand.

Communicate your plan– Having a plan for a next career step is great, but you need to create some ownership with your boss. Once per year, for example when you review the achievements of your targets, tell your boss what you would like to do next and when. 

Then ask them how you can achieve this and whether he or she can help. Maybe they can send you to an extra training or connect you with a co-worker who works in that position / area.

Be Flexible– Anyone who tells you that there is only one correct career path, will never succeed because they do not have the open-mindedness to realize when an opportunity presents themselves. Be flexible and always consider opportunities when they arise, no matter how weird they might seem.

Integrity– Always be integer. Never talk bad behind someone’s back and never go back on promises and commitments made. If you cannot keep a promise, inform the person and explain to them why you cannot keep it. 

You might lose out on a promotion in the short-run because someone lied or took credit for your work. But my experience is that it always catches up with them eventually. Being honest and integer always works out for you in the medium to long run.

Give credit where credit is due– When you are leading a team and one of your team members does a good job, give them credit. Show them some appreciation and let your boss know what good work he or she did. This works better for team morale than any salary raise or bonus. In the end, we are all humans and what we crave is appreciation.

Take the blame– If you are leading a team and a mistake happens because of one of your team members, take the blame and the fault. Never blame it on one of your team members in front of your bosses. It is your team, you take the blame. Again, this works better than any kind of pay increase to create trust in your colleagues and a good working condition.

Educate yourself– Never stop learning. This can be by reading books, going to trainings or just calling up someone who is an expert in a field you are interested in and taking notes from this person. Without developing yourself, you will never progress.

Show gratitude and appreciation– Maybe the single most important piece of advice. This can work wonders, both in your interactions with your boss and your colleagues working for you.

Network– And I do not mean this in the cheesy way of handing out business cards (anyways, who has business cards nowadays?). I mean showing genuine interest in your co-workers. Show interest in them as professionals and as people. Having a personal connection goes a long way to create great work relationships.

Show vulnerability– For people to open-up to you, they need to see you as a human and not a machine. 

Saying something along the lines of: “I am so sorry for being a little uptight today. I am just having trouble with project ABC and this is putting a lot of pressure on me.” or talking about something in your personal life, such as problems with your children or a passion project you have on the side, shows you are a normal person and have to deal with the real-life problems everyone else has. 

Maybe the other person will show you what they are currently struggling with and you might be able to help them.

Ask for feedback and reflect on it– Ask as many people as you can for feedback and write it down. Even if it is negative feedback, just write it down and do not argue about it. Sleep on it a day or two and then look at what you had written down. 

Reflect on it, think about it, discuss it with other people. Then try to improve. If three people mention the same points that you should improve on, then they are most likely true, even if you believe them not to be.

Say Yes– “Find a way to say yes to things. Say yes to invitations to a new country, say yes to meet new friends, say yes to learn something new. Yes is how you get your first job, and your next job, and your spouse, and even your kids.”—Eric Schmidt, Executive Chairman of Google

There is a ton of other advice out there on how to improve your career. There is not one simple rule. Most often when you meet a senior person in a company and you ask them for general advice for life and / or your career, you will be stuck for hours listening to their advice. Most often it is very valuable and you will be able to learn a lot from it. It might even help you find a mentor. 

The only simple advice I have related to salary increases is what to do with them: 

Save 90% of your raise.

Whenever someone gets a raise, they tend to use that money to upgrade their lifestyle, without saving the extra money. Once they upgraded, it is much more difficult to go back to the old level in case they want to save more money.

If you save 90% of your salary increase and use 10% to upgrade your lifestyle, then you get the best of both worlds. This way you manage to avoid the danger of what is called lifestyle inflation.

The Extra Income Path: Side Hustling

A “Side Hustle” is a job or a hobby which you have next to your normal job and generates some kind of income. Many people within the FIRE community use a side hustle as a way to generate extra income and reach financial independence earlier than normal. 

For some people, their side hustle becomes so successful that they even quit their normal job. Some stories are quite incredible and you will find a ton online if you search.

Some of the most common side hustles include:

  • Ridesharing
  • Food Delivery
  • Online teaching
  • Blogging
  • Freelancing
  • Babysitting or Dogsitting
  • Taking online surveys
  • Buying and Reselling Stuff

The list goes on and on. A guy called Chris created the so-called “Side Hustle School” where he has a course on how to create a side hustle. He also does a podcast where he introduces a new side hustle every day and talks about it for ten minutes. 

Some of the weirdest side hustles I have read and heard of are:

  • You can have people pay you to be their friend. Rentafriend.comgives you the opportunity to become that “friend” for hire, based on an hourly rate.
  • You can be paidto live like Dracula. A medical company creating vitamin products was looking for people who were willing to avoid sunlight for a whole month to test their vitamin products. Salary: GBP 2’500.
  • Some families hire tutors for when they go on holidays and pay all the expenses of the tutor in addition to a small salary. So potentially you could go on holidays to place like Ibiza, Miami or the Canary Islands for free.
  • A guy called Elan Lee created a card game called Exploding Kittens. They say it’s a game for people who like kittens, laser beams, explosions and sometimes goats. They wanted to raise USD 10’000 on Kickstarter and eventually ended up with USD 8.7 mio.

As you see, there are many types of side hustles and a ton of information on them out there. In my opinion there are two ways to really start a side hustle:

  1. You have an idea or a passion. You start turning it into a side hustle. The most important part here is to take action and implement.
  • You have no idea. Take a course on side hustles and through a structured process you might come up with an idea. Again, the most important part is to take action and implement.

The Passive Income Path: Real Estate Investing.

Passive income is the concept of you earning money, but not working for it. The best-known type of passive income is real estate investing. 

In simple words, you buy a house or an apartment and you let it to other people. Every month you get an income from their rent without you having to work for it. Voila, passive income.

Many people within the FIRE community have reached financial independence through real estate investing and there is a ton of material on it out there. It is not always without a significant risk, especially when you have a high mortgage. 

If you want to get into this topic then I would start reading the book “Rich Dad, Poor Dad” by Robert T. Kiyosaki which explains the concept and advantages of generating a passive income stream. Following this you might want to delve deeper into a podcast called BiggerPocketswhich has a massive following in the US.

Of course, real estate investing is not the only way to create passive income. It is just the most common. With some research online, you might come up with other ideas. 

Side hustles sometimes turn into passive income as well. In short, the world is yours to explore.

Income Vs Expenses

I am sure that there are not just these three ways of generating income. They are just the most common I know of.

The great thing about income is that it is potentially limitless. There is no law or regulation which says you can only earn a maximum of CHF XXXX per year. 

Expenses on the other hand can only be reduced to a certain level. This means they have a limit. This limitlessness of income is one of the great advantages it has over expenses. 

From a point of reaching financial independence, my advice is to first put your effort into reducing your expenses and investing your savings. There are simple actionable strategies which you can implement fast and effectively. 

Increasing your income is a longer process and sometimes includes much more risk (such as real estate investing or starting your own business).

Also, when you are increasing your income, you are increasing your pre-tax money. This means for every CHF 1 earned, you will finally receive less than CHF 1, because you still need to pay taxes on it.

If you reduce your expenses by CHF 1, then you will receive the full CHF 1, because it is after-tax money. Meaning, no taxes have to be paid on it.

Conclusion

Income, Expenses and Investing.

Now we have covered all three of them. I hope they make sense to you and you now know how to tackle them and put yourself on the road to financial independence. 

“Ok, Mr C&M. Thanks for the advice. Let me now go and implement everything. I will let you know once I have achieved financial independence. Arrivederci.” 

Hold your horses. Do you even know how much money you need to have to be financially independent? Is it CHF 1 million? CHF 100 million? Or even 1 billion?

Don’t worry. The next letter will explain the concepts of how to calculate whether you have reached financial independence or not. Your brother has got you covered.

Bye Bye, Ciao, Zaijian.

Cheers

Mr C&M

Actionable Items


  • Set up goals with your boss and put reminders in your calendar to send him / her an update every two months
  • Communicate your plan for your next step in your career to your boss
  • Check your passions and the possibilities of creating a side hustle

Do you have any questions, concerns, feedback or constructive criticism? Let me know in the comments or send me an e-mail at info@chocolateandmoney.com. Anything is highly appreciated.

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