How to Earn More Money

Everybody is always looking for ways to make more money.

The Internet abounds with articles about side hustles and negotiating raises. There are entire television channels devoted to following stock market investments. Being a co-host of a show about angel investing can help catapult you into consideration to be a vice presidential candidate.

But from what I’ve seen and read, it looks like most people are taking a scattershot approach to making more money.

People try a little bit of this and a little bit of that. They jump into a side hustle and then when that doesn’t work they try another.

Like most other things that I talk about, I think it makes sense to look at earning money in a more systematic way. If we really want to make more money, we should understand the landscape.

Labor vs. Capital

There are two ways to make money.

When it comes down to it, you are either making money from your labor or from your capital.

Your labor is your time, effort, brainpower, and muscle. If you are trading any of these for money, then you are earning from your labor.

Your capital is your money and your assets. If you make money from investing, then you are earning based on your capital.

There are also occasional situations in which both are required for an endeavor. If you open a restaurant, you are probably investing capital and labor in an effort to earn money.

Trading Labor for Cash

Let’s start with labor, as this is where most of us start anyway.

If you work for a salary, then you are in the labor market. You are trading your time and effort for money.

This is where most of us start.

We have no money, and so we need to trade our time for it to get started.

Most side jobs are also labor. If you are driving for Uber or consulting you are trading your time for money.

Labor can be an ongoing exchange for money or an up front commitment of time and effort for payment later.

If you work for a salary, then you work for two weeks, get paid for those two weeks, work two more, and rinse and repeat. If you write a book, then you spend a whole bunch of time writing and get checks in the future for as long as people continue to buy your book.

Making Your Money Make Money

Earning based on your capital is basically spending money to make more money.

This could be buying stock, angel investing, or purchasing rental real estate. You are tying up money that you have right now in the hopes that it will grow into more money over time.

This can be as safe as investing in index funds that track the market or as risky as investing in a local business.

The riskier investments have larger upside and larger downside. If you want to double your money in a couple years, you probably won’t be able to do that with index funds, but you might be able to do it by investing in a single business.

On the other hand, you probably won’t lose all of your money with index funds, where you very well could in a single business.

Investing your capital requires knowing how much risk you are willing to stomach.

Earning More

Now that we have that framework, let’s look at how we can make more money. There are a few different options that we can pursue.

Earning More with Labor

First, we can earn more from our current job or career path.

One option for this is to brush up on our negotiation skills and negotiate a raise. This allows us to make more money for the same amount of labor.

We can also spend more time networking, reading, and improving at our job. This requires some extra time up front, but gives us more leverage in negotiating a promotion or raise. Alternatively, it also puts us in a good position to move to a higher paying job at another company.

Similarly, we can work on certifications or degrees that are relevant to our work. This costs both time and money up front, but gives a big boost to your leverage in negotiations. This helps with both raises and new positions.

If none of those paths are for you, you can also use your labor outside of your 9-5.

The most obvious example of this is the side job. You could drive for Uber, do some freelance work, pick up a part time job, or any number of variations.

In taking this path you are spending more of your time and labor in exchange for some supplemental income. Generally this work will be lower paying than your day job, which is a negative. You also only have a limited number of hours in your week, so the upside is somewhat limited and you need to watch out for burnout.

On the other hand, you may find it to be a nice change of pace or you may enjoy the lower stakes. This type of work generally gives you better control over your hours. Plus, knowing that you have the ability to walk away at any time and still have your main paycheck helps avoid some of the stresses that generally come with paid work.

An option outside of the standard side gig options is creating a future passive income source.

This includes things like writing a book or recording music. A lot of time and effort are required up front and the compensation doesn’t come until later.

These can be great options while you are working a day job. Because you can rely on a steady paycheck from your job, you can plant seeds now and don’t need to be paid instantaneously.

As for negatives, this type of work can be quite speculative. It is difficult to know how much money (if any) you will make down the line. You could plant seeds that never sprout. However, if it works out you could be cashing paychecks in the future for work that has been completed for years. At that point you have income that doesn’t require any time to earn.

Earning More with Capital

At some point, however, we must recognize that there is only so much that we can do with our time. This is where investing capital comes in.

Investing your money allows you to earn without spending any time, effort, or brainpower. Your money can keep working while you sleep.

As noted above, this can be as risky or as conservative as your comfort level allows.

Traditionally, most Americans make all of their money with labor and only a small fraction of the country earns from investing their capital. This needs to change.

As we’ve examined in depth, the value of labor is declining rapidly. This means that the amount of money that you’re being paid for your time is shrinking. And that trend shows no signs of slowing. Rather, it could speed up as automation continues to expand.

The economy needs to be fixed. However, none of us have the power to do that right now. Instead, we all need to protect ourselves and our families from dangerous economic trends. This means we need to get a larger portion of our income from capital.

Making the Shift

Have no capital right now? Let’s work on making some.

If we don’t have enough money to invest our capital, then we need to create more savings. This means we can either cut back our spending or increase our income.

For advice on cutting spending, check out some tips here and here.

On the income front, now might be a good time to work on some of the ways to earn more with labor that we discussed above. Then you can take that extra income and turn it into capital investments that will earn you even more money while you sleep.

We all need to start somewhere. Understanding the different ways in which money can be earned allows us to make a long term plan to get financially stable.

So what’s your plan?

28 thoughts on “How to Earn More Money”

  1. Great breakdown, Matt. I think most folks should try to ramp up their earnings from capital as much as possible for the reasons you said and because it tends to earn you money when labor is no longer possible due to retirement, illness, etc. If all your money comes from labor, there’s no way for your earning power to outlive you. Okay, royalties. But for most of us, investments are a much better prospect.
    Emily @ JohnJaneDoe recently posted…New Grocery Store in Town: How Does Lidl Stack Up?My Profile

  2. Hey, Matt. Excellent examination of what making more money entails. I heard on a YouTube clip the other day that AI is now producing better trading results than seasoned Wall Street traders. How soon before automation makes the bonus-dependent and hooker-loving trader obsolete? Tasks that are rote and susceptible to mental biases will be overwhelmed by automation. The average person’s mindset therefore needs to change. As you pointed out, capital is becoming ever more prominent. The future will be bright for those who know how to create and build capital.

  3. Great overview Matt. I believe we all need to think beyond just trading our time for money. Sure that’s a great starting point, but not sustainable over the long term. It’s an old way of thinking. We need to find ways to break the cycle and let money work for us, via investments, passive income, saving, etc.
    Brian recently posted…Connecting More Offline in an Online WorldMy Profile

  4. Great breakdown and separation. I’m continuing my 9-5 but don’t have an exact plan to grow that yet. For making money with money, continue my FRIP thru dividends and invest excess cash quarterly if possible.

  5. I really like this analysis. At the moment, I am investing in my career, which has seen increased income over the years. But we are also looking for ways to create additional streams of income. Index investing is our primary path right now, but we would like to explore real estate in the future as well.
    Mrs. Adventure Rich recently posted…Leveraging our Property for Half a PigMy Profile

  6. This is a concept that is touched upon in Rich Dad Poor Dad. Two people with exactly the same income can differ greatly in their wealth. The “poor dad” channels his income towards expenses (like groceries) and liabilities (like cars) while the “rich dad” channels his income towards expenses (like groceries) and assets (like investments). For those pursuing side hustles, it’s so important to ensure that increased income translates directly into increased wealth via assets – otherwise it’s ends up being a terrible waste.
    We have been focused on debt reduction for 5 years, and have just recently been getting more psyched about increasing our assets. There is a step-by-step process involved in attaining good financial health. For us, correcting old mistakes before investing was key. Any effort to invest when we were still in high-debt mode would have been sabotaged by both debt and inefficient cash-flow. Now that we’ve got our debt and cash-flow under control (for the most part), we’re ready for that next step. The light bulb is finally on : )
    Prudence Debtfree recently posted…Dealing With My Financial Achilles’ Heel: Metaphor of Pipe, Valve, and FilterMy Profile

    1. That’s a great way to think about side hustles. If you’re putting the time in, you need to make sure the money is going into wealth building. My first year working side jobs I put 50% directly into VTSAX and the other 50% into a savings account for vacation spending. Since then I’ve done 50% to VTSAX and 50% set aside for charity.

      Conquering debt is a big first step. Glad you’ve been able to jump that hurdle and move on to building wealth. Good luck!

      Thanks for stopping by!
      Matt recently posted…The One Key to Optimizing Your ProductivityMy Profile

  7. Great write up. For me investing in myself to increase income from my 9-5 made the most sense. I am already working that job, why no get as much for it as I can. Next, is continually increase my investments and collect a passive income via dividends. I am currently around the $500/month mark and growing every month. I fear so many people will experience burn out from all the side hustles they try to maintain. I like the Keep it simple approach!
    FIbythecommonguy recently posted…DIY Fence BuildMy Profile

    1. I’m also a fan of keeping it simple. I like your approach of focusing on one thing at a time before moving on to the next. That can help a lot with actually succeeding with each step.

      Thanks for stopping by!
      Matt recently posted…Comfort is Not HappinessMy Profile

  8. I think most would say that side hustles like Uber don’t really pay off and aren’t sustainable because you still have a to keep trading time and labor for money. Even so, it is at least more sustainable if you’re able to generate side income if you’ve already mentally set it aside for investing! (Though I haven’t tried it, I’d love to)
    Jing recently posted…What to Look For In A Savings AccountMy Profile

    1. I haven’t tried most of the popular side hustles, Uber included. I feel like most side hustles have pretty low pay, so you might as well try one that seems fun. I do always make sure that side hustle money always gets put aside and doesn’t end up in the normal monthly spending pot.

      Thanks for the comment, Jing!
      Matt recently posted…Comfort is Not HappinessMy Profile

  9. Hey, Matt, An excellent examination of what making more money entails. I really like this analysis was done by you. At the moment, I am investing in my Capitals. I hope I can manage all the things properly. Looking forward to more articles. Thanks a lot for sharing this great post with us. Best wishes and regards.

  10. Great Tips! Such a great information.

    I agree with you that “The Internet abounds with articles about side hustles and negotiating raises.” I have always been facing problems with Making Money and was trying to hire someone to help me.

    The way you have stated everything above is quite awesome. Thanks a lot for sharing.


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