Home Personal FinanceFinancial Freedom In 5 Simple Steps Financial Freedom Step 5: Increase Your Income

Financial Freedom Step 5: Increase Your Income

by phiafreedom101@gmail.com
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We’ve arrived at the last post in our 5 part guide to reaching Financial Freedom. While you can achieve Financial Freedom following the first 4 steps alone, you will get there a WHOLE lot faster if you can simultaneously increase your income. So Step 5 is all about learning to hustle.

No – not the dance move.

My best advice for this step is to get creative. If you invest some serious time thinking about it, you’ll be amazed at the different ways you can come up with to generate cash in your own personal situation.

While the avenues to up your annual take-home may be plentiful, let’s go over a few just to get your wheels spinning.

#1 Ask For A Raise

Photo courtesy of Hunters Race on Unsplash

Yes – sometimes it can be just that simple to increase your income. This one certainly won’t apply to everyone, we aren’t all in positions where a raise is a possibility. But if you are, have a hard look at the value you bring to your job. What do you offer that sets you apart? Ensure you are being appropriately compensated for your skill sets.

Part of this is knowing your job market. What are competitors paying their employee’s that fill positions similar to your own, and how does your compensation package fare in comparison. (Not just your pay – but your total compensation including benefits, vacation hours, pension etc).

If you find that you’re being shortchanged relative to the job market – ask for a raise, start shopping for better opportunities. Or both.

#2 Improve Yourself

Photo courtesy of Sharon McCutcheon on Unsplash

Are you in a line of work where a simple course or minor upgrade could have a positive impact on your salary/wage. If you are, look at the return on investment to determine if it’s worth both the time and cost.

It’s important to do the math when you are looking at investing in education strictly for the benefit of your current employment. Determine the total cost of the training (including anything like required travel, time away from family etc.), identify the increase in wage that you will eligible for, and determine how long it will take you to recover the cost from the increase in wage.

There’s no magic formula here, but assess the ROI based on your personal situation, and how much the increased income will impact your ability to reach Financial Freedom.

The earlier you implement this step in your Financial Freedom journey, the more time you have to recoup your investment AND accelerate your savings rate.

#3 Work Some Double Bubble

Photo courtesy of Mitchell Luo on Unsplash

If you are in a line of work where overtime is available to you, this can be an incredibly efficient way to increase your income.

You’ll be doing exactly what you do every other day, but making 1.5-2 times the rate of pay. Sometimes even more depending on the employer.

This is exactly how Mike and I upped our annual income into the six digit range for many years.

While this can be a simple way to make extra money, I do suggest a bit of caution in this department. Working incessantly can be a grind. Even if you love your job, devoting more than 40 hours a week can be tough mentally and lead to burn out.

It can also lead to overspending in other areas because you end up feeling as though you’ve earned a reward or two. So approach this avenue with caution, but do use it to your benefit if it’s an option.

#4 Clear The Clutter

Photo courtesy of Samantha Gades on Unsplash

This is one of my favorites. I absolutely love to clean out our house at regular intervals. I ALWAYS find stuff hidden away in cupboards and cabinets that we don’t use.

It doesn’t hurt that Mike is a certified Craigslists master. Whenever we find stuff that still has value but is getting limited use, he throws up an ad or ten and gets it gone. All while adding cash to our savings.

Although you’re probably going to get the most bang for your buck the first couple times you go through all your stuff, it’s worth continuing the habit. 

Doling out a couple hundred dollars on an impulse buy that you never end up using and then being smacked in the face by the fact that you could only sell it for 20 bux 6 months later really makes you start to assess your spending.

Clearing out my clothing and seeing what little I could get back for it was a huge wake-up call for me.

I’m not even that much of a shopper. But the first couple times I cleaned out my closets I was literally getting rid of thousands of dollars worth of clothing, shoes and accessories. And it wasn’t even like it was designer stuff.

It was just regular clothes, and most of it didn’t sell. Now I think long and hard before I buy a piece of clothing (or anything for that matter). Both for me and for my kids. It has to be something that is extremely versatile and that we’re going to get a ton of wear out of, otherwise it doesn’t come home.

Now, I like to calculate the value of my clothes based on the cost per wear

Remember, Stacey and Clinton from TLC’s What Not to Wear. Cost per wear was one of their golden rules and I highly recommend implenting it in your own wardrobe.

If you spend $100 on a pair of jeans that you wear almost daily, in terms of value per dollar spent, it definitely beats getting a “deal” on a $30.00 pair of pants that you only end up wearing once.

#5 Turn Your House Into An Income Producing Asset

Photo courtesy of Scott Webb on Unsplash

This one is HUGE. If you can utilize one of your biggest expenses to generate income, that can be a huge swing in how much money you can save.

In reality we all spend the majority of our time at home in three rooms.

  • The kitchen,
  • the living room, and
  • the bedroom.

All the extra rooms, the dining room, the guest room that occasionally gets used, the office, THE BASEMENT, all these extra spaces are just money waiting to be made.

If you have a basement, look into the cost and regulations in your area regarding turning it into a basement suite. If your basement comprises half the square footage of your home, you just found a way to not only generate income, but to turn half of all your housing bills (think mortgage interest, property tax, hydro, gas, etc) into tax write offs.

In this department, you MUST check the tax laws for your specific area before ever completing a claim or writing off expenses.

If you don’t have room for a suite, or the cost of putting one in is to high to make sense in terms of recovery, look at renting out rooms or hosting an Air B&B.

You can still find plenty of write-offs, you just have to calculate the amount of space utilized and the frequency it is used for generating income and conduct your expense calculations accordingly.

Live on a large property? Maybe you could rent space on your property to people who need to store RV’s or boats? 

Live in a dense area and just got rid of your car when you were cutting expenses? Rent out your parking space monthly.

When Mike and I bought our home, a must have was space for a basement suite. We knew that once we paid off our mortgage we could easily cover all the maintenance and ongoing expenses of our house (hydro, gas, property taxes etc), with the rental income alone, And STILL generate a positive cash flow.

Our entire housing costs and maintenance, plus some extra, covered by 1/3 of our house. Talk about turning your home into a true asset.

#6 The Side Hustle

Photo courtesy of Garrhet Sampson on Unsplash

Now to the hustle. When it comes to increasing your income, this one can go hand in hand with turning your house into an asset.

Think of a small home based business you can do in your off time. Remember that office or dining room you rarely use? Turn that space into full time space for your business. What skill sets or hobbies do you already have that you can market?

For two years Mike and I started a small business that took advantage of our individual skills sets. Mike would find old pieces of furniture for free or low cost on Craigslist, and I would refinish them. Mike would then re-sell everything on Craigslist for a pretty profit.

We were able to generate nearly fifteen thousand dollars just doing this part time, AND we both really enjoyed it.

Mike’s a great salesman, and I got to satisfy my desire to be crafty without loading my house up with furniture I didn’t need.

The business also required nearly zero start up capital.

If you’re having trouble finding inspiration for a side hustle, check out the podcast Side Hustle School by Chris Guillebeau. I found this podcast when it first started and love that Chris puts out daily content that is anywhere from 5-15 minutes long.

It’s a super quick listen, and each day he covers a new idea. Frankly, I think everyone should have a side hustle, it’s a ton of a fun and a great way to diversify your income streams.

If you think you don’t have time, ask yourself if you watch TV. If the answer is yes, you just found a space where you can reclaim some time.

The Bottom Line

One caution. However you choose to increase your income, that extra money should never inflate your lifestyle. This is phantom money.

Its sole purpose is to get you closer to your goal of FF and the only places it should be going is

Identify your values, get your partner on board, set your financial goals, cut expenses and increase your income. Those are the 5 steps to Financial Freedom.

As I promised previously, and strongly maintain, the road to Financial Freedom isn’t easy, but it is that simple.

In the coming posts we are going to delve deeper into specific ideas you can implement to support the 5 steps, as well as getting into the finer details of the most impactful actions we took that got us to Financial Freedom.

Have you started on your journey to Financial Freedom? Leave us a comment below and tell us about your strategy, timeline, and what Financial Freedom means to you! And don’t forget to subscribe by joining our Freedom Fastrack. You’ll get our weekly post delivered straight to your inbox.

Thanks for reading!

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