Everybody will agree with me when I say people want to grow their income. A bigger income means more savings, more money to invest and a better ability to spend. Over the years, I have greatly improved my income. And I do not want to stop there.
There are two main ways to reach Financial Independence (FI) faster. Either you reduce your expenses or you grow your income. We have already seen that you should do both if you want to reach FI faster. Most people are quickly reaching some limits when trying to reduce their expenses. On the other hand, growing your income is virtually limitless.
A lot of people do not focus enough on increasing their income. Even in the personal finance community, a lot of people are focusing on reducing small expenses. Whereas it is sometimes easier to get more money!
In this post, I am going to detail The 7 Best Ways that you can use to grow your income. And of course, you are not limited to one of these ways. If you want to increase your income as much possible, you need to work on several fronts. There are other ways as well. If you know a good way to increase your income, please let me know!
1. Grow your main career income
The most used way to grow one’s income is to grow your main career income. It sounds obvious but many people do not try to grow their income as much as it is possible. It may not be as difficult as you think to grow your career income.
We have already discussed earlier that there are many ways to grow your main career income. You could ask for a raise or get extra education to increase your value to your company. Sometimes you can also get a very increase in income by changing company, or even by changing country! Of course, do not change for a job that makes your life miserable. I believe that a good job is very important. I prefer to reach FI while still having a good life in the meantime.
For me, this is the main way to increase my income. I am planning to increase my salary and not increase my expenses. This should make me reach FI faster. And this is what I would advise to most people.
2. Start Side Hustles
Another way to increase your income is to start a side hustle. A side hustle is some small paid work that you do aside from your main career. There are many side hustles that you could do. This is a very popular way of getting some extra income.
You could develop websites for other people for instance. You could walk dogs for your neighbors or babysit their kids. Or you could sell vegetables from your garden. Some people start a blog as a side hustle. There are a lot of things you can online such as online surveys. These days Uber and other ride-sharing companies are also used a lot as side hustles. You can also make a profit by buying and reselling stuff. The options are limitless. Some people have one side hustle. But some people can have more than ten side hustles.
As you see, there are many possible side hustles. Some of them can bring you some nice amount of money and some of them are more modest. When you choose a side hustle, you need to consider the return per hour. You need to decide how much of your free time you are willing to trade for money.
There are many side hustles that will take a lot of your time for a little side money. I do think it is worth it to spend all your free time on side hustles. However, that is what some people and they can reach FI faster because of it. In the end, it only depends on your goals and the way you want your journey to reach these goals.
Personally, I do not have any side hustle. And for now, I do not plan on starting a side hustle. I believe it is more efficient to focus on growing the career income. Moreover, I also do not want to use all the free time I have to get a little more money. Nevertheless, it can be good, especially if you can turn one of your passions or hobbies into a side hustle. I may not have a side hustle, but Mrs. The Poor Swiss uses videos shows as a side hustle.
3. Invest in Real Estate
Another good way to get some extra income is to invest in real estate. I’ve talked already in details about the different way there are to invest in real estate. You can invest either in physical property directly and receive the rent. You could also invest through crowd-investing real estate or through a Real Estate Investment Fund (REIT) on the stock market.
All these forms of investment will generally bring back a nice amount of money. And it is generally some regular income. But you may need a big original investment. If you decide to invest in physical property, this will not really be passive income. Indeed, it may give you a lot of work to manage the properties. If you invest through REIT or crowd-estate investing, it will be mostly passive income.
This strategy is used by many people in the personal finance community. If you have a large amount of money to invest, Real Estate can be an excellent investment. Nevertheless, you have to remember that this is an investment. And therefore, it is not without risk. You may end up losing some money with real estate investment. The real estate could crash in your region or even in your country. You may also have issues finding a renter. This is something that you really need to consider.
Personally, I do not plan to invest in real estate any time soon. We may buy our own house. But the house in which you live is not an investment. It will not bring any income.
4. Invest in Bonds
If you invest in stocks, you will not get extra income. You will only get the money once you sell. Before that, your gains are not realized and therefore not guaranteed. But there are other forms of investments that bring some guaranteed income: Bonds. A bond is some money that is lent and generate some fixed income.
You can purchase a bond from a government or from a company. There are also Certificates of Deposit that are a form of bonds that you can get from a bank. All these bonds will have a duration before maturity. During the duration of the bond, you will receive some fixed income year after year. After the duration, you will receive the principal back to you. If you do not sell it before, you cannot lose money with a bond. However, if you sell before maturity, you may lose some money or even get some money. It will depend on the current interest rates.
However, even if they are fixed income and generally, bonds are not without risk. Big governments are not very likely to default. Nevertheless, if you invest in shadier, smaller, countries, they may default on you. It is still rare. On the other hand, corporate bonds are riskier. And generally, the higher the yield, the riskier the bond. That is up to you to decide how much risk you are willing to take.
And one more thing to consider, there are also bond funds. However, these will fluctuate in value much more than single bonds. This is because the fund managers will sell and buy more funds. And also because the value of the fund represents the current value of the bonds, not the bonds at maturity time.
Personally, I do not own any bond. And I do not plan to in the near future. I think that bonds are a great tool once you are closer to retirement. But I am quite far from it. Once I will get closer to retirement, I will consider again bonds and bonds funds.
5. Invest in Peer-To-Peer Lending
Another thing that some people do is to use a peer-to-peer lending platform. On these platforms, you can lend money to other people using the platforms. They are generally offering high yields compared to banks or bonds. Some people reported some very nice income from these platforms. There is an entire online community of people using these platforms.
I hesitated a bit before mentioning this option for income. Because I am not yet sure it is very safe. Once again, this is not without risk. The originator of the loan could default and you would not get your money back. And some of these platforms could go bankrupt. And there were a few cases where some of these platforms were actually a Ponzi scheme.
I have not tried this technique to improve my income yet. I am considering trying to use it with a little amount over a test period. But I am not yet sure about this. It has advantages. But I am not sure it can hold its promises in the long term. Most of these online portals are advertising very high yield. I am very skeptical about yields of 20% when you can borrow money from the bank at a fraction of a cost. Nevertheless, this could be totally legit. And I could be losing some opportunity. I do not know.
Do you have any experience with Peer-To-Peer Lending?
6. Invest in Dividends Stocks
Another way for having some extra income I want to talk about is investing in dividends stocks. I have already talked about Dividends in details for stock investing. If you invest in the stock market through index funds, you will have some dividends. Not all companies pay a dividend but many of them do.
Some people choose to invest only in companies that are paying dividends. That means that they do not focus on building capital gains. But they focus on increasing their dividends. And dividends are generally reinvested into the companies that distributed them.
The advantage of this kind of income is that it is entirely passive income. Your money is invested and it brings back some extra money. There are two ways to invest here. Either you pick the stocks or you invest through indexing. It seems that most people in the dividend investing community are picking stocks themselves. But both options are perfectly viable.
In our own case, we do not plan to invest especially in dividends paying companies. The reason is that dividends are taxed as income in Switzerland. Therefore, capital gains are more tax-efficient than dividends. This is not the case is a lot of countries where dividends are not taxed.
7. Sell Some of Your Stuff
The final way to get some extra income is to sell some of the things you already own but do not use anymore. Most people have a lot of stuff in their home that they do not use.
Sometimes you can find some valuables. It will take time to go through your things. But it is a really good thing to do. Not only will this bring you some extra cash but it will also declutter your home. If you manage to tidy your home in the process, it can have a lot of advantages for your life!
Now, your mileage will vary will this way of increasing income. Some people do not have much clutter in the first place. And not all clutter is valuable, far from it. However, everybody should value more a tidy home and some cash rather than some clutter they do not use. And of course, this tip is limited in that there is only some much stuff you can sell!
I personally prefer selling things online. But there are other ways such as a yard sale.
As you can see, there are many ways to grow your income. However, not all these ways are equal. Some of them are just investments of money that will grant you some extra income. Some of them are investments of your time. Side hustles can bring back a lot of money but may take away a lot of your time. And we already have so little free time.
My favorite way to earn extra income is to push your career to the maximum. This is the best way because it will not take all of your free time to do it. And I believe the return on investment can be great. However, side hustles are not a bad thing at all. And investments into real estate can make a lot of sense as well.
Do not forget that every situation is different. What works for one person will not necessarily work for another one. It is important to know the different tools that are available. But then, it is up to you to decide what to do with these tools!
So, personally, I will try to increase my main career income as much as possible. I will have to make it one of my goals for next year. I do not plan on starting any side hustle any time soon. Next year, I am considering whether I should invest in real estate. I am probably going to start investing small amounts in a real estate crowd investing platform.
To learn more about increasing your income, learn The Ways to Grow your Main Career Income.
But enough about me, what about you? Do you have any tip on increasing your income? What do you do to earn extra income?