Increasing your income can have a huge impact on the time it takes to reach your financial goals.
Most people will find it incredibly difficult to cut out $5k or $10k of annual expenses from their budget (there are only so many lattes that you can stop drinking).
However, some people will be able to negotiate a raise or find a new job that would bump up up their income by many thousands or even tens of thousands of dollars.
To be clear, this is not for everyone. There are many industries or careers where your salary is based on a pre-determined grid. Jumping to a new employer or negotiating harder won’t yield any results in some cases. If it’s not possible to increase your income, you’ll still get to where you want to go by focusing on the core personal finance skills — budgeting, spending less than you earn, and investing wisely.
With that said, let’s discuss the steps you can take to jump on the rocket ship to financial freedom by increasing your income.
We need to walk before we run. Before you can make any radical changes to increase your income, you’ll need to understand how your current income compares against people working in similar companies / departments / jobs.
To get a sense of the market salary range for your job, try out these resources:
For Americans: Check out this fantastic interactive map from the Hamilton Project, which allows you to see salary data with filters for job titles, age, and location. A pretty amazing data set.
Try searching for a few variations of your job title (companies tend to use slightly different terminology to describe the same job). Your goal should be to find out what the typical salary range is for your type of job (low, average, high).
Where do you fit in the salary range?
Spend some time to figure out what you want next in your career. Are you happy with your current path, but want to move up the ladder? Do you want to jump ship to do the same job at a better company? Do you want to try out something entirely new?
What would your dream role would look like? What are the key areas where your current job is lacking in (pay, type of work, seniority, work-life balance, team, purpose, autonomy, etc.)? Which companies would offer a better overall role?
Try to sketch out an outline of what you want.
Use those same salary research tools above to get a grasp on what the pay range is for a few of the jobs you’d be interested in.
Don’t skimp out on the effort here. The decision of where you’ll work for 40+ hours a week, week after week for years (or decades), is not one to be taken lightly.
To get in in deeper than what’s available on the internet, and to increase your job switching prospects, I highly recommend setting up a few informational interviews.
An informational interview is a quick chat with somebody (over the phone, in person over a coffee) where you’re trying to learn about their industry, what their day-to-day job is like, good ways to break into their company, etc.
The goal of an informational interview is well, information. You’re not trying to immediately leverage this into a job offer. Instead, this is a great opportunity to expand your network, learn about a new industry, and ask some basic questions.
A quick primer:
By the end of this informational interview process, you’ll have met plenty of people actually doing the job you want, and you’ll be ready for interviews. You will be miles ahead of the competition if you decide to switch.
Be open to new opportunities even if you’re happy today with your company / salary.
The best time to look for a new job is when you already have one. This allows you to be patient and picky with new opportunities, instead of being forced into accepting the first offer that pops up.
Keep in mind that your work situation can change on a moment’s notice. The boss that you get along with could get replaced by someone who drives you insane. Your company could get acquired, making your job redundant. Colleagues change, company budgets change, you just never know.
You can even go as far as interviewing for jobs that you don’t really intend on taking. You’ll keep your interviewing skills sharp, get to know your market value, and will have the opportunity to make a change when it suits you.
Negotiating salary at your current job is tough, but is definitely well worth it. A 15-minute conversation could be worth thousands of dollars a year.
Some tips for getting a raise during your next annual review:
As always, know your market value before you walk into any negotiation.
If you’re moving to a new job, this the absolute best time to negotiate. They have a role that they’re trying to fill, providing you with quite a bit of leverage.
Pay is undoubtedly important, but be creative. You can also score wins on vacation time, work from home privileges, remote work, expense reimbursements (moving expenses, cell phone, car).
For some great tips on negotiating when you move to a new job, read through:
Getting an advanced degree in your current field, or studying something entirely new can be a great way to increase your income. Taking time to go back to school can be incredibly rewarding on an intellectual level, and a healthy reward for your paycheck as well. People with grad degrees are typically paid more and are likelier candidates for promotions.
But, just hang on for a little before you trade in your briefcase for a backpack. Going back to school can be incredibly expensive. Starting with tuition, and lumping on foregone income and student loan interest turns this into a sizeable check.
To weigh the pros and cons of going back to school, use this interactive grad school calculator.