There's no question that frugality is an important part of personal finance — you can't outearn dumb spending — but trying to get rich by pinching pennies is like trying to win a car race by conserving gas. If you want to reach the finish line fast, you can't be shy with the accelerator!
Today I want to explore a better way to boost your savings. Let's talk about how you can earn more money. Whether you're self-employed or working for somebody else, your income is determined by three factors:
- Your knowledge and skills. If you want to earn more, it pays to learn more.
- Your productivity. Both the quality and the quantity of your work affect how much people are willing to pay you.
- Your ability to sell yourself. To be paid what you're worth, you have to ask for it.
If you want to earn more money, you have to become more valuable in the job marketplace — and demonstrate that value for the market to see. Let's look at how to make that happen.
The More You Learn, the More You Earn
In the United States, education has a greater impact on work-life earnings than any other demographic factor. Your age, race, gender, and location all influence what you earn, but nothing matters more than what you know. That's great news, really, because you have total control over your level of education.
How much does schooling matter? Here are some numbers from the 2014 Consumer Expenditure Survey conducted by the U.S. Bureau of Labor Statistics:
The average college graduate earns twice as much as his friend whose education ended with high school.
Even a two-year degree from a community college helps. The average worker with an associate's degree earns twice the annual income of a high-school dropout and 50% more than somebody with only a high school diploma. Two years of community college typically boosts income by $20,000 per year. (That's almost a million dollars during a typical 40-year career!)
Similar research from the Current Population Survey shows that education also affects unemployment rates:
When you produce more, you're worth more.
In addition to increasing the quantity of your work, it pays to increase the quality of your work. This may seem obvious, but you'd be surprised at how many people “go through the motions” at the office every day. You'll never get ahead if you're only faking it.
It's tough to provide general advice on how to do better work. “Better” varies from job to job. But you know what quality output looks like for your profession. (If you don't, that's a problem you should solve immediately.)