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5 surprising insights on earning more money

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Sound familiar?

The conventional wisdom goes like this: Keep a budget, save 10% of your income, don’t spend on any extravagances (especially not lattes, the most evil of all), invest your money (where? oh, you know…just “invest it”), don’t use credit cards, and buy a house because it’s a “good investment.” And somehow, someday, you’ll be financially secure. Not rich, just okay.

Never mind that few people have the skills or discipline to save 10% of their income. Never mind that each of those recommendations depends on willpower, which lasts for a month or two, then dissipates as predictably as the effects of diets. Never mind that credit is essential and can save you over $100,000 on the purchase of an average house.

I Will Teach You To Be Rich readers know that those “tips” are filled with so many holes that it’s almost difficult to believe — chiefly human psychology. This is why you’ll have a friend whose new resolution (every month) is to stop spending money and really save! This nearly always fails — just like diets — because behavioral change is extraordinarily challenging and few people study how it actually works.

Yet “experts” continue spouting off this nonsense of saving and trying harder through sheer force alone. Why? Because it’s easy to write, inoffensive, produces pageviews, and requires very little energy from a largely apathetic and semi–financially-conscious public. Real behavioral change takes systems, not simply willpower. Real behavioral change requires conscious spending, not across-the-board cost-cutting.

For example, the ordinary wisdom of “stop wasting your money on stuff” is filled with outdated cliches like encouraging us to stop spending on lattes, eating out, and bars — all things that people in their 20s and 30s spend money on as a natural part of life. Even more importantly, we’re all embedded in a social system that reinforces this spending, making it virtually impossible to cut down discretionary expenses by willpower alone. This is like telling teens to stop having sex: You can try, and it may make you feel better to say it, but that’s not going to change the actual numbers. (Exception: My future kids, who I will lock down with one ankle chain each, like an elephant.)

Today, we’re over halfway into 2010, and I want to check in with you on where you are with your finances.

If I’d followed the advice of most “experts,” I “should” have done the following this year: Stopped eating out, cooked at home every day, never take a vacation, sit at home (no cable) and knit, reuse plastic bags 47 times, cut down on the amount of toilet paper I use, walk everywhere (no cabs or driving), and on and on. Who the hell in their 20s and 30s wants to live like that?

In fact, based on some back-of-the-reused napkin math, all I have to do is use 50 fewer squares of toilet paper each day, which will save me $2.35/month, times TWELVE MONTHS!! I WILL TEACH MYSELF TO BE RICH!!!

Instead, after automating my finances, I’ve decided to earn more. In fact, in one hour this year, I earned 10x what I recently earned in an entire year.

Many people are spending the summer being lazy, watching The Hills, and drinking themselves into a Chico State-inspired stupor.

Screw them. You’re going to crush them like a dump truck.

Let me show you what I’ve learned recently. Then I’ll tell you what’s coming your way.

The case of the confused man

Two weeks ago, I get this email from someone who’s unsubscribing from my newsletter. Now, every time someone unsubscribes, I get an email with their reason, and I usually reply to most of them just to see why they’re leaving.

This guy says he “already knows all the basic stuff” I write about. Whenever I read this, it’s usually a tipoff that you’ve got someone who’s more interested in finding newer and newer material (!!) instead of actually doing something. Anyway, I decide to ask a few more questions.

Ramit: “What kind of material would you be interested in?”
Guy: “I have done the basics. I am looking for ways to grow my money substantially, high-risk investing, take a vacation. I am looking for a stronger background in finance.”
Ramit: “Have you done [XYZ]”?
Guy: “Yes, I have done all that.”
Ramit: “Would you be interested in earning more?”
Guy: “Yes, I would but its all scam material out there. Any way to earn more would be appreciated.”

My first thought was, HOLY SHIT, I spent all of January writing all-new material on earning more. How could he not know? But in retrospect, it’s my fault: Why should I expect him to know about it? Honestly, I haven’t talked much about earning more since then, even though I announced that 2010 is the year of earning more. And then, as I searched my email and survey responses, I found more and more people asking for material on earning more and quitting their jobs to do something better.

So, oops… I can’t believe I haven’t shared what my team and I have been doing behind the scenes for the last 4 months: creating hours and hours of audio/video material, case studies, new techniques to earn more, and capturing tons of stories about people earning more.

My fault for not sharing. So I’m going to spend the next 4 weeks giving you a bunch of free stuff that you can use to take action right now to earn more — and use the money to quit your job, fly to Vegas, pay off debt, or whatever else you want to consciously do.

Why earning instead of cutting back?

I like to focus on earning more instead of cutting back for a few reasons that make a profound difference in living a rich life.

There’s a limit to how much you can cut back, but no limit to how much you can earn. In fact, as you cut back on spending, it gets increasingly harder, but as you earn more, it gets increasingly easier. For example, one of my students is earning several thousand dollars more per month. Let’s say he makes a small 10% tweak (say, a phrase he uses in his pricing negotiations, or the way he presents his guarantee, or even the customers he pursues). At his scale, that small tweak alone can be worth hundreds of dollars per month.

Cutting back on everything really sucks. Really, when you read some of these judgmental people who think it’s unconscionable to spend a little money on a nice dinner or trip or shirt…don’t you wonder, who really wants to live like that? Let’s assume you want an extra $1,000/month in your bank account. Let’s compare what you’d have to SAVE vs. what you’d have to EARN.

  • Saving: No eating out, cancel gym, cancel cable, no going out, reduce cellphone minutes…etc.
  • Earning more: Spend 4 weeks testing ideas rapidly (these could be anything you’re good at, including dog walking, organizing, writing, singing, high-school math, programming…), spend 4 more weeks developing your service offering, testing it in an iterative fashion, then identifying 50 leads, qualifying, and pitching them. If you get 1 client, you have $1,000/month. That’s about 5 hours/week. And the best part? As long as you continue doing a great job for your client, that money continues flowing in, and you can find more clients to compound your growth.

The point is, if you can earn $50, you can earn $500. And if you can earn $500, you can earn $5,000. For those people who are willing to challenge themselves beyond the simple mantra of “cut back on everything,” there is a lush and rich life waiting for you — not just financially, but also intellectually, because knowing how to earn more money is a skill that applies to so many areas of your life.

Anyone can cut back for a few days. Few can persist. And even fewer can earn money on the side, which is a GOOD thing for you. How often have you gotten gung-ho about saving money, cut back 80% on your spending, then watched it float right back to what it was before? Anyone can make a short-term resolution, but it’s extraordinarily difficult to change behavior for the long term. Since we have limited willpower, I believe we should automate as many basic decisions as possible, and concentrate our limited cognition/willpower on more things like relationships, health, and our work. Also, since we have limited willpower, if you’re going to direct it to your finances, why not pick something that will result in a BIG WIN — something like earning more money?

If you earned just $300/month for 5 years, that’s $18,000. My students know how they can easily earn that much and, since it’s such a modest number, how they can virtually automate that money.

Think bigger. If you earned $1,000/month for 5 years, that’s $60,000. That assumes you don’t increase your income and that you earn more for just for 5 years. You see? When you earn more, it’s in your control — and the numbers are staggering. How many lattes is that worth?

Who wants to wait 40 years to live life? Not me. When you see people taking trips, or maxing out their Roth IRA, or spending consciously however they want…I don’t think to myself, “Waa…I can’t afford that.” I ask myself, “How could I afford that?” That simple shift in the form of the question has a profound effect on your ability to take action.

I’ve heard a lot of people say something like, “Oh yeah, HE can earn more money on the side because [some reason], but *I* never could.” That is wrong. In fact, as you know I generally hate artists because they are the worst business people in the world. But look at this from one of my students:

“Thanks to you, I’m an artist that’s not starving. Your Earn1K course helped me successfully secure two new corporate accounts (Anthropologie and Takashimaya) in the last month.”
— Julie F.

My new motto is, if an artist can do it, so can you.

In general, people behave conservatively in times of ambiguity. So when faced with the ultra-ambigous idea of earning more, most people create barriers in their mind to justify why earning more is impossible.

  • “How does so-and-so always get to go on those weekend trips / have flexibility / work from home? She’s so lucky”
  • “But I’m a [fill in your job here]… I just CAN’T earn more on the side with my skill set.”
  • “I’m just waiting for a good idea”Now let me share some of the insights I’ve learned that might help you figure out what you could do to earn more money.

    5 surprising insights on earning more money

    Over the last 4 months, I’ve learned a huge amount from over 8,000 data points, including survey responses, individual emails, phone calls, in-person meetings, and webcasts. Here are 5 that stand out.

    1. The #1 barrier to people earning more is finding an idea. Everyone loves the thought of earning $1,000+/month. But when you ask them how they might do it, they suddenly stop, confused about which idea might work — or even guilty that their idea could never be good enough to charge people for. I’ll go into this more over the next few weeks because there is a lot of interesting psychology going on here.
    2. Next, there are several common reasons that people want to earn more. It’s not what you think, either. I initially believed it would be so people could buy a $800 coat or bottle service at a club; in other words, live a baller lifestyle. Not the case. Most people are simply unsatisfied with their job and want the option of eventually quitting and working for themselves, or simply having the option of doing SOMETHING else.Do you guys know people who are a few years out of college and feel like, “Huh…is this it?” Shouldn’t we be meeting CEOs now? Flying around to dispense our wisdom? Seeing huge growth in our salaries, exotic travel, and new ways of thinking all the time? And when you realize it’s not happening — especially in those years between now and having kids — it becomes really disconcerting. What do you do?

      I have a college friend who I went to visit a few months ago. We were catching up on his dating life and he confessed that he was still not doing very well with women. I asked if he’d considered getting some dating advice or taking a course. (I know some people think this is weird, but I think of it as pure self-development.) He thought it was weird too, and he’s actively refused to get advice from anyone more successful with women — but his lack of a dating life was really bothering him. I said ok, and we got quiet for a while. Then I asked, “So you want X but it’s not working. Have you changed anything to get it?” And he looked at me, point-blank, and said, “No, I guess I haven’t.”

      Without changing any behaviors, how can you expect your results to change?

  • Then I learned that more and more people want accountability and smart people around them. They actually openly say, “Yes, I need accountability. I start things but never finish them.” I was surprised to hear how honest people were. Another thing they point out is that often, nobody around them is really motivated to do anything, so they don’t have any support system. More key insights when it comes to earning money. If all your friends are satisfied working at the local insurance company, it becomes “weird” for you to do something different…and that simple social dynamic is enough to dissuade many people from trying something new. We tried to be very careful building in accountability and got comments like this from one of my students named Wendy L.: “This course is probably more valuable than my MBA.”
  • Most importantly, I learned that earning more is NOT about tactic after tactic. I’ve been emphasizing that lately on iwillteachyoutuberich for the readers who are constantly clamoring for more and more new material. In truth, most of them haven’t actually implemented any of the old material, so they simply want new material as a sort of novelty drug, which will give them the illusory feeling of doing something and absolve them of actually having to take action. When it comes to earning money, mindset is also paramount. For example, people HATE calling others to ask or sell something. They just hate it. So even when we showed students that calling someone to get their input on an idea (not selling) would immensely help them earn more, people were extremely hesitant. They would ask for examples, scripts, and all kinds of other things so they wouldn’t have to call. But my most successful students overcame their natural tendency to avoid the phone, stretched themselves to build this new skill, and earned a TON of money on the side.You know people like this: They have some kind of mental barrier and no matter what you suggest, they have an excuse ready to counter everything. I knew a guy in college who HATED going out. I’d say, “Well, what about this bar? What about this restaurant? Want to see a movie? What about go-kart racing dude.” And to each suggestion, he would have some kind of excuse. The problem was not the suggestion. The problem was a mental barrier. And by the way, yes, I realize it sounds like I was trying to date this guy.
  • I learned that more than ever, systems are important. I can tell people the 75 things I did to earn more money, but unless it’s in a carefully constructed system that people can go through and understand which part affects the other parts, it’s pointless. Systems matter. Here’s what one of my students said:

    “Before [you helped me earn more money], I was wasting time shotgunning résumés, writing cover letters, making shitty portfolios, making robots from scratch, unsolicited engineering design analyses—anything and everything to get a new job.
    I got zero responses. I was an aimless, desperate mess. I was so discouraged and embarrassed that I just played videogames all day.”
    –Eugene Y.

    Whether it’s earning more, automating your finances, or trying to lose weight, a system matters far more than simply trying harder.

  • The 6-month check-in

    At the beginning of this year, I told you that this was the year of earning more.

    And one of the insights I listed above was that we WANT someone to hold us accountable. It’s too easy to give up. It’s too easy to settle for doing the same old 9-5 job with a 50-year outlook on retirement. Fuck that. It never gets easier than now.

    Before you run a marathon, it seems impossible to do it. And novices fixate on tactics, like “which shoes should I wear?” But once you’ve completed a marathon, you’ve cracked the code and you realize it’s a mental game. You can do it again anytime if you want. If not, you don’t have to…but at least you know you can. Once you earn your first $500, then $1,000…you can stop there. But if you WANT to earn more…for the rest of your life, you know you can.

    So: Think back to New Year’s Day. January 1, 2010. What were your money resolutions? How much progress have you made?

    Did you want to save more? Get in control of your finances? Learn new skills so you could give yourself the option of eventually quitting your job?

    Let this be a kick in the ass. I’m going to hold you accountable because I know we all need someone to do it.

    3 stories about people who earned more

    I just want to share these short excerpts with you.

    I like this one because it’s so quantitative and funnel-based. This removes all doubt that most people have about “Should I create a Twitter account? FB page? Maybe I should go to a conference…” More on how to do this later.

    “In the first two weeks, after I pitched 229 people by email, I presented to 45 in person, booked 10 consults , took on 4 new clients (I’m 2 for 2 closing consults, 8 out of 10 are scheduled for the next two weeks and two people bought lesson packages directly w/out an additional consult) and have $679 on the books in new revenue as a result. My goal at the start of Earn1k was to get this up to a steady $2,000/mo in private lesson revenue, so with more leads in my funnel to follow up with, I’m feeling great about how this is going to grow.”
    –Dan K.

    This guy earned a $100/hour rate in 2 days. Imagine what his rate will be after he refines his pitch and customer research models.

    “I wanted to tell you this story so you can pass it to the rest of your team at Earn1K. For the past 2 days I have sought out leads on service based business’s with really crappy craigslist ads. I emailed 20 of them each day with a short sales letter I wrote that basically offer them a free 30 min marketing consultation with me and no strings attached.

    I have had 4 people schedule the calls with me via email. During the calls I give them massive value, teaching them about moving the free line, free recorded messages, and finally I provide them with 3 things they can implement right away. I make no mention of my services or cost or anything.

    Each of them has then called me back the next day to ask me to work for them implementing my suggestions… without even asking for a cost! So I threw out $100/hr and they took it!

    I love this course man, thanks to you and your team for all your hard work, I am only into the sample material and module 1 and I have already landed 4 clients and I start working for them today at $100/hour. Thanks for everything, I will have made back my investement in 5 hours of work!”

    –Jordan R.

    This guy earned $10,000:

    “I’m not sure if you’re collecting success stories yet, but I have secured, as of this morning, better than $10,000 in side income over the next two months from one mega client, with prospects to continue with similar compensation. This is up from roughly $100 per month before. I have not only met my goal for the course, but met my goal for the remainder of the year! I owe this success in no small part to the Earn1k course. I think that once I invested my own money (and more than just $50 for a book), that added enough incentive to get off my ass and make things happen. A 2000% return on investment doesn’t seem too bad to me, either, especially considering the course is only about half over.”
    –Ben D.

    When I think about these stories, I want to look at myself in the mirror and lick my own countenance. Seriously, it is awesome to see people stretching and challenging themselves to crack the code of earning more. And now they know they can use those same skills to earn money FOREVER.

    What you should do right now

    Please answer these 3 questions to help get started:

    1. What are your barriers to earning more? (Think deeply…some barriers are buried, like “Only evil people earn money” or “I don’t deserve to earn more”)
    2. Have you started to earn more in the past 6 months?
    3. If not, what’s holding you back?

    Talk to you soon.

* * *
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  1. Getting back to the meat of the blog, this is good. This line is classic, I plan on quoting you on it: “Then I asked, “So you want X but it’s not working. Have you changed anything to get it?” And he looked at me, point-blank, and said, “No, I guess I haven’t.”

    Without changing any behaviors, how can you expect your results to change?”

  2. Thanks Ramit, I think this is absolutely accurate. We are very often our own worst enemies, and we just need to understand that anything we *really* want to achieve is possible.

    Looking forward to future posts.

  3. My biggest barrier is finding people to pitch. Or perhaps I know where to find them but I’m afraid to come off as sounding like a used car salesman.

    [Ramit’s response: Good insights, Kevin. But those are two different things. Finding people to pitch depends on narrowing your market down and deeply understanding them. Where do they hang out? What do they do for fun? What are the needs in their lives? Once you really understand that, it becomes much easier to find them — and find a lot of them.

    The second concern you have is coming off like a used-car salesman. This is a common belief: that sales is a dirty job where you’re trying to “push” something on someone. But in real sales, you’re serving the client. Helping them. When you REALLY understand someone’s problems and can help them, they’ll pay virtually anything to get your help. That’s why sales is fundamentally serving, not pushing.

    I’ll show you how to do both in upcoming posts.]

  4. This post is great. I’m spanish, living in Spain and I really love how you write.
    I think that my barriers to earning more are that i don’t know what to do. I have very little experience in my industry (marketing and business administration) so, what could I do? This is a question that is killing me, specially If i tell you i’m without a job.
    By the way, with regard to your previous post I must say that ” I will teach you to be reach” has helped me with my English. It’s so interesting that makes easier for me reading english every day. I really appreciate it.

    • Hey Rosa. If you lived in the U.S. I would definitely tell you to teach Spanish. I’m trying to learn on my own but in time I am going to find/pay someone to teach me. Second languages are very appealing in the business world.

  5. Aside from getting more money (which is sweet), I just want to say that simply knowing that you CAN earn money outside of a job is a really great feeling. I’m not freaked out about graduating and getting a job in my field like a lot of my peers are because I know I have at least some skills that will keep me from selling all of my possessions and living off ramen, like some of my friends do when they can’t find a job.

  6. This was an amazing post.

    I’ve been earning $1000 more a month since May at a second job as a consultant that I do in my spare time. What’s surprised me is that it doesn’t take up more time, but has allowed me to do more overall. I’m less worried about finances and paying off the debt I have, so I actually go out and do the things that make me happy. I don’t feel as paralyzed anymore. And I’m ahead of all my financial goals. This post was a good reminder that I can make even more. I particularly related to wanting smart people around you. I often complain about this, so I’m going to take more responsibility to find and surround myself with motivated people. Thanks!

    [Ramit’s response: Thanks Rebecca! I agree. I heard from so many people that they just don’t have people around them that can challenge and motivate them. It’s incredible to put these people — who want to be motivated, but don’t have the social system around them — together in a structured course and watch them blossom. There is tremendous value in being exposed to other people who are ambitious and skilled.]

  7. Ramit, I wholeheartedly agree about systems. I have implemented all of your money “systems.” Automatic savings, automatic investing, automatic bill pay, sync bill dates, etc.

    I never wonder how much money I have or will have at the end of the month, I know. My savings account is constantly growing (so is my checking.) My 401(k) is constantly growing. I’m never late on bills. The amount of time I spend looking at my personal finances has dropped to maybe an hour a month, as opposed to a couple hours a week.

    All of my financial attention is now focused on making more money and what to do with that money. No more wasting my energy on things that can be completely automated with just a few clicks.

    And like you said, this should be applied to everything. Great insight. Thank you.

  8. 1. What are your barriers to earning more? (Think deeply…some barriers are buried, like “Only evil people earn money” or “I don’t deserve to earn more”)

    Lack of time/energy. I work full-time in a field that requires a high level of attention to detail (it’s all data entry and data checking) and when I get home I’m so tired of staring at a computer screen! But my side-line skill set is all computer based, webdesign being my poison of choice.

    I have made money from web-design, and what got me wasn’t how hard it was to find clients, but how quickly my time got filled and I couldn’t handle all the incoming work. I felt that by only working evenings and weekends I was taking too long to turn projects around, and thus failing the client.

    All of my clients have come back to me, bar one, but I almost end up pushing them away because I don’t think I can do the job justice. There are better web-designers out there with more time!

    2. Have you started to earn more in the past 6 months?

    No, my side-income has actually declined, because I went from part-time to full-time at my day job. I suppose I earn more from the day job though….

    3. If not, what’s holding you back?

    As the first question? I know what I need to know, I kind of feel like I could do it, if I wasn’t so doggone tired when I get home!

    [Ramit’s response: Time management and “I don’t have any time” is one of the most common barriers I hear. To some extent, it’s true (especially if you have a family). But there are also people busier than any of us who somehow STILL manage to do a ton. At IWT/Earn1K, we’ve developed strategies to prioritize and work effectively. For example, I have a student who has a wife and two kids. He can only work after they go to sleep, so he set up a retainer system where he can work any time. Because he LOVES what he does (IT work), he’s thrilled to spend a few hours/week on it. And he earns thousands of dollars/month for this.]

    • “how quickly my time got filled and I couldn’t handle all the incoming work.”

      I had a similar experience, and solved it by doubling my rates. If your time gets filled up again, double them again. Sign short project contracts (not all-encompassing “I will do everything” contracts) so you don’t burn yourself out and so you have the flexibility to raise your rates later.


    • P.S. I’m up to $500/hr and my schedule still gets filled regularly. I’ve been turning down consulting at that rate because I’m so swamped with things that earn even more.


  9. Thanks for the response Ramit. I took your Earn 1K course and am still having trouble finding “where they hang out” and “what they to for fun”. Looking forward to any additional input you have.

    Re: the second point – even if you find someone that needs your service, you still have to sell them that you’re the one to provide the service, am I wrong? That’s what I was trying to say.

  10. great post, love all the content, all great stuff. your reinforcements of earning more versus spending less are great too. i’ve had a rocky couple years, income wise, and while i’m keeping my head above water by slashing costs on everything, life just isn’t that much fun. i can’t go out with friends, buy new clothes, get video games, see shows, etc- just don’t have the money.
    finally i said to heck with all this and started applying for any job related to my field, instead of just cherry jobs. i already nailed a great interview yesterday and am looking forward to putting some elbow grease into MAKING some money, not just not-spending it!
    plus, those credit cards aren’t payin off themselves.