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“But starting a freelance business is too risky!” and other reasons people don’t earn more money

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Today, you’ll learn about the barriers we create to prevent ourselves from earning money.

Why cover barriers? Why not get right to the tactics? (We will cover them later this week.)

Because most people never get started at all, so the tactics are useless without understanding your own psychology. I could throw 50 tactics at you, but if you’re not ready to get started — if you still worry about XYZ or think “people who earn money are greedy” or there’s no way you could charge $100/hour — then they’ll just fly right by you.

For the past year, I’ve been researching barriers for people who say they want to earn money or find a new career, but aren’t. For example:

  • “What about a business license?”
  • “What about my boss? Should I even tell him? What should I say?”
  • “What if it fails? I really want this to be good but I don’t want to spend 60 hrs/week earning more…it’s just not worth it.”

I love all these objections because they can each be systematically dismantled until you finally take action…or acknowledge that earning more just isn’t for you.

Jonathan Fields puts it best:

How do you handle fear?

“Well, comes my answer, “that depends. Fear of what?”

“Of failure, of course.”

“Wrong fear,” I add. “You wanna be afraid, really afraid, take a look at what your life’ll look like not if you try and fail…but if you keep on keeping on for decades. That’s the real nightmare scenario for most people.”

Exactly. While there are a lot of fears (or “barriers,” since we usually only identify our fears retrospectively) about starting to earn money on the side, for me the scariest is the idea of not doing it at all and wasting years wishing for a better life / job / savings just like everyone else.

No thanks.

To examine our self-imposed barriers for starting to earn money on the side, I’ve asked Susan Su to help examine these barriers. You’ll remember Susan as my friend who left her fulltime job to become a freelance marketing consultant, where she now earns more than she did at her full-time job — and she can live on her own terms (e.g., yoga in the middle of the day).

Now let’s walk through the self-imposed barriers we erect to prevent ourselves from earning money.

* * *

Susan Su: The self-imposed barriers that stop you from earning more

Can you ‘afford’ to start earning money on the side? What about all the risks?

Sure, there are some real risks involved with starting a business, but today let’s look more closely at risks. Some will be related to freelancing — and some won’t. You’ll notice that lots of these familiar ‘risks’ can quickly turn into self-imposed barriers.

Specifically, we’ll get into questions like:

  • Do the risks related to starting a “business” apply when you’re simply earning a little side income?
  • What about your full-time job? How stable is it really?
  • What happens if you do nothing?

Risk #1: Do nothing

When it comes to wanting to earn extra money on the side, this is what most people do: nothing. We work at our 9-5 job, hope that one day we get a raise, and deep-down we know that we’re not sure how we’re ever going to live the lifestyle we want to live.

The thing is, while we’re so concerned with saving money on small things or, as Ramit likes to point out, complaining about taxes, we never stop to consider the risks of the things we’re doing today: nothing.

‘Nothing’ is not innocent. It can carry huge potential risks. Remember opportunity cost from basic economics class? There are opportunity costs with everything that you’re currently doing — including nothing. Doing nothing might be your most threatening risk precisely because it’s so invisible. It’s invisible, but we can still measure it.

Doing nothing seems to be completely unrisky – it’s sort of like hunkering down in a bomb shelter. What could possibly happen to you in there? Probably nothing. But even ‘nothing’ has a cost. If you do nothing –- or if you hunker down in a bomb shelter -– you’re probably safe, but you’re also missing out… on A LOT.

Let’s take a minute to measure out the risks of doing nothing in monetary terms. We’ll assume you keep your job, but you also learn how to earn money on the side and learn how to replicate it each month.

If you were to make $500 on the side each month, here’s how much you would have if you invested your ‘side’ money into a standard investment account with an 8% return:

  • After just 5 years, you’d have $36,983
  • After 10 years, you’d have $92,083
  • After 20 years, you’d have $296,473
  • After 40 years, you’d have $1,757,140

Let’s look at what would happen if you made $1,000 on the side each month, invested at 8%:

  • After 5 years, you’d have $73,967
  • After 10 years, you’d have $184,166
  • After 20 years, you’d have $592,947
  • After 40 years, you’d have $3,514,282

Money money

Did everyone catch that? After 40 years, you’d have over 3 million MORE dollars than if you had done nothing.

By doing nothing, you are essentially losing out on more money.

There are also intangibles to earning more like opening new doors and meeting interesting people (probably leading to better-paying jobs), but just by the numbers alone you can see that doing nothing costs you money.

Doing nothing is risky. If you do nothing, then you don’t earn that money on the side. You don’t get to invest it. Or spend it. Or pay off debt or start your own full-time business or….

You get the point. While most people create barriers against earning money on the side (“Oh no, I have to make business cards!”), their biggest fear should really be continuing to do what they’re already doing, and nothing more.

Risk #2: Stick to your job
Most people take comfort in thinking that their jobs are safe and secure, even if they’re not the most stimulating or fulfilling. In exchange for showing up from 9 to 5 every day, you’re basically guaranteed a steady paycheck every month. This kind of reliability lets you plan your finances and your life around a stable foundation.

But let’s look deeper. It doesn’t seem risky to stick to your 9-to-5 job. You know what’s expected of you, you show up every day, you do what your boss says, and you get paid.

But what kind of control do you have over your job?

  • You can’t control how much you earn — only your boss can — and it’s often not even up to him.
  • Most people can selectively work on items, but you can never control 100% of your workload. This is up to the needs of the organization.
  • You can’t guarantee a stable job. Do you think people who get laid off expected to get laid off?

If you want to enjoy big rewards at your job – a promotion or a raise – then you have to take just as many risks on the job as you would in a freelance situation. But, you still wouldn’t be in control of the recognition and reward levers that you’d need to pull in order to get promoted and start making more money.

And then… what happens if you get laid off?

My friend Sameer, a well-paid senior manager at a company, lived a great life thanks to his fat regular paycheck. Last fall, he was laid off and remained unemployed for over 6 months with no severance to tide him over.

Risk isn’t just about the chance that a bad event will happen. It’s also about how severe that event is. Getting laid off, not being prepared, and being unemployed for 6 months– that’s very severe. Sameer was dramatically affected by the layoff risk at his job, a risk that he might have been able to reduce by developing more than one stream of income.

Maybe you’ll work hard, putting all your energy and extra time into your job, maybe you’ll get laid off. Or, if things get really bad, maybe both will happen in succession.

Jobs like Sameer’s made him feel like he was set for life. But, he definitely wasn’t. Why don’t we think jobs are risky? We know layoffs are common, we see people being passed over for promotions all the time, but a lot of us still sit by and do nothing. Why?

On the flip side to this, there is something you can do – let’s call it layoff insurance. Phil H., an IWillTeach reader and Scrooge Strategy member, emailed Ramit a little while ago to tell me that he was getting his hours drastically cut at his regular job, probably in preparation for a full-on layoff. Eventually, he was laid off. But, here’s what he told Ramit:

“You have had so many great articles on little ways to increase income; everyone else talks about little ways to cut back. I don’t LIKE cutting back. It makes me unhappy. I want to live in the manner to which I’ve become accustomed. I like cashing checks. I like bringing in more money. So, with that in mind, I took my freelance work and really hustled on it. I’m in a situation where I’ve _had_ to hustle, because I was finally laid off in Sept., but I still could get a day job if I wanted to. I’m NOT out of work with no hope of a job.”

Phil landed on his feet thanks to the fact that he’d already been freelancing for months before he was laid off.

A lot of us have confused the perceived risks and the real risks of our regular 9 to 5 jobs, but both Sameer and Phil learned the hard way. The perceived risks seem low, but the real risks can be painfully high – and more dramatic than we ever expected.

Start doing some work to earn money on the side

Now what happens if you go for it and start a side business doing some freelance work? It will most definitely cost you time and effort, but what are the real risks to freelancing on the side?

What if I sink a bunch of money / time / energy into this and it doesn’t work out?

What if my 9 to 5 job suffers?

What if my business fails?

Sometimes, questions like these highlight real risks that could negatively impact your life. More often, though, they are limiting beliefs that we use as excuses to make doing nothing seem ok.

What if I sink a bunch of money / time / energy into this and it doesn’t work out?

Ok, that might happen. If you sink a bunch of money, time, or energy into earning money on the side by attending to non-essential tasks that won’t return on your investment. Some of these non-essentials might include:

  • Business cards. $70 to $200
  • Website and web hosting
  • Hours or days spent setting up a blog and writing posts

I’m not saying don’t do these things at all. Just know that the risks you’re assigning to them can be easily reduced or eliminated if focus your money, time, and energy on the areas of earning money on the side that are guaranteed to yield returns. All of us at IWillTeach have each made our own mistakes in this area, sinking lots more money, time, and energy into non-essentials than we’d ever like to admit. The key is not to get stuck here. These risks are easy to control because it’s up to you whether you get mired in these minutiae or you move on to earning more money.

What if my 9 to 5 job suffers?

This is a fair point, and is something you’ll have to manage. But (and this is something we discuss extensively in the full Earn 1K product), you don’t have to run your freelancing like a Fortune 500 company. Remember, your time and resource commitment to your freelance business all depend on your goals and your timeline, both of which are up to you. Freelancing doesn’t have to interfere with your normal job, as long as you set those goals accordingly.

What if my business fails?

Realistically, it might. That said, there are some pretty powerful things you can do to cut down on the risks related to the already highly unlikely scenario that your freelancing business will fail.

In general, you can:

1.    Start a freelance business on the side while you keep your job.
2.    Invest just the minimum you need to get going.

Here’s something to remember: the whole point of earning money on the side is to make failure hurt less. So what if your business fails? You were just doing it for extra side income, so you’d still have your regular paycheck to pay the bills. If your business fails, you can count yourself as one of the lucky ones — you didn’t bank your whole life on it like some insane entrepreneur (more on that next week).

Of course, there are also specific tactics to making each of these really work, and we cover those in depth in the full Earn 1K product.

When you let go of your fear – or barriers as Ramit describes at the beginning of this post – it becomes highly unlikely that your freelancing will totally fail. There are many, many measures you can take to reduce or eliminate your risk, all while you plot out a course of action that still ends up earning you an extra $500 – $1,000 on the side.

The right strategies aren’t fancy, can be done from scratch, and are very much within reach. Just think of the easy wins you can score by just getting started.

* * *

[Updated]: The 3-week course on earning more is finished. If you want to learn more about earning more money — with materials, scripts, tactics, and techniques that you won’t see on the blog, join my private Earn1K insider’s list:


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  1. I recently started focusing on developing my technical skills to mitigate the risk of losing my job and being unable to find a new one. I’m glad I started working on this stuff now, because not only will it act as an insurance policy, it has also revealed some opportunities to earn a side income right now.

  2. This is a great article! I’m in the planning phases of earning some side income and this was a great reminder to help get over the mental barriers that manifest themselves. As we’ve all seen throughout this recession, we can’t get too comfortable in our current jobs and it never hurts to have a backup plan.

  3. Hey Ramit and Susan,

    The biggest risk of all is not taking a risk.

    Yes, very high Hallmark-card cheesiness level there. But it’s true.

    By venturing outside your comfort zone and diversifying your income streams, you make less of a risk for yourself, like you mentioned. If one income stream dries up, you’ve got others to keep you afloat while you make new ones.

    But if you only have one stream, and the faucet can be turned off at any time by your boss with two simple words (You’re Fu- er, Fired), then you’re living a high-risk life.

    I feel part of the reason for the barrier is people make out creating side-income as a bigger deal than it really is. When someone hears “business,” they think they need to do this, register that, open up this account, etc.

    But all a business is, is providing value for a monetary exchange.

    So start at that simple of a level. Did you help your friends set up a website or fix some tech? Just keep doing more of that, but ask for money. You don’t need business cards or to register some copyright or open up a business checking account. All that stuff is for later, once you’re at a level when that’s needed (if it’ll even be needed… like business cards).

    I mean, look at Scrooge Strategy. A single webpage (WordPress it), a link to ClickBank (which anyone can go on and create an account with), and a Aweber email newsletter account (ditto). That doesn’t take an office, business cards, filing paperwork, registering trademarks, hiring employees, whatever.

    Just set something up that you already know how to do, but make it a bit more organized by charging money for it, and that’s it. Don’t think any more of it.

    Great, great reminders on how to get past these simple barriers that seem huge at the time.

    Looking forward to more Earn1k,

  4. Fantastic article. This kind of writing and thinking is why this site is rapidly climbing in my list of finance blogs. I’m starting to get sick of reading about ways to save nickels.

    This is the kind of thinking you need to really get ahead.

  5. Ramit and Susan:

    It’s a good article, but I did not like a couple of things:

    – it assumes that we all want to earn more money. It might be true, but the I thought it could have emphasized one point: why do we want to earn more money to begin with? Is to live a more luxurious lifestyle? Is it to save money for a vacation or an escape? It is my strong belief that earning more money is good IF AND ONLY IF you know where you are gong to spend it. Earning more money just for the sake of earning more money is another trap which will ultimately lead to unhappiness.

    -it assumes that most people do nothing with their lives after coming back from work. However, I am sure there are tons of people who do very cool things after work: take additional classes, learn a martial art, learn how to play an instrument, read books and so on. If you put that into the equation those presumed earnings over 40 years of millions of dollars become much less attractive. In turn for earning that extra money, you will be working even more outside of your job and doing less of the things that you love. As for me, I’d rather die with 3 million dollars less but after doing and learning things that matter for me.

    Over all, you are making good points, but I think the article makes it seem like the life is all black and white, rather than somewhere in between.


  6. I definitely had that terrifying moment in which my comfortable but dull life was an excuse for not striving to create, innovate, and grow as a person. For me my motivation was my father, who showed me the potential of a driven life, and my son, who made me want to set that example for him.

    Tomas, I don’t think they were knocking your lifestyle and saying that their way is the only way, but most people already reading this blog already have that urge to create something and to be financially successful. I agree that it is not for everyone, but absolutely the way I want to live my life. Thanks Ramit andSusan.

  7. I think that some of the risks of breaking outon your own are minimized, and the likelihood of success as a freelancer is HUGELY disproportional to reality.
    These risks are substantially less “risky” to single people with no dependents. As a single mom (late 30’s) with a disabled kid, I would assume a lot more risk, not only for myself, but for my child. I do have enough savings to carry me through a period of unemployment. Not a HUGE period, but enough to get us through about 6 months. After that, we lose our house, and the biggie: the health insurance. The federal assistance program to help pay for COBRA ended last year Anyone newly unemployed will not have the option. For us, that means an extra $1500/month in insurance costs. That means if I face unemployment, my monthly expenses go up, not down like most young people. At my job (which is certainly not secure, I recognize that), I bring in $85K a year, in a city in the Midwest. That’s a pretty comfortable living, but I want those additional sources of income to keep me going when times get tough. And at soem point, they will. So I am working diligently on those extra sources of income. I just completed my master’s degree, which should make me able to move up in my own company, or another, or even become “employed” part-time at still a very high salary, so I can pursue other income opportunities.
    The second point I had (wow, I am making lots of points within these points), is that the article states that there is little likelihood of a freelancer failing. That’s really just make believe. In fact, most free-lancers do fail. I can look up the statistics, but I think we are all aware of that fact, although last I read, it was about 90%.
    So when looking at the option of breaking out from a job, we can look at two statistics. A)The likelihood we will lose our full-time jobs. This depends on a few different factors. Your workplace, the unemployment rate, the direction of the economy, but as a general rule, we should be able to use the unemployment rate plus the underemployment rate (and those that have given up hope rate). I think IN GENERAL we are looking at close to 18% – 20%. So we can say that at any given time (right now in history), we are 20% likely to lose our job (defined as failure) B) If we break out on our own, we are 90% likely to fail. That’s a far cry from “the already highly unlikely scenario that your freelancing business will fail”. That’s simply disingenuous.
    For the young (those with little obligation or responsibility), for those who have enough money saved to cover a failure for a significant period of time, and for those whose A (where A = current income * likelihood of success, 80% here) < B (where B = well-researched most likely potential income * likelihood of success, 10% here).
    That would be a pretty standard risk model. I love the energy and optimism you are giving your readers, I just have a problem with some of the more unrealistic assertions.

  8. Ramit and Susan,

    The fact that you addressed psychological barriers in regards to earning more money really gave me comfort. It helped me realize that I am not the only one having these feelings, which in turn helps me feel less isolated.

    Personally, my barriers come into play less in regards to what I need to do to operate my business (business cards), and more in regards to what business path I’m actually going to follow.

    I can’t decide what I want to do!

    I am compiling a list of strength areas in my life (areas I feel that I can excel in while maintaining a general happiness). I find myself leaning towards one of two of these areas but am hindered due to the anxiety that I simply don’t know enough about any particular area to run a business. Then comes the familiar overwhelming anxiety about what my next step should be; Should I seek more education in this particular area? What if I spend the time/money/energy on more education and I don’t like/am not good at my newly learned skill? Is this particular business idea saturated already?

    Maybe my own personal anxieties are at fault and I just need to pick something and run with it. Or, maybe there is a process to pick which strength area is the best.

    Suggestions? Anyone?

  9. Awesome article that allowed a student like me to realize anyone can make more, mitigate risk, and overcome mental barriers. One of the most persuasive pieces of the article was displaying the long term gains from relatively minimal immediate gains by investing the newly found side income.

    My only question at this point would be where I find this “standard investment account” that maintains an 8% return?

    I realize the answer to this question is not the point of this article, but one of the most persuasive points for me is also the most befuddling.

    Even without an answer to my question, this article does a great job examining the many aspects to making more.

  10. Vin,

    Just pick one of the options you’re considering and brainstorm ways you could get started earning money with it right now. If you don’t know how to do it, look at other people who are doing what you’re thinking about doing and ask them how they started, or how they would recommend you start.

    One of the best maxims I’ve heard regarding entrepreneurship, especially of the digital sort, is that’s you don’t get killed by making bad moves, you get killed by not making any moves. Don’t let analysis paralysis allow you to procrastinate getting started.