“But starting a freelance business is too risky!” and other reasons people don’t earn more money
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, 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 money on the side?
- 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
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 freelancing 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 your freelancing 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 on the side, 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.
After this 3-week course on earning more is finished, I’ll be running a private (free) 1-week advanced course on earning more — with materials, scripts, tactics, and techniques that you won’t see on the blog.
Join the advanced course to earn more money.
Bartek is a great easy to remember last name.
