Is your goal to get rich? There's lots of advice out there about how to do it, and a lot of it centers on spending less so you can save more.
A lot of this is good advice, because it is indeed possible to become a millionaire if you diligently set aside money over the course of decades. Unfortunately, for many people, a focus on cutting spending can mean a lot of sacrifice over the course of a lifetime.
The good news is there's a much easier approach. If you really want to become wealthy, there's just one thing you need to do: Earn more money.
Why earning more money is key to becoming wealthy
Earning more money is the best way to become wealthy. There's no limit to how much you can increase your income, but there's a hard limit to how much you can cut spending.
Living a life of sacrifice to become rich on a low income can be difficult to sustain. But if you increase your income it becomes a lot easier to save the money you need in order to grow rich.
Let's say your idea of wealth is having $1 million, and you want to hit that $1 million goal in 25 years. Assuming an 8% rate of return, if you were starting from scratch you'd need to save around $1,000 per month to hit your goal.
If you're making $40,000 per year, that would be around 30% of your annual pre-tax income. But if you were making $80,000, it would be around 15%, which is much more doable.
Even a small increase in your income can make a major difference in your nest egg. Say you were making $40,000 and saving 15% of pre-tax income. If you got a 10% raise, bumped your income to $44,000, and kept your saving rate the same, you'd save $600 more per year. Saving an extra $600 annually over 25 years would give you around $43,000 in extra cash at the end of that 25 year period, assuming an 8% return.
How to earn more money
By now, you're probably thinking that it's all well and good to suggest you can become richer by getting richer. But the reality is almost everyone can increase their income.
And there are lots of ways to do so. In fact, here are five suggestions for how you can earn more money so you can get on the path to true wealth:
- Negotiate your salary: More than half of all workers don't negotiate their salaries according to a Career Builder survey. Failing to negotiate a salary comes at a major cost, especially as most employers initially offer substantially less than they'd be willing to pay. In fact, around a quarter of employers who lowball candidates offer at least $5,000 under their final number. Missing out on that extra $5,000 affects not just current earnings, but also your future salary, as raises are typically based on current pay. Your total earnings could end up being more than $500,000 lower over your career than they would've been had you negotiated your salary when you started.
- Take on a side hustle: More than 1/3 of the 44 million Americans with side hustles are able to earn at least $500 monthly from their side gigs according to a Bankrate survey. There's a long list of ways to increase income by working a side job. You could sell items on Etsy, drive for a ride sharing company, dog walk or babysit, start a blog, or find another approach suited to your talents.
- Improve your skills: Learning new skills can help you advance at work or obtain a better job. If you go back to school and get an additional degree, you can make an even bigger impact on earnings. In fact, obtaining a graduate degree could help you earn more than $10,000 extra per year, although the payoff varies depending upon your field.
- Invest in income-producing assets: Another big way to earn more money is to make your money work for you. Instead of spending money on depreciating assets, such as buying a brand new car that loses its value quickly, invest as much as possible in stocks or real estate.
By taking any of these steps, or exploring other ways to increase income, you can earn more -- which will in turn make it easier to save more and build wealth.
Get started on your path to prosperity today
There are steps you can take today -- such as starting a side hustle or making a plan to talk to your boss about a raise -- if you want to earn more money. If you're hoping to become wealthy, start working now on earning more. It's the single best thing you can do to achieve your dream of financial success.