How I earn my money
Frugality is important, but there's only so much you can cut your costs. In theory, your income is unlimited.
This post comes from J.D. Roth at partner blog Get Rich Slowly.
A lot of what we write here at Get Rich Slowly is theoretical. "This is how you should do things," we say. Or, sometimes, the articles are meant for inspiration: "Here are some great ideas for taking control of your finances!" We don't write as often about the things we actually do with our own money.
In the early days of the site, I shared many of my own experiences. I've gotten away from that in recent years. For one, I feel like I've already revealed most of my financial life. For another, much of what happens behind the scenes is b-o-r-i-n-g. ("What? J.D. put more into his savings account? I'm glad I read that post.")
But after writing recently about the building blocks of personal finance -- which I hope was both theoretical and inspirational -- I realized it might be useful to share some snapshots of how I actually put these principles into practice. This week, I'll share how I earn money. Next week, I'll describe how I spend money. And later, I'll review how I save money. (And remember: For our purposes, I'm defining "saving" as how you make your surplus grow. Some folks prefer to call this "investing.")
How I make money
I write a lot about making more money. Frugality is important, but there's only so much you can cut your costs. In theory, your income is unlimited. But there's often a big difference between theory and practice, right? How many of the ideas I've shared are applicable to real life?
- Calculator: Am I saving enough for retirement?
Actually, I think all of them are. When I share an idea, it's because I've tried it myself, or because I've talked to somebody who has.
To illustrate, here's a list of all of the ways I've made money since 1998:
- The day job. Like most people, the bulk of my income has come from working a normal 9-to-5 job. For 17 years, I sold custom boxes for the family business. I didn't like it. I was a lousy salesman, and the work felt meaningless. But it paid the bills (which were mostly credit card bills in those days).
- Hobbies. I'm a huge fan of making money from hobbies. I know this path has its drawbacks, but for many people, it's a great way to earn a few extra bucks. In my case, I've made money from my photography hobby. I've won cash prizes at the county fair. I've sold prints to friends. And I even sold a photo for $600 to Audubon magazine. I've made money from other hobbies, too. My computer hobby turned into a computer consulting side business (see below), and my writing hobby turned into this blog -- and a career in writing. (My wife has made some side income from her hobbies, too: gardening and food preservation.)
- Side business. About a decade ago, I got tired of selling boxes. I decided to make a career change. I started taking computer-programming classes at the community college. Eventually, I was skilled enough for people to hire me. After a year of working for others, I decided to work for myself. I started a small computer consulting firm, which earned me a couple of hundred dollars per month.
- Writing. Though this too started as a hobby, it's become my primary source of income. I make money by writing for Get Rich Slowly, obviously, but my writing brings income from other sources, too. I earn money from my book (though, admittedly, less than minimum wage). I earn money by contributing to other people's books. I earn money though my monthly column for Entrepreneur magazine. And I've earned money by writing short essays for other outlets on the Web and radio.
- Speaking. I'm not a great speaker, but I'm getting better. (I'm learning to relax and not to over-prepare.) I'll never make as much money speaking as some of my colleagues, but I'm fine with that. Right now, speaking lets me travel and meet new people -- and take home a little cash besides.
- Selling stuff. Outside actual work, my largest source of income has been through selling stuff. I accumulated a lot of crap when I went into debt. To get out of debt, I sold much of this. There's still a lot left to sell, which ought to bring in a few thousand dollars.
- Medical research. In 2008, I made $120 for participating in a one-hour research study. And it's not just me. GRS and MSN Money writer Donna Freedman has participated in a variety of medical studies.
- Lending money. While I don't advocate lending money to family and friends, there are times when making loans can be a smart choice. I've loaned money to a local business owner. I know I'm taking a risk, but I like the prospects -- and the interest rate. Maybe I'll be singing a different tune in five years, but right now, this is a great source of additional income. (Note that under my new personal-finance framework, this might actually belong in the "saving" category.)
- Unclaimed money. As I've mentioned, my father opened an annuity for me in 1977, when I was just 8 years old. Then he forgot about it. When found, that abandoned account brought $438.79 into my pocket.
These are actual methods I've used to make money over the past decade. These aren't pie-in-the-sky recommendations, but actual things I've done to put cash in my pocket. (There are probably others that I'm forgetting.) And I'm always looking for new ways to make money. If Kris would let me, for instance, I might explore real estate investing. Plus, I've considered doing some sort of consulting work (blog consulting? success consulting?).
Multiple streams of income
I suspect some of you have already noticed that I'm striving to have the proverbial "multiple streams of income." For those who haven't immersed yourself in get-rich-quick literature, that means that I try to have as many income sources as possible. This is the same principle as diversifying your investments; you're able to obtain the same results but with less risk. If you have only one source of income -- such as your job -- you're in a world of hurt if that source dries up. But if you have several sources, you've always got something to fall back on.
Example: I have a friend who does a great job of having multiple income streams. First, he owns a small business, which is his primary source of income. Next, his family owns a few restaurants, which provide more income. Finally, he owns tiny pieces of other businesses. He says that if he can make $100 a month from dozens of different income streams, he feels more secure than if his income all comes from one place.
Having multiple streams of income doesn't just reduce your risk, and it doesn't just boost your cash flow. I think it's also fun. In fact, that's one of the biggest draws for me. I enjoy having money trickling in from lots of different sources. Here on my desk, I have:
- A royalty check from a book I contributed to.
- A check for an essay I recently wrote for the radio.
- A check from the business I loaned money to.
- A check related to my blogging duties.
What fun! In addition to these income sources, I field offers from folks all the time who want me to write for them, or who want me to be a spokesman. (I was once asked to be a spokesman for Coinstar, of all places!) These offers come because of other work I've done. In other words, earning money sometimes leads to more opportunities to make money. (This isn't always true, of course. I know I'm in a unique and fortunate position.)
No theory, no inspiration
So there you have it: an article without theory or inspiration. These are the ways I've made (and continue to make) money. My methods are based on my own skills and preferences, just as your methods will be based on your specific personality. Only you can say for sure where opportunity lies.
One thing I know for sure, though: None of my income sources "just happened." I had to hunt for them. I had to make the effort. My income has been relatively high over the past five years, but that's because I've made it a priority. I've worked hard to make more money. As a result, my cash flow has increased.
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