PPP's Tip of the Week

Forget Frugality: Focus on Earning More
by Ramit Sethi courtesy of Yahoo! Finance Provided by

Think of the last 10 pieces of personal finance advice you've read. Do any of these sound familiar?
• Cut back on lattes!
• The world's top 10 coupons
• Don't go on vacation this year!

If you boil all the advice down, there are just two ways to improve your financial situation: earn more or cut costs. So why don't more personal finance experts talk about earning more? Because most of them don't know how.

And so we get lectures on frugality, giving us obscure advice like how to save on paper towels. With each tip, we get diminishing returns. And we start to believe that personal finance is about "No, No, No!" No, you can't spend money on lattes. No, you can't go on vacation. No, you can't buy those ans.

It's no wonder that most Americans simply ignore their finances. We don't want someone constantly lecturing us on what we can't do.

I believe personal finance should be about saying "Yes."
Yes, you can afford that extravagant coat, or iPhone or even a trip to the Bahamas. In fact, I believe in conscious spending, or spending extravagantly on the things you love -- as long as you cut costs mercilessly on the things you don't.

Once you've cut on the basics, the single best way to live a rich life is to earn more money.

How to Earn More Money

The simplest way to earn money on the side is to turn your existing skills into side income. Nearly everyone has skills that others would pay for. Can you play an instrument? Consider being a music instructor. Are you obsessed with personal organizing? Hire your services out as a personal organizer. Do you have expertise in Excel, Web analytics or even free-lance writing? Many employers would love to hire you as a free-lancer.

This is a new way of thinking, and it makes many people uncomfortable. "That's ridiculous," they say. "Nobody would pay me $25 per hour."

To them, I say two things:

1. You already pay service providers for things you could do yourself. Have you ever eaten at a restaurant? Changed oil? Gotten your hair cut? We all pay others for their services. Now, I want you to flip this around and charge for your own services. People will pay -- as you already pay others.

2. You don't know if your offer of services will work until you test it.

Twelve months ago, I declared it the year of earning more money and wrote a series of posts on the topic. I then launched an online course on earning money, in which I took hundreds of people from around the world and taught them how to turn their skills into side income.

Dean Soto was one of them. He has a wife, two children and a demanding full-time job. How could he find enough time to earn money on the side? Dean went through several exercises to determine which of his skills would be profitable. He realized that the information technology skills he used at his day job could also earn him money on the side -- if he found the right clients. But his side income needed to be worth giving up his scarce time with his family.

Once he figured out a potential idea, he used his network to meet people and ask what their needs were. He found his first client by accident. When he heard Dean's asking rate -- $30/hour -- he scoffed and insisted Dean charge more.

To account for his busy schedule, Dean used a clever retainer technique, which lets him work flexibly as long as he gets the work done. "I come home from work around 5 p.m.," he said. "Then I spend time with my family until about 9 p.m. and spend about an hour a day on my side work."

"I never thought I could do something like this," he said. "Now I'm like a boxer, looking to take little jabs and see where there's an opening."

Last year, Dean earned $22,700 on the side. He raised his hourly rate from $30 to $60 and then $150 per hour. The best part? "My wife loves it," he said. "She's able to stay home, which is her dream, and my kids have their mother all day."

There's nothing unique about Dean. But he is remarkable for taking action instead of being blinded by the frugality brigade that so permeates personal finance.

Frugality is important -- to a point. But after we cut back to a reasonable level, our biggest win will come from earning more money.

To read this complete article click here.

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