An annual raise is not an efficient way to boost your income.
Most people want to boost their income, but most people also won’t take the steps to do it. This is both good news, and bad news. If you’re motivated, this can be great news for your personal income.
Making more money can be done at your current job without asking for a raise or side hustling yourself to death. I would argue that asking for a raise can actually put your job security at risk.
The Employee + Job Relationship – Why Raises Are Horrible
Things about this scenario. As an employee, you are hired to do a certain job(s) for a company. That company has to create a profit. The good news is that this business needs to hire people in order to grow their profits. This company has also figured out that they can afford $45,000 to $53,000 for the job you were hired to do.
If you were hired at $50,000 and given an annual raise of 3%, you would be near the max that the company could afford to pay you. A few things can happen at this point:
- You hit a ceiling and need to search for a new job
- You get fired because there’s no where to go up, you cost too much, you’re hurting company culture because you’re understandably bummed that you can’t get paid more, and the company found someone new for $45k
The “standard” 3% annual raise doesn’t provide much financial stability, does it? Your earned income potential might actually be hurting because you opted for depending on a raise.
I think there’s a better way to increase your income at the job you currently have AND ensure that you are seriously considered for the next promotion.
Increase Your Earned Income by 10-20%
If you want to make more money, having human to human interaction is key. This is what opens up doors to increasing your earned income (especially if you’re in a service based industry).
My biggest tip for people who really want to increase their earned income is to shoot for bonuses.
Approaching your boss and saying, “I’d like to bring more value to the company. Would you be willing to bonus me for pulling in more revenue?” is a way better ask than “I’ve been here for 11 months. I demand a raise.”
Bonuses and commissions have high margins for your effort and they bring significant value to the company.
I love this approach because:
- Bonuses can have an immediate and compounding effect on your income
- This mindset sets you up for upward movement within the company. You’re a team player that increases revenue for the company.
Keep the job you love, stand out for the next promotion, and avoid burnout by getting stuck in the gig economy to make extra cash. Your biggest challenge is taking the first step and having the conversation with your boss.
“If you’re the kind of person who has no guts, you just give up every time life pushes you. If you’re that kind of person, you’ll live all your life playing it safe, doing the right things, saving yourself for something that never happens. Then, you die a boring old man.”