065: FI School Lesson 4 | Income

Want to know what your greatest asset is? It’s you! In this episode, we’re diving into Lesson 4 of FI School, which is all about income and how you can earn more of it. Learn how to maximize your human capital, earn more money and reach your FI goals sooner.

Thanks again to listener Alexi, who volunteered to edit the transcripts for our show notes. Thank you, Alexi—we’re so grateful for your help!

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Money Mechanic
Welcome to Explore FI Canada, where we investigate the financial independence topics important to you. Join us as we learn how to optimize our lives, save money and invest for our future. We’ll go coast to coast interviewing experts and chatting with Canadians about their inspirational FI journeys.

Chrissy
EQ Bank’s Savings Plus Account is Explore FI Canada’s favourite bank account. It’s not hard to see why… it functions as both a chequing and savings account, offers an everyday high interest rate, free Interac e-transfers, and so much more. Visit exploreficanada.ca/eqbank to open your account today.

Money Mechanic
Welcome to Explore FI Canada, where we investigate the financial independence topics important to you. Join us as we learn how to optimize our lives, save money and invest for our future. We’ll go coast to coast interviewing experts and chatting with Canadians about their inspirational ePHI journeys.

Chrissy
EQ Bank Savings Plus account is Explore FI Canada his favorite bank account, it’s not hard to see why it functions as both a checking and savings account offers an everyday high interest rate, free interact etransfers and so much more. Visit exploreFIcanada.ca/EQBank to open your account today.

Money Mechanic
Hey there listeners it’s Money Mechanic with you again on Explore FI Canada. Welcome back to FI School, lesson number four. Hope hopefully you’ve joined us for the previous three lessons. And now we’re following up with this one this week. And it is all about drumroll please, income. The next big thing on your FI journey. Chrissy is with me as always. And because you’ve been diligent and listen to the first three episodes in the intro, you know that Chrissy blog, eatsleepbreathefi.com has a fantastic series all about FI School. And we are using that as the basis for these short little episodes that you can use to help your FI journey and identify some of the things that are gonna help you along the way. We pick a couple of references, and we’re gonna chat about those. So without further ado, Chrissy, income, what do you think?

Chrissy
Income that’s a big one, because like I started to allude to in Lesson 3, you can only cut so much right? Whether it’s frugality and saving, or through optimizing your expenses through your tracking and budgeting, there’s a point where you really can’t do a whole lot more. If you really want to get to FI sooner, you need to increase your income. That’s really the only option left. And there are multiple ways to do that. And that’s what we’re going to discuss in this episode. But a lot of it is surrounding your human capital. And that’s something that I’ll discuss more when I bring up the content piece that I picked. But what do you think money mechanic? How does human capital tie into all this?

Money Mechanic
Human Capital? Yeah, that may be one of the least-utilized things that we recognize on this journey, that, again, maybe it comes down to the complacency, you have a job, you have an income, you don’t think about that. And one of the things that has always bothered me a little bit about the generic mainstream view of the FIRE movement is that it’s all about deprivation, frugality, living an extreme minimalist life. And that’s just not true. We’ve talked in the last episode about tracking and optimizing and getting to a streamlined level of spending. But your human capital is that next step that we’re talking about in this episode? It is the possibility that potential, you have unlimited earning potential. You know, technically, I don’t know if I feel like I have unlimited, but you do, right. And there’s so many ways you can use that human capital to speed up this journey to change your trajectory. Right? And I think that’s one of the things about the article that I picked, it was the quote that I liked. I’m just going to drop this first, before we move on with your article first time Chrissy, but, you know, it says “why bother making more money? Frugality is an important part of personal finance, which we talk about a lot in the FI movement. But by managing your expectations, and living within your means, you’re more likely to be wealthier and happier. But cutting costs isn’t the only way to boost your cash flow. If your goal is to build wealth, you’ll get the best results by looking beyond frugality to increase your income.” So really, that’s what this is all about this episode, this lesson is, maybe don’t be satisfied with what your income is today. Get creative, see what you can do. And I think this is one of the difficult ones, Chrissy, because it involves work. Like you actually have to do some work. But if you’re dedicated and you’ve set yourself some goals for your FI journey, then maybe it’s time to roll up the sleeves and do a little bit of hard work to increase that income.

Chrissy
And sometimes work doesn’t have to feel like work right? Especially if, for instance, maybe it’s a side hustle, something that you kind of do. That’s kind of for fun, but also you do it because it earns you some income. Sometimes it doesn’t feel like work because it’s novel. It’s something that maybe it’s quick to do and maybe that you can do on your way to something or on your way home from work. Whatever it is, there are lots of ways to increase your income without it feeling like drudgery or trading more of your time for money.

Money Mechanic
Yeah, and one thing before we jump into your article Chrissy is, if you’re going to try and increase your income, be conscientious of what you’re doing and the time you’re spending. Because your article, they talk a lot about that the time, or sorry, it’s a podcast that you’re that our listeners are gonna have to go listen to, which is awesome. But they talk a lot about the time value of money, right? And as we always like to reference your money or your life, she talks a lot about that, as well as like, how much does this cost you in minutes of your life. And if you’re out trying to increase your income, and your return on that time is so low, be able to identify that and go, You know what, walking dogs for $5 An hour isn’t really moving the needle. If you love doing it, do it anyway. But if you’re going to try and increase your income, try and find the ways that are most impactful.

Chrissy
Yeah, definitely. So in this my content piece, let’s dive right in and talk about it. This is a podcast episode, as we mentioned, and it’s from the Afford Anything podcast with Paula Pant and her guest is someone that’s very well-known in the FIRE community. His name is Michael Kitces. He’s a financial planner. He’s usually known for talking about withdrawals and retirement strategies. But in this episode, he talks about something quite different with Paula Pant and the title of the episode is, “Your Mind Is More Powerful Than Money”. And what he talks about is quite a wide ranging discussion is actually not just focused on income, he talks even about expenses and spending. But what he starts off with is saying that you really have to think about something that we often ignore, which is your human capital, and how you take your human capital, which is your time, your energy, your skills, your knowledge, everything that you can use to make money, that is your human capital. And you take that and convert it into financial capital. And then your financial capital, which is the money you earn is what you take to then turn into your retirement. And he puts it this way your retirement is essentially how much financial capital you put into the current spending bucket versus future spending bucket. So your future spending bucket is retirement. And so it’s that spectrum of how much you put in current spending versus future spending. And that’s basically how quickly you get to retirement, right. So the more you save, put away into the future spending bucket, the quicker you can get to retirement. And so it’s an interesting discussion.

Money Mechanic
I would kind of like going “Hmm”. I just listen to this podcast the other day, too. And I’m like, yeah, yeah, he did say all that. But it gets a little bit, you really have to listen to it yourself. You did a good job of describing it. But it sounds more complicated than it is.

Chrissy
Yeah it does, and he’s a super smart guy, right? So he covers a lot of ground in this podcast, I actually listened to it twice, even though I’ve listened to it two or three times before, already because I love it that much. It’s such a good piece of content. But he goes into such detail with so much of the stuff and he covers information that you don’t hear enough about in the FIRE community because admittedly, we’re part of we’re guilty of this too. We cover frugality and saving and all of that sort of cutting so much that we forget about the income side a lot of the time. And so I think it’s important to really showcase this and share that this is just as important for your journey to really find ways to increase your income.

Money Mechanic
Yeah, one of the things that struck me that stood out for me from this podcast that Michael talks about is the power that a change in your income can have if you can renegotiate a salary, if you can earn an extra few $1,000’s a year. That’s forever. Right? It’s really important to understand those the small gains today will last for a long time as long as you’re at that job, right? It’s and it’s important to know how to value yourself. And there’s been other, there’s other content in this community about how to you know, go in and have that discussion, right and negotiate for a little bit of money because that’s your human capital being maximized. That’s gonna make such a big difference compounding down the road.

Chrissy
Absolutely. And you know, there is actually a lot more wiggle room in most of our jobs than we think of, for instance, our former co hosts Ryan, he would, I mean, I think he still does work overtime at the same job he’s working at, but he chooses to take overtime shifts, and so he gets paid a lot more for these extra hours that he works. He doesn’t have to find a new job is not a side hustle, but it earns him way more than his regular job or any side hustle would simply by taking overtime shifts. And you know that these are, I think, creative ways to think of how you can earn more income and use your human capital, and really increase how much money you’re earning, so that you can put it towards your investments, or maybe even supplement more of your spending so that you can enjoy life more and maybe reach retirement sooner. And you can’t do that by just cutting. I think it’s really important, again, to stress that this helps to supercharge your journey, if you’re able to really look at the income side of the equation.

Money Mechanic
Another thing that struck me from that podcast is when he discusses self education, and it was an interesting one, right? Because he’s like, Well, maybe you take a course that costs $5,000, just pick a number, right? Cost $5,000. And you look at that today, and you go, wow, I don’t want to spend $5,000, that’s a lot of money. And if I just invest that $5000, and it compounds over the next 20 years, it’s going to be $35,000, just picking a number, right? So that’s fine. But if you take that course, and it increases your income, even 500 a year, maybe 1000 a year, now extrapolate that out over a longer period of time. And he talks about this, and I’m gonna butcher it because he’s much more intelligent about this, what he’s talking about in the podcast about this, but it basically says is your return on investment, could be 10x 20x 50x. If you had not done that, and just kept the five grand and invested it. Educating courses, things like that, that can make you an expert in your job can move you up to that next level, are just so impactful over a longer period of time.

Chrissy
Absolutely. And he also talks about how it doesn’t have to be a degree, it doesn’t have to be this certified. Whatever it is that you get from a school, it could be something as simple as I think he mentioned $100 a year for Toastmasters, something as simple as that could get you so far ahead. And he at the very beginning, he even mentioned, if there’s one thing that he might tell a new financial planner to learn is how to write better, you know, and he’s not talking about creative writing, he says, learn how to write a proper email with good etiquette and good business language, right? So that you come across in a way that’s professional and makes you look good. And like someone that people want to work with and trust, right? So it doesn’t have to be these big, expensive courses or a degree, it could be as simple as these $100. Sometimes even free lessons or courses that you learn to improve yourself.

Money Mechanic
Exactly. Now, before we totally talk about my whole article before I get to talk about my article, because it ties together in so many ways, right? So let’s jump over to mine. And it was written, or it’s presented and written by the blog getrichslowly.org. And if you don’t know who JD Roth is, have a look. look him up. He’s been blogging about FI and FIRE for a long, long time. This article. Yeah, this article originally came out in 2010. But it was updated in 2021. So it’s got some good references in it. Now, I will say that this is not specifically Canadian content, but a lot of these principles do apply. So it’s definitely worth looking at. So it is called “Make More Money, How To Supercharge Your Income.” And I read the quote before from the article that I liked. And I think this overlaps. it dovetails nicely with Chrissy’s podcasts on Paul Pant there, because he mentioned a lot of things. And the first one, of course, is maximize your salary. So we discussed that a little bit already about maybe you know, Chrissy was thinking about that. Was it Modest Millionaire that wrote about how to negotiate your salary?

Chrissy
I believe so and but she definitely did write about how to negotiate various aspects of your job.

Money Mechanic
Right? Well, there you go dropped some Canadian content. So I’ll carry on with the rest of it. Yeah, so maximizing your salary, and he highlights how you know, like giving up five grand a year now is like giving up the five grand for the rest of your life. So something important to take into consideration. He goes on to say I’m gonna list through all sorts of his ideas here. For the listeners, the second one, these are in no particular order, just the way they’re presented in the blog was take a second job. Now, I know right? Excuses excuses, Mr. Money Mustache called it, excuse-itis right that we don’t have the time. We’re busy with our kids, with our dogs, with our first job. And maybe you are but taking a second job is a pretty easy way and especially if it’s something that you like doing maybe there’s something that you, you know, you work in an office behind a desk all day. And you might go teach an art class or work at a coffee shop and and get the social interaction that you’re missing, right. So think about a second job if that’s you, something that you’re going to enjoy doing as well because it’s not Gonna make it feel less like work. So that’s an option. Chrissy, you mentioned it become better educated, look how much or how many courses are available online now, the ability to take courses to, you know, have self improvement, it’s just easier than it ever was before. So if that’s your thing, get on it, and go and take something and again, maybe pick something that you’re interested in, right?

Chrissy
Yeah, and I think this is actually something that’s quite difficult for people in the FI community, because we’re so we’re frugal, right? Sometimes to a fault. And it can be hard to spend, especially on ourselves on something that you don’t, you sometimes can’t quantify the payoff, right, it’s really hard to determine if it’s gonna pay off and how much and so sometimes it might take some soul searching and really analyzing the situation. But a lot of times investing in yourself through education, it pays off in dividends. So it’s definitely worth looking at.

Money Mechanic
Exactly. And that one kind of works into this next one here, which is we’ve talked about this quite a lot before, make money from your hobbies. And, okay, so my spouse is totally reticent about this, because, you know, she does a great job making soap and she’s making kombucha and I’m like, Hey, turn this into a side hustle. And she’s like, I don’t want my hobbies to become a side hustle. It, this is definitely a personal thing. But, you know, I also know that there’s people in the community that you know, they love yoga, they become yoga instructors, that it’s kind of a hobby now turned into a side hustle there are options out there. I think this one rolls back into one thing I was mentioning earlier is is kind of doing analysis though. It’s like, if trying to make money from your hobby, is making it feel like work or a chore, then maybe it’s not the best thing, or maybe the return on investment isn’t the best, but it’s an option for you. Right? Yeah. And start a side business, right? And I’ve kind of struggled with this myself, because I thought, well, heck, why don’t I just go buy some power washers and a trailer and get some college students to powerwash driveways? Like you could start a pretty simple hands off business. If you know I need to be more of an entrepreneur than I am. But for people out there, you know, you can start something pretty simple. And it can be fairly hands off to depending how you structure it right. So starting a business may be an option. I hate this one. Start a website or a blog. How’s that working out for you, Chrissy?

Chrissy
Well, if I didn’t love it, it’s a very low paying job. It’s pennies, pennies per hour if that.

Money Mechanic
Yeah, yeah, like, well, he should have like website blog or podcast, he didn’t even put podcast, like it didn’t even make the list of making money.

Chrissy
No no not at all

Money Mechanic
So another one here is become a landlord. Now this one will be contested, right? Because so many people are anti-landlording. Because they just don’t want that extra work and all the rest of it. But we have talked on other episodes, that there are hands off way of doing this, there’s passive ways of doing it. So I won’t go into that sort of big details, because lots of content out there, but it’s potential to increase your income, right even and especially if it’s passive income. And maybe it’s not passive, maybe you are hands on. And maybe that’s your thing, like, if I could afford a rental where I live, then I would do it because I would enjoy, like fixing up the house. Right? So that’s up to you.

Chrissy
And I do want to suggest there are other ways to be a landlord or make money from real estate like house hacking, right, you could rent out your suite, or do what we used to do before pandemic was host international homestay students. So there are ways to use your real estate to make money and be a landlord. Without the typical landlord hassles, right? I think it’s a little easier when it’s in your own house. So that is another option to landlord with it in a slightly different way.

Money Mechanic
For sure. And one of the ones that I love the most is using or renting out unused space, like maybe you’ve got a double driveway that you don’t use, and you’re close to the city and somebody would park there every day or, you know, you’ve got a storage shed in your backyard that you don’t use it, you can get pretty creative if you’ve got some, you know, if you’re willing, right? That kind of ties into selling your stuff, you know, stuff isn’t garbage. It’s money waiting to be made. I kind of like that, I’m gonna have to use that line. Because I was just cleaning up the I was cleaning out the FI Garage here, and I’ve got like a router table. It’s been sitting around forever. And I’m like, that’s money waiting to be made. But that’s the line I’m going to use with my partner now. when I start rounding up stuff, she always knows, right? Because I’ve got the phone out and I’m taking pictures of items. And I’m like trying to set up the lighting and she’s like, you’re selling stuff again, aren’t you? But so it generally has to be my stuff. So I gotta be careful there.

Chrissy
You can’t take her stuff, be careful there.

Money Mechanic
Totally, but it is a great way because I think we all accumulate over time. And if you haven’t used it, I don’t know. Like, I think my mom’s rule was you know, if you haven’t used it for two years, you don’t need to get rid of it type thing. But you could definitely there’s, I’ve made, this isn’t gonna change the world. But the nice thing about selling your stuff is that money didn’t exist before it can go directly into an investment. And now it’s making money for you. It’s amazing.

Chrissy
And it’s one less thing to deal with in your house. Right?

Money Mechanic
Yeah, exactly. You’re probably, you will be happier. Yeah, yes. Yeah. And he goes on, there’s a whole ton of links here about just get creative about it. There’s a lots of other ways. And you know, Google that have a look through this particular blog post. And through the rest of the content and community, you’ll find some interesting ways that you never even thought existed, right? And he kind of ends up with what I brought up in the beginning is don’t make excuses, right? It’s going to be harder to make more money to make more income than it was to chop your expenses. But it’s worth it. Right. And you have that human capital as Chrissy brought up to go and make it happen, right?

Chrissy
Yeah. And you can make it work to fit your life. Like I mentioned already, that I host homestay students. But I’d like to mention how, why I chose that it was because it fit into the life that I was living at that time. And my kids were little, I wanted to stay home with them, I didn’t want to have to leave the house to earn an income. And I was a graphic designer, I could have done freelance design. But for me, that was too stressful. Because if I made a mistake, if a print job went bad, it was all in my head, if computer issues, I didn’t want to have to deal with all those headaches. So I chose a way to earn income that worked for my family at that time, you know, I could stay at home, it was in our house, I didn’t have to leave. And it was stuff I was doing anyway, just had to do a little bit more of it cooking and cleaning that kind of stuff. And so you can find ways to fit earning more income into your life. It doesn’t have to be through your job. It could be in your house, it could be there’s so many possibilities. I just feel excited by this, because there’s so many forms it can take. And that’s why I think this episode is a great introduction to get people thinking about and getting, as this article said, getting creative and really thinking about ways that you can earn income that are not traditional and not necessarily through your job.

Money Mechanic
Yeah, absolutely. And the human capital point is an excellent one, it’s something we all have access to. And another one that I just want to bring up here and this one, we can consider maybe a little bit more of an advanced option, something further down the road. Or maybe if you’re listening to this, and you’re already in this situation, it’s a possibility it might work for you. And it’s a way of generating passive income, it increases your monthly income as a family. But it’s passive. If you have, like we talked about human capital that you want to unleash, perhaps you have financial capital tied up in a home. And I don’t want to get into whether you should or you shouldn’t be using leverage. But the potential is there to use it wisely. If that fits in with your risk profile and your financial plan. And I’ve I’ve done it and I’ve generated replaced some of my income with passive investments by using my equity. And it’s a way of using something that was doing absolutely nothing for me, zero. It was sitting there on the sidelines. And now I’ve made it make its own paycheck for me each month. So it’s a little bit more advanced. We won’t go into all those details. But something to consider be creative. Think outside the box, look at the options that you have for generating more income.

Chrissy
Yeah, exactly. It goes back to lesson three. The constant optimization that Mr. Money Mustache talks about is really looking at different ways and getting creative, really digging into how you can really use what’s in your life to increase the income that’s coming in. And it could be your human capital and but as Money Mechanic said, you could use something like the equity in your home to turn that into a source of income. And I love that too. Because everyone knows. I also use leveraged investing. So both of us vouch for it, but again, yes, as you said, it’s it’s more advanced, you have to be careful when you do it and you have to know what you’re doing. But that is that could be quite a good source of income.

Money Mechanic
You know what I’ve always wanted Chrissy?

Chrissy
What’s that?

Money Mechanic
I want my dogs to make some money. Like can’t they be stunt dogs, can’t they be in a commercial or something like they’re pretty cute.

Chrissy
Start an Instagram channel.

Money Mechanic
They could be influencers.

Chrissy
Yeah exactly, It seems like everyone’s pet has an Instagram feed now.

Money Mechanic
Okay, that’s happening now. That is now happening because I am terrible at Instagram. But now my dogs are gonna have Instagram’s well, okay, so the funny thing is, is my spouse has been basically wanting to make a cartoon of the two dogs. Big Big Dog little dog, right? Yeah, she’s got this vision of it. And I think it’d be fantastic. Who knows? Maybe this. Have you ever seen The Oatmeal? The cartoon strip the oatmeal.

Chrissy
Yes. It’s hilarious.

Money Mechanic
It’s totally hilarious. So I’m kind of envisioning that’s kind of like these two dogs. But anyway, there you go. Maybe that maybe you’re creative and an art type and that’s that’s your increased income right there. The key here is, is being creative. And I do want to come back to something I brought up a couple times is earning a few extra bucks is great, increasing that income is great, but recognize the time is taking you to do that. And that’s something that was brought up a lot in your podcast is he talks about like that time value, right? So just my point is to be conscientious, if you’re taking away from family time, and you’re like holed up in your home office trying to type out blog posts, or in a couple cents, maybe it’s not worth it for your bigger picture of your value of your life, right?

Chrissy
Yeah, exactly. And in the same vein, Paula Pant talks about how you can really play tricks on yourself, or wrap your mind around these crazy concepts where, you know, if I keep working on my blog, or my business, I would earn X amount of dollars per hour, but here I am lying on the beach is costing me that same amount of money. And so you can get go down the rabbit hole and really, psychologically mess yourself up if you think about it a bit too deeply. But the whole idea is just use the time that you want to be productive in a productive way and earn yourself more income. But don’t let it overtake your life. You don’t have that balance where you do need that downtime. You do need that quality time with the people in your life. That’s what’s the point of earning more money if you’re not spending it with the people that you care about doing things you enjoy. So yes, earn more income, but be balanced about it. Don’t go crazy with it.

Money Mechanic
Alright, I guess it’s my turn to give some homework for this week’s lesson.

Chrissy
Yes, Teacher Money Mechanic.

Money Mechanic
My homeworks pretty straightforward, right? We’ve given you lots of ideas, just sit down and brainstorm. Let’s sit there and write down ways you can increase your income. I think, you know, just if you brainstorm and write it down, and it’s in front of you, maybe stick it in the bathroom mirror on the fridge or something and you know, you know, negotiate for a raise, maybe you haven’t done that for a while, if you keep looking at it, find some content, get confident about doing it, and just figure out some ways, you know, get get started. So that’s my homework, brainstorm, and get started. What do you think?

Chrissy
Yeah, I agree. And if you’re finding it too overwhelming, break it down into the smallest steps that you can so that you can just take one task one tiny little step and get that done, and then you’ll build the momentum, and you’ll be able to keep going. Yeah, I think that’s a great piece of homework for everyone to tackle. And also, again, as in our last episode, please share with us what you’re doing what you discover. Any tips you have in our show notes or on our Facebook page. We would love to hear and all learn from each other and lift each other up and help each other succeed with increasing your income.

Money Mechanic
Absolutely. Well, we’ll catch you on the next episode. Why don’t we keep calling them episodes, they’re lessons. I’m terrible.

Chrissy
They are lessons.

Money Mechanic
What the heck is lesson number five?

Chrissy
Lesson 5 is an exciting one. It’s perfect for our community. It’s early retirement planning. So I think this is the fun part. So I’m excited to do Lesson 5 next time.

Money Mechanic
Alright, thanks a lot for listening. We will catch you next time on FI School on Explore FI Canada, catch you later, Chrissy.

Chrissy
Bye.


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