How to turbocharge your earnings power
Saving money is great. But to truly expedite your path to early retirement, you’ll need to turbocharge your earnings power as well.
Earning and saving are two sides of the same coin – it’s stating the obvious, but the more you earn and the less you spend, the more you can save and invest – and the sooner you’ll reach financial independence.
The best way to think of this is like a scissors-effect, with the top blade being earnings, the bottom blade being spending, and savings being the gap in between. Someone maximising their earnings and minimising their spending can see a very quick and very significant impact on their net worth.
You earn what you’re worth
This statement might sound a little harsh, but it’s true in one sense: you earn what you’re worth to your employer.
Kids always get told in school that they’ll be successful if they work hard. But that’s not necessarily true. I know plenty of people who work very hard but aren’t rewarded particularly well for their efforts.
It isn’t enough to simply work hard; in order to be financially successful in our careers, we need to work clever. This means choosing the right career path, investing time and effort to gain an ‘edge’, and successfully negotiating our way through the travails of moving jobs, getting promoted and asking for a pay rise.
Choosing a job
If I were starting out again from scratch, I’d research which industries and sectors were projected to grow strongly in the future and which were expected to stagnate or decline.
It’s much easier to progress in an industry that’s growing – growing industries experience shortages of labour, which pushes up the cost of labour (wages). Shrinking industries, on the other hand, experience a glut of labour, which pushes down wages.
Once you’ve ticked that box, you can then think about what position you want to go for. This is probably more important than choosing the right sector.
To illustrate this, let’s look at a real-world example.
Bob is a checkout operative working for a large supermarket chain. He gets paid minimum wage to serve customers. Meanwhile, Jane is a procurement manager. She gets paid four times as much as Bob to negotiate the best deals with suppliers on behalf of the supermarket chain.
There is nothing intrinsically more important about Jane’s job than Bob’s. If all the checkout operatives downed tools, the supermarket would grind to a halt just as soon as (in fact, probably quicker than) it would if all the procurement managers upped sticks and left. Objectively, their roles are equally important for the supermarket’s continued functioning as a business.
However, whereas Bob’s job can be done by pretty much anyone who is able to work, Jane’s job requires a particular skillset that is in short supply in the labour market. Furthermore, Jane’s decisions and actions can have a large impact on the overall commercial success of the supermarket. If she were, for example, to negotiate a lower price than a rival supermarket for Richmond sausages (my favourite!), her employer would become more competitive and profitable as a result.
Therefore, the two roles could be considered asymmetrical in terms of the effort to impact ratio. Bob may be very effective in his role, but his cumulative impact on the prosperity of the company is relatively small compared to Jane’s.
This should explain why it is so important to choose the right role within a company. Another way to look at this is cost centres versus profit centres. Bob is seen as a cost – indeed, the supermarket would very likely make Bob redundant at the drop of a hat if it could replace his labour with a machine. Jane, meanwhile, is seen as an asset, as she can bring down overall costs for the firm.
Of course, the supermarket sector could be undergoing a period of contraction, in which case Jane’s firm could enter difficulties and she could be made redundant (which brings us back to the first point about picking the right sector). But she would probably find it easier to find alternative work than Bob because she has a more advanced skillset.
So, to summarise:
- Choose a growing industry/sector
- Choose an area of expertise which is in relatively short supply
- Choose an area of expertise where your efforts have a relatively large impact on the overall prosperity of the firm
- Choose profit centres over cost centres
Once you’re in the right job, you need to make sure you work your way up the corporate ladder as quickly as possible. Again, hard work alone won’t ensure success; I know people who have an unbelievable level of devotion to duty at work, yet they are continually passed over for any advancement. In some ways, being highly effective in your current role while keeping quiet about it can keep you there, as management don’t want the hassle of rocking the boat and making any changes. Blow your own trumpet – no one else will do it for you!
Before you ask for a pay rise or a promotion, you need to make sure you have an angle to work from. Just saying, I haven’t had a real-terms pay rise in three years won’t cut the mustard. You generally have to be worth more to the company in some form or another.
A really good way to make yourself more valuable to the firm is to upskill. In my experience, good firms are more than happy to support you when it comes to gaining new qualifications. Often, this means that they’ll pay towards the cost of your studies and even give you some time off to learn. Make sure you choose something that’s relevant to your current or future role, as this will give you leverage when it comes to negotiating that pay rise or promotion.
Going hand-in-hand with formal qualifications is learning ‘on the job’. In order to progress quickly and make yourself really stand out to your employer you should be proactively seeking out all the information and insights you possibly can on how the company operates and how you can optimise your performance within it. Granted, this is a very generic point, but this will vary in nature from firm to firm.
The overriding point is to get stuck in, be inquisitive, take on extra responsibility and make yourself useful wherever you can. A good rule of thumb is to always be learning about the next position above you. Don’t be afraid to ask your superior out to lunch so you can gain a better insight into the operations of the firm or something along those lines. They will probably be flattered that you see them as a font of knowledge and it’s a god way of building up a rapport.
Indeed, personal relationships can be very important when it comes to getting promoted. When I was promoted to my current position, I had my name put forward by my then-superior, who was leaving the company. Although I was the natural choice for the role within the team, the company could just as easily have decided to start an internal/external recruitment process, but instead I was shoe-horned into the role with the blessing of its incumbent, with whom I’d developed a personal friendship.
The last point to bear in mind is that it doesn’t hurt to use external leverage when asking for a promotion or a pay rise. If you’ve been inundated with calls from recruitment firms, let your boss know about it! This can be used as a shot across the bow when it comes to your discussions with your employer about your career development. What you’re doing is letting them know that your skills are in demand, and if they don’t satisfy your career goals then someone else will! It’s also worth keeping track of what pay and conditions are offered by equivalent roles in other organisations.
All these techniques work best when they’re combined, so you can feel confident that you have plenty of weapons in your arsenal when negotiating with your employer.
- Upskill through gaining relevant industry qualifications
- Work proactively and take on extra responsibility
- Build key relationships
- Use external leverage
Getting a new job
If you find yourself to be constantly frustrated in your efforts with your current employer, it may be time to consider jumping ship. Indeed, some career coaches suggest going for an interview for a new job every 6-12 months in order to keep on top of your game and create a steady flow of opportunities.
The first step is to make sure prospective employers know you and can find you online. LinkedIn is a great tool for this, as are the various recruitment websites. I’d recommend creating a LinkedIn profile, as well as signing up to the three main recruitment websites, and keeping these all up to date. The really cool thing about LinkedIn is that it facilitates personal connections with other people in your sector. It can also help to showcase your work and achievements.
By now, the recruiters will probably be all over you, but you may also want to take a more pro-active approach to looking for a job – especially if you’ve come to the end of your tether with your current employer.
The first step is to get yourself accepted for an interview. But remember, applying for jobs can be a very frustrating endeavour at times – so don’t let it get to you if you don’t achieve instant success.
Don’t just canvass every single employer with your CV. In order to make yourself stand out, you’ll need to convince them that you’re not only capable of doing the job, but also that you’re passionate about it. Read the job description and the requirements of the role, and write a cover letter explaining why you’re the right fit, with relevant examples that address the points in the job ad. Also, don’t make the mistake of sending the same CV with every application; each job is different, so make sure your CV fits the application.
Once you’ve been accepted for an interview, now’s the time to do extra research on the company itself and make sure you’re prepped with relevant examples for all the most common questions asked in an interview. A good way to do this is to use the STAR technique:
Go through all the requirements of the role and think of examples of how you’ve dealt with past situations that would set you in good stead for the role in question. Always try to make it relevant to the role!
The next point is to make sure you’re familiar with your prospective employer, how they operate, what their goals are etc. Employers like to feel that you understand them and that you’re not just looking for the next step on the ladder – even if you are! What is it about this employer in particular that makes you want to give your right arm to work for them? Be passionate, show your enthusiasm and it will set you apart! Don’t be afraid to contact people who already work for your prospective employer before you go for the interview to gain some insight into the company.
So, you’ve aced the interview – but the recruitment process doesn’t end there. Follow-up with an email about how you’ve done some further research on one of the topics you discussed in the interview, for example. This will help to keep you in the minds of the interviewers and help to demonstrate your enthusiasm. To take one example from my own personal experiences, I once sent a follow-up email with a link to an article I’d written for a company that had been talked about in the interview. In the event, the digital magazine that the article was due to be published in didn’t come out in time, and I wasn’t successful in my application – but you get the picture.
- ‘Advertise’ yourself via LinkedIn, recruitment sites etc.
- Tailor each application to the specific role
- Fail to prepare for an interview: prepare to fail
- Follow-up with an email