How To Make More Money - And Need Less

Money - everybody seems to want more of it.  Very few people feel that they have or earn enough.  Consequently it is the source of so much anxiety and conflict.  Financial problems are cited as the number one reason for divorce.  To Timothy Paul the Apostle wrote "For the love of money is the root of all kinds of evil".  And yet it is so necessary to our lives.  Let's explore money - what is it, where did it come from, how much do you need, and how to get more of it.

The Origins of Money

Money is any clearly identifiable object of value that is generally accepted as payment for goods and services and repayment of debts within a market.  One theory (promoted by Aristotle) holds that money was invented to solve problems with barter exchanges.  Barter depends on a coincidence of wants so if you have extra grain but not enough cloth you need to find someone with extra cloth but not enough grain.  That may be difficult to do.  If you had a generally accepted medium of exchanges (i.e. money) that would facilitate the trades because someone who wanted your grain could give you money and you could trade it for the shoes.

Skeptics of this version of money's history point out that there is no evidence of any society that ever used barter.  They believe that the pre-monetary economic systems were "gift-economies" based on mutual altruism and community sharing where valuable goods and services were regularly given without any explicit agreement for immediate or future rewards.  There are vestiges of these societies today among tribes and societies where sharing and gift-giving have deep cultural roots.  The argument is that eventually these societies evolved to an expectation of reciprocation (a primitive form of debt) and that money was created as soon as that expectation needed to be quantified (i.e. when the response to "hey, thanks I owe you one" became "OK, one what?").

Any mutually-accepted relatively limited object can be used as money.  Historical examples include metals (often in stamped pre-weighed quantities called coins), grain, animals, shells, and even (strangely) pieces of paper with funny pictures and green writing on them.  The key is mutual acceptance.  Money only has value when most everyone thinks it does.  The moment that public confidence in its exchangeability or value wanes (e.g. in hyper-inflationary cycles) the usefulness of money as a medium of exchange is impaired or destroyed.  When that happens governments often switch currencies to attempt to reestablish public confidence.  We moved to Brazil just as the government there was converting the currency from the "Cruzeiro Real" to the "Real" because the Cruzeiro Real had lost value through inflation.  Unsurprisingly the Cruzeiro Real had been a replacement currency for the original "Cruzeiro" which had become nearly valueless.  Some people worry about the risks of government-issued currencies and believe in alternatives such as precious metals, but in the end, no money has intrinsic value--it's value comes from the trust and expectations of others, so any currency can be undermined in value if enough people lose that trust.

Why you should try to earn more of it / Enough is as good as a feast

Money is a tool to be used to achieve good ends, not an end unto itself.  You can trade money for fundamental necessities and desires or your life.  Money increases your choices.  With it you can meet your basic needs as well as provide life-enriching activities for yourself and your family.  Poverty can be grinding, but so can wealth.  Money is like water, you need enough of it to live, but too little or too much can be deadly!  While money can be a wonderful servant to provide you freedom it, ironically it often becomes a cruel master that saps our energy and keeps us in bondage.

How much is enough?  Well, you first need to understand the difference between wants and needs.  For survival you need food, water, shelter, clothing, fuel, and occasional emergency medical care.  In western economies it takes relatively little money to obtain these things--even people with incomes well below the poverty line typically find a way to meet their basic needs.  Beyond those basic needs everything else is a want (i.e. a choice).  The problem with wants is that they are self-perpetuating and limitless.  It costs us to fulfill these wants.  For instance, possessions can be useful or pleasurable, but they are also a burden to acquire and to own.  A big house, a fancy car, wearing the latest fashion, and even attempting to keep up with the latest electronic gadgets tends to add stress, debt, and a kind of bondage to your life.  That's why there is freedom in frugality and satisfaction in simplicity.  Enough is as good as a feast.  When I retired early we shifted from spending $100 per day to $100 per WEEK on the variable component of our budget (e.g. food, fuel, clothing etc.) and in so many ways we are living even more abundantly than before.

Sit down and calculate your target income including:

• The monthly cost of your basic needs - first consider downsizing your home, vehicles etc.
• 20% for savings - you need an emergency fund and reserves to support yourself if/when you no longer have an income
• Think about worthy wants - some examples of these for us include:
• Investments in ourselves such as college, music lessons, art suplies, musical instruments
• Tools to help us connect to others such as phones computers and internet
• Insurance to mitigate risks to our health and personal property

Principles of Making Money

Now that you know your target income you may find that you need to earn more money than you are currently getting.  Under the law of supply and demand the only way you can raise your income is to become harder to replace.  You must be better than others at provide a service that people with money need.  Why does a professional basketball player make 50X more than a teacher?  It's not because what he does is 50X more important than what the teacher does.  It's simply that there is a high demand for his services (millions want to watch him play) and he is very difficult to replace.  If you are going to earn more money you must understand the law of supply and demand and use it to your advantage.  Choose (or move to) a career that is in relatively higher demand, and become the best at it.

The first thing you need to do to make more money is to think about yours knowledge, skills, and abilities as a product.  You will need to sell your skills and abilities to someone else who values them more than they value the money they give you in exchange.  Look at your product (your current knowledge, skills, and abilities) and ask yourself two questions:

• How much do people need my product?  If you have an arcane skill (e.g. making button-hooks in an age of zippers and velcro) it won't matter how good you are at it, it won't be very marketable.
• How hard is my product to replace?  The more difficult it is to find an in-demand skill the more people are willing to pay for it.   If your skills only suit you to be a "common laborer" and a lot of people have that skill (i.e. you are easy to replace) then supply and demand will make your wage relatively low.  If on the other hand your skills differentiate you with skills that are hard to find/replace (e.g. a brain surgeon) then your wage will be relatively high.

If you find that there is low demand for your knowledge, skills, and abilities or that there is an over-supply of other people with similar capacities then you need to develop new capacities that more people want, and that are harder for them to replace.  You can do this by going to school or getting on-the-job training.  You can also start a program of consistent personal study and self-development to become an expert in your field.  The greater your expertise the more difficult you are to replace with someone else.

Next you need to make your product (i.e. yourself) easy to use.  It's possible to have high-demand skills and still be fired or shunned if you are a pain-in-the-neck to work with.  Improve your "soft skills" such as communication, punctuality, and integrity.  If you work for someone else think of your boss and others in your organization who use your services as your customers.   Provide them with great customer service.   Ask them for feedback and then taking formals steps to make improvements (circle back to let them know what you've done).

Finally you need to market your product.  You can have a great product (high-demand capabilities in a low-supply world) but if no one knows about them no one will pay you for them.  Here are some ways to market your product:

• Network with others in your field - networking means getting to know people.  Join industry associations, ask experts in your field for advice or mentorship, connect with people in your field on LinkedIn.com.  
• Make sure your boss or other customers know what you can do - Use your status reports (start creating them if you don't do them now) to communicate to your boss what you are accomplishing.  If you're self-employed and selling products and services consider advertising, focusing on SEO (search engine optimization), and building/monitoring your on-line reputation.

Current High Demand (i.e. High Income) Skills

Interestingly jobs come and go as industries change.  In the modern economy you have to continuously expand your knowledge and capabilities to keep up with changing times but there are some skills that transcend change and are intrinsically in high demand.  Fortune Magazine recently published and article called "The 10 Skills That Will Get You Hired in 2013".  They drilled into the critical skill-sets for the top jobs of 2013 as defined by CareerBuilder as the occupations with the most jobs added since 2010 (using O*NET, the U.S. clearinghouse of occupational information).  The results were interesting because they have less to do with "hard skills" (e.g. the ability to write computer code in Java or C++) than they do with more transferable "soft skills".  Here is a list of their 10 most critical job skills:

• No. 1 Critical Thinking (found in 9 out of the 10 most in-demand jobs) - Using logic and reasoning to identify the strengths and weaknesses of alternative solutions, conclusions or approaches to problems.
• No. 2 Complex Problem Solving (found in 9 out of the 10 most in-demand jobs) - Identifying complex problems and reviewing related information to develop and evaluate options and implement solutions.
• No. 3 Judgment and Decision-Making (found in 9 out of the 10 most in-demand jobs) - Considering the relative costs and benefits of potential actions to choose the most appropriate ones.
• No. 4 Active Listening (found in 9 out of the 10 most in-demand jobs) - Giving full attention to what other people are saying, taking time to understand the points being made, asking questions as appropriate and not interrupting.
• No. 5 Computers and Electronics (found in 8 out of the 10 most in-demand jobs) - Knowledge of circuit boards, processors, electronic equipment and computer hardware including applications and programs.
• No. 6 Mathematics (found in 6 out of the 10 most in-demand jobs) - Knowledge of arithmetic, algebra, geometry, calculus, statistics and their application.
• No. 7 Operations and Systems Analysis (found in 5 out of the 10 most in-demand jobs) - Determining how a system or operation should work and how changes in conditions, operations and environments will affect outcomes. Understanding the needs and product requirements of a particular design.
• No. 8 Monitoring (found in 5 out of the 10 most in-demand jobs) - Monitoring and assessing performance of yourself, other individuals or organizations to make improvement or take corrective action.
• No. 9 Programming (found in 3 out of the 10 most in-demand jobs) - Writing computer programming for various purposes.
• No. 10 Sales and Marketing (found in 2 out of the 10 most in-demand jobs) - Knowledge of principles and methods for showing, promoting and selling products or services. Includes marketing strategy and tactics, product demonstration, sales techniques and sales control systems.

Set a target income based on your needs and limited wants, and improve your skills to reach your income target.