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Growing Your Income Is Essential For Early Retirement


This is part 3 in the series – Retirement advice for young folks.

Young folks who are saying no to debt and minimizing lifestyle inflation have a great head start. However, they will have to earn more money to increase their retirement savings. It’s great to be frugal, but that won’t get you very far if you don’t have money left over to invest. The first step to financial prosperity is to be frugal, but the second step of earning more money is even more important.

Invest in your career

Young people in their 20s usually do not make as much money as older folks in the same career. However, their compensation has a lot more growth potential. A well paying career goes a long way toward an early retirement. If your job doesn’t have good growth opportunity, then early retirement will be much more difficult (assuming no pension.)

Work Hard

When you are young, you have plenty of energy and spunk. Working hard and over delivering is the ticket to promotions. If you are the first person to get in and last to leave the office, then your boss will notice the hard work. I worked 60+ hours per week many times when I first started out in my engineering career. Once I was more senior, I cut back on the hours quite a bit.


It’s essential to build a good working relationship with your boss and coworkers. In a perfect world, promotions and raises will be based on merit. In reality, the manager promotes the people they like. If two people deliver the same result and you like one better, who would you promote? I’m not saying you need to kiss up to your boss. Most of the time, it’s enough to be dependable and volunteer to take care of various problems whenever they come up.


grow your income essential to early retirementFurther education can be the ticket to higher salary. Most employers need their employees to grow with their careers. It is important to take classes and keep up to date in your field. Some employers will even pay for your advanced degree. When I was in college, I signed up for the 5 year BS/MS program. I was able to take advanced classes during my senior year and receive my MS with one additional year instead of two. The MS gave me an extra edge in finding a job and I also started at a higher grade. Mrs. RB40 went back to college to earn her advanced degree after a few years in the workforce, and it helped her career as well.


Changing employers can be a good way to grow your salary. It’s a pain to switch jobs, but these days it can be more lucrative than staying with one employer. I think switching jobs every few years is quite normal these days. However, you probably shouldn’t change jobs every year. One of my old coworker had 10 jobs over 10 years and that’s a red flag. This guy was a bit nutty and didn’t last in that position either.

Side Income

Another way to grow your income is to work outside of your day job. I’m talking about building a side business and not working for an hourly wage. Delivering pizza is a good way to make extra money, but the earning potential is not that high. It’s a good way to help pay off debt, but the earnings won’t grow much. You have to think outside the box and invest your time in something that has more potential.

  • Write a book – Anthony Bourdain wrote his first book, Kitchen Confidential, while he was a head chef. This book opened the way to his current celebrity career.
  • Photography – I heard that wedding photography is a great side career.
  • Blogging – Blogging is a terrible side job. Most blogs never earn a cent, but there are some successful blogs out there that are making a 5 figure monthly income (Smart Passive Income) so who knows…

These are just a few examples and I’m sure there are a ton of side businesses out there that are generating great extra income.

Buy Income Producing assets

Before spending a lot of money on luxury goods, you should consider buying Income Producing Assets instead. What are income producing assets?

  • Dividend stocks
  • CDs and Bonds
  • Peer to Peer loans – higher risk, but much higher rewards than CDs right now.
  • Rental real estate or REIT (real estate investment trust)
  • Stocks, mutual fund, ETF and other financial products
  • Businesses
  • Internet assets (domains, web sites, etc…)
  • Anything that can increase your income

The big mistake many young folks make when they start earning good income is to buy a new car. Even if they can afford it, this is not a good way to spend money. A new car will depreciate very quickly and most of that money will disappear in 5 years. I made that mistake when I got my first well paying job. The car was useful, but if I had purchased a used car instead, I would have been able to invest the extra money. It is important to start collecting income producing assets when you are young. Buying income producing assets will change the way you think about spending money.

Grow Your Income

You can’t get rich by being frugal alone. You also need to earn more money so you can save and invest. In my 20s, I focused on growing my income through my day job. I also invested in the stock market and real estate, but I didn’t focus on them until my 30s. Now that I’m retired from my corporate job, I’m focusing on growing my online income.

What about you? What are you doing to grow your income? 

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{ 31 comments… add one }
  • Don September 12, 2012, 4:13 am

    Great advice! I definitely need to change jobs 🙂

    On “buying income producing assets”, the only thing I don’t have is CDs (I should look into those options…)!

    • retirebyforty September 12, 2012, 8:31 am

      I don’t have any CDs at this time either. The interest rate is just too low.

    • Financial Samurai September 13, 2012, 11:48 am

      Yeah, I’d definitely pass on CDs for now. Even 7-year CDs are at only 2%, and Bernanke just announced he’s gonna save us from the world!

  • Michelle September 12, 2012, 6:13 am

    These are all great tips! Right now we are working on buying income producing assets.

  • Kim September 12, 2012, 7:49 am

    “Blogging is a terrible side job” You just squashed my retirement plans, HaHa. No, you are absolutely right about working as hard as you can when you are young, don’t need much sleep, and don’t have kids. Unless you want to have several, I would delay children until your 30’s. Your priorities change drastically then or you keep working and end up with severe mommy/daddy guilt.

    • retirebyforty September 12, 2012, 8:31 am

      Sorry to burst your bubble. 🙂 If you are good enough to get to the top, then it could be very lucrative. We waited until our mid 30s to have a child and it was a great decision for us. We were a lot more mature and responsible by then.

  • I agree that unless you are focused, determined and have a bit of luck blogging is a horrible idea to rely on side income. That said I have begun to make a little bit of money and I haven’t even hit the 6 month mark yet! Do not confuse a little bit with massive life changing money. I am talking minimum wage or less money, but still money.

  • 20's Finances September 12, 2012, 9:41 am

    I’m with Kim. Why did you have to go and burst my bubble? haha

    I’m one of those people who doesn’t expect to earn a bunch of money through my day job, so my side business is the only hope that I have. That and a successful wife. 🙂 She’s making progress towards supporting us and letting me have all the fun.

    • retirebyforty September 12, 2012, 10:51 pm

      I think you’re one of the exception to the blogger rule. You are doing very well and blogging is becoming a viable source of income for your family. Great job!

  • Alexa @ travelmiamor September 12, 2012, 11:45 am

    I totally agree that blogging is a big time investment and not a lot of payoff. I blog for fun and because I love to talk about travel and share my stories. I hope one day to make some money off it but I’m not betting on it.

  • krantcents September 12, 2012, 3:01 pm

    I think you have to do everything, mainly because it takes everything to make it. Grow your income, save more and invest wisely. The most important thing is to early.

  • Gen Y Finance Journey September 12, 2012, 3:21 pm

    Blogging is a terrible side job? Tell that to the 9 cents I’ve earned since starting my blog in May!

    But in all seriousness, this is a great post. For those of us who want to retire early, it’s not enough to just be frugal. Frugality will get us a comfortable retirement, but to get there by 30/40/50, you have to work to increase your income too.

    • retirebyforty September 12, 2012, 10:50 pm

      Hopefully you’ll earn more by next May. 🙂 It took me a long while to earn any money too.

  • MB @ 12 Year Career September 12, 2012, 3:37 pm

    So many great points here.

    Networking – I once worked for someone who had candidates go around the office and talk to everyone (myself included, and I was low on the totem pole). He would then ask us if we liked them. It wasn’t just about the things on their resume, it was about how good of a “fit” they would be in our office.

    Changing Employers – I think a lot of this has to do with negotiating your salary. Companies probably have a lot more wiggle room in your starting salary than they let on and, because most people probably don’t have the guts to ask, they can lowball on offers more often than not. I’ve changed jobs once thus far in my career and negotiated a 17% raise for myself 🙂

  • Paula @ Afford Anything September 12, 2012, 4:08 pm

    I absolutely agree … you can’t frugal your way to wealth. You have to earn more and invest. (And I don’t recommend blogging if you want to make money …. I don’t even want to think about the number of hours I’ve sunk into blogging, divided by the pay. Yikes!)

  • [email protected] September 12, 2012, 10:53 pm

    Another essential part of early retirement is reducing your taxes. People manage their expenses, yet when you make a good salary taxes will be your largest expense. Even more than housing and raising children, yet very few people plan to reduce their taxes. It’s not how much you make, its how much you keep. If you make more than $50,000 you should get an accountant, the deductions they find you will make them worth it. Other way to reduce taxable income:
    Max out your 401K, home mortgage deduction, Roth IRA, 529, tax exempt Muni bonds, depreciating rental properties, incorporating your income into S corporations or LLC, or developing a skill and starting a business (like blogging) that allows tax write offs. It takes a little planning but can mean thousands annually in your pocket.

  • FI Fighter September 13, 2012, 12:11 am

    I agree and think it’s very good advice for young people to work hard and invest in their career during the early years. This will payoff big time. First impressions have a lasting impact, so it’s best to establish yourself as a “can do” person from the onset. This will also make it easier to get pay raises and promotions later on.

    Looking back, I realize that I also did the bulk of my learning during those early years. Like you, I also put in the most hours then. At the time, I sometimes felt under-compensated and under-appreciated. However, once you get passed these rough years, it does get better later on. Now that I’m a senior level engineer, I’m working less hours, and learning less on a daily basis. I’m basically being compensated now for a lot of what I did/learned in the past. So suck it up, and invest in your career early on. You’ll reap the benefits later.

  • Mike September 13, 2012, 4:56 am

    For me, my primary focus is finishing up an ebook then returning to making apps when I get the chance. Right now I have a lot of free time to focus on “business as usual” while I am waiting for other opportunities to open up. Since I am in a tourist town at the moment (for about a month or so), “careers” just don’t really happen even if you work hard and volunteer to do a good job (hello minimum wage slavery!).

    • retirebyforty September 13, 2012, 8:56 am

      I agree that just working hard in a crappy job isn’t going to work out. That’s why it’s important to find a job with high potential salary. Education is the key to get those positions, but there are other ways to do it too.

  • SMB September 13, 2012, 6:33 am

    I’ve recently starting investing in dividends and am trying to build my own little portfolio, but it hadn’t occured to me that these were “income producing assets.” I think that’s a great way to think about it, instead of buying stuff, you should set money aside to buy income (or hopefully income). I’m hoping since I’m 25 that starting out early will help build my portfolio to the point I could consider retiring early. Thanks for the tips!

  • William @ Drop Dead Money September 13, 2012, 8:02 am

    Awesome advice! If I might, I’d add one more thing: pay attention to WHEN you buy your income producing asset. If you bought a rental property or stocks in 2006 and 2007 you know what I’m talking about.

    The economic cycle has a bigger impact on the value of your investment than probably anything else. Ignore it at your peril, embrace it and profit.

    • [email protected] September 13, 2012, 11:52 am

      Agreed William, I might add that be careful when the general public all invests in one asset class and thinks it can do no wrong. Bubbles and overvalued assets can last for months or years, but when they pop they deflate fast. Ex: tech stocks in 2000, housing in 2006. Today there is much love for gold, and dividend stocks have all the love. I’m not saying dividends are a bubble, but the valuation for dividend stocks are at an all time high.

  • Financial Samurai September 13, 2012, 11:50 am

    I would say that if people can stick w/ blogging for 3 years, and THEN wake up to see what they can produce income wise, it would be a pretty great side job.

    Otherwise, the first several years is just about fun!

    I’ve got time to invest/start new small businesses now with buddies. We shall see!

    • retirebyforty September 13, 2012, 3:31 pm

      Actually, 3 years sounds about right. That will be enough time to figure out how much the blog is worth.

  • Pat February 2, 2013, 4:18 pm

    Getting a side hustle is a good way to earn some extra income. There are two thoughts on this: 1) do something completely disconnected from your line of work and dominant brain hemisphere even, or 2) do something in line with what you do in your job.

    Folks who fall into 1) typically want something different, or don’t particularly like their job, or just want different experiences to round themselves out. For engineers and scientists, I heard a lot of them take up a side job dealing with the arts, or workmanship / handyman, even boutique foods and cooking (recent survey found 1 out of 9 folks who go into the sciences have a side job unrelated to their work).

    Folks who fall into 2) recognize their strength and want to keep doing it and like doing so. For other engineers and scientists, for example, this means taking up a side job as a consultant in a particular field they’ve studied or have experience in. Or it could be something like tutoring. That last one is the most common side job technical folks take.

    More engineers and scientists fall into 1) because a lot of times where they work their companies have very restrictive rules about what they can and cannot do as a side job, and usually the market is saturated with tutors since there’s lots of technical folks. My company actually says basically if it has anything to do with my line of work I could be fired. They’re worried about intellectual property escaping. Thus couple of my coworkers just avoid the headache altogether and just do something unrelated to their job. One guy I know works on cars and is certified, has a pretty impressive garage. Another trains people to fire guns (his side business is booming because the latest debate about gun control, but he won’t quit his day job). Another is a handyman (and you wouldn’t believe how inept most people are around the house, he charged $300 to remove a fused light bulb, something I did in an hour and a bit of internet research).

    I’m thinking of getting into organic boutique low-volume foods. People here are quite liberal in that regard and I thought maybe I could capitalize on the recent organic craze. Or, at the very least, reduce my grocery bills.

  • Wd April 21, 2016, 11:04 pm

    These all are really good advice. Thank you for sharing that. I have a few questions on early retirement as we are young couple and in late 20s. Howmuch combine household should be now to retire early by mid 50 or 60s? My husband is making six figures and currently happy in career but I am going through dilemma of changing my engineering career entirely and to get into business admin role which is less stressful but we will still make decent money together. Plus, there are not many opportunities on what I do around where I live. I have got job offer in a very good company but all the way across country so weighing my options which is really making it hard to choose one or the other. I definitely know how stressful my job is and will be in this field so trying to weigh my options long term. We own a decent not too lavish home in nice neighborhood that we love, with no credit/student debt. Car is paid as well. We don’t spend much outside except groceries and already have pretty good savings. We are very contented people. Our house value has already increased significantly in a year. My fear is, should I give up on my engineering career this early on? I definitely know, things will change vastly if we try to move to cross country where we don’t know anyone. I would have a job but my husband will have to find one. Any advice would be much appreciated.

    • retirebyforty April 22, 2016, 10:06 am

      I think if you save 20-25% of your income, you should be able to retire in your 50s. It’s tough to estimate because I don’t know the detail. You should try Personal Capital’s Retirement Planner. It’s actually very helpful.
      Good luck with your career. You should keep your eyes open for other opportunities. Maybe you can change career path while doing the things you enjoy. Good luck! It’s tough to make a move like that. I’d probably stay, but that’s just me.

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