Do you want to stop trading time for money?
Yep — you, and everybody else.
Thanks to the Tim Ferriss and his band of passive income pursuers, “not trading time for money” has become the rallying cry of people who are stuck in a job that they don’t like, and want to create the freedom to quit and do something different.
They say it with pride, confident that they are making the smart, strategic choice that their corporate colleagues don’t have the guts or foresight to make.
But most of the time, they go about it all wrong.
Most of them never see a dime, and years after they’ve started their quest for freedom, they’re still trapped in their corporate cage.
What are they doing wrong?
How can you avoid making the same mistakes?
What It Means to Stop Trading Time For Money
Let’s start by getting on the same page.
I mean, “stop trading time for money” is an inspiring goal, but it’s kind of like “pulling yourself up by your bootstraps”, in that it isn’t actually possible. (Try to visualize the bootstrap thing to see what I mean.)
Here’s the truth:
Everyone trades time for money.
Even the guys who gross over $30,000/month from information product sales, affiliate commissions and iPhone apps. They spent time building their sites, promoting the affiliate products, and creating the applications.
And when they work, they work hard.
But they also work smart.
Here’s the difference between those guys and most people:
Each hour of work they do results in a large amount of money, which means that they can afford to work on projects that are more lucrative in the longer term, hire the resources they need to make it a success, and have enough free time left over to live it up with their friends and family.
So when people talk about not trading time for money, what they are really talking about is adjusting the relationship between time and money: how much time for how much money.
How to Spend Less Time and Make More Money
Let’s face it. The hourly rate of most corporate employees is pretty low.
By the way, an easy trick for calculating your hourly rate is to take your annual salary, divide it in half, and take off three zeros (this assumes a 40-hour work week).
- $30,000/year = $15/hour
- $50,000/year = $25/hour
- $80,000/year = $40/hour
- $120,000/year = $60/hour
Let’s compare those numbers with the effective hourly rate of the entrepreneurial projects that people aspire to when they think of not trading time for money:
- An affiliate niche site that you spend 10 hours researching, 30 hours setting up, and another 30 hours promoting (link building, etc.), which then earns you $300/month for 2 years. Effective hourly rate is $102.86/hour.
- An information product that you spend 800 hours building (Don’t kid yourself, that’s not a lowball estimate. It took us over 2,500 hours to create our Firepole Marketing training program) and then launch 4 times over two years, making $7,000, $20,000, $40,000 and $80,000. (You make more with each launch as your list and audience grow, and factor out your costs.) Effective hourly rate is $183.75/hour.
- Build a business that you put $150,000 of your own money into, work on full–time (60 hours/week, 6 days/week, with no vacations) for three years, and then sell your stake in for $11,000,000. Effective hourly rate is $1,159.19/hour.
- Deliver a keynote presentation at a major conference, billing $20,000 for a 90–minute talk (less travel costs and speaker bureau fees). Effective hourly rate is $8,665.62/hour.
The numbers I’ve listed above will change depending on the assumptions (how much you charge, how long it takes to set things up, and so on), but the fact remains that they are all significantly higher than a six–figure corporate salary. Which, of course, is why they’re all so attractive.
So, why isn’t everybody doing those things?
Why does anybody work a corporate job when they could be making many times that as a consultant, affiliate marketer, internet entrepreneur, or keynote speaker?
The Interval Trade–Off: Work Now for Money Later
The reason why most people are working corporate jobs rather than doing any of these super–lucrative activities is that they have bills to pay today, and a job is the only thing that will make them money today.
- The affiliate site won’t make you a dime until it has been researched, setup, built, and promoted. Time to start seeing the money is 80 hours, and time to see all the money is two years later.
- The information product won’t make you any money until you build it and sell it. Time to start seeing the money is 800 hours, and time to see all the money is two years later.
- The start-up will make you rich when (if) somebody buys it, but in the meantime you’ll be living on peanut butter and jam. Time to start seeing the money is 9,360 hours and three years.
- The keynote presentation may seem like fast and easy money, but before you will be invited to deliver that sort of presentation, you’ll have to spend a decade working hard to become the next Tony Robbins or Jim Collins. Time to start seeing the money is more hours than I can count, and at least ten years.
So what can you do? Are you just trapped in a cycle where the rich getting richer and you’re stuck in the same place?
I don’t think so, but the answer isn’t to stop trading time for money. Instead, you should try to start trading time for more money!
Start by Trading Time for More Money…
Instead of going after a route that takes hundreds of hours before you see any meaningful results, try a path that — although it definitely involves trading time for money — allows you to make money a lot sooner.
- Consulting work, in which you bill $150/hour, but need to spend at least one hour generating business for every two hours that you bill. Effective hourly rate is $100/hour.
- Group coaching services; each group has five members that pay you $400/month in exchange for four hour-long phone calls/month, plus an hour/month each of email support. Effective hourly rate is $222.22/hour.
The beauty of these options is that the effective hourly rates are much higher than a corporate job, but you can still be up and running pretty quickly.
Spend a couple hours of focused work per day on networking and finding clients, and you could have consulting clients lined up within a month. At $100 per hour, you don’t need many. If you line up just 5 hours per week of consulting work, that can replace half of a $50K/year salary.
Do you see where I’m going with this?
Transitioning to Higher Income Activities
It takes time to build up to the higher income activities, and unless you’ve got a giant nest egg set aside, you can’t just quit your job, which means you don’t have all that much time. That’s why the key to transitioning from a corporate job to higher income activities is that it has to be done gradually.
Here’s what a timeline might look like for someone who is making $50K/year.
- Day job working 40 hours per week and making $50K per year (which equates to $25/hour).
- Start a consulting practice, and grow it to the point of having 5 hours of work per week, billing at $100 per hour.
- Reduce your day job to part–time (the 5 hours/week of consulting replace the rest of the salary), and invest more time in building the consulting practice.
- Grow a consulting practice to the point of having 10 hours of work per week and billing $100 per hour. This fully replaces your day job income.
- Quit your day job. Now you have the same income as before, but you’re working a lot less.
- Use the time that you’ve freed up to setup a group coaching practice, so that you can spend even less time, and make the same amount of money.
- Using all of the time that you’ve freed up, you can build a real business selling information products or services. You could even do that startup, or lay the groundwork for the keynote speaking career.
Most people try to jump straight from step 1 to step 7, but that’s very hard, because step 7 takes a lot of work, and if you’re still stuck in step 1, you don’t have time to do it all.
Over to You
Do you aspire to stop trading time for money?
What avenues have you tried in order to achieve that goal?
Leave a comment below.
Danny Iny (@DannyIny) is an author, strategist, serial entrepreneur, expert marketer, and the Freddy Krueger of Blogging. Together with Guy Kawasaki, Brian Clark and Mitch Joel, he wrote the book Engagement From Scratch!