“Stop trading time for money.”

Thanks to the Tim Ferrisses of the world, that has become the rallying cry of people who are stuck in a job they don’t like and who want to create the freedom to quit and do something different.

They say it with pride, confident they are making the smart, strategic choice their corporate colleagues don’t have the guts or foresight to make.

It makes perfect sense, of course.

After all, time is finite. So, by trading hours for dollars, you’re limiting your income.

Whether you’re paid $15 or $150 per hour, your income is limited by the number of hours you can put in.

But people who want to stop trading time for money 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.

Here’s what they’re doing wrong, and what you can do differently.

What Does It Mean to “Stop Trading Time For Money”?

Let’s start by getting on the same page about what we’re really talking about.

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 and you’ll see what I mean).

Everybody trades time for money.

Even the folks who gross over $30,000/month from information product sales, online courses, affiliate commissions, and iPhone apps trade time for money.

They spent time building their sites, creating and selling their online courses, promoting the affiliate products, and creating the apps. The difference is that they make a lot more money than the average employee!

Each hour of work they do ends up translating to a big amount of money, which means 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 (which is really the point of it all).

So when people talk about not getting stuck in the trading-time-for-money trap, what they really want is to adjust the relationship between time and money: how much time for how much money.

They want to make more money in less time.

How to Make More Money in Less Time

Let’s face it, the hourly rate of most corporate employees is pretty low. The easy trick for calculating your hourly rate, by the way, is to take your annual salary, divide it in half, and take off three zeros (assuming a 40-hour work week).

For example:

  • $30K/year = $15/hour
  • $50K/year = $25/hour
  • $80K/year = $40/hour
  • $120K/year = $60/hour

Compare that with the effective hourly rate of the entrepreneurial projects people aspire to when they think of not trading time for money:

  • An affiliate niche site that you spend 10 hours researching for, 30 hours setting up, and another 30 hours promoting (link-building, etc.), which then earns you $300/month for 2 years.

Effective hourly rate = $102.86/hour

  • An information product that you spend 800 hours building (the content, the technology infrastructure, etc.—and don’t kid yourself, that’s not a lowball estimate; the Firepole Marketing training program took us over 2,500 hours to create!), and then launch 4 times over 2 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 = $183.75/hour

  • Found a startup that you put $150,000 of your own money into, work on full time (60 hours/week, 6 days/week, with no vacations) for 3 years, and then sell your stake in for $11,000,000.

Effective hourly rate = $1,159.19/hour

Deliver a keynote presentation at a major conference, billing $20,000 for a 90-minute talk (minus travel costs and speaker bureau fees).

Effective hourly rate = $8,665.62/hour

My point here is not to say that the numbers I’ve listed as the effective hourly rates above are always right (they will change depending on the assumptions, like how much you charge, how long it takes to set things up, etc.), but rather to show that they’re all significantly higher than even a six-figure corporate salary.

Which 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 = 80 hours
Time to see all the money = 2 years

  • The information product won’t make you any money until you build it and sell it.

Time to start seeing the money = 800 hours
Time to see all the money = 2 years

  • The startup will make you rich when (and if) somebody buys it, but in the meantime, you’ll be living on peanut butter and jam.

Time to start seeing the money = 9,360 hours
Time to see all the money = 3 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 = more hours than I can count
Time to see all the money = at least 10 years

So what can we do?

Are we just trapped in a cycle of the rich getting richer while the rest of us stay stuck where we are?

I don’t think so, but the answer isn’t to try to stop trading time for money—instead, consider trading time for more money!

Start by Trading Time for MORE Money

In other words, instead of going after a route that takes hundreds of hours before you see any meaningful results, try a path that—while it definitely involves trading time for money—allows you to make money a lot sooner.

For example:

  • Consulting work, in which you bill $150/hour, but need to spend at least one hour generating business for every hour that you bill.

Effective hourly rate = $75/hour

  • Group coaching services, in which each group has five members who pay you $400/month in exchange for four hour-long phone calls/month, plus an hour/month each of email support.

Effective hourly rate = $222.22/hour

The beauty of these options is that the effective hourly rates are a lot higher than a corporate job, but you can still be up and running pretty quickly.

If you spend a couple of hours of focused work per day on networking and infrastructure building, for example, you could have consulting clients lined up within a month. Not a lot, but then, it doesn’t have to be a lot. At $100/hour, if you line up just 5 hours/week of consulting work, you can replace half of a $50K/year salary.

Do you see where I’m going with this?

Transitioning From a Corporate Job 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 to do it gradually.

Here’s what a timeline might look like for someone who’s making $50K/year, and wants to transition out of her corporate job to a more “not trading time for money” lifestyle:

  1. Day Job: Working 40 hours/week, making $50K/year ($25/hour).
  2. Start Consulting Practice: Grow it to have 5 hours of work/week, billing at $100/hour.
  3. Reduce Day Job Hours: Start working part-time (5 hours/week of consulting replaces the rest of the salary) and invest more time building the consulting practice.
  4. Grow Consulting Practice: Get to 10 hours of consulting per week, billing $100/hour. This fully replaces your day job income.
  5. Quit Your Day Job: Now You Have the same income as before, but you’re working a lot less.
  6. Set Up Group Coaching Practice: Use the time you’ve freed up to invest even less time and still make the same amount of money.
  7. Trading-Time-for-More-Money Lifestyle: Using all the time you’ve freed up, build a business selling information products, courses, or services. You could even do that startup or lay the groundwork for a career in keynote speaking.

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 to achieve that goal?

Updated on April 23, 2018.

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