The Income Snowball & Funding Your Freedom: A Four-Part Guide

[If you read nothing else in this article, read about the income snowball. It's halfway through this article.]

If you have built castles in the air, your work need not be lost; that is where they should be. Now put foundations under them.
-Henry David Thoreau

Most of my articles focus on the “inner game”? of personal liberation (from traditional work environments and lifestyles). That’s because I — like a million other people in the personal development space — believe that change usually manifests on the inner plane before it manifests on the outer plane (see Socrates, the Bible, Thoreau, Stephen Covey, etc.).

But it’s hard to leave even a horrible situation and begin re-envisioning your life if you don’t believe you’ll be able to support yourself. Because if you can’t get around the money issue then what’s the point?

Here are two reactions to my last post . . .

Go ahead, tell the government to fuck off, go live in cardboard box if that is such a great improvement on your career.
-Ufia
I think many of us “real” people would happily become “unreal” if we could figure out another way to get money. Homeless people would fit into this “unreal” category, but I don’t want to resort to that to simply shed the title.
-Disillusion

In addition to the money issue, people also hold the self-limiting belief that all this lifestyle design stuff is for those who don’t have to financially support children. I usually hear guys making “the kid argument”? — it probably has something to do with our urge to provide). On the other hand, I’ve spoken with several women who are living creatively with children. (They believe that if you feed a child, love them, and spend time with them, that they’ll be OK. I couldn’t agree more).

I’m doing a series of profiles of parents living incredibly adventurous lives (e.g. traveling the world, working from home, etc.) so stay tuned for that if you want more proof that this stuff can be done.

But I digress.

So this article is about how to think about funding your freedom. It won’t be exhaustive. It’s not going to tell you how to start an internet business or start making money with e-books in about 5 days. (By the way, if you do want to start making money with e-books in about 1 month, I’d check this out. I picked up Alexis’ book about a month ago and it’s been worth every penny).

But I digress even further.

Here’s a four-part guide to financing your freedom:

1.) Start With Some Baselining

The process of baselining involves writing down everything you don’t have to have, be, or do, to live a ridiculously happy and amazingly fulfilled life (for more on this, see here).

For example, I don’t have to own nice furniture (thrift store furniture works just fine) or a house. I don’t have to eat out every week (I actually love rice and beans and see no shame in eating the basics). Additionally, I don’t have to be able to tell a coherent story about how I make money.

If you’re serious about doing a thorough job of baselining, you’ll create a spreadsheet and write down each thing you’re willing to give up. Next to each baselined item you should also write note how much money and time you’ll eliminate by doing away with the listed possession, obligation, self-image, or future purchases.

When it comes to baselining, my advice is to “dream”? big by eliminating everything you possibly can and then calculating how much your baselined life costs you.

After you’ve done the baselining, it’s time to . . .

2.) Do Some Dreamlining

Timothy Ferriss’ dreamlining process can sometimes be useful. Dreamlining involves writing down what you would have (e.g. a motorcycle), be (e.g. a professional tennis player), or do (e.g. take a trip around the world) if you couldn’t fail, and then determining the costs of these dreams (for a better description and a great tool for implementing, see here).

Most people think they can’t afford long-term world travel, a weekly massage, a half-time job, or three weeks at home with their children. Dreamlining is meant to challenge that assumption.

Ultimately, you want to arrive at a weekly price tag for your ideal lifestyle.

I encourage you to think in terms of time and freedom. Want to travel the world with your children? Want to work half-time and spend the other half working on a writing project? Want to start a community organization? Want to hike the Appalachian trail? Want an extended vacation so you can feel sane again and start worrying about the next step? Put that stuff on your dreamline.

In my opinion, one of the best ways to fund your dreamline is by implementing what I call . . .

3.) Start an Income Snowball

We’ve all heard of the debt snowball, right? No worries if you haven’t.

The debt snowball idea asks you to apply ALL extra money to your smallest debt until it’s paid off. Once you’ve paid your smallest debt, you start working on the next biggest debt, and so on until you’re debt-free. The primary benefit of this “smallest-balance plan”? is the psychological benefit of seeing results sooner.

The debt snowball works because, as Dave Ramsey says, “while the math seems to lean more toward paying the highest interest debts first, what I’ve learned is that personal finance is 20% head knowledge and 80% behavior; you need some quick wins in order to stay pumped enough to get out of debt completely.”?

So onto the Income Snowball . . .

The income snowball is like the debt snowball, but a little but more tricky to explain. Here goes…

Most people know how they’d make money in an ideal world. The problem is that most of these “ideal”? schemes require lots of time, planning, risk taking, etc. On the other hand, most of us have skills that we could implement tomorrow to make money independent of an employer (this could be anything from doing landscape to hiring ourselves out as a consultant).

So the first step in creating an income snowball is to write a list of things you can do to make money in ascending order of difficulty and speed of implementation. The list should start out with the “smaller sooner”? income items and move to the “larger later”? items. My actual list, which I created six months ago, goes something like this:

Make websites
Do social media and SEO consulting (I love doing this)
Write e-books
A bunch of top secret stuff I’m not ready to talk about
Start “Project Liberation”?
Become a published author and speaker
Other top secret stuff

The challenge here is to only write down sources of income: my list, for example, doesn’t include plans to bike across China or hike the Lake Superior Trail. Those lifestyle plans are on another list.

Like the debt snowball, the income snowball works because of psychological factors (as much as anything else). It has you making income from day 1. And once you’ve become confident that you’re capable of making money WITHOUT your job, you’ll have the courage to go for your next most ambitious goal. The income snowball also works because it imposes organization on the sometimes anxious, nerve-wracking, chaotic, and disorganized process of hacking together an income after you’ve quit your job.

In addition to the above, the income snowball helps you focus your energies. Indeed, for most new business owners and lifestyle entrepreneurs, the next actions aren’t always clear. There are thousands of directions you can move in at any one time and it’s more than a little easy to become schizophrenic when considering all the options.

It’s also important that you . . .

4.) Hang Your Shingle Up

If you’re good at something, chances are people approach you all the time for advice on your area of expertise. The thing is, your friends, or whoever is asking you for advice, wouldn’t dream of actually paying you unless you hang up your metaphorical shingle.

At some point after I started this blog, I become inundated with questions about social media: how to optimize for it and how to properly leverage Digg, StumbleUpon, etc. to get hits. And at some point I made this website and started charging for social media consulting. Social Media consulting is now one of my top 2 sources of income.

My “shingle” isn’t fancy at all, but it’s not meant to convert new website visitors into clients. It’s meant to declare that I’m open for business and that social media marketing is a service for which I charge. That’s all.

For more advice on how to make trillions on the Internet, subscribe to The Growing Life.

Posted on 4 Jul, 2008

Did you like this article?

30 Comments so far »

Brett McKay said,

Wrote on July 4, 2008 @ 6:41 am

Excellent post, Clay. I actually started to implement income snowballing just recently. My goal is to make enough income to where I don’t have to practice law and I can move to Vermont. Let’s see if I can make it happen.
Clay Collins said,

Wrote on July 4, 2008 @ 7:04 am

@Brett: It’s great seeing you in the comments section. I hope ArtOfManliness.com (or whatever else you’re working on) more than does it for you. Because (1) Vermont is beautiful, and (2) you’re one hell of a talented blogger :-).
Jarrod - Warrior Development said,

Wrote on July 4, 2008 @ 7:11 am

Very cool article.

I started this without really knowing it when I made my blog. I think your steps are very useful.

Baselining is often underestimated/underused but it is rather important as it shows possibilities. Something I do now and again is to write down everything that I do in and a day as I do it. Then reviewing it at the end of the day I see where most of my time goes.
@Stephen Productivity in Context said,

Wrote on July 4, 2008 @ 7:41 am

Clay, we *really* need to get back to those weekly phone calls.
Clay Collins said,

Wrote on July 4, 2008 @ 7:49 am

@Jarrod: Cool. I wish that I did this stuff intuitively like you. Alas, I don’t.
Charlie Gilkey | Productive Flourishing said,

Wrote on July 4, 2008 @ 8:24 am

It’s been awhile since I commented - but I had to write to say that I liked this post a lot. My gut lies sometimes with the “that’s great…but how” camp, but I’ve more or less got over that since I’m doing the “how” now.

What kills me about us two is that we’re doing similar things independently - kind of like Newton and Liebniz. I started my income snowball a few months ago, and I know have a legal business shell that’s covering my streams. The name of the shell: Creative Liberations, LLC. So when you wrote about Project Liberation - I thought, huh, that’s interesting.

Too much Tim for us, I guess.
————————————–
Response:
Wow. That’s some insane synchronicity. Must be in the zeitgeist. :-)
Great post, Clay.
Laurie | Your Ill-fitting Overcoat said,

Wrote on July 4, 2008 @ 10:44 am

As for the kid argument, my parents raised two kids on a combined income of less than $40k a year. The time period was 1982-current (my brother and I are eight years apart).

My brother and I are both awesome (if I do say so myself), well-adjusted, and have a great relationship with our parents. We both had happy childhoods filled with family vacations (fishing trips to the beach near home and yearly road trips to our grandparents’ home in North Carolina), parties (low-budget affairs in our living room), and lots of love.

I think parents should worry less about lavishing their kids with game consoles and more about being around for dance recitals and homework help.
————————–
Response:
Awesome story. (In case anyone’s wondering, Laurie really is awesome).
Adam King said,

Wrote on July 4, 2008 @ 11:09 am

You know, I have owned a business for almost four years now. Starting out, I knew absolutely nothing about running a business. Today, I know very little about running a business. Finally, I have been education myself in the different areas of business. (i.e. marketing, customer relations, finance, organization, etc.) Still, though, I show my ignorance for this subject (business) when I read a post just like this and think to myself,

“WOW! That’s amazing! I would have never thought of that! Now that I mention it, I NEVER HAVE thought of that before! I need to do what this article says! Right now!”

(Insert sound byte of hand hitting forehead!)

Because for people like you, Clay, who have a mind for business and money, it comes second nature to think of these things. I guess I’m commenting to say thanks for the lesson. I needed it and I’m going to do these things today!

Happy Fourth. Don’t burn your hair off or anything.
———————
Response:
You a truly gifted and skilled craftsman and I hope you’re well on your way to becoming a millionaire.

Have you read “The E-Myth Revisited”? I highly recommend it. It’s a great read for small business owners.
Maria - Never the Same River Twice said,

Wrote on July 4, 2008 @ 12:37 pm

Great concepts, Clay. I recently worked out a baseline “survival” income for myself - just enough to keep me fed, housed and healthy. It is a *lot* less than I expected and an amount I could easily make steaming milk at Starbucks for 20 hours a week. That’s pretty liberating to know. It takes away a lot of the fear that I was feeling about moving on from my current position.
vered said,

Wrote on July 4, 2008 @ 2:24 pm

Dying to know what the top-secret stuff is.

I think your plan makes a lot of sense.
Katie said,

Wrote on July 4, 2008 @ 2:57 pm

I love the idea of dreamlining. Only recently have I started to take up the challenge of widening my perspective to include what I would love to do, along with what I’m told I can do. Part of this has been paying attention to opportunities for win/win situations, like creating certain things for gifts that other people show interest in buying. I’ve also been working on creating a clear plan for myself to get up to Maine and build my own home and grow my own food. Exciting stuff, and the baselining idea helps to get things distilled to a point where I can decide what I need versus what I feel attached to from habit. Thanks again for a great post. Nice work with the Thoreau quote to start off with, I’ve been reading Walden lately, which is inspiring in many ways. One of my current favorite quotes from him:

“To affect the quality of the day, that is the highest of arts. Every man is tasked to make his life, even in its details, worthy of the contemplation of his most elevated and critical hour.”
J. David Fox said,

Wrote on July 4, 2008 @ 6:04 pm

Good article, Clay! I think the income snowball concept is exactly what I’ve been trying to figure out, it really helped to hear it articulated this way. Over the past year I keep coming up with business ideas, but they’re usually BIG ideas that are designed to equal the income of my current job (and it’s taken me about 7 years to get to this income level). As a result, I keep getting overwhelmed by the sheer SIZE of my plans, and guess what…I never launch anything.

I’m currently trying to strip it down to the basics, and start focusing on stuff I can do easily now, and most importantly, stuff that I feel passionate about. I’ve got over a page of topics written down for the blog I’m getting ready to launch, and several articles already through the first draft phase. I’m heading out for a camping trip all next week; I plan to seriously de-stress and re-focus, read a few books, and draft out more articles in a notebook. When I get back, I’m gonna launch that puppy whether or not all the details are ironed out.

I think once I finally take a first step, no mater how small, I’ll get rolling…
Duff said,

Wrote on July 4, 2008 @ 6:26 pm

I love the baselining and income snowball concepts, especially put together.

I actually just ran the minimum numbers in a sloppy way that I need and it’s far less than what my “goal” has been. In fact it seems very, very doable, and very soon. Cool!

Keep on rockin’ the excellent posts.

~Duff
chris said,

Wrote on July 4, 2008 @ 9:33 pm

This is why I like you. One day you are into very philosophical stuff the next day you hit it with something very tangible and pragmatic.

I love the income snowball stuff and I’m very anxious to hear about the top secret stuff.
Daniel Richard | WE said,

Wrote on July 4, 2008 @ 10:06 pm

Guess what… This is a very do-able goal. Loved how you come up with interesting concepts and terms used such as the “entrepreneurial rabbit hole”, to “project liberation” and now “income snowball (to making trillions on the Internet)”!

Let’s start with the snowballing effect first shall we. :)

Daniel
http://winningeveryone.com
Louise Pool said,

Wrote on July 5, 2008 @ 12:20 am

Another great article. Love the idea of dreamlining. I’ve been doing it intuitively for many years now, but I think I’ll actually make a list and see what more comes up.

And yes, it’s definitely possible to live a free life with kids. I have two and, without having a great income, even managed to get the “required” game console, cellphones, etc. This whilst moving countries on a “whim”, etc. We’re a very loving, if unconventional, family and my kids are now happy teenagers, drug and addiction free.

I’m really looking forward to Project Liberation. Sounds right up my street.
Laurie said,

Wrote on July 5, 2008 @ 1:45 am

My new business is a part of my dreamlining. Hopefully it will pay the bills once we get it kicked off!
Jared Goralnick said,

Wrote on July 5, 2008 @ 1:16 pm

Interesting post, Clay. We all need a little kick in the butt to pursue things that will allow really help us to develop perspective and make the most of life.

Let me be the contrarian and just point out that the debt snowball is a very personal and passive endeavor–regardless of what you pay off, it just affects your own financial situation and nothing else. On the other hand, the “income snowball” is actually a pretty big deal in that taking on new lines of work really affects those around you, people’s perceptions of you, the amount of commitments you have, your existing financials, etc etc.

I like your approach of suggesting “start with the easy stuff and hang a shingle,” but there’s a greater commitment to taking on a tangential career path than choosing which debts you pay off first. Some streams of income are no-big-deal and others may become beasts of a job. I just want to offer the caveat that when figuring out which new jobs are most accessible that one should also consider what the long term implications are. (I know long term is anathema to “quitting things and flakiness” but I also recognize your readers don’t want to leave their new customers hanging.) Sometimes that might lead to choosing a number slightly higher up the list…or a different path entirely.

There I go being the traditional boring guy. Just food for thought : ).
Adam King said,

Wrote on July 5, 2008 @ 4:11 pm

@Jared

You know, I think I agree with you on this. That’s a good thought. I see where that needs to be a consideration. If you take on an income stream that works, and works all to well, then sure your time will be required to maintain it. Sometimes this may mean a total sacrifice of everything you once and still hold to be most important. So, is it worth it in the long run?

I never did ask myself that in the beginning, I wonder what would have happened if I did?
Clay Collins said,

Wrote on July 5, 2008 @ 4:42 pm

@Jared and @Adam

I agree about tangential careers, but I believe that one can build an income snowball while doing a number of things that are clustered around your ideal career path.

My long-term goals are very tied up with the internet, so I’m not building websites, doing social media and SEO consulting, and writing ebooks just to make an income.

It’s also worth nothing that you can create business relationships that don’t demand 2+ years of commitment. Unless they hire me, I don’t think ANY of my clients would feel mislead if I can’t continue my services on a consistent basis for the next two years.

So, in summary, I think it’s possible to (1) create an income snowball that’s clustered around a core of relates talents and passions, and (2) manage the expectations of your clients so that no one misunderstands what you are offering.
Kenny said,

Wrote on July 5, 2008 @ 8:39 pm

I’ve tried to consistently read productivity blogs for over a year now and just can’t seem to do it. And though it’s difficult for me to do anything consistently, I’ve found myself coming back The Growing Life and listening to the Precision Change Podcast in my car on the way to work (on a burnt CD, because I’m too poor to buy and iPod).

So, now that that unrelated to the post part of the comment is over, I really enjoyed this post though there is one theme I find that always places me outside the scope of the productivity circles… it always seems that everyone is employed, and makes a decent income at an office type job and they’re trying to get out of that. However, I have a shitty job, working at a security monitoring company (I don’t get a flashlight) making barely enough to get by (my fault entirely).

I do, however, have a plan, and I’ve been studying and implementing many ways to make money online and I believe I’ve come to a point where I can make enough to quit my job (which would make me freaking amazingly happy in just that).

So, I’m just going to lay it all out there. I’m in moderate debt, make about 23k a year and I have very few expenses (the biggest one is my debt). I hate my job and feel like I work and sit around and work and sit around… etc. I’m very inconsistent but I’ve seen results from very small amount of work online. I know if I worked online (which I love) I could make enough money to support myself.

This is probably a stupid question that only I can answer, but hey, it’s good to hear what other people have to say.

Should I quit my job and just work my ass off on my online business…

Or, should I keep my job and try to work my ass off simultaneously to make enough money to quit (which I’ve been trying to do for years).

This comment is way longer than I expected. Sorry. And thanks for the post.
Clay Collins said,

Wrote on July 7, 2008 @ 5:34 am

@Kenny: Thank you so much for this very thoughtful comment. I’ll go ahead and email you offline.

–Clay
The Financial Philosopher said,

Wrote on July 7, 2008 @ 9:24 am

I’ll provide testimony that starting your own business or a new career with children is quite possible. I started my own business two years ago with two young children and a stay-at-home wife…

The only financial advantage I had was equity in my home (but not a large amount) to finance the business.

For me, the ability to make the change came from a combination of frustration with constantly hitting dead-ends and glass ceilings working for “the man” and an attitude that money is abundant. In my first year of business, I gave money to charity even though I was not profitable; my wife and I never changed our lifestyle; I continued my masters program; I started a blog; and the newfound freedom opened new doors as my creativity exploded.

Now I see that the possibilities are only limited by my imagination…

My advice to others is that “being responsible” can actually be counter-productive and the quest for discovery is limited without adding adventure to our responsibility…

“We have to recognise accident, i.e., the fact that there is no formula, no ‘principle’, which covers all things; that there is no totality or system of things. And this recognition at once supports a life of ‘responsibility and adventure’ and leads to scientific discovery.” ~ John Anderson

Great post…

Kent (The Financial Philosopher)
Lila said,

Wrote on July 8, 2008 @ 12:56 pm

In 2000 I had a baby at the age of about 30. I had a pretty solid career in a very specialized IT related field. Luckily my boss let me go to very part time, but about 3 1/2 years later (and a couple of years into a second baby) we suddenly parted ways. I panicked for about a month, but amazingly work just started coming to me. 5 years later, it still just comes to me (knock on wood). I’ve been able to stay at home the entire time and keep the outsourcing of motherhood to a bare minimum (an average of less than 18 hours a week since their birth) Although they do go to school now, I’m able to pick them up and help them with their homework before they run outside to play with their friends.

Just about the time I start panicking that a current consulting job is about over, someone else calls. I have a dozen projects I’d love to do (including advertising my consulting “shingle” and blogging) but haven’t been able to swing it yet.

When people ask me what I do for a living I can never really say because I do so many different things so I’ve made up some line about computer consulting.

If it hadn’t been for the sudden change in employment I don’t think I would’ve had the nerve to jump off of that bridge, but I’m very glad I did. Now if I can just figure out a way to make the money come in automatically so I can do more traveling… I’ll have to read part two!!!
Chris Kirk said,

Wrote on July 8, 2008 @ 9:17 pm

Thanks for the post, man. My wife and I just walked through your post here as a framework for discussing an impending life change. Very helpful.
resonanteye said,

Wrote on July 20, 2008 @ 2:34 pm

had to subscribe; this was helpful as f^ck. Nice to finally have a name for what I’ve been doing all these years.
Blake@YoungDough said,

Wrote on July 22, 2008 @ 3:04 pm

This was a much-needed jolt to get me back on track! Have you heard of the song ‘Real World’ by Matchbox 20? It reminds me of this so much, since the real world seems to put up a good fight as we try to escape, but it’s completely worth it.
Blake@YoungDough said,

Wrote on July 22, 2008 @ 3:11 pm

Oops, sorry about the last comment! Had several posts of yours open at once and wrote in the wrong tab!
Jake @ Silver Coins said,

Wrote on July 25, 2008 @ 3:35 am

great post. everyone should have various sources of income
Greg Gardner said,

Wrote on July 27, 2008 @ 10:32 am

I listened to the podcast on PC and have been reading your blog for a while. I’ve been a student of personal development for 20+ years. What a refreshing and liberating perspective!

My wife and I have been baselining and taking small steps to decrease our “stuffprint” — (I just made that up!!)

I work for a Fortune 500 company but I have to tell you that the Life Design idea has not gone unnoticed by them. It seems that allowing employees to create their own reality makes sense for them as well. I now work from home and have almost total control over my schedule.

Because of that transition I’ve had the space to share my own voice on certain issues. Sufficed to say that I appreciate your voice. You’ve helped me and my family.