Grace by definition can't be earned. It's free - a gift. Grace is unmerited, divine favor bestowed freely upon people by our Savior, Jesus Christ. One definition of grace I read said, "a favor rendered by one who need not do so; indulgence." Grace is indeed indulgent.
Why do we experience God's grace? Because God desires us to have it. Purely out of his benevolence. Grace is given by the Creator of our universe generously, freely and totally unexpectedly.
Grace is not given because of any merit on our part. As stated in its definition, grace is not earned; it's undeserved. So called "good works" are what a believer does in response to his salvation - out of gratitude toward his Savior. Grace is not the result of "good works." Quite the opposite is true.
What I love about this song and especially these lines is the implication that I should not be striving. Instead I should be resting in God's grace and love. Psalm 46:10 says, "Be still, and know that I am God."
"Be still" in the original language translates "cease striving." It implies that we are to rest in the grace of our Lord Jesus Christ. We are to wait on him as he works in and through us. We are to wait on him to direct our next steps.
And then... only as a result of our resting and waiting will we know through experience (not just head knowledge) whom our God is.