“Good things happen when you get your priorities straight.”
If you’ve been a long time reading of this site , you’re hopefully either beginning your ascent of the career ladder or adjusting to your new (and hopefully better paying) job. If you haven’t, you’re probably feeling like all of this seems like a heck of a lot of work. Well I have great news for either group: you can still make a major improvement to your salary.
This final step is all about increasing your salary’s buying power. You can change how much you make by changing the way you spend it. I’ll explain with a few examples based on various financial goals:
More savings – Let’s say you make $50,000 each year (after taxes) and live a lifestyle that costs $40,000. Let’s say you want to increase your salary because you want to be able to save $20,000 per year. If you’re having trouble finding ways to increase your earnings, you can still achieve your goals by decreasing your spending. Cutting $10,000 from your annual expenditures will have the same effect as earning an additional $10,000. You’ll reach your goal either way!
More extravagance – Now let’s say your only goal is to live a flashy lifestyle. You make $100,000 per year (after taxes) and you already spend all $100,000 of it (or worse, you’re spending beyond your means). You can increase your buying power by making a list of your desired lifestyle’s absolute essentials, and then cutting the rest to the bare minimum. You can still drive the 2012 Mercedes if you skip Starbucks every morning, join a cheaper gym, and cut your eating out in half.
Budget Control – I know what you’re thinking: “This step is just a cheap trick to make me feel like I’m earning more.” In a way you’re right, that’s exactly what it is. All too often, people adjust their spending habits to exactly match their income. Be aware of where your money goes and spend based on your priorities. All too often, people fall into the habit of spending money simply because it’s there.
Don’t fall into the status trap – If you do get a raise, what’s the first thing you would do? Move into a nicer apartment? Lease a shiny new sports car? Treat yourself to a brand new wardrobe? Each of these choices would be a money sink, and you won’t be retaining a single dollar of your income. So often, people follow their 20% raises with a 20% increase in lifestyle cost. Here’s the question: weren’t you getting by on what you made before? Couldn’t you keep on spending what you did? Treat yourself a little, but keep your priorities in line.