Generally us humans don’t like intimidating things, and we don’t like things that give us a different answer than we are looking for. It’s typical for us to ignore these things completely. It’s kind of like that for money.
If you really look at your finances for the first time it might be intimidating. You might find that you really can’t afford that new car you want, or you might not be able to afford going out to dinner every night.
You might want to go do all these things, but when you look at your finances you will realise that you can’t. Well, you might just ignore it and do it anyway. In the short term, this will provide you with a nice life, flash car, dinner with friends, the whole nine yards- but in the long term, this will hurt you.
It will cause your stress, you might stop sleeping, and your communication and relationship with your loved ones might start to break down.
For this reason, I’m going to encourage you to create a basic budget. You don’t need any fancy budgeting software like PocketSmith. Hell, you don’t even need to use a spreadsheet. You can just use good old paper.
Basic Budgets
Work out how much after-tax you are bringing in every week, and how much you are spending each week. Categories our spending- how much is on rent, how much on your car, how much on your insurance, groceries, clothes and consumables, and eating out.
This will give you a general sense of your personal financial situation.
It doesn’t stop there though- you need to roughly track how much you are spending on each of these categories over some time- eventually, you might realise that you spend much more on eating out, or spend much less on clothes that you originally thought.
After a while, you will have a good idea about where your money is going and how much you have left each month. And for you to get ahead, your budget needs to have money left over- you have to live below your means.
Once you have crafted a budget that is below your means– below your income- you can start saving.
Earn More or Spend Less
Now if you’re not living below your means there are two ways you can change this. You can either earn more or spend less.
Spending less has been hammered- don’t buy coffees every day, don’t get a car loan, don’t buy the latest iPhone every year- Just eat rice every day. I’m not going to go over any tips on spending less here.
It’s interesting that many people are willing to talk about their weight, love lives and secrets with others but when it comes to money it seems to be very difficult for people to share their experiences. I think that this makes use all worse off.
There are other aspects of your money that might also intimidate you. You might be intimidated when you trying to negotiate an increase in salary or wages. This definitely intimidated me at first- but you need to do it to get ahead.
Income is not Fixed
Now the first step to trying to increase your salary or hourly rate is to stop thinking about that number as a fixed number. Think of it as a number that can grow over time. Have a goal to increase this number every year.
Increases in wages are rarely given- they are earned. They are earned through working hard and providing value- but remember the increases go to the people that are confident enough to ask. And the people that are confident to ask for increases are not always the ones that deserve the increases- so remember to ask.
Invest your Time
Now- to ensure that you deserve that increase in pay think about how you spend your time. Time is truly the one resource that is finite. Once you spend it, it’s gone.
If you are actively trying to increase your income us your time wisely. Invest your time. Spend time to expand your skills, take classes. Find a mentor. Figure out other ways that you can get income. Or figure out how much other companies in your industry pay.
Use your time to figure out how you can earn more next year.
Follow the Money
When you are paid to do something- where does that money actually come from? Follow the money- where does it really come from. And think about. Who is paying your salary and how are you creating value to them.
Who is your boss really- it might be that it’s not really your actual boss- but rather the clients or customers that write the checks. Understanding how you can add more value to your real boss- the person who is paying- leads to one of the most important things you need to know- how much are you worth.
How much you are worth is not related to how much you earn. Rather it’s how much money your work is bringing in because of the value you add. When you know your worth you can negotiate.
Your worth is also relative. It’s relative to what others are being paid for doing the same work. To make your self worth more than making sure that when you have gone beyond and above your normal duties- quantify it to your bosses. Not at the time of your performance review- start before your performance review.
Salary Transparency
Working in today’s generation has one big positive when compared to the past generation. Data. There is much more transparency into how you and everyone else gets paid. This is normally led by governments, where government employees have clearly defined salary bands and income levels. You know where you are and you know where you are going.
Knowing what everyone else is getting paid allows you to ensure that you are getting fairly paid too. The problem now is that its the responsibility of the employee to prove that you are worth, and to make a case to get an increase.
Be more aggressive. It might be intimidating to confront your work and negotiate for more money- Take ownership, don’t let your income be left in the hands of your employee.
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I saw a lot of raises over a long career. It wasn’t unusual for me to get more than one raise in a year. But I had a very good system for getting them too. It depended on two things. The key one was for me to be indispensable, to be so good at my job and to show so much promise for future positions that they would be terrified to have me quit and go elsewhere. And the second one was to have a network that included a lot of other companies that hired people like me and a lot of professional recruiters. It was normal for me to get a call about a job offer at a competitor at least once a month from one of these recruiters and when I did, if the salary range was higher than my current pay, I would let my boss know. I always said, “I’m happy here but I thought you might be interested to know what others are paying.” That worked every time. I saw my salary go from X to 24X over my career without ever leaving my first employer. In fact I ended up running the company. Nothing proves your worth to your company like another company wanting to pay you more. It was like asking for more money without actually asking!
That’s good advice. I have used similar tactics with some success. But now that I am in a somewhat managerial role- I keep getting told that good managers make themselves obsolete. This doesn’t sit well with me. How are you providing value if you make yourself obsolete? So far I have resisted from this way of thinking and continued to provide as much value as I can while still managing and teaching those below me.