“Spend less than you earn” — that’s a timeless and essential piece of financial advice. However, even among money experts, there’s disagreement about which side of the equation to focus on: earning more money or spending less of it.
Unfortunately, the income side of the equation often is neglected. If you don’t earn enough, you might be cutting costs and micromanaging your budget, but you still might not see the desired results.
Here are five telltale signs that it’s time to put away the budget spreadsheet and focus instead on growing your paychecks.
1. You’ve already cut your budget to the bone
Cutting costs can be a smart way to start managing money wisely. Too many people tend to overspend on things they don’t need and might not even want.
But every budget has a point at which it can’t be cut anymore before you hit your bare minimum of expenses. Living costs eat up huge portions of your budget, but expenses such as rent or mortgage, food, and child care often aren’t negotiable.
If you’ve already nonessential expenses and still are struggling to scrape by, it’s a sign you’re not earning enough money in relation to your costs of living.
2. You’re in danger of missing debt payments
If you’ve come close to missing one or more debt payments in recent months because you couldn’t afford them, that’s a big problem. Missing a payment can have some harsh consequences beyond the initial late fees and or a penalty APR.
A missed payment also can put a derogatory mark on your credit report and cause your score to drop. It usually can take more than a year for a credit score to recover from making a late payment.
You can try to manage debt through options such as refinancing your student loans or consolidating credit card debt, but it can be tricky. If you’re in danger of missing your payments, you might not have the income or debt-to-income ratio needed to qualify for refinancing. Instead, it might be more effective to focus your efforts on raising your income.
3. Your income is lower than it should be
Are you being paid what you’re worth? It’s an important question to consider, but one that can be tricky to answer. You’ll likely need to review your compensation and research average salaries by industry to be sure.
First, you might want to review your income growth in recent years. If your income has been stagnant or hasn’t risen recently, it’s likely that your wage isn’t keeping up with market increases in pay.
You also can use income-tracking sites such as PayScale to see if you’re being paid fairly for your area, job title, and level of experience. Or you can use job-hunting sites such as GlassDoor to compare salaries in your company to make sure you’re not making less than what your coworkers do.
4. You’re feeling stressed about money
Money has long been a major source of worry for Americans, with 62% of people surveyed selecting it as a top stressor in American Psychological Association’s 2017 Stress in America survey. There are plenty of causes of financial stress, from too much debt to high living expenses.
Most money worries, however, can be resolved if you have more resources available and manage them responsibly. If your debt is stressful, for example, you can pay off a loan balance to get rid of a monthly payment. If your budget stresses you out, earning more could mean you won’t have to agonize over every expense.
In these cases, increasing your income can be an effective solution to the problems that are stressing you out the most.
5. You want to speed up financial goals
Even if you’re doing well with your budget and income, you might be interested in growing your income. After all, having more money at your disposal will help you work on reaching financial goals faster.
Whether you want to get out of debt, start saving for retirement, or invest money, you’ll need to have the funds available. Earning more now will mean you’ll reach those financial goals sooner.
Ways to start growing your income today
Increasing your income is easier said than done. Unlike being able to cut expenses, you don’t always have direct control over your income or see immediate results from your efforts. But there are steps you can take to boost your earning potential and bring home bigger paychecks:
- Seek overtime or extra shifts. If your current job offers overtime or pays hourly, see if you can work more to boost your income. It can be one of the simplest and fastest ways to earn more money.
- Ask for a raise. If your research shows you’re not getting paid what you’re worth, it could be time to broach the subject of a raise with your supervisor. Document all the successes you’ve had at work and your contributions to building the business to show you deserve to earn more.
- Look for a new job. Instead of counting on your employer to pay you more, accepting a job at a new company can grow your income faster, research shows. Update your resume and start sending out applications to find your next great opportunity.
- Get a second job. You can do a part-time job in the evenings or on your days off from your regular job to earn an extra paycheck. You could try working at a local retail store, wait tables at a restaurant, or babysit.
- Start a side hustle. To use your free time more effectively, consider taking on a side hustle that’s suited to your skills. You could offer tutoring or classes in a skill you have, for example. You also might be able to freelance or offer consultations for a higher hourly fee.
It can take a while to see the results of focusing on growing your income, but the payoffs can be huge. While there’s a limit on how much you can cut costs, there’s no limit on how much you can earn.
The key is to get started. Consider the above steps on how to increase income, choose one that’s a good fit for your skills and needs, and take action.
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