Biggie was singing truth when he sang, “Mo Money Mo Problems.” Like that elusive carrot, that next raise or promotion won’t necessarily mean financial success. If you’re on the corporate ladder but feel like you’re on the hamster wheel, the problem may not be your job or your income. The problem may be you.
A friend of mine who’s a successful hospital administrator texted me recently. She said, “Career-wise, I’m doing great. Financially, I’m doing horribly. With each promotion and raise, which bring more demands, I have less free-time and, therefore, spend more money on conveniences like dining out and house cleaning.”
This story is a classic example of lifestyle creep. Lifestyle creep is when our standard of living in proportion or beyond our income increase. For example, would you even consider drinking the wine today that you drank in college? Do you own a more expensive car today than you owned ten years ago?
As we continued, my friend said that she’s also not exercising. So, between not working out and her increase in dining out, she’s gaining weight. Therefore, she’s buying more clothes that she doesn’t even want. My friend feels like she’s in a perpetual cycle trying to succeed at her career and hoping to succeed financially only to fail financially and otherwise. She said, “What gives? I might have more money if I wasn’t so focused on my career.”
Outflow is More Important than Inflow
The truth is that doing well with your money isn’t based on how much money you earn but how much money you keep. For most of us, our lifestyle increases with increases in our income and, even, increases in our available credit.
It’s tempting to want to be king – or queen – of the hill: You call the shots, you’re accountable to no one, and you make the big bucks. However, the proverbial “brown” runs downhill, and it can be lonely and stressful at the top of the hill or ladder.
Once upon a time, I was a tiny cog in a big wheel. I put in my 9-to-5, clocked out, and my nights and weekends were mine. When I became a slightly bigger cog in that wheel, 9-to-5 became 7-to-7. Monday through Friday became “and some weekends.” I had more responsibility, more to lose, and more ways to lose. I wondered if it was worth it.
Steve Tappin, the author of The Secrets of CEOs, said, “The major emotions a CEO has are frustration, disappointment, irritation, and overwhelmed. There should be a health warning. If you have those emotions for 80 percent of the day, they lead to stress and cortisol in the body, which leads to accelerated aging, heart attacks, and cancer.”
Therefore, in addition to my friend’s increased expenses from exercising less, eating out more, and buying clothes she doesn’t want, she could also expect a decrease in her health exacerbated by her increased stress. So, with these challenges in mind, let’s see why my friend, and potentially you, can do to avoid this tricky situation.
Learn from the Best
How many million-dollar celebrities and athletes do we hear get into financial trouble? From MC Hammer to Johnny Depp, history is ripe of millionaire earners with no money in the bank.
On the other hand, there was Oseola McCarty, a former washerwoman from Hattiesburg, Mississippi who gave her $150,000 fortune to the University of Southern Mississippi and was, at the time, its most famous benefactor. $150,000 in 1999 would equal $220,957 today.
Likewise, consider Ronald Read, a former gas station employee and janitor. When Read died in 2014, he was worth an estimated $8 million. Read was an avid investor who lived frugally. He’s another example that it’s not about how much money you earn, rather it’s what you do with the money you make.
“If you want to have more, you have to become more,” said Jim Rohn. People who don’t improve themselves when an opportunity presents itself often return to their current state. Lack of personal development, especially with managing money, is why 70% of lottery winners and 80% of retired NFL players go broke. They have a losing money mindset, and their winnings don’t change that.
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Know Yourself to Improve Yourself
How do you get off the wheel if you feel like you’re the hamster?
The first thing to do is figure out what’s most important to you and then live your life and spend your money accordingly. When my husband and I admitted that we had $51,000 in credit card debt and expected the next raise or promotion to solve our money problems, we realized we were on a similar cycle as my friend.
We did a lot of self-reflection and had lengthy discussions about what we most want out of life, what we want to achieve and what’s important to us. Then, we put everything we said on the witness stand and cross-examined them until our actual goals became evident.
After you assess what you want and why you want it, determine what’s blocking you from your goals. It was a harsh reality to learn it wasn’t our jobs or our incomes that put us into $51,000 worth of debt. It was us. Until we improved ourselves, no job or salary would change our results.
Finally, decide what you’re willing to do to overcome your blockers. For us, it meant not traveling for a while, cutting back on dining out and adjusting our social lives. Keeping our eyes on our goals gave us the inspiration to pay off our debt. At first, it felt like we had to give up a lot. Since that time, though, we paid off our debt and turned our financial lives around. Our quality of life has never been better. The temporary sacrifice was worth the long-term gains.
Stick with the Facts
The salary you’re quoted when you’re offered a job won’t equal your take-home pay. After factoring in pre- and post-tax deductions, your net take-home pay will be considerably different than that larger, quoted salary.
When you create your budget based on your new job, include such expenses as Medicare, Old Age Security Disability Insurance (FICA), state and local taxes. Also, don’t forget about the expense of your employer benefits, such as medical, dental and life insurance.
These costs are listed on your pay stub. Because of the above deductions and more, it’s important to use your net take-home pay and not your gross take-home pay when creating your budget. You can use your net take-home pay as a gauge to help prevent lifestyle creep. Using your net-income will also help you choose which conveniences are most important as you focus on the responsibilities of your new job.
While my husband and I each received raises and promotions while we paid off our debt, it was only because of being clear with our goals, and how much money we actually brought home, that our raises and promotions improved our financial lives.
Just as climbing the corporate ladder won’t solve all your problems, your next promotion or raise won’t make you rich. It may even make you poorer. Realizing that it’s not external factors or our circumstances that dictate our success, but our choices and behaviors will do more for our financial success than any job.
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