7 Little Changes That Will Make a Big Difference with Your Income
Improving your income requires a hard look in the mirror
Improving your income might seem like a dream, perhaps even a far-off one.
Have you ever gotten to the end of the month and realized that you’re all out of money in your checking account? Have you ever looked at your paycheck and said, “If I just made a little more money, I would be fine.”
I definitely have.
It’s easy to get depressed looking at your empty bank account at the end of the month, hoping that you can make it just a few more days until your next paycheck arrives.
Approximately 80% of Americans live paycheck to paycheck, and it happens at every income level. I have had financial coaching sessions with couples making less than $20,000 per year and couples making over $200,000 per year, all of whom feel trapped in an endless cycle of living paycheck to paycheck.
The thing is, it’s almost never just an income problem. It’s almost always at least partly due to your spending habits. If you spend more than you make, you’ll never get ahead. That’s just the mathematical reality.
Improving your income: 7 things you can start doing immediately!
1. Do a budget.
Regardless of what topics my financial coaching clients want to cover during a coaching session, their first session always starts off with a discussion about budgeting. The reason for that is that it’s the number one thing that consistently links high net worth individuals.
Millionaires are intentional about directing their money where to go so they don’t get to the end of the month and wonder what happened to it. If you do a budget every month and then really stick to it, you’ll feel like you got a raise. It’s amazing how well this works.
If you want to get your money really working for you, start with the budget. For additional details on how to do a budget, check out my three part series on budgeting and download the free guide to creating an easy budget that works.
2. Stop going out to eat.
Eating out is consistently one of the top three things my coaching clients cut back on in order to make their budget work each month.
Think about the last time you went to a restaurant. Dinner and drinks for a family of four is going to run $25-50, even if you’re going to a quick-serve restaurant. You do that 10 times per month, and that could be over $500. Cut back on the restaurants and eat at home.
3. Increase the number of tax exemptions you claim.
This will mean you’ll have less taken out of your monthly paycheck. If you got a tax refund of $5,000, that’s $417 per month that you’re giving to the government above what you actually owe in taxes. An extra $417 per month in your pocket would probably make a huge difference to your financial situation.
My goal every year is to have a refund of no more than $2,000, but ideally around $1,000. I try to not put myself in a situation where I have to write Uncle Sam a big check in April due to underpayment of taxes, but I want to be close enough to zero taxes owed that I know I was receiving as much of my income on a monthly basis as possible.
4. Get rid of debt.
This isn’t a short-term solution, but it has to be at the center of any serious financial plan. Debt is a thief. If you have money going out the door to credit cards, student loans, car loans, and personal loans, then you have less money available for saving, investing, or spending.
Be aggressive about paying off debt, especially non-mortgage debt. Don’t fall into the trap of letting those student loans hang around and steal your joy for 20 years. Get rid of them as fast as you can! See my beginner’s guide to student loan management for more information.
5. Maximize use of tax-advantaged investing.
Investing in your 401(k) or IRA won’t help your monthly cash flow, but it’s an important part of making your money work harder for you in the long run. A dollar you invest at 7-10% rate of return now will be worth much more in twenty or thirty years. Get that money working for you now so you have more available when you need it for retirement.
6. Make more money.
Ok, this one seems pretty obvious, but I’m amazed at how often people overlook this. You are not limited in earning an income, except in your imagination. Here are a few ideas:
- Pick up more shifts
- Start doing some moonlighting
- Ask your boss for a raise (if you’ve earned it).
- Maybe your spouse can pick up a part-time job.
Ideas for a stay-at-home spouse:
- Walking dogs
- Housesitting for neighbors who are going on vacation.
- Start a small business selling something or providing a service
- Deliver pizzas
- Driving for Uber/Lyft.
There are lots of ways to make extra money in the short term to meet a goal like getting rid of debt or saving for a major purchase. This doesn’t have to be a life sentence. Use this option to propel you forward for a short time to meet your goals.
7. Increase your generosity.
This might seem counterintuitive. After all, we’re all about improving your income. If you give away your money, there’s less for you, right?
Here’s the thing. I’ve rarely met someone in the hundreds of clients I’ve coached who could live on 100% of their income and legitimately couldn’t live on 90-95% of their income.
As an evangelical Christian, I give 10% of my monthly household income to my church, and I’ve been doing this ever since I was old enough to earn a paycheck. Regardless of your religious views, would you agree that generous people are more attractive to be around?
Generosity breeds contentment, and content people are more likely have good home lives and successful careers. I encourage you to include giving in your financial plan. It may be a small amount when you’re first starting out after school/training. No matter what the amount is, just start giving something.
Build those giving muscles so when you’re making more money, you will have an even greater capacity for outrageous generosity.
Improving your income: wrap up
You are the master of your money, so take control! These seven practical suggestions are a great way to start improving your income effectively and begin taking control of your financial future. Be intentional, and you’ll find that you have more money coming in than you thought you did.
Leave a comment below and share your number one tip to help make the most of your income.
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- Budgeting Part 1 – You WILL Fail Without a Budget
- Budgeting Part 2 – Five Easy Steps to Make a Budget that Helps You Win with Your Money
- What to Do if You Want to Retire with Enough Money
- Budgeting Part 3 – How to Budget on an Irregular Income
- The Beginner’s Guide to Student Loan Management
- Four Steps for Calculating Your Net Worth
- Generosity is the Cornerstone of Any Good Financial Plan
- Who Is on Your “Personal Board of Directors?”
- You’re Doing Your Insurance Wrong. Here’s What You Need!