Why A Pay Raise Does Not Always Translate Into A Better Life

How often have you said or heard people say “if I could only get that pay raise, I would…” and you can fill in the blanks with every imaginable fantasy.

Unfortunately, even after the pay raise, something is still quite missing and the over simplification by using the word ‘only’ is suddenly not as obvious as it seemed.

I worked in a corporate environment where that was the order of the day. Each pay raise came with an increased set of expenses to ‘fit the part’ of the new position and often the take home would be worse than it was before the raise.

It is important to understand that it’s not how much you earn, but what is left over after all your expenses.

Here are some of the things you need to look out for to ensure that any increase in your earnings is worth the while.

1.  Increasing your expenditure over and above your increase in earnings

Higher pay qualifies you for larger amounts of debt, since you can handle the enhanced installment payment with your increased pay. The outcome is usually a bigger car loan and a bigger mortgage and more expensive tastes.

This usually begins as a celebration for what may seem like a ‘financial breakthrough’ for you, but can easily end up as an uncontrollable habit.

If you are barely one step ahead of your bills and drowning in a sea of debt, it helps to maintain your current expenditure and increase your savings and investments.

2.  With an increase in income, you may move into a higher tax bracket

Depending on how significant the increment is, you may find yourself moving into a higher tax bracket and therefore paying a lot more in taxes than you were before.

Your increment in ‘real terms’ would only be a fraction of what you thought it was after the government has taken its share in form of taxes.

The tax system, however, is usually more favorable to business owners than it is to employees.

3.  Increased vulnerability to your source of income

In extreme circumstances, we are naturally conditioned to adjust our lifestyles to our earnings. If you are a business owner, you are more in control of your financial destiny than if you are an employee.

As an employee, the higher you rise up the corporate ladder, the more vulnerable you become to interruptions in your lifestyle pattern should you lose your job.

Furthermore, it’s a lot easier to replace a low salary with income from a business of your own that it is to replace a higher one, should you become unemployed.

Thus the fear of losing your job will increase as your earnings increase, and you will find yourself doing things you wouldn’t otherwise have done, like working for a boss you do not like or respect.

4.  Increased responsibility and therefore less time for yourself

Every employer wants to get the most out of employees. For that reason, it makes sense to weigh the increased responsibility that comes after the raise, with the extra value you are getting from the monetary increment.

In most cases, you may be required to work longer hours, often at the cost of time with family, your hobbies and other personal interests.

The question to ask yourself is whether your increase in earnings will help you achieve your spiritual, financial, relationship, career or business goals.

If you are struggling financially and barely making a living, the problem is usually not your employer or the government or any other person you may choose to blame.

Money doesn’t flow to you simply because you need it. Make the decision to go where your value is recognized by a target market that is willing to pay for that value.

In that way, you will find yourself attracting money rather than slaving away for it.