If you ask most people whether they would like to earn a pay raise, they would answer yes.
If you ask them whether their boss is likely to give them a pay raise, they would most likely answer no.
However, there is a reliable way to give yourself an after-tax pay raise in any year and any economy. This fool-proof strategy is to track your spending and tighten-up your budget, regardless of your pay.
The power of this strategy comes from the fact that every dollar of our pay that we spend is taxed before we spend it. This means that when we find ways to reduce our personal spending profile, we can immediate reward ourselves with an after-tax pay raise.
There are seven steps to this process:
- Begin tracking your personal spending – An online tool like Mint may prove helpful.
- Review your income spending each month to see the source and uses for all of your money.
- Determine how much of your spending is a “Fixed” obligation each month and how much is discretionary.
- Rank your spending (fixed and discretionary) from the most important to the least important.
- Cut out the least important item on your list, and see if it makes much of a difference. (Chances are it won’t)
- Repeat this process next month, finding more low-importance items to eliminate.
- Take the money that you are saving (your after-tax raise) and do something intelligent with it, such as investing it for the future.
In the end, you have the power to shape your personal financial future with the decisions that you make. Instead of waiting for a politician to create a program, take action yourself to build a more productive and more prosperous future.