Last week I shared some ways to becoming a millionaire and I’ll hit that topic from a few different angles in the coming weeks. This week, I want to give you some simple ways to make the most of the income you already bring in, because if you can cut your expenses, it is pretty much the same thing as getting a pay raise. Here are five ways to cut those expenses and resources that will help you maximize your income.
Look at Your Paycheck
I am privileged to see pay statements for lots of those folks I counsel. As we’re reviewing the pay information, I always check to see what things are being taken out before the net (take-home) pay. There are the usual suspects: federal and state taxes, health insurance, 401k, etc. But every now and then there’s something crazy in there. I’ve seen everything from allowing the IRS to withhold an extra $500 per payday so you’ll get a big tax refund (which is a bad plan, by the way) to withholdings for some random, unclaimed benefit that the employee didn’t even know he/she had and didn’t want. That’s money down the drain. As obvious as it may sound, look over your most recent paycheck stub and make sure you’re not giving away any money you shouldn’t. If you can’t understand everything on there, visit HR and ask them to explain it.
Be Willing to Change
This is a biggie! There is very little about personal finance that has to do with complicated math. I get asked all the time why I don’t use a calculator when I counsel folks and my answer is that the math MUST remain simple for you to be willing to do it. If you can do 3rd grade math, you’ve got the math part covered. The key to success is your willingness to change your behavior. Are you willing to change a habit if it will better you? Are you willing to admit you’ve made some bad choices and start making better ones? All of us struggle with this, but if you’ll be willing to change, you’ll be ready to win!
Look at EVERY Expense
With a willingness to change, now it is time to sit down and look at your checkbook and bills and review EVERY EXPENSE. Even if it is just the power bill – look at it! Are you spending money that you could use somewhere else more effectively? Britni Ross from Our Eventual Homestead just released a great little eBook called “Grow It, Build It, Save It!” that will really get you thinking about ways to cut unnecessary expenses (Note: the book is $0.99 right now, but she told me she’s going to run it for FREE on Amazon March 4-6!). It is short, to-the-point and is a great resource to get you thinking in the right direction on this.
What really matters to you? I’ve heard many pastors say they can look at your checkbook and answer that question and they’re right – we spend our money and our time on what is important to us. If you want to make the most of each day, set a schedule and stick to it. If you want to save money and maximize what income is coming in, spend a little time prioritizing your money (it’s called budgeting) and stick to it. You are in charge – make sure your money knows it. Need some help with budgeting and getting your financial house in order? Let me make a shameless plug for my book, “From Debtor to Better.”
Be Smart About Savings
If you’re not saving anything now, START! Don’t wait – do it now! Then once you start looking at where to put some of that money back for later, don’t be lazy! I’m consistently surprised that most people who complain they aren’t making any money in their savings/investments can’t tell me what they’re investing in, what their savings goals are, when they plan to retire, how much they need to retire, or a myriad of other pretty important questions that must be addressed if you want to be smart about what you do with your savings. Think about it – is it worth a few hours of your life to learn these things and develop a plan? It could literally be worth thousands, tens of thousands, or even hundreds of thousands of dollars. Figure out a plan for saving and then do it!
Earning a higher income can mean paying more in taxes at both the federal and state levels. There are a number of high earner tax savings strategies for high-income earners that can help to reduce what you owe.
Okay – your turn. What are some tips you’d share to help others make the most of their income?