Once upon a time, a now-defunct financial media company had a Twitter contest asking people to put a piece of financial advice into three words. My submission was:
Earn, Save, Invest
I didn’t win, but I still think that’s basically everything about personal finance. If I’m allowed a fourth word, I would throw in Insure and make it "Earn, Save, Insure, Invest."
First you earn the money. Then you save some of it, insure against accidents, invest your savings for the long-term, retire, and live happily ever after. Of course the devil is in the details: how to earn, save, insure, and invest. The details produce countless musings and strategies.
Among the four elements — earn, save, insure, and invest — I think earn is the most important. Income drives everything. It’s possible to save a lot on a modest income. Some people have a high income but spend it all. Still, a good income helps a lot. I won’t be surprised to see that as a group, people with a higher wealth had higher income.
You are going to work many years doing something. You might as well earn a good income while doing it. However, it’s difficult to find out how to earn more money from your work. I think for that reason it’s not covered as well as other topics in the personal financial circles.
I don’t have a good answer either.
How much people earn is a taboo subject. I have no idea whether I’m paid the same, more, or less than my colleagues. I have no idea whether people in other companies make more or less.
While doing my taxes, I looked at my wages in the last few years. 2008 was the high watermark. 2009 and 2010 were lower due to my employer skipping bonuses and holding off salary increases. We are done with bonus for 2010 and salary adjustment for 2011. My wages in 2011 will finally catch up with 2008.
The economy definitely contributed to the stall in my wages. Maybe I’m also reaching a plateau in a my career. Maybe it’s a sign I should look for a new job. The answer is probably all of the above.
What about you? How did your wages (salary plus bonus) change in these past several years?
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I started in 2008, +3% in 2009, +6.5% in 2010. We have no 401k matching, no bonus, or any other benefit other than basic healthcare, 2 weeks vacation and sick leave, and an average 401k plan.
Had fairly steady and small increases in wages via annual merit increases at work (Fortune 100 company).
Regarding how to earn more, check out the I Will Teach You To Be Rich blog by Ramit Sethi. He tries to get people thinking on what their skills are and how to turn that into income. From what I’ve read, many people have taken his advice and created side businesses for themselves. At the very least I think his writing is interesting for the most part.
Similar, although I only compared 2009 and 2010; I usually do so after completing tax returns. Slight decline in total income, due to reduced bonuses. Can’t complain, as many of my coworkers got shown the door in the time frame. At least two are involuntarily retired, some others only have temp (contract) work. Some may have landed at a better position, but I think most have taken a step down in income, perhaps a significant one, if they have income at all. (Telecommunications sector)
It is not just taboo, it is actually against company policy (at least where I work) to discuss compensation with your colleagues. I think one can get fired for it. I wish more people disclosed compensation data on Glassdoor.com, but there is not much benefit in doing so, for most people it doesn’t outweigh the risk that your employer will find out, even if that risk is small.
Financial Samurai says
Hmmmm… from peak to trough, I think I was down about 15% or so and now it’s back to 2007-2008 levels.
Everything comes back, which is why I’m buying all the property I can!
I don’t think an employer can fire someone for talking about salary. It is a protected activity under one of the union-friendly worker protection acts.
Wai Yip Tung says
Good advice. Sadly many people are obsess in the Invest part only. Buy stock and make a lot of money!!! The saving part is so slow and boring nobody give it any though. Unfortunately those friends has only 4 digit funds. It is not going anywhere no matter how well the stock is doing.
I agree that the “earn” part is by far the most important. I think that young people choosing careers don’t pay enough attention to their earnings potential. My husband and I both work for huge multi-national companies. My income has gone up every year about 3% and my bonus has increased more than 3%. My company did lower its defined contribution pension and make its 401k matching (which used to be automatic every paycheck) now an annual match that is not guaranteed. So far, we’ve gotten the whole match at the end of the year. My husband worked for one large company that was cutting back on everything, salary cuts (5%), new restrictions on what could be expensed (internet access), etc. My husband jumped ship to the company’s competitor and and got a 30% pay increase.