Saving money and getting out of debt are two different things. Sometimes you must do one before you can do the other. Other times you can do both simultaneously. However, neither approach becomes possible if you don’t make enough money. The most effective way to increase your financial resources and become debt
Unfortunately, not making enough money can keep you from making real progress even if you are dedicated to not spending money. In order to succeed in budgeting for a debt-free life, you need to know if you’re making enough to start with.
I’m guessing you probably already know if you’re making enough money or not BUT if you haven’t identified whether income is an issue, take a look at these 6 signs you need to make more money.
Credit Card Spending
In an ideal world, you should be able to live comfortably on what you make. However, we all know that’s not reality for so many of us. If you regularly need to rely on credit cards to get your bills paid every month, that’s a good indication that you aren’t making enough money. Sit down and create a Reverse Budget (exactly how to create one is outlined in my book, The Spender’s Guide to Debt-Free Living: How a Spending Fast Helped Me Get From Broke to Badass in Record Time. Borrow it from your library or get it HERE.) The Reverse Budget is the #1 thing I hear about as the most-enlightening part of the Spending Fast.
You’ll likely be able to remove unnecessary expenses and spending that you didn’t even realize was happening and you’ll be able to create some breathing room for yourself.
However, if you still find credit cards are necessary just to make it through the month, then it’s your income not your spending, that you need to improve. It might mean that getting a raise or starting a side job is in order. Find what you need to make to cover your excess living costs and make a plan to generate the needed income.
Paying the Minimum
Even if you do not use your credit card, you may still have credit card debt. Getting out of debt by using the Spending Fast is a proven strategy that yields incredible results (our debt-free community has paid off over 5 MILLION in debt in at the time of this post! SO WILD, right?!). Lifting your financial burden has a positive freeing effect that can improve your whole outlook on life. But when you can’t pay out more than the minimum balance on what you owe, you never make progress and that can feel so demoralizing. No matter what you do, if you can’t pay down your debts, the interest will bury you. This is a sign you need to be making more money on top of the Spending Fast, so you can finally get forward motion.
Can’t Build Savings
Another sign you don’t make enough money is that you can’t save it. “Extra money” at the end of the month is important to have. When you live week to week or month to month, it not only impacts your quality of life, it keeps you stuck in a position you cannot free yourself from, no matter how hard you struggle. When you don’t make enough money to build at least an emergency fund, you will find that something always comes up just when you think you’re getting close to your goals. If you find that random occurrences always hold you back financially, you should find a way to make more money.
You’re Working Too Hard
Another sign you are not making enough is morale. Hard work is a good thing, but it needs to be proportional to your income. Focus on the end result rather than the work you put in. If you know you need X amount of dollars to pay off bills and set aside money for savings, then factor that into your job search, or balance your time so you can make up the difference with a side gig. If you already work long hours every week and only spend your money on “needs” rather than “wants” every month, it
We’ve already touched on this, but it is really important that you actually work out a budget. Do the hard work of finding all of your expenses, cancel unnecessary subscriptions, consider costs of maintenance and regular upkeep and compare that against your income. Without doing this, you can’t really get a true sense of whether your problem lies with spending, or with what you make. You don’t need to make a budget that fits into your income. It’s better to start with a budget and then go after the money you know you need to make. Letting your income dictate your lifestyle is fine as long as you can manage an effective budget. Otherwise, you should let reasonable costs determine how much money you attempt to make and choose your work accordingly.,
Mortgage/Rent is Less Than 3x Income
Another effective tool besides budgeting is to look at your mortgage or rent expenses. This is a generalized, at-a-glance sort of indicator, but it is a very solid sign of whether you are on the right track with your income. If your mortgage or rent is too high, it could mean that your income is too low. Your monthly income before taxes is the measure you want to use to determine what your housing cost should be. Lenders generally go by the 28% rule for your mortgage. That can be applied to monthly rent as well. If you’re paying more than that on housing, you should make up the difference by taking on additional work, getting a roommate, renting out a portion of your home on Airbnb, finding less-expensive housing or finding another way to make more money.
I’m curious, what insights do YOU have that signal to you that you’re not making enough money? Tell me in the comments! And, if you found this post helpful, I’d be so thankful if you shared it with your friends!