A few months ago, we published a post about how delegation is the best way to increase your income. Although this is true, delegation also increases your flexibility, which is equally — if not more — important than your pay packet.
Most of us live to our means, meaning that our pay packet often dictates our lifestyle. Not many people have the discipline to live under their means and save money from their wage each month. This means that the delight of making more money remains a short-term benefit, that wears off as soon as you adjust your lifestyle to the new income amount. Flexibility, on the other hand, is something you can enjoy in the long-term and it can also help you to rewire your approach to finances — essentially allowing you to create more, have more and do more with less money.
In this article, we argue that prioritizing flexibility over income is more beneficial than simply being paid more.
Should You Always Accept a Pay Rise?
It’s common for people to lose all sense of objectivity when they think about money. Money is proven to be an attractive asset, that makes people excitable and sometimes illogical.
Let’s take the example of being offered a job promotion, paired with a healthy pay rise.
If you were told that this new position would give you an extra $5,000 or $10,000 each year, you might think it’s a no brainer. But is it that simple?
Well, here are some factors you should consider that might change your mind about taking on the “richer” role. These things might mean the spike in your earnings could end up worse for your wallet:
- Taxation of Your Total Earnings — Check before accepting a promotion how close your current annual pay is to your country’s taxation brackets. In the UK, it’s widely accepted that earning over £46,000 can do “real damage to your take-home pay” due to taxation rules. The first step when being offered a pay rise is to work out what portion of the sum will hit your bank account and whether this new figure is actually tax efficient.
- Distance Travelled to Work — Your new wage might grant you an extra $5000 per year, but does the new position mean more travel, fuel and transport costs? If you’re taking on a new role, in a different location, it’s worth figuring out whether your raised income will just serve to pay for gas, car insurance — or if it’s a fair swap for the time it might take to commute each day. If you’ve been walking to the office that’s just around the corner, it might be worth skipping the pay rise to dodge a two-hour round commute.
- Taking on a High-Pressure Role — With more responsibility, comes more money — but is this a fair trade-off? The extra pressure in a role can have negative side effects like a detriment to your health, social life, and family connections. You might also find yourself with less time to prepare meals and end up spending a considerable amount on convenience lunches.
- Expected Hours of Work — Does the extra $5000 each year come with the same contracted hours as your last gig? In some high paying roles, work is expected to become a central focus of your life. Before you know it, you may have been better off taking on some overtime at your old job to earn the extra 5K than being expected to work late-nights most of the time.
Make Your Existing Wage Work Better
Now we’ve discussed how a pay rise might be a really terrible idea, let’s figure out how to make your existing wage work better.
Research shows that a constantly increasing wage isn’t the key to happiness, as most people put the ideal salary between $50,000 and $75,000. The Individuals surveyed above this pay bracket reported a decline in happiness.
What does this mean? There’s always an opportunity to make your existing wage work better. Perhaps you’re always feeling broke because of some bad financial decisions, as opposed to not earning enough. So, how can you retrain your brain to think about money differently?
- Think about the Why, Not the What — People tend to hone in on the item they want to buy, rather than their reason for buying it. For example, people get swayed by luxury brands, without really assessing why they’d justify the hefty price tag it costs to wear them. Before rushing to spend your monthly salary, think carefully about the benefit you’ll get out of the item, cost per use, and whether a cheaper alternative is available. Be flexible about the brands that you buy from and your perceptions about quality and value.
- Think About Flexibility, Not Just Pay — It’s clear that a payrise doesn’t automatically mean more money. Ask your boss about working from home or consider transitioning to a remote role. Why? Because working from home is likely to save you some money – you won’t be splashing your hard-earned cash on costly fuel or convenience lunches. This type of work is made possible using a virtual phone number and a home-office and is incredibly popular thanks to the gig economy.
Remember to Re-evaluate — Most importantly, be flexible in your approach to life. Instead of being stuck in your day-to-day routine, take some time to reflect and re-evaluate your performance. This can help you to identify where savings can be made and how you can continually create more financial freedom in your life without having to make huge personal sacrifices.