Day 2 How Your Earnings Determine Your Lifestyle
Yesterday, we got an overview of your finances and determined your top financial priority. Today we’ll discuss the one factor that will influence your wealth more than anything else: your income.
Yes, it’s taboo to ask someone how much they make. But when it comes to your own income, this is something you should think about regularly—not just when you get a raise or switch jobs. For various reasons, when it comes to their finances, women tend to focus less on their earnings and more on spending carefully. But boosting your income is the easiest way to increase your wealth—so you can provide for yourself, enjoy your life and reach all your goals.
RESOURCES: YOUR EARNINGS
Two Main Reasons to Plan for the Future:
- On average, women live longer than men, making it important for them to have a nest egg that will support them long after they retire. Sadly, statistics show that elderly women are more than twice as likely to be poor as elderly men.
- Women also need to focus on their earnings more than men because women are consistently paid less than equally qualified men for the same work. While this gender gap is closing among the youngest wage earners, it still exists—but hopefully not for you after you take this course.
You probably already know that you don’t take home your full salary. Part of your earnings is immediately siphoned off to pay your taxes. While we all love to gripe about taxes, they do pay for essential services: clean water and air, trash pickup, healthcare in our old age, public schooling that saves us from paying private school tuition and much more. Some of that money will eventually be repaid to you in Social Security after you retire. So, the first big chunk of your salary will go to pay for those things—likely in the range of a quarter or more of your salary, though for the those with low incomes, it can be as little as 10%.
The remaining money is entirely yours and in your control. With every saving and spending decision, you choose what kind of life and lifestyle you will have. If you want to upgrade your lifestyle, then you have to make more money. If you’re happy to spend less time working or are committed to pursuing your passion in a low-paying field, then you’ll need to scale back your lifestyle expectations.
The Money Center can help you keep track of your after-tax income. As money arrives in your bank account, it shows up in the Income part of the Smart Budget and shows you how much more you expect to earn this month. This is especially helpful if you have an irregular income, as you can see if you’ve reached your earning goal for the month, if you need to pick up another freelance project or if a check hasn’t come in. It also shows you how your income has been trending over the past few months.
In Step 2, you’ll take a quiz that will reveal your dream lifestyle, and then we’ll give you tips on getting an income that will support it.
DO YOU THINK THE GENDER GAP EXISTS?