Harsh Truths: Earning More Costs You More

When you go for a new job, there’s several things you consider. You consider the package you will be offered, the potential for extra benefits like healthcare or childcare. You consider the commute and how it will impact the time you spend behind the wheel of a car – or in a train carriage – rather than something you actually want to do. You think about the opportunities for advancement, and…

… oh alright, let’s be realistic: you look at the salary.

money management

In fact, in the vast majority of cases, the salary is your primary consideration. It’s the reason you change jobs, jolting yourself out of your comfort zone, and throwing forth into a new experience. The salary is what counts.

Most of the time, you’ll be looking for a salary that is higher than what you have earned before. You find yourself thinking about all the things you’ll be able to do with the extra money, recalculating your monthly budget, and marveling over how much easier your life will be with more disposable income. It’s one of the best parts of going for a new job and through the rigors of the interview process – it’s all about what you imagine it to be rather than having to be concerned with the mundanities of everyday life in the new environment.

For the most part, this is a sensible area to focus on. It makes sense to want to better your situation in life, afford yourself more opportunities, and add a little more to your pension.

However… in the midst of all the excitement, there is always the chance that you’re overlooking something very important. With any new job, there is always the risk that you might end up worse off.

And yes, that can happen even if the salary is better.

What’s more, it can happen whatever industry you’re in. You might have been headhunted by a prestigious banking firm; it can still happen to you. You might have found and grabbed your new healthcare role from Staffnurse.com in anticipation of a new challenge: it can happen to you. You might have made the contacts through a family friend and are moving up in the world: it can happen to you. Or perhaps it’s just come through your existing company – you’re a lawyer, a cleaner, or you work in customer service – and yes, that’s right: it can still happen to you.

So how does this happen? How can it be possible to be earning more money, but actually be worse off? It doesn’t take much for your eye to slip off the ball and this situation to settle itself upon you – so if you’re moving into a new role, you’re now going to know the things you need to watch out for.

1.When You Earn More, You Spend More

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When your monthly salary hits, you do the sensible things first. You set aside the amount you need for bills, you pay your rent or mortgage, and you take care of immediate expenses.

The amount you have leftover after that – your disposable income – has suddenly increased. And you’re going to live like it’s increased too.

“So what’s the problem with that?” You might be wondering. “I’m earning more, so I can have as much fun as I want!”

Sure – but it’s going to cost you. Let’s say you used to spend around $50 on clothes; you now spend $100 per month. You can more than afford it, so what’s the issue?

Well, there isn’t one – but that figure is just going to go up and up. You’re going to feel that you deserve more. You earn more money now, so of course you should go for a 5 star rather than 4 star hotel. Of course you should eat at the latest restaurants. Of course you should…

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And that’s how it happens; you spend more to the point where the actual amount you have left in the bank at the end of the month is still the same. You don’t necessarily save more; your life doesn’t even have to change that much. You can still do the same things, but paying more for a higher quality.

2.You Have More Chance To Get Into Debt

When your income level rises, you’re going to be looked upon more favorably by credit reference agencies due to the improvement in your finances. As a result, you’re going to find your credit limits are increased. You might be offered opportunities that you wouldn’t before, perhaps for cashback cards or cards with special member perks.

If you’ve got those, you figure, you might as well use them. So you do. Maybe you’re smart; maybe you know that even with your credit line extended, you should continue the practice of paying off your bill in full at the end of every month.

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Except, then there will be a month when something happens. Your boiler breaks down; your car needs more repairs; or you just go a little bit too far with a spending spree. There’s not as much cash sitting around in the bank, and you decide: “I’ll just pay 80% of the balance this month and then rectify it next month…”

And maybe you will, but chances are, you won’t. You’ve gotten used to a higher standard of living, and when you don’t have the cash for a purchase, you’ll have no bones about whipping the credit card out to pay for it. After all, you will tell yourself, you work hard and earn good money – so why shouldn’t you?

Before you know it, your personal debt is creeping higher and higher and your income is being bitten into, more and more, with minimum payments.

3.It Costs More To Do Your Job

There’s a reason salaries tend to rise the higher up the chain of command you progress. To an extent, it’s to attract the biggest and the brightest, to reward people for years of commitment and a solid work ethic. The other reason is far more simple: it costs more for people to do their job.

These extra costs come from a variety of situations. If you have to travel more with work (something that is far more likely as you progress in your role than when you are an underling), then that costs money. You might think it’s fine as the company will pay for it, but that’s not the case. The company is not going to pay for your luggage, your house sitting costs, your children’s extra daycare requirements, and the money you spend while away to try and stave off the inevitable boredom of a business trip. That’s all going to come out of your pocket.

The point continues at home. If you have to work longer hours, then you’re going to require more childcare. That’s never cheap. You’re also going to be expected to look the part and appear more professional. If, for example, you were a staff nurse, then it would have been fine to rock up to work with your hair scraped back into a messy bun. Now, if you’ve moved into the corporate side of the system, you’re going to have to get your hair cut and styled so you look “business presentable”.

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It’s no easier for men, either. No more showing up for work in whatever shirt was first to your hands from the wardrobe; you now need to kit yourself out with sharp suits, ties, and even a pocket square.

Your costs increase in a thousand and one little ways, and there’s nothing you can do to stop them. You’re stuck. If you want to do the job (and earn the extra money), then you’re going to have to spend more to do it.

If you do find a job where progression does not mean that you have to increase the amount you spent on additional grooming, outfits, travel, or childcare – then hold onto it, because you’ve hit the jackpot.

So Is It Worth It?

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You might be reading this and thinking that if it’s more expensive to do a better-paying job, then what’s the point?

Well there’s still the progression, the potential for extra fulfillment, and of course the likelihood that if you’re aware of how it might go wrong (as above) then you can guard against it. The annoying problem is that you won’t truly know if something is worth it until you have actually done the job and seen how it impacts your spending patterns.

Prior to that point, all you can do is ensure that your calculations are correct. There’s no point at looking at your existing budget and assuming it’s going to stay the same when you get a higher-paid job – as you have seen above, the chances are that it will change. You need to factor in this extra costs, adding a potential 20% to your current spending levels.

When you have done that, you will actually have a better, more informed, idea of if a new job is worth it. It might be a higher salary than your existing role, but is it higher enough? That’s the question you really need to answer, and if you can do that satisfactorily, then you know you’re on the right road.

(Images credited to: RoamingPro, stevepb, monikawl999, JESHOOTS, greekfood-tamystika and geralt)


Arnel Ariate is the webmaster of Money Soldiers.

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