Are You Treating Your Salary Correctly? Start Being Smarter!

How Do You treat Your Salary_ Be SmartI am always interested to know as to how the various people I work with and are friends with treat their salary. Many people have the popular “money in money out” mentality. Some try save it all. Others treat themselves a bit here and there but ultimately want something left over at the end of the month.

It’s interesting because it’s part of every working person’s life.

Many of us have aspirations to be financially independent one day. Others don’t really care.

Each to their own, I guess. But if you are one of those people who does not plan on working for someone for the rest of your life, then this post may be of some interest to you.

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How Do You Spend Your Salary?

The way we treat our salary can play quite a big role in determining our long term financial success. This I believe quite strongly.

Not everyone thinks about their financial future. And you rightfully don’t have to. But your mentality about money itself can be quite a good indicator of where you might find yourself in a decade or so in terms of wealth.

Do you still want to be a payday to payday kind of person?

Or do you want more financial freedom?

This can be decided by shifting the way you treat your income or the way you see your pay cheque.

Should We Purely Just Save Our Money And Put It Away For Retirement?

I, for one, do not believe that saving money and putting it all away in a bank account for later in life is the best way!

As the author of Rich Dad Poor Dad Robert Kiyosaki said, saving is for losers, right? (This is a completely whole other topic for discussion).

But saving so you can put this money into any kind of project or idea?

That’s great!

Read this really good article about why purely saving money and putting it away for retirement makes you a loser. 

Is Saving Money Good?

Another interesting article to read is this one here where Mr Money Mustache talks about his personal 4% rule for saving for retirement. His blog is a good read for anyone looking to becoming more frugal!

So What Do You Do With Your Salary The Moment It Hits Your Bank Account?

A question everyone should ask themselves right now.

You often hear financially successful people speak of how we should treat our salary. And how rich people and poor people have a completely different way of seeing income and money.

An interesting topic for sure, and one that I think everyone should take a bit more serious!

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Three Ways In Which People Treat Their Salaries

Below are THREE general ways in which I have found people to be treating their monthly salary. I am sure all of you can fall into one of these categories.

The end goal should ultimately be to get into the final category.

Let me know what you think!

1- MONEY IN, MONEY OUT 

Pay the bills. Go shopping. Eat & drink. Pray you make it til next payday.

Most people I work with, and a lot I know personally, fall into this category. I am pretty sure this is the most popular one worldwide.

Basically you live month to month.

If your salary after tax is $2000 a month. You will spend $2000 a month no matter what.

You do not ever think about having anything left over at the end of the month or trying to save a bit. This is something which won’t even cross your mind.

The last few days of the month are usually spent with you counting down the days until you next get paid. Often you find yourself eating baked beans on toast a day or two before pay day!

You scrape through and when the money arrives, you can sigh a bit and know you will be OK for the next few weeks.

And on and on this goes.

So where does all your income go?

You pay your bills such as rent, wifi etc first. Thereafter, it’s money out on anything really.

Drinks, eating out, partying. You find the need to buy ANOTHER pair of shoes or some new clothes which you most likely do NOT need.

Basically anything which costs money.

Money In Money Out

Why are so many people in this category?

I think most people who are in this category never really sit back and think about their money and what they should do with it in order to maybe have a positive, future effect.

They have, from the get go, seen an income as something which needs to be spent. It’s sole purpose is to be spent on anything. Then working another month. Getting paid again and repeating this process over and over again.

As I said in this article where I talk about the lack of financial education in general, if you have never been taught about finance and the mentality behind it, then you just do not know any better. If you do something because you think this is the normal way, then you always see it s the normal way. Correct?

That’s how it is, I think.

Until someone either teaches you or YOU decide to get out of your own way and change things up by educating yourself, you will always be stuck in this category.

How can one get out of this category?

Educate yourself a bit. Read a few articles about finance.

Write down a plan on how you would like to be able to save money and / or put it to better use. The onus is really on you.

Ask friends or colleagues for advice. The important thing is that you start to look at money a bit differently.

2 – MONEY IN, MOST MONEY OUT – Hope Something’s Leftover

Pay the bills. TRY and be frugal all month and hope you left with something to save / invest.

Also quite a common category. I think a lot of people can find themselves mixed between this category and the previous one.

They get their salary, pay their bills, spend it on a few goodies for the month and like to “see if they have something left over” at the end of the month which could go into savings. If there is nothing left over, then no worries!

How does this category differ then from number one?

The difference here is the people in this category do THINK about saving a small part of their monthly income. They see it as a major possibility, but not necessarily as a MUST do.

Money in, money mostly out!

Some months you have a few $100 left over and you manage to save it. Other months you have $0 and that’s fine as well! You don’t really have any plans changing up your financial future massively anytime soon. You are quite content with how things are.

Why?

Again this may be partly due to a lack of finance education coupled with just being that bothered about it all. You know you should be putting your money to better use, but you struggle to make it happen!

3 – PAY YOURSELF FIRST

$x into savings; $x into investments / projects. Manage to live off the rest.

I personally think this is the category everyone should be trying to be in.

In this category people have a bit of a financial plan. They want to put x% of their monthly income into a savings account, another x% into some sort of investments or business projects.

Thereafter the remaining amount of money will have to be enough to cover their life expenses such as rent, food, etc etc.

Be Financially Smart

It’s a completely different mindset to other two categories. The whole “whatever is left over at the end” is kind of reversed. Instead of having the leftover part for savings, you have that for expenses.

Understand? Cool!

Which Types Of People fall into this category? 

Usually someone who does not plan on continuing to be 100% reliant on a job or some other sort of employment for the rest of their lives.

They see the need to be financially independent, and have a long term goal of achieving this.

They may possibly already have a side business starting out and need to put money into it on a monthly basis with the hope that the business income will replace their salary at their current job.

I know MANY people who are financially successful who started out like this. They all have a few things in common, and one of those things is the way they treated their monthly salaries at their old jobs.

There is a reason why they are all successful! If it worked for so many of them, then maybe we can learn from it.

So Which Are You?

Which category would say you fall into? It could be a mix of two.

Are you happy with your current situation or would you like to improve it a bit?

I think the goal should be to get to the third category as soon as possible!

Cheers,
Richard-t
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P.S. 
How’s your treatment of your income going? 

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