Are You At Your Earning Peak Already?

For many employed people, annual salary increases are their perceived increase in earning power. Many companies have been using annual salary increases to entice their employees to stay on with them.

But sooner or later, many employees would realize that annual salary increases don’t really take into account the increase in prices of the many basic necessities of life. For example, when I was an employed person, my salary increase was offset by the increase of my rent.

My salary increases annually by a small amount each year, but my rent increases by a larger percentage and happens more than a few times each year. This was my situation at least in Australia.

Sooner or later you may find your salary increase and even bonuses being offset by your daily living costs which may actually mean that each year you could be having less and less money available for saving or buying.

When this situation happens, we could say that you are past the peak of your earning potential and your situation is all downhill from here. You may be working more because you are earning more money, but in the end you are actually working more for lesser money.

Is this your career situation in life now? Don’t feel so bad, you are not the only one. Many employed people suffer the same situation. I mean, how many times have you heard the words: “My salary increase isn’t even able to cope with the increase in prices these days.”

You are not even in the worst state yet. At least you are getting a salary increase. Many employees these days do not even get a salary increase. If you are truly unlucky, they may even reduce your salary.

For many employees who have been used to working for someone else who determines their financial future, having no salary increase for the year might not seem much. But if you do the maths, you would determine that it amounts to a large loss of money for you.

Let us say you are earning a conservative amount of money where you are only getting an annual increase of about $US1000 to $US 1500. In ten years that would be a loss of more than $US10000. We would assume that this money would be placed in a bank where it would earn interest.

If you worked for that same company for almost a lifetime of 40 years, this would mean a loss of about $40,000 to $50,000. This amount of money means that you would have worked for one year in your company for free.

This amount is only if your company does not increase your salary for one year. Now imagine if your company repeatedly does not increase your salary. By not having to increase your salary and even reduce it, your company have actually increased its profits.

This is how important an annual salary increase is, and this is the reason why you should not take it lightly when your company does not give you a salary increase. When you apply for jobs at companies, you should always ask how much are annual salary increases and how frequent they are.

If you think that you might be getting greedy and even inconsiderate to your company especially when your company’s earnings are down, think about your position as well. Your job contract states that you should perform a set amount of work for a set amount of money.

If your job contract states that you should get a minimum amount of salary increase each year, then it does not matter if the company is having a good or bad year. You and the company should both consider the cost of inflation when factoring your costs and compensation.

As I have said before, you may reach your peak earning power where you have less and less purchasing power due to inflation. It might be wise to look for a higher paying job if you reach peak earning power before you end up with financial problems.

I made this mistake when I reached my peak earning power. At first, I was just happy getting my first job and then as times went along, I managed to secure higher and higher paying jobs. But moving from job to job can be exhausting, everyone can attest to this.

I made the mistake of being too reliant to one company that I stayed there for far too long. In short, I stayed in a company even though I reached my peak earning power already. I was now by then too scared to find another job.

My solution was to cut down on my spending costs. For a while, my strategy worked. In the long run it did not. Cost cutting or belt tightening as a strategy to cope with peak earning power only goes so far.

I soon realized that I cannot cut costs anymore. I now know that if I continued with my present trajectory in my career, I would end up working more and more for lesser and lesser money. A situation which is frightening as I get old.

Think about it. What could you realistically achieve with belt tightening? You can’t cut on the essentials like food, transport, utilities and so on. You can eat less nutritious food or do away with leisure and luxuries, but is this the way to live?

Imagine being old and not being even able to afford eat properly or have some extra money for some leisure? Do you imagine your old age life to be this? You could face this horrible situation if you do not do something to solve your peak earning power situation.

I might sound anti-company but I’m just emphasizing the truth. The company’s business is to make a profit and right now your salary is a cost to them. The company wants to minimize your cost to them while maximizing their benefit from you.

There is nothing wrong here. This is just how things are. There used to be a time when big companies can afford to pay high salaries and generous benefits to their employees, but business competition have made all these go away.

Why do you think freelancing as a job is becoming more and more popular? This is because many employees are seeing that they can best earn money and have a better quality of life working for themselves rather than to a company.

I’ll give you an example. When my mother was having one of her houses remodeled, we hired a contractor. The contractor paid his workers a salary. As a result, the workers were more interested in counting the work hours than they are of finishing the job.

They know that even if they worked harder, they would be paid the same amount or even lesser. This is why many of them wanted to work on a contract arrangement. They would be paid for the work done and not on the time they stayed on working.

By having this arrangement, the workers can hurry to finish their job to the contractor and then move on to another contractor. This way, they end up earning more for working lesser hours. This might not be good news for contractors, but it is a better arrangement to the workers.

The contractor-worker situation which I have previously made an example of is one way for you to increase your earning potential. I know for example an accountant who stayed very long for one company and got meager salary increases and wasn’t even promoted.

Seeing she was getting nowhere fast with her career in the company, she eventually resigned and became a freelance accountant. She now has control of her time and can work according to her own schedule.

She eventually was able to get regular clients which are composed of small companies who want their accounting books done but could not hire a full-time accountant. She usually works at home and earns more.

In both examples, I have given extreme examples of people taking control of their lives and leaving employers who were limiting their earnings potential. But you should not go to such extremes especially if you think you cannot leave yet the financial safety of your company.

You can take baby steps and take on contract jobs outside of your regular working hours with the company. There are many people in fact who started out this way. They only completely left their company once they were sure that their own ventures would sustain them better.

This is a mistake that many people do especially the young and people who have not yet experienced a roadblock or a stumbling block in their career. They think that if they are an employee for example, they would always continue to have increasing purchasing potential thru their salaries.

Many of these people already anticipate their imagined future money windfall and do not think that this may not happen at all. How many times have we heard of people having financial problems because they bought a brand new car for example, anticipating that their salary increase would come.

Then the unimaginable happens. The company tells this person that they would not have a salary increase and might even cut their salary. The person is then left with the problem of not having the money to pay for their newly purchased car.

Athletes, Actors, Artists…:

I read about the story of athletes who because they earn a lot of money due to their sports and endorsement contracts spend lavishly without saving for the day when they were no longer highly paid athletes.

Most of these athletes are at the peak of their earning potential and they don’t know it. Athletic careers usually end up early unlike company or factory careers. I am not too sure but athletes are usually at their peak earning usually between the ages of 30 to 40.

The same goes for actors. Many actors are at their peak when they are young, beautiful or handsome. I have read about many actors and musicians who end up broke because they did not save any of the huge pile of money they used to earn.

They are extreme examples of people who failed to plan for the inevitable when they reached their peak earning potential. Instead of saving their money for the time when their short careers end, they spend money like they would stay popular forever.

The bad thing about this is that many ordinary people look up to these celebrities and follow their bad example of spending lavishly without saving for the rainy days. This is bad since there are many impressionable people out there who look up to celebrities.

…Going Back To Ordinary Workers:

But let us not delve too much on athletes, artists and other celebrities, but on the common employee or worker. It is an unwritten rule that unless you are promoted in a company, your salary increase tend to get less and less.

There was a survey made about compensation amounts for rank and file employees. It was found that new employees are actually paid more than older employees. If you are a long term employee, you should bear this in mind.

Are you the employee who is working more and more but your purchasing power is getting less and less? You might not be a celebrity, but if you are not careful you might end up just like them especially in our worsening business climate.

There was a time when employees looked forward to a generous pension from the company by doing a lot of overtime work. Now, overtime pay is almost a thing of the past, the words retrenchment, downsized, contract, part-time and so on are the buzzwords of management.

Maybe you have already reached your peak earning potential and don’t know it yet. This may be the time to study your financial situation. Are you working more and more for lesser and lesser purchasing power?

Cost cutting or belt tightening only goes so far as a solution. Eventually you will reach a point where you can no longer cut your costs without severely affecting your health and quality of life. The best that you can do is to gradually find another income source that would increase your purchasing power.

Career Advise I Would Have Told My Younger Self