Feature Article: Learn to earn your potential

Are you earning less than your potential and unhappy about it? Are you ashamed of how you live, the condition of your home, your clothes, your car? Are you relying on credit cards to boost your quality of life, then suffering stress because of the rising bills?

If you answered “yes” to any of these questions, you may be a chronic underearner. This isn’t to be confused with those who earn little, but are happy with their quality of life and satisfied with the work that they do. Many people do consciously choose the simplicity of a non-traditional lifestyle.

Money problems that present themselves as too much debt or an inability to control impulse spending often mask the deeper problem of underearning, defined as “earning significantly less than you need to life a self-respecting lifestyle”, according to Jerrold Mundis in his book, Earn What You Deserve – How to Stop Underearning and Start Thriving.

Mundis estimates that approximately 4.5 million Americans earn less than they need, in one form or another. The factors that keep them from improving their situation include low self-esteem and the belief, often subconscious, that “I don’t deserve more.”

If you are underearning your potential, what can you do about it?

Do not debt. This means consumer, non-secured debt used to meet basic living expenses. Credit card debt and personal loans often hide the consequences of underearning, delaying the pain – and the incentive to change. Debting also limits your daily spending options and dramatically reduces long-term wealth building. And, it becomes a handy excuse for not changing careers ("I have too much debt to risk a change"). Cut up the credit cards, stop borrowing from family and friends and learn the real consequences of your underearning.

Do not take work that pays less than you need. Underearners will often get themselves into a financial crisis that forces them to take the next offered job, whether it pays what they need or not. They see no options. Self-employed underearners will take assignments or work without stating firmly what they charge; in fact they have great difficulty stating a fee and sticking to it, afraid of losing work altogether. Practice with a supportive friend or colleague to increase your comfort level with stating what you need to be paid for a position or a piece of work.

Do not say “no” to money. It’s not unusual for underearners to say “no” when opportunity knocks, saying “It’s not right for me”, rather than exploring how they may make the opportunity fit. Think on an offer for 24 hours to give yourself time to explore how to make it right for you. But don’t wait too long. Underearners often lose money by procrastinating so that they don’t have time to do the job well, or fail to return phone calls promptly or follow up on networking leads, all ways to sabotage earning potential.

Do use a spending record and a spending plan every day and every month. A spending record gets you crystal clear on your needs and the gap between income and expenses. In the beginning, a bare-bones spending plan may be necessary to help you get to the end of the month without debting. But very soon, do a “desired quality of life” spending plan to see what you really need to live in a place with the car, clothes, and leisure time activities that you need to feel comfortable and respect yourself.

Do ask for more. If you are self-employed, do an honest market assessment of your services and what the market in your area demands. Are you under-pricing yourself, thinking that it will get you more work? Interestingly, it is often those who have the confidence to charge more who are in the most demand, in part because of the image they convey. Explore what emotions and beliefs about money keep you from asking for what you need. Use positive affirmations to change self-defeating beliefs. Also, tell everyone you know that you are looking for more – more work, a better job – and be open to what the universe makes available to you.

Do use your time wisely to generate more income. Track and plan your time, just as you do your money, to consciously set your priorities and make deliberate choices about where to focus your effort. Eliminate those many wasters of time that eat up your days and substitute for things that enhance your quality of life. Stephen Covey, author of 7 Habits of Highly Successful People, advises regularly setting aside time to improve skills and network with others who can help you build your career or business.

Changing the beliefs and habits that contribute to chronic underearning is a difficult and challenging process, like any major life change. But with the right tools and support you can change your life from one of deprivation to one of plenty, achieving financial well-being and peace of mind.

By Kim Corwin, CFRC, AFC, founder of New Leaf Financial Counseling.