While some recent data shows wages outpacing inflation, some industries (retail, accounting) and some demographics (ages 25-54) fare better than others. In addition, your own experience may diverge from the average. Your company may be growing (or not), your career may be growing (or not) or you’re just in a situation where your compensation doesn’t change much year-over-year.
If you haven’t been proactive about monitoring whether your salary is keeping up with your cost of living, the recent spike in inflation means you can no longer stay complacent about managing this part of your career. Here are four options to get your salary back on track with the new expensive normal:
1 – Negotiate a merit increase
If your employer’s approach to raises is to target a nominal cost-of-living increase, then your salary probably hasn’t kept pace with the most recent inflation numbers, and you are effectively earning less than you were previously for the same job. With rumblings of an imminent recession, employers will more likely hold back, rather than be generous. You can’t just appeal to a sense of fairness about the state of inflation (they’ll point to their own economic worries about recession!). You’ll need to make a business case that you deserve more money – i.e., a merit increase above and beyond a cost-of-living adjustment. Pull together your recent wins and an updated list of your responsibilities, and practice being a fearless negotiator.
2 – Move into a higher-paying role
If the merit case for more money is weak (e.g., you’re in a line of business that isn’t doing well or isn’t a priority), then you may have to move into a role that is more valued and therefore better paid. You don’t necessarily need to leave your company to do that, especially if you love other aspects of where you work. Look for opportunities to advance into a bigger role that comes with higher pay. Align yourself to lines of business that are growing (these might pay more). Figure out the strategic initiatives prioritized by senior leadership, so the things you work on may turbocharge a promotion to higher pay or at least put you in consideration for a spot or performance bonus.
3 – Start a consulting business on the side
If you like your job as it is and don’t want to rock the boat, look at bringing in money outside your day job, such as rental real estate or other sources for passive income. A consulting side business is active work – i.e., you’re trading time for money. However, consulting builds on what you already know. It doesn’t require any inventory so startup expenses are minimal. If you can build a practice around a passion of yours, you may find it’s a nice complement to your other job.
4 — Consider geo-arbitrage
Where you live is the biggest expense for many people. If you can downsize your house or cut your rent, it eases the need to make more money. Geo-arbitrage is earning in a higher-paying area while living in a lower-cost one. If your job is 100% remote, you could work for a global employer but from a smaller city (Tuscany, Italy anyone?).
You may need to switch employers to mark yourself back to market
Unfortunately, leaving your job for a different employer is often the best way to get a compensation bump, especially if you have been at the same place for a while. Years of minimal raises may have kept your salary artificially low. While quitting your job should not be the first move you make if you find your salary hasn’t kept up with inflation, it should be one of the options you consider if these four moves can’t make up enough of the difference.
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