One of the leading reasons for a lot of professionals inevitably falling into the debt trap is their clouded ability to properly work out their earnings. Yes, it is indeed a debt trap because employers alongside anybody trying to sell you anything in any way gang up to perpetuate the debt trap by incorrectly referencing what your earnings really are, whether inadvertently or otherwise.
I mean think about it for a second; which credit provider will look you in your eyes and tell you that you can’t really afford to take out the credit you are otherwise indicated to qualify for? When creditors tell you that you qualify for credit, it’s not necessarily that you can comfortably afford it, but rather that you can afford to meet the re-payment terms, sometimes and often just barely at that.
On the side of your employer or prospective employer, when someone’s looking for a job and they search the internet or look in the classified ads section of the newspaper, the earnings indicated as part of the pay package aren’t the actual earnings. Yes, that’s what your payslip will indicate you earn, but between the income-tax deductions, transport costs (whether you spend on fuel or if you commute), pension fund contributions and other expenses associated with the act of getting your job done, that’s where you should be looking if you want to realistically calculate your earnings.
It’s a scary thought, I know, but I truly believe it to be a very necessary dose of reality. When a member of your family or perhaps your friend is in the privileged position to be able to ask you how much you earn and you quote the gross income, you’re quite simply setting yourself up to fall right into the debt trap. Yes, it’s common practice, but that still doesn’t make it right and it certainly won’t help you on a path to a better financial standing.
The way to calculate your real earnings is indeed to subtract all the costs associated with the process through which you earn your income, which may require you to dynamically tweak and rework your calculations as you get closer and closer to a more accurate earnings value. Not all the money you spend on fuel is for driving to work for instance, and so some technical calculations such as working out your distance to work in relation to your vehicle’s fuel consumption may be in order.
This can be a lot of fun, even for anyone not working in the financial industry, but what’s most important is just how empowering the resultant information can be. This is precisely how the ability to “find extra money” when you need it is developed since you learn to have a real feel for the numbers that matter most.
As I mentioned, through all the smoke and mirrors of the costs tied to earning your income, when the dust settles, it may be scary to learn that you actually work for way less than you thought, but then again, so is just about everybody else! You might also learn that you’re spending way too much and essentially can’t afford to keep up your current expenditure without running into long-term debt, but that’s ultimately a good thing because only then can you effect some positive changes.