As we have gone through the financial snapshot, we have taken a look at how you score in the category of budgeting. Now, let\’s look at income.
In evaluating how you rate in the area of income, we will first look at where you are in relation to the market for your position. Then, we will determine whether that role is a going concern of your role and industry and then land at determining the streams of income you currently have.
Step 2: Income
In the blog Mastering The Offense of Wealth Building, I stressed the importance of building a life that maximizes your income streams. This would look like assessing your current primary income source to find if it is first and foremost what you should be doing. Assuming that it is something you enjoy, are good at, and give you the ability to provide for your family, you will want to look at how to maximize that income source. Start by evaluating the competitive environment for the position and looking at whether you are paid appropriately for that position. Evaluating this will enable you to figure out whether to ask for a raise, look for an opportunity elsewhere within the same industry, or change industries altogether.
What is considered an “income source”?
- Primary Income Source
- Earned income from a W2 position
- Business Income
- Owning a business, Franchise, Freelancer, Self-employed
- Interest Income
- Having a bank account, high yield savings account, or other interest-bearing opportunities to invest
- Dividend Income
- Rental Income
- Capital gains on a property or stock
- Royalties and/or licensing
Once you look at you and/or your spouse\’s primary income source(s), you will need to figure out if your primary income source is at market value or not. You can utilize resources like [link: payscale.com, salary.com, roberthalf.com, glassdoor.com], or some other resource like these. This will help you insert key components of your career field, locate other similar positions and enter qualifications, all with the intention of improving your ability to analyze your current package.
In evaluating this role, look at the likelihood of automation to replace that role––and be realistic. Is this role lucrative enough to continue until automation replaces the role, or do you need to be cross-training in another set of skills?
It is crucial to make sure that you are doing your research first and looking at your industry and how you measure up.
Once you evaluate the level you\’re being paid at and look at other actual intangibles like work environment (remote, good location, etc.), you\’ll also want to make sure that you\’re looking at the benefits package.
Another aspect to consider is whether or not you are married and have a spouse who also has a primary income source. You\’ll want to evaluate both your primary income source(s), as well as your spouses, and all the tangible and intangible aspects to figure out whether it makes sense to ask for a raise, apply for positions outside of the company you work for, or change industries altogether.
In conjunction with this, you will want to evaluate if multiple income streams are possible. As I mentioned at the beginning of the episode, it will be important to look at your primary income source and whether you have dividend income, interest income, a rental property that you gain income from, or any kind of capital gains. Determine all of those aspects from which you could potentially be making a side hustle income and an additional income.
I would encourage you to go through the process of figuring out how many different income sources you have.
You may have just a primary income source, and there\’s nothing wrong with that. But many in this day and age may have two or three income sources, and some even have seven or more income sources, commonly known as the millionaire circle.
In the next blog, we will look at the financial snapshot matrix and determine how you score in the category of income.
