Quiz: Are You Underearning?
May 23, 2016Are you constantly scrambling to make ends meet? While there can be many causes to budget problems, including sudden unemployment, overspending and big credit card or student loan balances, one frequently overlooked trouble spot is how much you earn. “Underearning” is the persistent state of earning less money than you are capable of earning, given your education, experience and the economic environment, in a way that negatively affects your financial health.
What’s the difference between underearning and living the simple life…or underearning and choosing to work in a lower paying non-profit or public service job in your field? The key is whether or not you are earning as much money as you need to meet basic living expenses. Underearning is not the same as poverty, although persistent underearning can lead to poverty. Underearning is a type of self-induced deprivation of financial wellbeing.
It is not dependent on profession or income. The medical school graduate who takes a job making less than she needs to pay her rent and student loans is underearning. People can appear financially successful, but still live paycheck to paycheck with a negative net worth. If you can meet all your basic expenses (housing, food, transportation, clothing, health insurance, etc.), save enough for retirement, and have some money left over for enjoying life now without going into debt, you aren’t underearning, even if you don’t make a high wage.
Underearning behavior is a symptom of an underlying belief system. It generally comes from a personal sense of unworthiness and/or lack of self regard, which manifests as an inability or unwillingness to seek appropriate compensation for one’s efforts. Underearning can include active activities such as the PhD in computer science who works in the bicycle shop and lives at home with his parents or the mother who spends all her time volunteering at her children’s’ private school while building up a huge credit card balance paying the tuition.
It can also include passive activities such as failing to turn in rebates after purchases, forgetting to submit benefits-related expenses for reimbursement, or paying excessive brokerage fees for investment management – areas where many busy professionals fail to fully maximize. According to Barbara Stanny, author of Overcoming Underearning: a Five Step Plan to Lead a Richer Life, those who underearn, “devalue themselves, giving away their time, knowledge, skills.” The good news is that because underearning involves some level of self-sabotage, bringing self-awareness and compassion to changing behaviors that deflect money can lead to a full turnaround.
Do you think you might be underearning? Take the quiz below to find out. Rate your answer to each question by assessing how often you engage in that behavior:
Never 0 points
Rarely 1 point
Often 2 points
Almost Always 3 points
____I regularly accept lower-paying work which does not reflect my education and experience.
____I only work part time.
____I don’t think employee benefits are an important part of my compensation.
____I work all the time but I never seem to have enough money.
____I spend most of my week volunteering for causes and organizations.
____I believe most people who have money are greedy.
____I believe most people who have money are unethical.
____I resent people who have money.
____I believe that people who have money only have it because they are lucky.
____I don’t think my skills are worth much.
____I have never asked for a raise.
____I don’t make as much money as I think is fair.
____I feel poor.
____I would be embarrassed to tell my friends how much I really make.
____My income does not cover all my basic needs (food, clothing, shelter, transportation, healthcare).
____I do not save for retirement.
____I have trouble maintaining an emergency fund.
____I only pay the minimum payments on my credit cards and don’t pay them off.
____My income is not enough for me to pay down my debts.
____My student loans are in forbearance or on an income-based repayment plan.
____I incur library fines for not returning books or movies on time.
____I forget to use available coupons or discounts for things I usually purchase.
____I forget to submit rebates or expense reimbursements for which I am eligible.
____My salary is less than 90% of the median salary for those in my profession.
____If I am self-employed, my business is losing money.
____If I own a business, I do not pay myself a sufficient salary.
____Once I find a new job, I want to leave it soon.
____I believe that if I spend money on myself, no more will come in to replace it.
____I believe I will never have enough money.
____I have an advanced degree (e.g., graduate school or professional) but generally earn less than the median U.S. income (about $54,000 for 2014).
____Total Score
How did you do?
0 – 15 points Underearning is not a big problem. Congratulations!
16 – 35 points Some underearning behavior or limiting beliefs around money
36 – 55 points Underearning behavior contributing to financial challenges
55 points or higher Serious underearning limiting financial wellness
Is underearning something you would like to address? In next week’s post, I’ll write about steps people can take to begin challenge limiting financial beliefs and earn an income that corresponds to their capabilities. In the meantime, start with the two books listed above. Send me your thoughts or questions at [email protected] and follow me on Twitter @cynthiameyer_FF.