When Salaries Lose Value: 5 Employee Financial Empowerment Models

So it happens that there was a time you got your job, you were all happy with the conditions of service, the salary, and the entire workplace.

As usual, with your new salary, came some adjustments in your life, the house you rent, the mode of transport, and even the social places you might have been going to.

Things by then, were seen to be cheap or affordable. But as years go on, for some reason, you do not know where the money from your salary might be going. You even wish one of the prophets can tell you the actual devil stealing your money and holding back your blessings to financial prosperity.

So, what could be leading to the slimming of your wallet and your bank account?

(1). Chosen Type of Lifestyle

As it is often said, a salary is never enough. One thing however is for sure, when one gets a job from which he gets a salary or the salary gets to be increased, chances are very high that they are likely to change their lifestyle.

The change of lifestyle usually leads to some level of enjoyment at the beginning but soon or later, might be a source of some stress due to the need to maintain the newly found socio-economic status. From nowhere, expenses might increase and in other cases, even end up skyrocketing and have to be supported somehow by borrowing here and there. Before long, you are entangled in a web of credits and debts.

These kind of things might start making you financially stressed and end up making you look at the salary as being insufficient and having lost its value significantly.  

(2). Statutory & Other Deductions

In some countries, you may find that your salary has been static but then the Government may increase the statutory (mandatory) deductions on employees’ incomes. This may include an increase in the thresholds by a certain percentage for employee taxes known as Pay As You Earn (PAYE), the National Pension Scheme contributions, Local Government Levies, and so on.

In addition, there could be other deductions you may be experiencing on your salary which are even permissible by Law. Take for instance, the loans you may have taken, the contributions to some medical scheme, and so on.

In some countries you may find that the Central Bank at one point or another issued a policy directive which put a cap (limit) on the loan lending rates which allowed you to get some money from Banks to be repaid in say 2 to 5 years or whatever period. Then along the way, after some years, the Central Bank issues another policy directive which removes the capping on interest rates. This inadvertently, allows the Banks and Microfinance Institutions (MFIs) to adjust the interest rates upwards and therefore, starts to force you the customer to pay more to service the loan you already got. You will be required to pay more so that both the principal amount and the increased interest amount on the outstanding loan amount can start reducing.

The same thing could happen with the agreed medical scheme contributions when they go up.

All these and related deductions could make your static salary over time to end up reducing considerably thereby creating anxiety in your financial status.

(3). Increase in the Cost of Living

It is an open secret that due to certain global and domestic economic developments, an increase in the cost of living might be experienced. In some countries for instance, over time the citizens might be subjected to significant increases in rental charges, commodity/food prices, electricity tariffs, fuel/transport costs, toll fees, parking fees, airtime costs, TV fees, and so many other fees that citizens may have to experience.

These increases in the cost of living without attendant increase in your salary might mean that your salary might end up looking like it is shrinking and losing its original value. What you used to buy when you got paid a certain amount of salary, you can no longer afford to buy the same in similar quantities.

So, what is it that you can do to help you survive in the face of increases in cost of living with a salary that is static, and even starts to reduce due to some factors?

Five (5) Employee Financial Empowerment Models

In light of the financial challenges that many employees may be facing, here are some of the possible solutions that they may pursue as others have done without much ado.

(1). Change of Lifestyle

There may be need to change your lifestyle and any spending habits which might not be supported by your income.

Of course people have the desire to maintain a certain status in the workplaces and or community, and keeping up appearances as it is called. However, what is the benefit of being overly stressed and having sleepless nights because you are completely broke with debts that have accumulated to a point where not even the generation of your grandchildren will manage to pay back?

Make your Monthly Budget, in fact, an Annual Budget based on your current salary, including that of your partner if you are married or staying together with someone. In short, look at your expected (assured) income from your salary and outline your expected expenses. You can do this in excel or on a paper.

Some expenses to take into consideration may include but not limited to: House Rent, Electricity, DSTV/GO TV, Water, Garbage Collection, Transport/Fuel, Food, Groceries, House Help Fees/Maid/Baby sitter/Garden boy, Dependants' Expenses, Parents, Personal Expenses, Baby Expenses, Outstanding Loans/Advances/Credits, Education Expenses, Bank Savings, Business Investments, Plots/House & Buildings/Construction, Trips/Celebrations/Parties, Health Care/Vehicles Expenses/Repairs, and Miscellaneous Expenses.

By cheating oneself and trying to overlook or downplay a particular expense as being not important does not translate into your income (salary) increasing. Trying to be or even appear to be like a big spender who owns the Central Bank when you are financially constrained will not assist you in anyway. If anything, this is likely to increase your stress levels, which may end up predisposing you to early onset of high blood pressure (BP) and other health complications including stroke.

Change a lot of your habits including but not limited to buying things (which you can) in bulk rather than daily/weekly, stay in an affordable house, go for road runs or exercise from home and cut out huge gym fees, consider healthy home cooked meals, switch off any unused electrical appliances, adjust on partying or buy drinks from wholesale shops. You can do so many other things depending on your decision.

(2). Ask for a Salary Increase or Promotion

If you are able to, do not hesitate to negotiate for your salary increase or a promotion when an opportunity presents itself. Bear in mind however that many companies may also be crying of increased cost of doing business and may be less enthusiastic about increasing salaries.

You can request for a salary increase as an Individual giving what you consider as valid reasons to justify the request for an increase, or you can request for a salary increase through your Representatives/Trade Union if the Collective Agreement allows for such changes.

At an individual level, invest in knowing Salary Negotiation Skills which helps you to sail through the salary request/negotiation task. At a group level, follow the laid down procedures before your request could be thrown out or your strike for instance can be labelled an illegal strike which might end up making some people to lose jobs (unless you cry out to some powerful politician to look into your plight of course).

(3). Change Your Employer

No one was sentenced to work life imprisonment with one employer. In this era, you can change your employer at will.

For a long time, the people who may frequently change jobs have been seen as job hoppers who should not be trusted and so on. This is owing to the fact that in the past, someone joined one company and retired or died in it (in few circumstances got fired from it). In this era however, that notion might be changing as people are waking up to the reality of fixed term contract jobs.

What that means is that, be ready to change your employer (and not just wait to be fired by your employer). Invest in looking out for job opportunities if you so wish, learn proper CV and application skills, interview skills, and salary negotiation skills which you may need when the company makes an offer. If you have to change your employer, ensure that you make yourself a person with the sort after qualifications, skills, and experience among other things.

Remember, it is often said that the time you can get a chance to have a higher percentage of salary increase in your work life is when you change employers. Changing employers within say every 2 to 5 years (if you so wish and if opportunities allow), enables you not to become so rusty and insecure as you will be up to speed with the job search requirements and what is being offered in the market.

So take that important step to the so called greener pastures (if that might be your desire), if successful, the career and financial rewards may be great.

(4). Be an Employee & A Business Owner

Regardless of what might be said, to really survive in harsh economies, one need to have multiple sources of income.

While it is an offence in many companies for employees to do business, take note that the qualifying sentence to that offence is “Doing personal business on company time and or with company resources”. What that means is that if you can find a way to have a side business which you can run with minimum interference with your current job, then do it.

There are several ways to make money whilst you are working including online businesses, part time consultancy, partnering with someone else who runs the business on a day to day basis, owning houses and other real estate properties for rent, and so on.

Instead of the so many Consumer Loans that many employees run for so that they buy some car, furniture in the home and of course shine nicely among their mates, consider taking a Business Loan. Your Salary, Salary Advance, a Business Loan or Savings or any kind of money that you can get, invest in some business which will be able to generate more money and enable you to pay back without much stress.

(5). Quit & Own Your Business

If in your considered view, you believe strongly that, you have got what it takes to run your own business, then quit your current job, and go and create your own. It is not going to be easy but it is worth it. Business owners and not employees, are the people who make money and can at one point comfortably afford to live at large with considerable financial freedom.

It is important to remember that if you wish to take this route, you need to ensure that you have the passion and tenacity to follow through. Some pursue this route and thereafter run back to looking for employment.

Talk to other business people in your area or in your network to get more insights on how to successfully run a business. Remember that the many years you spent in school or college/university, and the years you spend as an employee, might not necessary prepare you adequately to know what it truly takes to successfully run a business. Take a look for instance at the many retirees who, without the necessary business skills, got their pensions, and put all their monies in some business which ended up collapsing terribly because of their lack of knowledge on running businesses.

In order not to find yourself in the trap of businesses failing within less than 5 years, you will need to invest in understanding how to successfully run your business in 5 or more areas including but not limited to: (i) Financial Management, (ii) Human Resources Management, (iii) Operations Management (iv) Business Development Management, and (v) Compliance to Statutory Requirements and Regulations. Many entrepreneurs start off with all the passion in the world to run a business but only knows one of those aforesaid areas and in the process, their business falls flat in no time.

In conclusion, it is important to make a conscious decision of what you wish to do with your life. Try to do that which is within your powers to make a difference in your financial status. Otherwise, as Reinhold Niebuhr is often quoted to have said, you may also consider saying, “Lord, grant me the strength to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.”

Wishing you the very best in your journey to financial freedom. Nothing is going to be easy, but in due time, all the pieces of your financial puzzle could come together and fit nicely.

Over and above, do not let your current financial situation make you work less for your current employer. Be dedicated, work hard for your current employer, and if your situation changes along the way on any of the five models above, then, congratulations, you have hit the jackpot.

The Author Owen K. Kabanda is a Zambian Business & Management Advisor. Click here to go to his LinkedIn profile for more related articles and insights.