6 Ways to Give Yourself a Tax-Free Raise

Unless you have a specific need and the money to pay for it, don't wander aimlessly through the mall or surf the internet just to see what looks good. Josep Suria/Shutterstock

These days, with the cost of just about everything going up, who isn’t looking for ways to increase their income? If you’re hoping the boss will come through with a healthy raise, your unemployment benefits will be extended, or Uncle Sam approves a healthy cost-of-living increase on your benefit check, I wouldn’t get too excited. Even if such an increase is exceptional, it’s not likely to do a lot of good.

By the time a raise is adjusted for taxes, unemployment income disappears, or you lock eyeballs with a Social Security monthly check increase of $1.50, your bank account is not likely to see much of a change. And if that’s not bad enough, it’s a common problem that when you earn more, you automatically spend more. Reckless spending can consume a lot of cash—fast.

The degree of reckless spending seems to rise in direct proportion to income. It won’t be long until you are back in your old financial rut, just barely getting by. Sadly, until you get serious about your spending, more money will never be enough.

The secret to getting cash inflow to exceed outflow is to reduce the outflow. That is a solution available to almost everyone.

Cutting expenses is not unreasonably difficult once you understand it is like giving yourself a tax-free raise. Every dollar you do not spend is another dollar in your wallet or bank account. The challenge is to find realistic yet painless ways to trim spending without creating drudgery or removing the fun from your life. Even if you do not have a job, you can give yourself a raise.

Live With Cash

Except for payments you must send through the mail, living with cash is a good way to curb mindless spending. It is not easy. In fact, it’s hard. But if you are willing to teach your brain and your attitude to treat this move as you would a job, it will become a very useful challenge.

Surveys indicate cash customers are more mindful of what they’re doing, and therefore spend a lot less than those paying with plastic.

Stop Shopping

Unless you have a specific need and the money to pay for it, don’t wander aimlessly through the mall or surf the internet just to see what looks good. Remember this: A true need is never discovered while standing in a store. It is realized during normal, everyday living.

Cancel Subscriptions

Study your last bank statement, looking for subscriptions—like streaming services, music services, product and entertainment memberships, and other kinds of subscriptions. Think: Which ones do you use most often? Which had you completely forgotten about? How could you replace it with a free (news, music, or entertainment) service? You could be spending a lot each month on stuff you no longer use or want. By cutting unnecessary subscriptions, you can give yourself a small raise every month.

Limit ATM Trips to Weekly

Frequent trips to the ATM and/or frequent swipes of that debit card tied to your bank account are like a small hole in the bottom of a boat. That constant leak can quickly lead to capsizing. Plug the leak by developing an envelope system for areas that can get out of control such as entertainment and fast food.

Get some envelopes. Label them accordingly for food, gas, etc. Divide the cash into the envelopes according to how you'll spend it. As you buy food, gas, coffee, and so forth, take the money from the corresponding envelope. When it’s empty, the money is gone, which means no more spending in that category until the next fill-up.

Use What You Have

Have you taken a look in your pantry and freezer lately? You may be surprised to see just how much food you have that is already paid for. Use it up before you make another trip to the supermarket.

Before you buy anything new, you should stop long enough to ask yourself this question: Do I already have something that will do just as well for now?

You'll be surprised how many times the answer is “yes.”

Pay Off Debt

If you’re rolling credit card balances from one month to the next, you’re paying out a lot of money in interest. Pay off those debts as fast as you can, and do not replace them with new debt. The interest you don’t have to send to your creditors anymore is money in your wallet. Yep, just like giving yourself a raise!