When someone says to me that their income is not enough, I find that their issue is related to one of two things. Either they have a spending problem, that is, they have created a spending pattern that cannot be sustained by their income or they have an income problem, which is, their income is not enough to cover their basic needs. One is a created issue, meaning it is created by you and the other is more of a circumstantial issue, and beyond your control (to an extent).

I wanted to write this article to provide you with information which you may find useful in changing this money experience and creating a more positive and peaceful one, regardless of whether your problem is an income problem or spending problem.

So how can you tell whether you have an income or spending problem?


Income Problem

You have an income problem if your income isn’t sufficient to meet your basic needs (keyword: Needs which refers to things you cannot live without). This is true for a lot of people, especially these days as inflation is hitting us hard, and a lot of us are struggling to stretch our income just to cover our basic needs, let alone savings. Here are some possible indicators of an income problem:

  • You have a budget (or spending plan) and you follow  it, but you still cannot make ends meet.
  • You have cut back on unnecessary spending (you don’t eat out, you don’t buy clothes, you don’t have paid tv, you don’t get your nails done etc.) but you still don’t have enough money.
  • You cannot afford to go to social events, so you don’t go out with friends and you don’t travel anywhere.
  • You can’t afford to buy gifts.
  • You cannot afford to pay for emergencies.
  • You cannot afford to save. There isn’t any surplus income that you can afford to put away in savings.

So basically you do all the planning for your income and you’ve trimmed down your expenses to just the essentials but you still struggle to get by. And if the problem is that the money you are earning is not enough to cover your needs, what can you do to help the situation?

What You Can Do

The main thing is obviously to try and earn more money. A few ways you can do this:

Get a new job

Often a new job comes with higher income. And job interviewers often ask you how much you expect to get paid, and that’s always an opportunity to ask for what you really need. (And I honestly think people are sleeping when it comes to leveraging job hopping)

Negotiate a salary increase

I know it’s not as simple to do this in some companies, like if you work for the government. But if you work in corporate you may be able to ask for a raise. The key is to demonstrate why you are deserving and back it up with evidence of your performance and how it’s adding to the company’s bottom line.

Start a side hustle

This is a great way to create an additional income source. You can start a side hustle from a hobby or by leveraging a skill that you have. Most of us are underutilizing our skills.


Spending Problem

Not everyone has an income problem however, for some people the issue is their spending pattern. A spending problem is created, in the sense that it is a result of specific money habits you have and choices you make. Here are possible indicators of a spending problem:

  • You don’t budget or plan for your income, and if you do have a budget you don’t stick to it.
  • You don’t track your spending so you don’t know where your money is going.
  • You always get a shock when you see your bank balance or bank statement like “where did all my money go?”  or “what was that payment for?”
  • You have created financial obligations that are unsustainable for your income. For example, you have taken on debt that takes up half of your income.
  • You are constantly making unplanned purchases.
  • You’ve gotten a raise recently but even then you still feel like your income is not enough.
  • You tend to be an impulsive or emotional spender. (When you are feeling emotional! Its no-holds-barred to your spending)
  • You often tell yourself “I work too hard” and “I deserve to spoil myself” to justify your spending when that little voice in your head tries to reason with you.

The number one factor contributing to this problem is not having a spending plan (AKA budget) or not referencing your spending plan when you actually start spending. It is also a result of not tracking where your money is going. If you are not intentional about planning for how you will use your money when you get paid and not intentional about tracking where your money is going then you are likely to be wondering where your money has gone. Do this for a couple of months and you will start to feel like you are not earning enough, when in actual fact, it is your planning and tracking that needs some work. (Because even if you did get a raise, you still wouldn’t know where that money is going).

This problem can also be an issue of income allocation. I like to think of income allocation in terms of the 50-30-20 rule which follows that 50% of your income (after tax) should be allocated to needs, 30% should go to wants and 20% to saving and investment. Allocating your income this way allows for balance in spending on necessities and spending on wants, while also taking care of planning for unexpected events and for the future. It allows you to take care of what is important while not depriving you of enjoyment of your hard-earned money.

Problems can arise when these areas are out of balance. For example, if you spend too much on wants or “enjoyment” (more than 30%) you are more likely to sacrifice another category (most likely savings) to cater for the excess spending. It is also possible to over allocate for your needs. For example, say you earn 8,000 after tax and your apartment costs you 4000 which is 50% of your income. Housing is a need, but this ratio of allocation is clearly unsustainable and will most likely cause you to sacrifice savings and enjoyment to cater to the rest of your needs, leaving you feeling deprived.

So how do you deal with a spending problem?

What you can do?

One way to determine if you have a spending problem, is to have a look at your bank statements to assess your pattern of spending over a few months and really see where your money is going. You can categorize your spending into the three categories (needs, wants and savings) to determine the ratio of spending for each category. That can help you see how much you are out of balance so you can make the necessary adjustments.

Next, create a budget (or spending plan, if you like) every month to plan for how you will spend your income. Do this ahead of receiving your income. Doing it before you get paid is best because you are usually level-headed at that point. I swear, there is something that happens when that money hits your account, it’s as if all logic goes out the window.

And finally, be mindful about how you are spending when the money does come through. Check in with your transactions on your banking app or check your bank statements. See whether you are still on track with your plans. You will feel more in control of your money this way and are more likely to achieve more of your financial goals if you take the time to do this.

Remember, our finances thrive on attention!

I would love to hear what action you are going to take from the information I have just shared. Drop me an email and let me know.