I have talked about Budget by indicators, which is a method you can use to track your income and expenses each month. I have also talked about the Battle of increasing bills, which discusses the importance of not letting your service providers raise your rates without a fight. Managing your budget is a crucial piece to financial success, but without income growth year-over-year, you may not be able to hit your targets. So, lets explore this a little bit more.
Each year inflation on average is between 3% and 4%. If your salary increase each year is between 3% and 4%, then you are not really making more money each year due to inflation. Your extra 3% to 4% is going to the increased cost of goods (i.e., food, clothes, gas). You will want to beat inflation, so on average you will want at least a 5% salary increase per year for at least 1% income growth. To accomplish a >5% increase on average per year, you will need to consciously manage your career.
To get ahead of the pack, you need to equip yourself with the tools and a good track record. The tools may be schooling, trainings, certifications, and/or experience. The track record is proven results showing your contribution and value to the company. In managing your career, you may need to jump from position to position to gain different experiences from different roles. With more knowledge and ability to contribute, your pay should increase.
Why is it important to manage your career? By building your capabilities and worth to the company, you are going to have the opportunity to earn more money. Earning more money helps you grow and build financial stability faster. If you have debts, you are able to pay them off faster. A larger salary will allow you to contribute more to your 401k.
It is highly unlikely someone will tap you on the shoulder and give you a raise for no reason. It is completely on you to build the talents necessary to get to the next level. It is also completely up to you to present yourself as promotion ready. As they say, the squeaky wheel gets the grease. You do need to be a squeaky wheel to get the grease, but make sure your squeakiness is meaningful.