Money Management

8 Red Flags That Signal That Your Income Is Too Low

March 8, 2023

If you're consistently struggling financially, even with a regular income, it may be due to multiple issues.

One of these issues could be that your income is too low.

It can be disheartening to feel trapped financially and seemingly with no solution despite earning an income and still finding yourself struggling month to month.

Just like with body health, an income that is too low comes with signs that show there is a problem with what you are earning.

These signs could be among many others, suffering from fear whenever you think about your financial obligations, often seeking bailouts from your office’s finance office through salary advances, being anxious whenever anything to do with money comes up, and always being financially constrained when you need to get some things done but you cannot afford it.

If this sounds familiar, then stick with us because this piece is meant to help with how you can identify those signs and then how to address the problem of a low income.

An income is a crucial factor in determining the financial stability and well-being of a person and it also affects one’s ability to save, invest and live a comfortable life.

Not everyone has the luxury of having a high income and there are many people who struggle to make ends meet and are unable to live a comfortable life despite a regular salary.

In this article, we will discuss eight red flags that signal that your income is too low and what you can do about it.

1. Financial Panic Attacks

Financial panic attacks are a sign that you are living beyond your means. This may happen when you receive an unexpected bill or if you fear that you won't be able to make ends meet. Financial panic attacks can be a significant stressor and can lead to health problems.

Solution: The first step to addressing financial panic attacks is to understand the source of your stress. Once you have identified the cause, you can start to take steps to manage your finances more effectively. This may include creating a budget, paying off debt, or looking for ways to increase your income.

2. Struggling to Make Ends Meet

Struggling to make ends meet is a common sign that your income is too low. This can happen when you have more bills than you can manage to pay or when you are unable to save money.

In addition, you may be forced to sometimes forego some necessities because you cannot afford them, despite having a salary every month. To make up for the shortfalls, you could also be seeking to always buy the cheapest, low-quality stuff, etc.

Continuing to live like this can cause stress and can also lead to financial insecurity.

Solution: To address this problem, you need to take a hard look at your expenses and find ways to reduce them. This may include cutting back on discretionary spending, negotiating bills, or finding a higher-paying job. Additionally, creating a budget and sticking to it can help you keep your expenses under control.

3. You Have Little to No Savings

Having little to no savings is a sign that you are living stretched out thin financially. It is also an indicator that you don't have a financial cushion (buffer) which can make it difficult to handle unexpected expenses (emergencies) and can lead to financial insecurity especially if you have to get into expensive debt to survive the emergency.

Solution: To build your savings, you need to start saving money each month. This can be done by creating a budget, reducing your expenses, and automating your savings. You can also look for ways to increase your income, such as taking on a side job or asking for a raise.

4. Reliance on Debt

Reliance on debt is a sign that you are living beyond your means and that you are not able to make ends meet. If you are debt stacking, i.e. borrowing from Peter to pay Paul, then this is an indicator that you are in a financial conundrum even though you are receiving a salary every month.

Other signs are you often have loans, either formal or from friends, and usually not for investments but for day-to-day existence where you keep taking on loans to cover basic expenses and then struggling to pay back this debt.

This can make it difficult to handle unexpected expenses and could already be an indicator that you could suffer financial insecurity.

Solution: To address this problem, you need to start paying off your debt. This can be done by creating a budget, reducing your expenses, and paying more than the minimum on your debt each month. Additionally, you can look for ways to increase your income, such as taking on a side job or asking for a raise.

5. You Run Out of Money Way Before the Next Payday

Now, if you have already done a budget and cut out every vestigial expenditure to have more of your money but you still end up running out of money before the next payday, then this is a sign that your income is too low.

This can make it difficult to handle unexpected expenses and can lead to financial insecurity.

Solution: To address this problem, you need to take radical steps beyond looking at your expenses. This may include finding a higher-paying job or starting a side job to try and plug the deficits in your spending budget. Additionally, you could consider moving to a more affordable location if rents are high in your neighbourhood or move to satellite towns and cut expenses like fares if you have options of working from home.

6. Lack of Financial Security

If it is constantly difficult for you to pay for basic needs, lacking a financial cushion and an emergency fund, or having no retirement savings even when you have a regular salary are some signs that your income is too low.

Lack of adequate insurance coverage is another indicator that you are struggling with earning too little.

In case of an emergency, this predicament can make it difficult to handle unexpected expenses and can lead to financial insecurity.

Solution: To address this problem, you need to start building a financial cushion. This can be done by creating a budget, reducing your expenses, and automating your savings. Envision yourself in 10 years or at retirement and see what you need to consider in your current financial status to enable you to have the future you project. This goes beyond “manifesting” which is now popular among people who want better for themselves and take concrete actions to improve their lot.

7. You Feel Undervalued

Are you at a place where you are constantly feeling that you are not getting value for your skills or that your efforts are not appreciated etc? This could be a sign that you are earning too little from your efforts. In addition, if you are starting to resent your work and becoming less productive- not because of your work relationships but because of your earnings at the end of every month- then these are other signs that you need to speak with your manager regarding what you are offering and the compensation you are not happy with.

Again, if the company is growing but you are still making the same amount you began on and you are not happy with it, then this could be another reason that you are being paid too little.

Solution: From the above scenario on seeking a raise, the worst a manager can say is "No." which gives you the freedom to start looking for a better-paying job.

Consider asking for a raise by first determining what your input to the company is worth. Research the average salary for your career across companies so that you have solid information and facts when you speak with your management.

8. Your monthly Rent is More than 40% of Your Income

If there was ever an apt adage to describe this scenario, then “you can't have your cake and eat it too” is apt.

A scenario where most of your money goes to paying rent and it is not because you are living in an exclusive address, then this is a sign that you are seriously dealing with a very low income. For you to survive, you are choosing to live far away from your place of work even though this does not translate to affordable housing and you end up spending more than 40 percent of your income on rent.

This means that the 50-30-20 budgeting rule which emphasises earmarking not more than 50 percent of your budget towards your ‘needs’ is not working for you since the 50 includes your fixed payments for essentials food, utilities, and rent.

Solution: To address this, you need to take drastic steps including finding a higher-paying job, starting a side hustle to try and improve your financial standing. In the meantime, you could consider cutting down further on expenses like travelling costs if your office allows working from home.

WRAPPING UP

If you have a regular job and you’re struggling to pay bills or falling short of your savings goals yet you are not extravagant, then that clearly shows that it’s time to have that conversation with your boss or look for greener pastures elsewhere.

When you are working hard at your job and you try to spend less than you are earning but it is still not working for you, then it means that you could be struggling with a low income.

If you have a combination of some of the signs above, then consider boosting your income by using the ways to earn more as we have discussed. You can also consider talking to a financial advisor to help you get on track with your finances.

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Njenga has over 8 years experience in multimedia and business journalism both as a writer, editor and producer. He has over 5 years of experience in radio broadcasting as a news reader, reporter and presenter. He is also a 2012 Earth Journalism Network-EJN Fellow.