Speed Up or Shift Up: Thinking About Your Income Path

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Let’s play a game, draw the X and Y axis of a graph. On the horizontal X axis, label it “age.” On the vertical Y axis, label it “total income.” Now, draw a line of what your income path and growth rate would be if you had only a high school diploma. Now draw a line of what your income path and growth rate would be if you had a bachelor’s degree. Draw one for the industry and job title you are now, then draw one for the industry and job title you want to be in next, then one fanciful/dream job. Start drawing it for all the permutations you think you are, could’ve been, or could be.

Do you get something this? (with more lines, but this illustrates the point)

Salary Growth Curve

Let’s say you’re in the green line (B) today. It will take you 6 years to make the same annual as someone who is on the purple line (C) and has worked two years. According to the lines above, it takes someone on the blue line (A) to earn as much in a year as someone who works two years in the purple line (C) or seven years in the green line (B).

What’s my point? My point is that for most young (and aggressive) employees, regular, organic growth in your salary is not going to get you to where you want to be. 3-4% raises may keep you on pace or a little ahead of inflation. Waiting for your superiors to recognize your fine work will be effective for a small percentage. The key to increasing your income is to speed up or shift you income. Either demonstrate consistent and solid performance, itemizing out accomplishments and bringing them to the attention of your superiors, or demonstrate the accumulation of valuable skills, degrees, or certifications that can justify significant merit increases. Doing a good job is mandatory, but unfortunately it’s become as much of a discriminator as a college degree (almost required for many jobs and only gets you in the door).

(Incidentally, there is nothing wrong with wanting to be the blue line (A), because the blue line has a better chance of giving you more time with your family, more time with your kids, and more time with your friends than the other three – maybe :))

So, what should you be doing? The solution is to either shift your income path upwards or speed up your growth. What I discuss below isn’t meant to be treated as advice or anything like that, it’s merely my own thoughts on the matter and subject to the specifics of your situation. Please read it with that in mind, it’s designed just to get your brain juices flowing and not designed as an instruction manual.

Shifting Up Your Income Path

The key to shifting up your income path has a lot to do with education. If you don’t have a high school diploma, getting a GED will shift you up. If you have a high school diploma, a college degree will shift you up. If you have a bachelor’s degree, consider a master’s degree (hopefully with tuition reimbursement from your employer!). If you can augment your resume on the education bullets, you can negotiate higher salaries with your current or future employers.

Another key to shifting up your income stream has to do with job responsibilities. Promotions often, but not always, lead to shifts in income to keep your salary competitive with the market rates. If you’re an engineer, a promotion to a team lead should get you a raise above and beyond what you would’ve gotten if you stayed a non-technical lead. If you are promoted to a first line manager or above, you should shift to higher lines. If you aren’t, consider moving to a company that will reward you for taking leadership and management positions.

If you can’t shift (those aren’t the only two ways, but I think you see what I mean), or at least not now, try speeding it up.

Speed Up Your Income Path

A shift up is much harder than simply speeding up your path along the income lines. Whereas a shift up requires degrees or actual responsibilities, you can speed up your income line by simply increasing your value to the organization relative to your peers. If you learn new applicable skills that improve your productivity and show gains for your organization, they should reward you for it. If you don’t use Excel at all in your daily routine, going to an Excel class won’t help. If you do use Excel and can show productivity gains by going to a class, your improved performance, and your documentation of it, should lead to speeding up your income line so you get a little more than the standard raise everyone else is.

The second part, regarding performing better relative to your peers, is just as important as performing better. If you are surrounded by superstars and your department only has a set amount of money to dole out in raises, you might have to work your butt off just to keep up (it could explain why you may have a few bad raises!). If you are surrounded by a department of fools, it’ll be far easier for you to shine so you better take advantage of it. If you need ideas, it doesn’t hurt to ask around.

Build A Case

One crucial point that is applicable to both ideas is communication with your management and company leadership. I know a lot of people who, upon attaining master’s degrees, weren’t properly compensated for their efforts after the degree was awarded. Part of that was institutional (the company simply didn’t see why they should, so people went to other more enlightened firms) but part of it was communication. You have to build a case for yourself before anyone else will. Your manager has a job to do too and it’s not priority number one to ensure you get what you deserve… that’s your priority number one. So remember to build a case for yourself, don’t just assume people will recognize what you’ve done and compensate you for it.

{ 7 comments, please add your thoughts now! }

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7 Responses to “Speed Up or Shift Up: Thinking About Your Income Path”

  1. Jude says:

    This is similar to the thought process I had when I was deciding whether to go to grad school earlier this year. On one hand, I would not make money for a year and have to take out at least some student loans. When I realized that after a year, the salary increase would be $20k and would grow larger with time, however, my decision became easy!

  2. jessica says:

    Don’t forget that (at least in aerospace engineering) you should be keeping tabs on what the market conditions are and perhaps always have a copy of your resume out there for potential job offers with better compensation. Contractors are pros at this. They always know what the top rate is and if they’re not making it, they will be soon!

  3. Ben says:

    Never graphed it before today and hadn’t quantified how much more I make since I started out.

    I have a linear line until I changed jobs for a better career move. My income dipped that first year but turned parabolic thereafter.

    The dollar amount that took 5 painful years to save up (for a house) I can now put towards my retirement yearly.

    I think if your demo graph showed compound increases in income the income gap would be outstanding.

  4. “must. . . have. . . *any*. . . degree. . . ”

    Blindly seeking out some bullshit degree will only help you so much. What you want is knowledge that few people have, or that people will pay a mint for. What about pipefitters and welders and electricians? They don’t take degrees, but it is a rigorous process.

    Example: I have no degree, but I can make plenty of money working at the trades.

  5. When prosperity is dependent upon others (i.e. employers or the market), then self-reliance is never a possibility; which self-reliance is a necesity for economic independence and financial freedom. Self-reliance resides in the mind. Certainly making oneself more employable is a great strategy, but it’s only one strategy. Creating value is the key; and those who educate themselves on how to run a business (for example) have the freedom to create value on their own scale. Now, it’s the market who decides the value you create, and you’re compensated justly every time (I see a LOT of your posts concerning “fairness” of salary, etc. Fairness is based upon what parties agree upon). Even if employed, having a plan for your money and being educated enough to create value with that money, perhaps a side business or investment stemming from your OWN mind and thinking rather than what is available and offered by someone else; these are the mindsets of prosperity. Prosperity implies creation of value. Creation implies original thought; whether applied to a job or one’s own ‘thang’. Either way, it would be a great challenge and exercise to discover one’s own path of creativity instead of only seeking one’s greatest advantage within someone else’s creative infrastructure. My two cents.
    –Dave Charbonneau, C.E.R.

  6. Shanti says:

    This is all assuming, however, that you’re working in corporate America, or at the very least for a larger company.

    I work for myself running multiple businesses. At 22 I make around $40k/year. Yes, maybe not that high of a salary – but considering I live on $15k, my relative savings each year is huge compared to most all of my peers who are just graduating college and going into jobs that pay $26-$30k/year. And unlike those people who work hard at a regular job, I don’t have to worry about when my next raise is going to come, or if I’m going to outperform the competing employees for the next higher position. There is a lot of liberation in working for yourself, if you can pull it off.

    Because I have a reliable, steady source of income for the main business, the rest of my “raises” and “bonuses” are directly related to how hard I work, and how smartly I work. I may have a degree in Italian and a useless conservatory degree in opera, but it’s my BRAIN that really determines how much I can earn in a year, and how much I can save.

    While a college education is important, it’s not the end-all, be-all of wealth building, and of moving along the earning potential of your life. I’d like to stand up and be an example of working on one’s own and doing well, and ever better, all by the labor I put in. I can be done, and it’s a lot less stressful than working with and against your co-workers all the time – as I’ve found, anyway.

  7. EA says:

    Your graph is great if everyone gets a flat raise, but typically in corporate america the raise is a percentage of your salary. E.g. everyone gets a 2.5% cost of living raise and high performers get another 2 or 3% on top of that. Percentage raises on top of higher starting salaries make the lines on the graph diverge even more towards the right side.

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