Income is how you make money. The concept of living on less than you make must be a defining rule that you live by in order to be financially successful. If you want to do more with your money, you may need to figure out how to increase your income.
What is Income
Gross income is before taxes before anything else is taken out of your pay. Net income is what is left over after taking out taxes and other fees. Taxable income is designed to represent the taxpayer’s actual economic income. There are ways that pre taxed investments can help lower your income which can help with paying less taxes.
Types of Income
Ordinary income encompasses earnings, interest, regular dividends, rental income, distributions from pensions or retirement accounts, and Social Security benefits. Ordinary income is taxed at rates ranging from 10% to 37%. Capital gains are the gains from selling assets that have appreciated in value. Assets held for more than one year are 0%, 15%, and 20% in tax rates.
Increasing Income
To increase your income, you can either work more at your current job, ask for a raise, or find a side hustle. A lot of companies offer overtime which you can take advantage of. The extra income at your overtime rate can really add income over the course of a year. If you make $20 hr normally, your overtime rate would be $30 hr because its time and a half. You can also ask your current employer for a raise. This can be uncomfortable for most but is necessary. This is a business, and no one is looking out for you. If you want more money, then go get it. If you feel like you are a high performer and are underpaid, then ask your employer to be paid what you feel like you are worth. Lastly, you can work a second job or side hustle to bring in more income. Try and find something that you are passionate about that will supplement your income.
Blue Collar Income
The average blue collar income in the U.S. in 2023 was $26 hr. This equates to a gross income of $54,000 a year. That about $42,000 a year after taxes and about a net of $3,500 a month. Your month budget may look like this.
| Category | Cost | Category | Cost |
| House/Rent | $1500 | Food/ Groceries | $450 |
| Truck Payment | $300 | TV | $75 |
| Truck Insurance | $110 | Water/Sewer | $130 |
| Phone | $55 | Retirement | $300 |
| Internet | $50 | Large purchases | $200 |
| Electricity | $100 | Emergency Fund | $105 |
| Gym | $25 | Wants | $100 |
Above is an example budget for a single person to earn $3,500 a month. Of course, these line items may change, and the numbers may change, but the concept is still the same. Once you pay for all your necessary expenses, you should always have line items for you to save money. These line items are green and include saving for retirement, building up your emergency fund, saving for large purchases, and saving for those small wants. Understanding your income is critical in being able to effectively budget and live on less than you make.