If you are an employee, you can get a 40% pay raise without ever asking the boss. And it’s all tax-free. Similarly, if you are an employer, you can show each of your employees how they can earn a 40% pay raise and it won’t cost the employer a thing. Before writing me off as being a pair short of a full deck, read on.

The following information is based upon figures gathered in the late 90’s from U.S. Census Bureau, National Association of Realtors, Chicago Title and Trust, Bankcard Holders of America, and Ram Research. Though the figures will vary today, the net affect is the same since income has risen proportionately but debt load remains the same.

1. The average household income = $3935 monthly or $47221 annual. 2. The monthly mortgage average (without tax and insurance) = $662 3. Average car, credit cards, and loans = $568 4. Therefore, the average total debt = $1230 5. Debt Load Average (% total debt to income = $1230 divided by $3935) = 31.3%

Therefore the average family’s present lifestyle could be maintained with 31.3% (or $1232) less per month without debt. Another way of looking at the same information is that if the average family were debt free, their current annual income ($47,221) would be comparable to a family income of $71,428 annually with a 31.3% debt load.

But I said in the beginning “40%”, didn’t I? What was I thinking of? How could I have made such an error? It’s only a 31.3% pay hike. By the way, since you gain this increase by paying off debt, is this taxable? I don’t think so! Therefore, we need to compensate for a post-tax versus pre-tax pay raise.

You can conservatively add at least a 10% tax relief since this is a post-tax raise in pay. Our pay raise goal now easily exceeds 40%. Give yourself a real pay raise… Get out of debt! (To learn more about getting out of debt, check out the article Debt Destroyed By Magic Bullet)

What’s Wrong With a Traditional Pay Raise?

What’s wrong with tax cuts and a pay raise? Not a thing as long as it leads to increased wealth. Unfortunately, it rarely does. It usually just leads to increased income. So, what’s the difference?

Realizing that I am swimming upstream while most others are swimming down, I cannot help but be disillusioned. When was the last time a national pay hike or tax cut kept pace with the overall inflation and shrinking dollar? How come with all this extra money we keep coming up with, we are no better off then we were? Throughout my military career, I was always amazed that about 2-3 months prior to a federal pay raise, local prices near military bases went up. By the time the money actually arrived, inflation had already destroyed the increase. To make matters worse, not only do prices increase just before a pay raise, but we usually turn around and commit the raise to some new monthly payment purchase. “Oh yeah, now I can afford that new High Definition everyone is talking about.” When will we learn that more money does not necessarily increase wealth?