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| The Basics | Spend too much or earn too little?
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For underearners, its not only about a paycheck thats stretched too thin. Its about earning potential thats untapped.
By Liz Pulliam Weston
Four years ago, Tami and Terry Mathisen were living in a trailer on the Kitsap Peninsula in Washington, earning less than $35,000 a year. Terry, who owned a landscaping business, had sold just about everything the couple owned to pay for Tami's hospital care during a life-threatening illness. Even the land under their home had been mortgaged to pay the bills.
Fast forward to today. Tami, 39, made nearly $100,000 on her own last year -- enough that Terry, 45, soon will be able to close his business and look for less physically punishing work. They're about to break ground on their new, custom-built home. And they expect 2006 to be even better.
What fueled the turnaround in their fortunes, Tami said, was realizing that she and her husband were "underearners" -- and that they didn't have to be.
The concept of underearning hasn't received a lot of attention in the past. Most advice on dealing with money troubles focuses on ways to cut expenses and live within your means. But sometimes, the focus needs to be on increasing those means.
Overcoming underearning
That's the subject of the new book, Overcoming Underearning: A Five-Step Plan to a Richer Life, by Barbara Stanny, a former underearner who taught seminars on the topic and who introduced the Mathisens to the concept. Stanny defines underearning as "anyone who earns less than her potential, despite her need or desire to do otherwise." She distinguishes underearners from:
- "Mindful low earners," who choose low-paying jobs that "feed their souls," and
- Adherents of the voluntary simplicity movement, who choose to live on less to have a saner life.
By contrast, Stanny said, underearners' lives are anything but sane or mindful. Most live in financial chaos, battling with debt or living paycheck to paycheck even if they're making what other people would consider to be good money. They unconsciously sabotage their own progress with frivolous spending, procrastination or by failing to focus on what can get them ahead.
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An underearner may work two or even three jobs without getting his head above water, yet still insist he couldn't earn more because it would involve working too hard.
"But no one," Stanny said, "works harder than an underearner."
Voice of experience
Stanny should know. She struggled for years to make a living as a freelance writer after losing a big chunk of her inheritance (she's the daughter of the late Richard Bloch, co-founder of the H&R Block tax preparation chain). She chronicled her struggle to learn about finances in her first book, "Prince Charming Isn't Coming: How Women Get Smart About Money.
But it wasn't until writing her second book, "Secrets of Six-Figure Women, that she realized how limiting some of her own core beliefs about money were. The successful women Stanny interviewed for the book weren't the cold, aloof workaholics she was expecting, but people who were genuinely challenged by their work and happy with their lives. They also put a high value on their skills and time, and they demanded adequate compensation.
The lessons Stanny learned, and the fact that she finally cracked the six-figure barrier herself while writing the book, led her to design the "Overcoming Underearning" workshops.
She decided underearners have several distinguishing traits, such as:
- They talk about their life or work as if they are trapped or have no choices;
- They underestimate their worth; they often give their time, experience and skills away for free;
- They crave "the comfort zone" and are controlled by fear;
- They're vague about money, often not knowing exactly how much they make or owe or own;
- They're "anti-wealth" and have negative attitudes about people with money, viewing them as greedy, snobs or workaholics.
Its hard, sometimes uncomfortable work
The first step to overcoming these attitudes and traits is to acknowledge that you have them and figure out where they came from, Stanny said.
Tami Mathisen, for example, said she realized her middle-class family was suspicious of rich people. She was taught to view them as somehow lazy, while people "who worked and struggled and just managed to stay off welfare" were more worthy.
Underearners also need to get clear about their financial situation and what isn't working in their lives, Stanny said. Then they need to make a decision to improve their situation -- and stick with that decision even when things get uncomfortable.
All this self-examination and change is hard work, Stanny said. That's why she encourages people to surround themselves with supportive people -- cheerleaders who can encourage them, mentors who can model more successful behavior and confidantes to whom they can confess their fears and concerns.
Your first project is your mindset
It may sound kind of airy-fairy for those who are used to focusing on the nuts and bolts of finance. It certainly did to Tami, who when she signed up for Stanny's seminar was expecting a how-to workshop on how to find a better-paying job and climb the corporate ladder. Instead, most of the time was spent on what Stanny calls the "inner work" -- figuring out your own mental barriers and how to overcome them.
Once that was done, Tami decided to take the first step in "the outer work"-- the practicalities of making more money -- by raising the prices for Terry's services. The couple held their breath, waiting for clients to drop them, but none did. Eventually, Tami decided to stop giving away her time; she closed an unsuccessful crafts business and backed away from overwhelming volunteer commitments. She started talking about what she'd learned to other people and launched a business as a motivational speaker and life coach.
It's only been a few years, but Tami has reached her first goal, which was to free her husband from work he no longer enjoyed. Now she's gunning for even more.
Her initial goal for this year was to make $150,000, but a few days ago she realized her income prospects were bright enough that "I went back and erased the one and put a two there."
"Before I would live in fear that something terrible would happen," Tami said. "Now I have the security of knowing it doesn't matter what happens. I'll be able to get beyond it and provide for myself."
Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.
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