How to tell if you are underpaid or overpaid in your job

What you do with your salary can affect your perception of an ideal income

When you save more than 50 per cent of your salary, it’s hard to argue that you’re not being paid enough, because you certainly have enough to meet your wants and needs. Photo: Getty Images 

It happened again this week. Another person trying to be kind and sympathetic told me that it was a crime how little money teachers make.

It went something like this. Tom is a lawyer who makes a high salary. In casual conversation, it came up that I’m a teacher and, as is so often the case, he responded with: “That’s a tough job! I couldn’t handle working with kids and the low salary they pay you is criminal. You are the real heroes.”

I appreciate his sentiment, even if I don’t agree with him. I’ve been teaching for more than 15 years in five different countries, including my home country of the US.

While it was financially difficult to teach in the US, what with taxes, rent, insurance and union dues, it’s a different matter overseas. I don’t need to get into my salary, but I don’t feel underpaid at all. However, I can understand why teachers who make the same amount as me might feel like they are underpaid, and a lot of it comes down to choices.

Let’s take my example versus a friend of mine who makes the same salary, but has a very different perception about being paid adequately or not. I live a simple life. I don’t have kids or pets. I try to keep my expensive habits to a minimum and not live a very consumerist lifestyle.

Consequently, I routinely save about 60 per cent to 80 per cent of my salary each month. When you save that much money, it’s hard to argue that you’re not being paid enough because you certainly have enough to meet your wants and needs as long as you’re not depriving yourself too much.

Saving is a key part of this. If you’re saving a large amount, you probably aren’t stressed about money. You feel abundant because you are literally getting more than you need to spend. I never have to worry about a surprise bill derailing my life or losing my apartment.

Now, let’s look at my friend, Jennifer. To be fair, I’ve picked a friend who also doesn’t have kids because that can be a very different conversation. Jennifer, however, does have pets, a dog and a cat. It seems like these animals visit the vet at least every other month and each time, the bill comes to more than Dh1,000. On top of this is the cost of their food, toys and pet-sitting.

Jennifer also loves her spa days and frequently has massages, hair treatments, manicures and other services. This adds another Dh2,000 to Dh3,000 per month to her expenses. Jennifer likes to party more than I do as well, and a normal night out for her can easily run into Dh500 to Dh1,000.

She also took out huge student loans to pay for a pricey private university education in the US, and now pays a nightmare loan instalment every month.

Even on the same salary, Jennifer is constantly stressed about money, putting things on credit cards, even though she knows the compound yearly interest rate is around 45 per cent for a UAE-based credit card.

If Tom had said the same thing to Jennifer, she would have agreed wholeheartedly. She doesn’t feel like she makes enough money because for her lifestyle, she doesn’t. This is why the same wage can be both overpaid and underpaid, depending on who receives the salary.

As long as I can save at least 20 per cent of my salary and not feel deprived, then I’m not being underpaid. Twenty per cent is a good amount of money that I can build enough of a financial cushion to buy assets, fund a strong emergency account and not feel stressed about finances.

Of course, there are other factors involved. If you are constantly stressed and have to work more hours than you want, you may definitely need a higher salary to compensate for those circumstances.

When I was much younger, I worked at a fast-food restaurant and earned a minimum wage. It was tough and I was probably underpaid there, even though I didn’t bring any special skills that made me especially valuable to the job.

I’ve also worked at terrible schools where they could have doubled my salary and I wouldn’t have liked the job any better.

If you are feeling underpaid, try cutting your expenses. Once you do this and build up enough money, you might realise it’s not the lack of salary that’s making you hate your job, but it’s the job itself. At that point, you’ll have enough money saved up that you can afford to quit the job and take the time to get a better one.

Schoolteacher Zach Holz (@HappiestTeach) documents his journey towards financial independence on his personal finance blog The Happiest Teacher