16. How to Know if You Are Underearning: Part 1

How to Know if You Are Underearning: Part 1

Underearning is a cancer that eats away at your life. Listen and learn what underearning is. What it isn’t What causes it. And how to find out if you have it.


  • The exact definition of underearning
  • The first test to determine if you are underearning—someone is marking up your services and keeping some or most of the money
  • How to apply this test
  • Why underearning is so prevalent among women (we are constantly groomed to do it)
  • How to put a stop to it




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Welcome to Episode 16 of How to Make More Money, a podcast that helps you get seriously good at the game of making serious money. I’m your host Kelly Hollingsworth. I’m thrilled you’re here, because today we are embarking on a deep dive into underearning.

Why are we doing this? Two reasons. The first is that under earning is an insidious cancer. It’s a cancer because it eats away at your bank balance and the quality of your life. It’s insidious because often, you aren’t even aware that it’s happening. But the result, whether you know it’s happening or not, is that you’re living a fraction of the life that you could, because you’re working way too hard for too little money.

The second reason we’re doing this deep dive into underearning is because underearning isn’t just a disease. It’s also a symptom. When you are underearning—when you have this cancer in your life—it means that you are playing at the game of commerce by what I call a “Low Profit Playbook.” Underearning is the natural consequence of following rules that simply don’t exist, and this is what you’re doing anytime you have a low-profit playbook.. The other players aren’t following these rules, and they are winning. When you’re underearning, you are following a set of rules that have you playing with one hand tied behind your back. Maybe both hands. Maybe the rules in your low-profit playbook are keeping you off of the field entirely.

This, my friends, is offensive. Commerce is a game, and it is inherently offensive that there is an entire faction of players who are on the field, trying to win, and operating under a set of imaginary rules that make it impossible for them to win. Today we begin uncovering the imaginary rules that prevent good players from winning the game. Starting today and in the next several episodes, we’re going to talk about underearning, and the imaginary rules that are routinely found in the low-profit playbooks of the players who are underearning.

Underearning isn’t disorganization, debt, or desire

To kick things off, let’s define our terms. When we’re talking about under earning, exactly what do we mean? I went to the Googles for some insight on this, and I found all kinds of definitions for underearning that have nothing to do with under earning.

For example, one source says that you are under earning if your financial life is a bit of a train wreck. If you are not organized with your accounts and your bills, according to this definition, you are under earning.

Is this true? No. You can be rolling in money and totally disorganized with your finances and your bills. Many of my ultra-high-earning hedge fund manager clients meet this definition. Financial disorganization has nothing to do with under earning.

Another definition of under earning is that you are in debt. Debt means that you’ve borrowed money, and you have not yet paid it back. You can have this going on whether you make a lot of money or you make a little bit of money. You can borrow money and not pay it back whether you underearn or you don’t under earn. So debt is not integrally connected to under earning. Fear of debt is related to underearning– we’ll talk about that in an upcoming episode. But for now, just consider that the act of borrowing money is a completely different thing than the act of underearning.

I also saw a definition that you are under earning if you want to make more but you are making less. But this doesn’t really quite get to the exact heart of the problem, because think about this. You can be overweight and not want to lose weight, or be conflicted about whether you want to lose the weight. At times you may want to lose it, and at times you don’t. But guess what? If you weigh 400 pounds and you’re four feet tall, you are overweight. It’s an objective fact, no matter what you want to do about it. You are overweight whether you want to lose the weight, or you don’t want to lose the weight, or you don’t even think about it.

It’s exactly the same thing with under earning. Whether you want to make more money or not isn’t the point. (Sidenote here: you probably do want to make more money, so if you say you don’t want to make more money, I don’t really believe you, and you shouldn’t believe yourself, either.) But the larger point I’m making here is that if you are under earning it doesn’t matter if you want to make more money or not. It is still happening.

An example that illustrates exactly what under earning is

Here’s an example to help you see why. Let’s imagine I own some shares of Coca-Cola stock. And I call my broker and tell him to sell them at the market rate. I don’t bother to check what the market rate is. I just instruct my broker to sell, and then later that day, I see some money coming into my account, and the shares of Coca-Cola have disappeared. So I know the stock was sold. And I know that I received some money in exchange for selling the stock.

But think about this. Imagine the market price for Coca-Cola shares at the time I sold them was $50. And my broker sold my shares for $50, but only put $10 into my account. The rest went into my broker’s pocket.

Now, in this scenario, I think we can all agree that I under earned by $40 per share. The market was willing to pay $50. And I only pocketed $10.

But do I want more money for my shares? No. I’m assuming that my broker paid me market rate, so I don’t want more money. Do I even know that more money was available to me? No. I have no idea, because I didn’t bother to check. So I don’t want more money, and I don’t even know that more is available to me, and I am under earning by $40 a share. It is a fact that I under earned in this transaction, regardless of what I think about it, or what I know, or what I want. I earned 20% of what I should have earned in that transaction–$10 vs. $50. This necessarily means I was under earning. Whether I wanted more money or even knew I was entitled to more money, it’s an objective fact that I was under earning.

Underearning means receiving less than the market is willing to pay

From this example we can begin to tease out exactly what under earning is. You are under earning if you are earning less than the market is paying for the thing that you’re selling. This is important, so I’ll say it again. You’re under earning anytime the market is willing to pay a certain amount, and you are receiving less than that amount.

How to know if you are under earning: Symptom #1: Mark Up

So now the question is, how do you know if you have this going on? There are lots of ways. We’re going to discuss them in upcoming episodes. And today we’ll dive into the first test for knowing if you’re under earning.

The first test of underearning is mark-up. You are under earning if someone else is marking up your services, keeping some or most of the money, and giving you the difference. Here’s what I mean by this. If I’m practicing law for a firm on a full-time basis and making a salary of $200k, but my firm is charging $700 an hour for my services. I am under earning.

How do we know this? Because there’s a market rate for my services–$700 an hour. How do we know this is the market rate? Because a willing buyer is already paying it.

How do we know I’m earning less than this amount? Because we do the math. If I have a $200k salary and I’m working 2,000 billable hours for my firm, I’m making $100 per billable hour. So you subtract what you’re making–$100 an hour—from the market rate ($700 an hour) and what you come up with is under earning at a rate of $600 per hour. Of course, most lawyers work more hours than just their billable hours, and if we factor those additional hours in, the lawyer in this example is making even less than $100 an hour.

Now, at first glance, this may not feel like under earning, mainly because everyone does this. or rather, most people do this. Most people go to work at a firm. They get paid a fraction of the money. And the firm keeps the rest. But let’s be very clear on this. This is under earning because there’s a buyer paying $700 an hour for the work, and the lawyer is the person who is doing the work but you are only making $100 an hour. When that’s going on, the unavoidable conclusion is that you are under earning because you are making far less than market rate.

So now I would like you to pause and check in with yourself. How do you feel right now? If you are playing by a low-profit playbook, you are feeling a teensy bit antsy or dubious about this example.

You may be thinking something along the lines of, “Wait a minute. A lawyer making 200k a year is not under earning. That’s a good salary. The firm has those clients who pay $700 an hour. How can an individual lawyer go out and get clients who pay that much? They can’t, so they have to be happy working for the firm.”

You might also be thinking that it feels very safe to make the 200k per year working full time for the firm. And it feels very unsafe to think about doing anything differently. But let’s look at the math. The work that this lawyer is doing is generating $1.4 million a year. The lawyer is receiving less than less than 15% of that money.

The reason I’m walking you through this math is because one of my missions in life is to close the gender earnings gap and the gender wealth gap in this country during my lifetime. And what I’d like you to notice is that the scenario that we all generally accept as commonplace and safe is actually one of the biggest earnings gaps we could possibly encounter. When the person doing the work is making 15% of the money, and the owners of the firm are making 85% of the money, that is exactly the kind of scenario that creates a wealth gap. This isn’t just a gap. It is a terrifying void that sucks up lawyers’ entire lives.

The example I’m working with today is for lawyers, but please know that if you are a professional of any kind, and your firm is marking up your services with this kind of magnitude, exactly the same thing is happening in your life.

So the question is, why are we so comfortable with math that is this skewed in favor of the partners in the firm making all the money, rather than you who is doing the work making all the money? Why does that feel fine for us? And commonplace? And routine? And safe?

The reason is because we have been groomed to feel that way. We are constantly being groomed to under earn.

We are constantly being groomed to under earn

Here’s an example. The other day I was listening to Dave Ramsey’s podcast, and I heard Ken Coleman telling a woman named Kim that she should never directly ask for a raise. This point about never directly asking for a raise was so important than it’s the title for the episode of Dave Ramsey’s podcast. Why You Should Never Directly Ask for a Raise.

The conversation between Ken Coleman and Kim begins at about ten minutes, thirty seconds into the episode. I’m linking to it in the show notes if you want to listen. And here’s what happened during the call. Kim calls in to say that she has a masters’ degree. She’s working in Boston in a corporate health care setting and she wants to know how to ask for a raise because she’s earning $3 to $4 an hour less than the market rate for what she does.

So then what happens? Ken Coleman asks Kim a series of questions.

The first is about the health of the organization she’s working for. How are they doing, given that the organization is in Boston, and we have Covid going on, etc.

Here I’d like to pause and ask you to notice something. If I called the Dave Ramsey show, and told them that my broker kept $40 of the $50 that each share of my Coca Cola stock was sold for, do you think Dave Ramsey would ask me, “Well, what your broker’s financial situation? Tell me about the financial health of your brokerage firm during Covid.”

Is there a snowball’s chance that he would ask me that question? No. Why not? Because when we’re talking about selling something other than our own services, it is very clear that we should receive market rate for it. Period. End of story. All day long. It absolutely doesn’t matter if my broker wants to keep some of the money for himself because he’s not doing well financially right now. All that matters is that there’s a market rate. If I’m not selling services, everyone agrees that I should get market rate. It’s not even a question.

And think about this. Does a landlord ask, “Is this company to which I’m renting financially healthy,” when they are saying what they need for rent? No. They just look at what the market rate for rent is, and that’s what they charge.

Does a supplier of something other than services pause to ponder, “What should we charge XYZ company for widgets? Are they really profitable this year, or are they struggling? Oh, they’re struggling? Then we’ll charge them a lot less than everyone else.”

This isn’t a conversation that landlords and suppliers have, when they are determining their prices. They just look at the market rate. So why are employees advised to go through this kind of analysis when they’re thinking about what their price should be? Why is it different when it comes to selling your own services in the marketplace? We’ll get to the reason in a second. For now, just notice how the grooming to under earn continues in this conversation between Ken Coleman and Kim. Once he asked her about the financial health of her employer, the next question he asked her was, something along the lines of, do you have your eye on another position in this company, or do you just feel like you’re underpaid in this position?

And she responded that she was underpaid in this role, and he basically cut her off saying, I get that. But what does the corporate ladder inside of this organization look like for you? What does the ladder look like that you may want to climb? He goes on to say, “Let’s say you got this raise today. That would make you feel better emotionally, but I feel like your eyes are on something bigger. Something higher up the ladder. Is that true or false?”

With this line of questioning, he basically wants to know if she wants to be promoted inside of this organization. Before we talk about this question, let’s pause and notice something else here. When he tells her, if you get the raise you will feel better emotionally, what is going on? The request for a  raise has nothing to do with emotion. She would feel better financially, not emotionally, if she gets the raise.

Notice how preposterous it would be if I called up Dave Ramsey to say that my broker was giving me less than market rate for my stock. Would Dave Ramsey say, “Well yeah, you would feel better emotionally if you got paid all of the market rate for your stock, but don’t you think you have your eye on something bigger?” No. He would never say that. It would be preposterous to conclude, when I’m calling in saying that I got less than market rate for selling a stock, that I have an emotional problem. What I have is a financial problem, because I got paid less than market rate.

So here’s something to watch out for. When someone takes a financial problem– you’re receiving less than market rate—and recasts it as an emotional problem, be afraid. Be very afraid. Why? Because what that person is about to do is feed you a bunch of low-profit rules to stuff into your low-profit playbook, and that’s exactly what we see Ken Coleman do in this conversation with Kim.

What does he go on to tell her? He tells her that if she goes in and tells her supervisor, I want more money because I’m earning less than market rate, she is going to put the supervisor on the defensive, and that’s going to be a problem for her because she wants to move up the ladder at this company.

Embedded in this advice are three nonsense rules that feature prominently in every low-profit playbook. One is that people are going to feel defensive if you ask for more money. The second is that the way other people feel is more important than you getting your money. And the third is that you have to under earn now if you want to get promoted later. The way you get a promotion is buying it by subsidizing your employer by working at less than market rate now, for what you’re doing prior to the promotion.

There is so much nonsense embedded in this rat’s nest of ideas I can’t even sort it all out in a single episode. But for now, think about this first point that asking for more money makes people feel defensive. Let’s go back to my broker example. If I call up my broker and say, “Listen, dude. The shares were selling for $50 and you paid me $10. I’m done selling shares for less than market rate. You need to give me the rest of my money,” how do you think my broker is going to feel? Defensive? Or is he just going to think, “Wow. we messed up,” and then put the money into my account?

I can almost guarantee that it’s going to be the latter. He’s not going to feel defensive. He’s going to feel sorry for making the mistake, and grateful that I alerted him to the fact rather than just packing up and going to a new firm.

But here’s the thing. What if he feels defensive? Is Dave Ramsey ever going to tell me, “Listen Kelly. Just let the broker keep your money, because if you ask for it, he’s going to feel defensive. He might not want to be your broker anymore.” Are those words that anyone uttered EVER? No. That would be insane. If my broker paid less than market rate, Dave Ramsey (and everyone else on earth) would just tell me to get my money, and also to get a new broker. End of story. All day long. It doesn’t matter how the broker feels. What matters is that I get my money.

Here’s something else to notice. The hosts on Dave Ramsey’s show ask for money ALL. THE TIME. They ask you to join Financial Peace University. They ask you to do business with their SmartVestor Pros. They ask for money constantly. Do you feel defensive about that? Are you offended by that? No.

So I’m flagging this episode for you because it’s a perfect example of how the “experts” who are supposedly there to serve you and help you make more money are actually telling you things that send you 180 degrees in the wrong direction.

And now let’s get into the nitty-gritty of the advice that Ken Coleman gave to Kim. After he tells her to never directly ask for money because someone else might feel an unpleasant emotion, what did he tell her to do? He told her to go to the employer and ask for a “growth plan.” To ask if there are skills she could acquire and trainings that she could do, so that she could take on more responsibility and eventually have more influence and eventually have more income as a result.

If I had a nickel for every time a woman told me she needed more skills and training and more responsibility and more influence so that she could eventually buy the right to eventually make market rate, I would be a billionaire. This is what women are always doing when they are under earning. They are always telling themselves, “First I need more skills. I need more training. I need to learn more. And then after I’ve improved myself, then I’ll take on a lot more responsibility. And if I do that well, then I will have more influence, and then and only then, can I have more income. Maybe then it will be appropriate for me to receive market rate for what I do.”

So this is another rule that we will see in almost every low-profit playbook. This advice that Ken Coleman gave to Kim is the essence of a low-profit playbook. Forget about getting market rate for what you’re doing now. Instead, learn more. Train harder. Take on more responsibility. Get more influence. THEN you can get more income. Not now. Definitely not now. You’re not enough to get paid market rate now. Let’s have you do a bunch more things, to broaden the discrepancy between what you’re getting and market rate now, and then at some point in the future, we’ll see what we can do about closing that gap a little bit.

This is a rule. You’ve been fed it. You’ve been groomed to believe that this is the way the world works. Why is this rule there? Because the “experts” are advising you that this is the way to proceed.

To this, here’s what I can offer you. Yes, do all of these things. Go learn everything. Go do everything. Go become as influential as you possibly can. But in the meantime, also get market rate for what you are doing NOW. No matter who you are, no matter what you do, don’t let anyone tell you that you must defer your right to receive market rate for what you’re doing now, until you are more knowledgeable, more skilled, more responsible, more valuable. When you become all of those things, your market rate will  increase even higher, and you should get market rate then, too.. And you should also get the market rate for whatever it is that you’re doing now, before you become all of those things.

The time to make more money is now, my friends. Always now. And yet we are constantly being groomed to defer making the money. It’s ridiculous. If I were talking to Dave Ramsey about my broker who kept $40 and only gave me $10, and I asked him, “When do you think I should take care of this? When do you think I should ask for more money?” What do you think you he would’ve told me? He would have said right flipping now. Not later. Right now.

But what happens in the conversation between Kim and Ken Coleman? At the end of the conversation, he tells her that she shouldn’t ask for more money now. She should wait. This brings me to the next low-profit rule that I want to discuss today. The low-profit rule is that when you have a choice between now and in the future, the best time to make money is in the future. The high-profit rule is exactly the opposite. When is the time to make more money? Now. The time to make more money is always now.

If we’re talking about selling a stock, all of this is obvious. So why isn’t it obvious when Ken Coleman is talking to Kim about how to ask for a raise? It’s not obvious because we are so accustomed to grooming women to under earn that we can’t even help ourselves. This advice that he gives her feels perfectly rational and normal. And this is one of the big reasons that the gender earnings gap and the gender wealth gap persist in this country. You’re constantly being groomed for the perpetuation of these gaps.

So here’s what you need to know. It is entirely possible to ask for money without offending people. Without putting them on the defensive.

It is entirely possible that if someone is momentarily defensive, that it’s not a big deal.

It’s also entirely possible to get paid a fair price—market rate—for what you are doing now. You don’t have to defer receiving market rate now with promises about being even better—more skilled, better trained, more resourceful, more responsible, more influential—in the future.

If you don’t know how to do all of these things right now, please consider joining us in my one-of-a-kind coaching program Gateway to Seven. Inside, we are curing the cancer that is female under earning. We’re doing it one woman at a time. If you are a dude and you want inside this program, you’re not unwelcome. We’re happy to have you. We’re not going to be like those law firms that told Ruth Bader Ginsburg that she couldn’t work there because she was a woman. That’s nonsense. But make no mistake. What we are doing in there is deprogramming this “expert advice” that has women in this country under earning on a mass scale. I’m done with it. The women inside the program are done with it, too. If it’s time for you to be done with it, please join us. Your first step is booking a call with me. My calendar is very full now, but I have opened up a few times for calls during Thanksgiving week, because I’m off that week so I have time to speak with you. So go to my calendar and set yourself up with a time to talk to with me, because now is the time to stop under earning. Now is the time to start collecting market rate for what you do, whatever it is. Now is the time for the under earning grooming that we’ve all been receiving to be rendered completely ineffective. Now is the time for us to point and laugh at this kind of silly advice that asking for money is such a big problem that we’d best never do it. If you’re in, so am I. Let’s talk during the week of Thanksgiving. And if I don’t happen to speak with you, I hope you have an amazing holiday and I will look forward to connecting with you in the next episode.