It's easy to assume that earning more money will solve all of life's financial problems. It's logical: If the income increases, the financial pressure should subside.

But, for many of us, the opposite happens. The paychecks are bigger, yet the feeling that you're still behind hasn't gone away.

Hitting a long-term salary goal can lead to a flood of thoughts and emotions including, "This still doesn't feel like enough."

What often gets overlooked is that income alone doesn't determine how financially secure you feel. Two people can earn the same salary and have different financial experiences. The deciding factor usually comes down to how that income is managed, spent and structured over time.

Why do you feel like you're behind?

In most cases, lifestyle is where the gap begins to form. As income starts to increase, spending usually follows suit. Earning a higher salary can often lead to higher fixed expenses, such as a more expensive apartment or a newer car, or increased daily spending.

Although more money is coming in, increased spending is diminishing what's left after necessities and bills.

The shift isn't always dramatic. Small upgrades such as dining out more often, taking more weekend trips, even prioritizing convenience can become routine. As time progresses, those habits can shift what feels normal, making it harder to identify where the extra money is going.

For many Americans, earning more money can also come with the feeling of needing to catch up. This can range from aggressively paying down debt to covering prior financial gaps, which can absorb additional funds before they can be saved or invested.

Additionally, the cost of living has increased significantly. Since 2020, household expenses have increased 25%, according to a report from Boston College. Food and transportation costs are up 30%.

Consequently, higher incomes don't stretch as far as they once did. For a proportion of Americans, what used to feel like a comfortable salary now feels like it's just covering just enough to survive.

When all of these factors compound, it's easy to see why earning more doesn't always translate to feeling financially secure. While it may feel like a tough situation to navigate, the solution isn't necessarily earning even more, but changing how the income is being used.

Remove the guesswork

Prioritizing savings before doing anything else is one of the most effective strategies to begin creating financial stability.

Allocating a fixed percentage of income, whether it's 2% or 6%, builds consistency regardless of how much is earned.

Rather than saving what's left over at the end of each month, which can vary, saving a fixed amount biweekly or monthly soon becomes a built in part of your financial routine.

For those who earn more than the average annual salary, the issue usually isn't income, it's structure.

According to Forbes Advisor, using data from the Bureau of Labor Statistics, the average annual salary in America is $64,505. For someone earning well above that amount, the expectation is that financial stress should go away.

However, without a clear framework for managing that money, the additional income can be spent just as fast as it's earned.

The key to making meaningful change starts with a shift in mindset: Pay yourself first. Treat every savings or investment contribution as your first expense, rather than something that happens after everything else is paid. Doing this removes the guesswork, ensuring saving doesn't become dependent on what's left over at the end of the month.

Earning more money is a great accomplishment. It can create more opportunity, but it does not guarantee financial stability. Making real progress comes down to how that extra money is managed over time.

Ron Tallou is a registered representative of and conducts securities transactions through CoreCap Investments, LLC. Advisory services offered as an investment advisory representative of CoreCap Advisors, LLC. RJP Estate Planning is a separate entity and not affiliated with CoreCap Investments or CoreCap Advisors. The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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• The Power of Living Within Your Means
• How You Can Save for Big Goals Even if You Feel Like You're Barely Getting By
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Question: I’ve got $10,000 from my year-end bonus, and I want to keep it safe but still earn something. Is a CD or a money market account the smarter move?

Answer: It’s a natural question to ask right now. With your bonus in hand and interest rates slipping after the Fed’s rate cuts this year, deciding where to put that $10,000 can feel surprisingly tricky.

Certificates of deposit (CDs) and money market accounts (MMAs) remain two of the safest, most popular options. Both offer FDIC/NCUA insurance, both earn interest and both protect principal. But the best choice for your $10,000 depends heavily on two things: timeline and liquidity.

Let’s break down how these accounts work today, including updated earning tables, so you can choose the smarter home for your year-end bonus.

What’s the main difference between a CD and a money market account right now?

The main difference between a CD and a money market account right now is rate certainty versus rate flexibility. A CD locks in a guaranteed APY for a set term (anywhere from three months to several years). No matter what the Fed does next month or next quarter, your rate won’t change. That predictability is valuable in a declining-rate environment like the one we’re entering.

A money market account, however, has a variable rate. APYs can adjust up or down depending on market conditions and bank pricing decisions. For savers who want liquidity and the ability to move funds anytime, MMAs offer more flexibility.

How do liquidity and access differ?

CDs restrict access while money market accounts don’t. With a CD, withdrawing before maturity typically triggers an early-withdrawal penalty. That makes CDs better for money you know you won’t need for a set amount of time.

Money market accounts allow withdrawals and transfers as needed. While some banks impose monthly transaction limits, you can generally access your cash penalty-free, making MMAs ideal for near-term goals or emergency-adjacent savings.

Are both options equally safe?

Yes, as long as you stay within insured limits. Both CDs and MMAs are insured up to $250,000 per depositor, per institution, through the FDIC (banks) or NCUA (credit unions).

In terms of safety, they’re essentially identical.

How much a $10,000 CD earns at today's best rates

CD rates have drifted down slightly following recent Fed action. But some terms like one-year CDs remain competitive.

Earnings assume interest is compounded annually.

The biggest advantage here is the certainty: once you lock in a CD, the rate is yours regardless of economic shifts. If the Fed cuts again, as many expect, today’s 12-month yields may look unusually attractive compared with what banks offer three or six months from now. For savers wanting predictability, that’s a major benefit.

How much a $10,000 money market account earns right now

Money market accounts remain competitive even as rates cool, with many high-yield MMAs still offering around 4.25% APY. Because the rate is variable, earnings calculations below assume monthly compounding and no changes to APY over the period.

What stands out is the combination of liquidity and competitive returns. While a money market account can’t guarantee the rate won’t slip, it gives you significantly more flexibility.

Many banks also offer these accounts with low monthly fees, making them accessible for everyday savers. For short-term horizons, especially under nine months, today’s best MMAs earn slightly more than comparable CDs.

Use the tool below to quickly explore and compare some of today's top savings account offers:

CD vs. money market account returns compared

Below is how the two products compare head-to-head across common savings timelines:

Across most terms, the money market account slightly outperforms the CD, with the largest edge appearing over longer periods as compounding works in its favor.

The notable exception is the one-year CD, which is currently offering elevated rates that many analysts expect won’t last. If you’re attracted to locking in one of the last remaining CD terms with a “4-handle,” this is the window.

When a CD makes more sense

A CD is most effective when you value rate protection and you’re confident you won’t need to touch the money. For people with a fixed savings goal like an insurance premium due next year, a future home improvement project, tuition savings or wedding costs, a CD gives you exact, predictable earnings without requiring active management. CDs also make sense right before a rate-cut cycle.

Locking in a higher APY shields you from the declines we often see in variable-rate products after the Fed shifts its policy stance. If you’re someone who finds peace of mind in structured savings and guaranteed outcomes, a CD delivers clarity at a time when interest rates are in flux.

When a money market account makes more sense

A money market account is the better choice when liquidity or flexibility is your priority. This is ideal for savers who want their bonus accessible at any moment whether for emergency expenses, a home repair, a flight deal you can’t pass up or simply because you prefer not to lock up your cash.

While MMAs don’t guarantee the rate won’t drift lower, they still tend to retain strong competitiveness, especially in the online banking sector where promotional APYs remain plentiful.

If your timeline is short or uncertain, or if you’re looking for a place to keep cash while evaluating potential investment opportunities, an MMA lets you earn a solid return without sacrificing access.

How to decide between the two

The simplest way to choose is by assessing your timeline and your liquidity needs. If you know with certainty that you won’t need the money for at least 12 months, a CD may offer a slightly higher return with rate protection. If you’re unsure about your plans or may need access at any point, the money market account is the safer, more flexible pick.

You should also consider how sensitive you are to rate changes. If locking in a guaranteed APY brings peace of mind, that’s a strong argument for a CD. If you’re comfortable with the variability and you prefer being able to move money freely, an MMA offers the better balance of return and accessibility.

Final takeaway

If you’ve received a $10,000 year-end bonus, you’re entering 2026 with options. Both CDs and money market accounts are safe, federally insured, and deliver attractive yields compared with traditional savings accounts.

In today’s environment, the money market account typically comes out ahead for most time frames thanks to its liquidity and strong APYs, while the one-year CD remains a standout for its combination of guaranteed yield and rate certainty.

The right choice ultimately comes down to how soon you’ll need the money, how much flexibility you want, and whether locking in a rate before the Fed’s next move aligns with your financial strategy.

Related Content:

• Why a 5-Year CD is Your Best Bet After the Fed Meeting
• Best One-Year CD Rates
• Money Market Account vs High-Yield Savings Account

If you plan to work while collecting Social Security benefits before reaching your full retirement age (FRA), you need to understand the Social Security Earnings Test (officially called the Retirement Earnings Test).

This rule allows the Social Security Administration (SSA) to temporarily withhold a portion of your benefits if your earnings exceed a set annual limit. This surprise deduction often catches retirees off guard, significantly straining their budgets and savings plans.

Who does the earnings test affect?

The earnings test applies to beneficiaries who are working and collecting Social Security retirement or survivor benefits and have not yet reached their full retirement age (FRA). Once you reach your FRA, the test no longer applies, and you can earn any amount of money without having your Social Security benefits reduced.

If you're under your FRA: Your benefits are subject to the test.

In the year you reach FRA: The earnings limit disappears. You can work and earn any amount of income without affecting your Social Security benefits.

The SSA uses two different earnings limits for those working and collecting benefits, depending on how close you are to your FRA. The limits typically increase each year and are announced by the SSA in conjunction with the cost of living adjustment (COLA) and wage tax cap in mid-October.

The two earnings limits for 2026

The specific dollar limits and the withholding rate depend on how close you are to your FRA.

An example of how the withholding works

Assume your full retirement age is 67, and you are 64 in 2026 (under FRA all year).

Annual limit in 2026: $24,480

Your earnings: $30,000

Excess earnings: $30,000 (earnings) minus $24,480 (annual limit) equals $5,520

Benefits withheld (at the $1 for $2 rate): $5,520/2 equals $2,760

The SSA would temporarily withhold a total of $2,760 from your scheduled benefits for the year. This is typically done by withholding entire monthly checks until the total reduction is met.

Remember, not only will the reduction go away when you reach FRA, but you'll also recoup any benefits lost to the reduction. More about that below.

The crucial recalculation: Withheld money is not lost

The most misunderstood aspect of the earnings test is whether the withheld money is lost forever. The good news is that it's only temporarily withheld.

Once you reach your FRA, the SSA performs a recalculation, increasing your future monthly benefit to credit you for all the months of benefits that were previously withheld. Essentially, the earnings test trades a temporary benefit reduction now for a permanent increase in your monthly benefit later.

The net result is that you receive the total value of your retirement benefits over your remaining lifespan. While it might not be preferable to have a portion of your Social Security benefits withheld until after you reach your FRA, this happens in the context of you being currently employed. Forewarned is forearmed — you can plan for and around that reduced benefit until you hit your FRA.

What counts as 'earnings'?

The Earnings Test is based solely on earned income.

The special first-year rule

The SSA has a special earnings rule for the first year you claim benefits. This helps those who retire mid-year after having already earned well over the annual limit. Under this rule, you can get a full Social Security check for any whole month you’re retired, regardless of your yearly earnings.

In your first year of claiming, the SSA can apply a monthly test. If you don't earn more than a specific monthly limit, $2,040 in 2026, for those under FRA all year, the SSA considers you "retired" for that month and will pay you a full benefit check, regardless of your total annual earnings from the months before you filed.

If you reach FRA in 2026, you're considered retired in any month in which your earnings are $5,430 or less, and you didn't perform "substantial services in self-employment."

What the SSA considers "substantial services in self-employment": Devoting more than 45 hours a month to the business, or from 15 to 45 hours to a business in a highly skilled occupation, or managing a sizable business. However, if you work less than 15 hours a month, you’re considered retired.

Working might defer some of your benefits, but won't reduce your benefits

If you're worried about losing some of your benefits because of the earnings test if you work after claiming Social Security, I hope you are relieved to know it's just a matter of time before you collect those 'lost' benefits.

When you hit your FRA, your monthly benefit will be recalculated and raised to reflect all the money temporarily withheld under the earnings test.

Related Content

• 2026 Social Security COLA is 2.8%: What You Need to Know
• Six Changes to Social Security in 2026
• Social Security Tax Limit Rises Again: Who Pays More in 2026?

More workers have better purchasing power today than they did before the pandemic, according to a new study showing that wages have grown more quickly than prices.

Despite the fact that prices are up 20% since the fourth quarter of 2019, wages for a typical worker are up 23%, according to The Center for American Progress (CAP) study.

"If wages rise more quickly than prices, workers can maintain or improve their standard of living — and since the start of the pandemic, wage growth for a typical worker has been higher than inflation," CAP said in the study.

About 6 in 10 workers, or 57%, earned higher annual inflation-adjusted wages in November 2023 than the year before, CAP said. This translates into a median change, adjusted for inflation, of around 45 cents an hour, or a $900 annual increase for full-time, year-round workers.

"In fact, real wages for a typical worker stand at about the level expected if there had been no pandemic or recession in early 2020 and if they had kept growing at the same rate as in years prior," it added.

The findings may be music to the ears of many, especially job seekers. In December, jobs growth was stronger than expected, as Kiplinger previously reported. Rising wages continued to be a source of inflationary pressure.

Following news yesterday (January 31) that the Federal Reserve will hold interest rates steady, Fed Chair Jerome Powell told reporters that inflation has eased without a significant increase in unemployment. "That’s very good news," he said. "Nominal wage growth has been easing and job vacancies have declined," he added.

Meanwhile, in a July 2023 survey of about 1,000 consumers, the Federal Reserve Bank of New York found that, while the number of job seekers has dropped, their wage expectations have picked up. It also showed that, on average, the likelihood of working beyond age 62 declined slightly to 47.7% from 48.8% in July 2022, and the likelihood of working beyond age 67 edged up to 32%, from 31.3%.

As Kiplinger recently reported, a recent shows that the fields most likely to offer the best job growth and pay raises in 2024 include healthcare, information technology, government and manufacturing. To see the study's details by the numbers, visit the Resume Genius job hunting portal.

RELATED CONTENT

• Best Jobs To Get A Pay Raise in 2024
• More Americans Are Saying No to Full-Time Retirement
• Layoffs Could Be Coming: What if You’re Near Retirement?

Now might be a good time to think about what would make you a happier employee and negotiate with your company to make it so. And that includes a decent raise.

Why now? Because employees are gaining the upper hand for the first time in a long time in the workplace as companies struggle to fill open positions and look for ways to keep people from quitting.

While raises may not be as big as the Social Security cost of living adjustment of 5.9% (the highest COLA since 1982), wage increases are expected to be higher than recent years and may also be joined by other added employee perks, like bonuses, flexible schedules, tuition reimbursements and remote-work opportunities

“It feels like it's almost a perfect storm,” said Gary Straker, senior compensation analyst at Salary.com. “I think it’s a combination of factors that are putting pressure on the labor market...Employee expectations have changed. They probably feel emboldened. They’re in a position to maybe ask and, in some cases, demand more from their employer.”

Employees Are Gaining Power

The pandemic economy has accelerated a shift in the employee/employer power relationship that had begun even before anyone ever heard of COVID. With income inequality on the rise, low-wage workers were demanding pay increases, while several states raised minimum hourly wages as high as nearly $14. These state requirements are well ahead of the federal minimum hourly wage of $7.25, which hasn’t changed since 2009, the longest period in history without an increase.

After shutdowns during the early months of the pandemic led to large-scale layoffs, many companies have had trouble hiring people back or finding replacements. Employees are reassessing what they want to do and how much money they expect to make.

At the same time, facing public pressure and the need to fill open positions, several big companies such as Amazon, Target and Costco increased starting wages. A recent study by researchers at Brandeis and the University of California, Berkeley found that increases in hourly wages by those companies were followed by increases (though smaller ones) at other employers in the same areas.

And increases in starting wages can lead to increases on salaries for existing employees. What this should mean is a nice bump up in wages for many employees next year. In addition to a raise, you may see other improvements at your workplace as companies look for ways to improve worker satisfaction and to stave off employee wanderlust.

Surveys Show Companies Plan Higher Raises

Employer surveys over the summer found companies expecting to increase wages about 3% in 2022, which is up slightly from 2021. But that number may ultimately be higher as conditions continue to evolve in a dynamic environment, according to Catherine Hartmann, the North America Rewards Practice leader at Willis Towers Watson.

Specifically, Willis Towers Watson found in July that companies project executives, managers and other professional employees will receive average salary increases of 3% in 2022, compared to the average 2.7% increases in 2021.

WorldatWork projected a national total salary budget increase average at 3.3% for 2022, which the firm’s director of Total Rewards content, Alicia Scott-Wears, said “signified not only economic recovery since the pandemic but also a tightening labor market.”

A National Salary Budget Survey by Salary.com found 41% of organizations planning higher salary increase budgets in 2022 than they did in 2021, which the company says represents “the first significant shift in merit increases in the last 10 years of survey data. For perspective, last year just under 10 percent of organizations planned a higher salary budget increase than the prior year.”

That survey found 12% of organizations planning increases of 4 to 5%. Last year, that number was just 7-8% of organizations planning that size of raises. Salary.com provides businesses with compensation market data software, and analytics.

Wage increases will vary according to industry. The Willis Towers Watson survey found that high-tech and pharmaceutical companies project the largest increases at 3.1%, with health care, media and financial services companies coming in at 3%.

On the other end, leisure and hospitality and oil and gas companies are budgeting just 2.4% for wage increases. Production and manual labor employees are projected for average increases of 2.8% next year, after average 2.5% increases this year.

Hartmann said she’s talked to employers, and anecdotally, many have told her they expect to give raises higher than those reported on the survey. Some expect raises to be closer to 5%.

“Please Stay”: Perks Planned in Addition to Raises

Hartmann said the wage increase numbers aren’t the entire story, as many employers are expecting to improve working conditions in other ways.

Those ways include things like bonuses, tuition reimbursement, spot awards, and gift certificates.

“Overall,” Scott-Wears said, “there is no doubt that organizations are preparing the business case for expanded pay increase budgets in 2022 for a wide variety of reasons, but ultimately the workplace issue to address is beyond pay. What is now coined as ‘The Great Resignation’ is having a lasting impact on the workforce and talent pools and therefore putting increased pressure on employers to compete for the talent they need whether attracting or retaining.”

In August alone, 4.3 million people quit their jobs, a rate of 2.9%, the highest since the Department of Labor began collecting this data in 2000. “It costs a lot to go out and find new employees,” Straker said. “Keeping the ones you have is a high priority.”

Straker said employees and employers are well aware of the power shift.

For some employees he said, 3% may be more of a floor on raises than an average. “I think what we’re going to see is it’s a very fluid and dynamic environment,” he said. “Organizations are going to need to adjust.. They’re monitoring wage movement routinely and are constantly benchmarking using the most currently available data.”.

Inflation, COLA and Wage Increases

Another reason for pay increases is to compensate for rising inflation. The downside is inflation is eating into pay increases and may render them inadequate to meet increased expenses.

Inflation data drives the planned 5.9% cost of living adjustment, or COLA, for Social Security recipients and others. But most workers can’t expect to see raises that high this year. While companies set wages based on a range of factors, including their own budgets and employee needs, COLA is established under law using the Consumer Price Index for Urban Wage Earners and Clerical Workers.

Experts say employers are aware of the COLA, but that it’s not a primary factor in setting wages. And most years, that’s a good thing. That’s because wages usually increase at a higher rate than the COLA. In 2021, for example, the COLA was 1.3%, while wages rose by nearly 3%.

Sources: Social Security and Social Security

How Can You Negotiate a Raise?

Before seeking a raise, Straker said employees should request information about pay ranges up front and should expect transparency from their bosses. “I would encourage people to be as informed as they possibly can before going in.”

He said several states have passed laws requiring wage range disclosures for new hires, with some states requiring this information for existing employees.

“Organizations have to find ways to elevate the employee experience,” Straker said. “They have to find ways to have employees feel valued in such a way that they are more engaged, they are hopefully more motivated in their work and committed to the organizational goals and mission.”

Transparency is one way to build trust, Straker added. “If pay is a mystery in your organization, that’s generally not a good thing. It can lead to employees not feeling respected or valued.”

Before you begin negotiations, Hartmann said, “it’s really important you understand your value and your worth.” At the same time, consider your priorities and be “really open about where the conversation goes.”

One thing to consider is if anything in addition to a raise would make you happier in your work. This can include accommodations for family situations, remote work, time off, training opportunities and the possibility of advancement. Might you be willing to accept a bonus in lieu of part of your raise? “Have in your mind about what your next steps will be if you get the raise if you don't,” Hartmann said.

If you do decide to leave, Hartmann said, remember that things may not actually be better at the next job. So resist the temptation to sing Johnny Paycheck on your way out the door. You never know when you might find yourself working with the same people again.

Efforts to increase the federal minimum wage failed once again, as the Senate rejected an attempt to add language that would increase the minimum wage to the massive COVID-relief bill working its way through Congress. On Friday, Sen. Bernie Sanders (I-Vt.) offered an amendment to the bill that would raise the federal minimum wage to $15 per hour by 2025. However, the amendment was voted down by a 58 to 42 count.

To pass President Biden's $1.9 trillion stimulus package without support from Republicans, Democratic lawmakers are applying rarely used budget reconciliation rules to enact the plan. Under these rules, legislation can be passed in the Senate with a simple majority vote, instead of the 60 votes normally needed to avoid a filibuster, but only provisions that "change spending or revenues" can be included in a reconciliation bill. On February 25, the Senate Parliamentarian ruled that the minimum wage provisions in the COVID-relief bill do not satisfy that standard.

Despite that ruling, the House of Representative included a $15 minimum wage provision in their version of the reconciliation bill. The House passed that bill on February 27. However, because of the Parliamentarian's ruling, the Senate version of the reconciliation bill currently does not contain language to increase the minimum wage. Sen. Sanders' amendment would have changed that.

Although they were disappointed in the Senate Parliamentarian's ruling, it didn't come as a surprise to most Democratic lawmakers. Even President Biden predicted that the $15 minimum wage provisions would eventually wind up on the cutting room floor. "I put it in, but I don't think it's going to survive," he told CBS News last month.

Sen. Sanders' effort to reinsert the $15 minimum wage provisions were doomed to fail. That's because there are a handful of moderate Senate Democrats who oppose the planned increase – most notably, Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.). Since the Senate is split 50-50 between Democrats and Republicans (with Vice President Kamala Harris casting the deciding vote to break any ties), the Democrats can't afford to lose any votes unless they can pick up an equal number of Republican votes, which is doubtful. Although some Republican Senators support raising the federal minimum wage, their plans typically call for smaller increases and have strings attached. For instance, Sens. Mitt Romney (R-Utah) and Tom Cotton (R-Ark.) recently released a plan for a $10 minimum wage, but employers would be required to use the E-Verify system to prevent the hiring of undocumented workers.

In a way, the Parliamentarian's decision may be a blessing in disguise for Democrats. They can now move forward and pass the reconciliation bill more quickly without having to go through an inter-party fight between progressive and moderates over the minimum wage provisions. They pledged to pass the stimulus package and send it to the president's desk before March 14 – when enhanced unemployment benefits run out – and it appears as if that will happen. Since the bill is being revised in the Senate (including changes to stimulus checks), it must go back to the House for approval after the Senate passes it. The House is expected to pass the Senate version, though.

[Stay on top of all the new stimulus bill developments – Sign up for the Kiplinger Today E-Newsletter. It's FREE!]

Sen. Sanders' $15 Minimum Wage Amendment

The current federal minimum wage is $7.25 per hour. (States can have their own minimum wage, which can be higher than the federal amount, but not lower.) Under Sen. Sanders' amendment, the federal minimum wage would have jumped to $9.50 per hour starting a few months after the bill is enacted. The rate would have then gone up to $11 per hour in 2022, $12.50 per hour in 2023, $14 per hour in 2024, and $15 per hour in 2025. After that, it would have been increased each year by the annual percentage increase, if any, in the median hourly wage of all employees.

Employees who work for tips would have also seen a pay increase under the amendment. The current federal minimum wage for tipped employees is $2.13 per hour. That would have shot up to $4.95 per hour this year. Then, starting in 2022, the tipped minimum wage would have increased by $2 per hour each year until it equals the federal minimum wage for other workers.

The "youth minimum wage" would have gone up under the amendment, too. Today, employers can pay a new worker who is under 20 years of age $4.25 per hour during the first 90 days of employment. That rate would have risen to $6 per hour in 2021 under the amendment. That hourly rate would then be increased by $1.75 each year thereafter until it's the same as the standard minimum wage.

Finally, disabled workers would also have gotten a pay increase if the amendment was adopted and passed. Right now, employees with a disability can be paid below the standard minimum wage at a rate based on his or her productivity. That would have changed under the amendment. Instead, disabled workers would have to be paid at least $5 per hour in 2021, $7.50 per hour in 2022, $10 per hour in 2023, $12.50 per hour in 2024, and $15 per hour starting in 2025. After that, they would have been paid the standard federal minimum wage.

Future Fights for a Higher Minimum Wage

After the Senate Parliamentarian's ruling, the White House released a statement saying that the president was "disappointed" with the decision, but that he will "work with leaders in Congress to determine the best path forward because no one in this country should work full time and live in poverty." Senate Majority Leader Chuck Schumer (D-N.Y.) expressed similar feelings. "We are not going to give up the fight to raise the minimum wage to $15 to help millions of struggling American workers and their families," he said in a statement. "The American people deserve it, and we are committed to making it a reality."

So, don't expect this issue to go away too easily. President Biden is expected to release another economic stimulus plan in March. Perhaps a minimum wage increase will be included in that proposal. A standalone minimum wage bill could also be introduced in the near future. Sen. Manchin has suggested an $11 minimum wage. So, maybe a compromise can be negotiated that will gain enough support to get through Congress.

There's a provision in the massive House budget reconciliation bill that would gradually raise the federal minimum wage to $15 per hour. (The reconciliation bill is being used to get President Biden's $1.9 trillion stimulus package through Congress without the threat of a filibuster in the Senate.) However, once the House passes the bill – which is expected to happen before the end of February – the fate of this particular proposal is in serious doubt. Senate Republicans don't like it, and a handful of moderate Democratic Senators are against the $15 minimum wage, too. Plus, the Senate parliamentarian could kick the minimum wage provision out of the reconciliation bill altogether if she determines that it doesn't sufficiently impact the budget.

So, with the $15 minimum wage plan on thin ice, maybe there's room for a compromise. Enter Senators Mitt Romney (R-Utah) and Tom Cotton (R-Ark.) with a new plan. Under their plan, the federal minimum wage, which is currently $7.25 per hour, would gradually rise to $10 by 2025. After that, it would be adjusted for inflation every two years. But there's a catch – employers would be required to use the E-Verify system to prevent the hiring of undocumented workers.

According to a plan summary, Romney and Cotton claim that their $10 minimum wage proposal "would raise wages for 3.5 million workers without harming the very workers it's intended to protect. Mandatory E-Verify would preserve American jobs for legal workers and remove incentives for increased illegal immigration. Both policies work in tandem to create tighter labor markets and put upward pressure on wages."

[Stay on top of all the new stimulus bill developments – Sign up for the Kiplinger Today E-Newsletter. It's FREE!]

Gradual Increase to $10 Minimum Wage

As mentioned above, the Romney-Cotton plan would raise the federal minimum wage to $10 per hour by 2025, and then adjusting it for inflation every other year. But it would increase the minimum wage at a slower rate for small businesses with fewer than 20 employees. It would also prevent any increase during the COVID-19 pandemic.

Currently, the minimum wage for new workers who are 19 years old or younger is $4.25 per hour during the first 90 days of employment. In an effort to help teenagers find their first job, the Republicans' plan would also increase the youth minimum wage and extend the eligible period to 180 days.

The table below shows how the minimum wage would increase under the Romney-Cotton plan.

E-Verify Requirement

E-Verify is an internet-based system that allows employers to confirm the employment eligibility of their workers. To use the system, employers submit information taken from an employee's Form I-9, Employment Eligibility Verification, which is then electronically compared to records available to the U.S. Department of Homeland Security and the Social Security Administration. It usually only takes a few seconds to confirm the worker's employment eligibility using the system.

The Republican Senators' plan would:

• Mandate use of the E-Verify system for all employers within 18 months;
• Raise civil and criminal penalties on employers that hire unauthorized aliens and/or violate the I-9 paperwork requirements;
• Require workers 18 and older to provide a photo ID to their employer for verification, which would be cross-referenced if a photo is available through the E-Verify system;
• Authorize states to share driver's license information/photos to improve E-Verify's accuracy and condition certain federal grant funds on information sharing;
• Provide $100 million annually in funding to ensure E-Verify is immune from a government shutdown; and
• Authorize a program to block or suspend misused Social Security numbers for E-Verify, including Social Security numbers of deceased people and unusual multiple uses of the same number.

This part of the Romney-Cotton plan is likely to be a non-starter for Democratic lawmakers.

State Minimum Wages

Don't forget that states can have their own minimum wage. They can be higher than the federal amount, but not lower. Check the U.S. Department of Labor's website to find your state's minimum wage.

Despite his hard work and tenure at a top-rated hospitality company, one of my executive clients did not receive a bonus last year and saw a $15,000 cut to his salary due to COVID-19. Unfortunately, he expects to be in the same situation this year and is planning to defer some home renovations and may have to dip into cash reserves if there are any unplanned expenses.

You probably know somebody like this, or you may be in a similar situation yourself. Nearly 1 in 3 adults say that they or someone in their household has taken a pay cut due to the pandemic, according to a recent Pew Research Center study of 13,200 U.S. adults from August 2020. Additionally, 1 in 4 adults say they or somebody from their household has lost a job or been laid off due to the pandemic. Many companies reduced or eliminated bonuses altogether in 2020, and some have already announced similar reductions for 2021.

Perhaps you have been fortunate enough to have kept your job through the pandemic and recession. But faced with a loss in compensation, either through a lower salary or bonus, or fewer stock options, 2021 is not looking much better yet.

As we enter the new year with uncertainty still lingering, I have several recommendations about how to navigate these challenging circumstances. When faced with the potential for less income, it is critical to fully understand the situation and have a strategy to cover any shortfall in funds.

First, Face the Facts

Whether you typically view life as a glass half full or half empty, it is time to be realistic. In recent months, I’ve asked many clients who are corporate executives to provide me with an estimate of their annual bonus. Some initially provide a vague answer, so I challenged their assumptions. For planning purposes, we often concluded that they will likely receive less money than they first thought.

Some at companies that have been hit exceptionally hard by the pandemic have estimated their bonuses may be cut in half this year. To be conservative, I am advising them not to count on that cash flow for any fixed expenses and ensuring that other sources of funding are available in case there is no bonus at all.

Next, it is important not to look at 2021 expenses through rose-colored glasses. If there is uncertainty about future income, do not plan to spend money on a big vacation, new boat or other expensive event when the compensation may not be there. If you typically fund some of these expenses from a bonus that may not be as big this year, the sooner you start planning for that, the better.

Next, Make a Plan

Covering essential expenses with reduced compensation takes planning. It starts with knowing how much money is needed to cover your needs — the mortgage and car payments, food, utilities and insurance.

Next, be careful about expenses labeled as essential. Many executives I work with shifted their discretionary expenses in 2020, spending some money on home improvement projects, but less on travel. Be willing to defer or downsize certain discretionary expenses if you need to make everything fit in your budget.

Perhaps you have been considering a home renovation project that would cost $15,000-$20,000. You could spend down your cash now and replenish that when and if your bonus comes through this year. I caution you to wait until you know your bonus will be paid before you commit to spending down cash. Instead, keep your reserves available for an emergency or unexpected expense.

If Possible, Continue to Save

When income is cut, many people are tempted to dial back their contributions to their savings; they see it as an easy line item to trim. For several reasons, I urge people to stay committed to their savings plan unless absolutely necessary.

First, you don’t want to derail your financial plan — and your future. Next, you could lose the tax benefits of saving in retirement accounts and miss out on the compound interest and market growth. If you decide taking a pause in savings is a must, be strict about resuming these saving habits as quickly as possible. Once your compensation returns to normal, it may be tempting to spend the new gross income. Don’t let that happen.

Find a Way to Cover Budget Shortfalls That May Arise

Unfortunately, not everyone will be able to cover their essential expenses. Some executives may have been spending all that they were earning and are now left with a budget deficit. Others may have experienced unexpected medical or home repair expenses with no infusion of cash from a year-end bonus.

For those with more expenses than income, determine if this situation is temporary or will continue for the foreseeable future. Next, what expenses can be reduced or eliminated? For example, is it possible to cancel lawn care service for six months or drop the monthly wine club? Reducing expenses even by $200-$300 each month will add up quickly.

Next, determine if there may be opportunities for additional income. Finding one consulting job or other part-time work can make a big difference in filling any gaps in your budget.

Try Hard to Avoid These Moves

The objective is to plug the dike until the water recedes and normalcy returns. Here are some additional tips to weather through:

• Falling into the credit card trap: Fight the temptation to leave balances on credit cards. This debt can pile up quickly in a crisis, and with high interest rates it can rapidly snowball out of control.
• Raiding your retirement account: Avoid pulling funds from retirement accounts, due to the penalties (if you are younger than 59½ years old) and taxes levied on these funds. 401(k) loans should also be avoided as, once again, you are taking money from your future self. If you absolutely must pull funds from retirement accounts, check to see if you qualify for any penalty waivers under the CARES act. If you, a spouse, or dependent were diagnosed with COVID-19 or experienced other financial impacts from reduced hours, your situation may be covered. Read more about these exemptions on the IRS website.

With the COVID-19 vaccines continuing to roll out, a potential new stimulus plan from the Biden administration and an improving economy, there is hope on the horizon. Doing your best to manage through these short-term obstacles will make a significant difference in your finances as the pandemic begins to fade away.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Even though President Biden included it in his $1.9 trillion economic stimulus plan, don't expect a $15 federal minimum wage anytime soon. The current federal minimum wage is $7.25 per hour, so Biden's proposal would more than double that amount. But even the president thinks his minimum wage proposal will end up on the cutting room floor. "I put it in, but I don't think it's going to survive," he told CBS News.

In addition to Republican opposition, there has also been push-back on a $15 minimum wage from more conservative Democrats – most notably, Sen. Joe Manchin (D-W.Va.), whose influence has skyrocketed now that the Senate is split 50-50 between Republicans and Democrats. Manchin has made it very clear that he doesn't support the proposed minimum wage increase, and his vote will most likely be needed to pass any new economic stimulus bill.

There are also questions about whether a minimum wage increase can be included in a reconciliation bill. Reconciliation is a procedural device that Democrats appear ready to use to allow a stimulus bill to pass in the Senate with a simple majority vote instead of the usual 60 votes needed to avoid a filibuster. However, according to a summary of the reconciliation process from the House Committee on the Budget, "[o]nly policies that change spending or revenues can be included" in a reconciliation bill.

On the surface, a minimum wage increase doesn't appear to meet that standard. But Sen. Bernie Sanders (I-Vt.), chairman of the Senate Budget Committee, isn't giving up. "We have a roomful of lawyers working as hard as we can to make the case to the parliamentarian that in fact raising the minimum wage will have significant budget implications and in fact should be consistent with reconciliation rules," Sanders told CNN. He faces an uphill battle getting a minimum wage increase in the reconciliation bill, though.

But that doesn't mean we won't see a push to increase the minimum wage down the road. President Biden said he would fight for separate legislation to increase the minimum wage after his stimulus package is enacted. The president has also taken executive action directing the Office of Personnel Management to come up with recommendations for promoting a $15-per-hour minimum wage for federal government employees.

Finally, don't forget that states can have their own minimum wage. They can be higher than the federal amount, but not lower. So, even though efforts to increase the federal minimum wage may fail, workers in some states could see a pay raise in the near future if their state increases its minimum wage.

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Will the federal minimum wage go up to $15 per hour? If President Joe Biden gets his way, it will. Biden recently released details about his $1.9 trillion COVID-relief stimulus package. Overall, the package is designed to provide crush the coronavirus and provide financial relief for Americans struggling during the pandemic. Although it's no surprise that Biden would want to increase the minimum wage, it wasn't expected in this stimulus package.

The president did try to tie the proposal to the pandemic, though. A summary of the plan noted that millions of Americans have put their lives on the line to keep the country running. "Let's not just praise them, let's pay them," it said. In a speech to the nation, Biden also said, "if you work for less than $15 an hour and work 40 hours a week, you're living in poverty."

The tipped minimum wage and sub-minimum wage for people with disabilities would also be eliminated under the Biden plan.

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In a separate executive order, the president also directed the Office of Personnel Management to provide recommendations for promoting a $15-per-hour minimum wage for federal government employees.

The current federal minimum wage is $7.25 per hour. President Biden's proposal would more than double that amount. States can have their own minimum wage. They can be higher than the federal amount, but not lower.

Biden's plan also called for an additional round of stimulus checks, extended unemployment benefits, increased tax credits, and more. For more information, see 12 Ways the Biden Stimulus Package Could Put (or Keep) Money in Your Pocket.

Many people in the workforce are experiencing pay cuts during the current downturn. I’ve heard from some clients who aren’t expecting a bonus check this year and possibly no salary increase or bonus next year. Normally, when possible, I try to encourage them to live on their salary and to keep the bonus as the gravy in their plan to help save for their financial future. However, for people in sales positions who generate the bulk of their pay from commissions, that’s not a possibility.

For those experiencing a pay cut or loss of bonus during the pandemic, the financial goal is to weather the storm until it’s over and come out as unscathed as possible. To that end, here are six tips to help you navigate this new climate to minimize any damage to your long-term wealth:

First, Evaluate Your Monthly Budget

Many of my clients set aside funds for travel this year that will no longer be spent. The trips they planned will be wrapped into next year’s budget, since they only have so much time off. Others are spending less on entertainment, dining out, transportation and even clothes and other personal expenses, such as haircuts. As a result, the typical household may be able to save several thousand dollars this year that can be used to pay for essential expenses.

One of my clients whose salary was cut in half temporarily made a game to see if he can keep his spending within the new salary, even though he had other means to maintain his lifestyle. He told me he was able to accomplish this since he was not eating out as much with friends nor traveling. He said that he plans to eat out even more than normal once his salary comes back … which brings me to my next tip.

Delay Some Spending, If Possible

Hold off on non-essential spending until your income is restored. I have some clients who planned on doing home renovations this year but are now waiting until their salaries and bonuses are restored. Another client had planned on getting a new car but decided she would wait for now.

Use That Emergency Fund, If Needed

It is there for that purpose. When this COVID-19 crisis hit, I checked with my clients to make sure their emergency funds were intact, so that they could avoid having to pull money from their investment portfolios if stock prices were temporarily down. In these unusual times, it’s OK to use some of the emergency fund, if needed. For those with brokerage accounts, use these funds as your second option.

Consider Reducing 401(k) Contributions Temporarily

If your emergency fund is getting low and there isn’t an investment portfolio to pull from, then it might be time to cut some of your 401(k) contributions. If possible, leave them at a level that still qualifies you for the company match, assuming there still is one. Many companies have been cutting their match during this crisis in order to be able to afford their employees’ salaries.

It’s preferable to postpone saving for your future for a little while to help maintain the health of your current financial situation. It’s worse to end up having to have an early distribution from your 401(k), as you may be subject to penalties, along with a tax bill.

Look into Refinancing Your Mortgage

Currently, mortgage rates are very low. A person or couple with a significant amount of equity in their home who needs cash may want to consider a cash-out refinancing or a home equity line of credit (HELOC). A HELOC currently offers attractive interest rates and is a good way to tide you over until you can be cash flow positive again.

Be Careful with Your Credit Cards

If possible, do not take on any other new debt. Be leery of using credit cards to pay for any non-essential purchases or racking up any other types of debt with high interest rates. I have seen people dig themselves deep into credit card debt.

The goal is to get through this period relatively unscathed, so you do not totally derail your financial plan. By keeping your expenses in check and finding creative ways to make ends meet now, you will have a stronger financial base to build from later, once the economy and the job market recover.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.