Want a raise? Here's how to give yourself one

By Holly Johnson

The latest Survey of Consumer Expectations from the New York Fed predicted that American's wages will rise an average of 2.4 percent over the next year. Unfortunately, prices have risen 2 percent in the last 12 months, spiking 0.3 percent in April alone -- the highest monthly rate of inflation so far in 2014.

So let's face it: Until wage increases climb higher, rising prices could keep American wages effectively flat for the foreseeable future. That's the bad news.

The good news is, you don't have to wait for the economy to turn around to give yourself a big, fat raise. In fact, simply cutting your spending can accomplish the same thing by freeing up extra cash for savings, investments or that vacation you've been dreaming of. You cannot control the labor market, rising inflation or the rest of the economy, but you do have control over how you actually spend your hard-earned paycheck. If you want truly want a raise and believe you deserve it, it might be time to take matters into your own hands.

This type of raise isn't the kind you ask your boss for. It's the kind you take for yourself -- simply by reducing your spending and keeping the difference. Want to cut your spending and earn an effective raise in the process? Here's how to do it in five steps:

1. Analyze last month's bills

One of the crucial steps in this process is figuring out where your money has been going up to this point. That typically means breaking out the last few month's bills, credit card statements and bank statements, and drawing up an itemized list of expenses. This can be a tedious chore, but it is a necessary one. After all, you need to know what you're spending your money on before you can decide where to cut, right?

2. Find the leaks

Once you've compiled your financial information from the last few months, it should be very apparent where your problem areas are. Perhaps you're overspending on groceries or entertainment, credit card bills or shopping. Or maybe your car payments are eating you alive. Regardless, something should be bugging you about the way you're currently spending. Something should stand out. Once you figure out the culprit (or culprits) of your money woes, it's time to take action.

3. Prioritize your spending

Once you've discovered the painful truth about your spending, it's time to get your priorities straight. Obviously, some of your expenses are non-negotiable. You have to pay your rent or mortgage payment, after all, as well as utilities, groceries and insurance. Everything else should be far down the list of priorities -- and below your need to save money and invest for the future.

4. Price shop for alternatives

Some bills are non-negotiable, but that doesn't mean that you can't find a better deal. Car and homeowner's insurance are an excellent place to start since it often pays off to shop around for a lower premium. Cable television, telephone service and Internet service are other bills on which you might be able to save. Use the Internet to explore your options and you might be surprised at how low those bills can really go.

5. Decide what you can live without

If your money is tight, it's probably time to give at least a few of your monthly expenses the old heave-ho. Ask yourself what you can live without. Start by cutting non-essentials like magazine subscriptions, monthly manicures or fancy meals out. Once you've taken those steps, keep asking questions. For example, do you actually use your gym membership? If your cable television subscription actually worth what you're paying? Chances are, the answer to some of those questions will be "no."

Asking for a raise at work is a great idea, but giving yourself a raise is sometimes an even better one. Or, better yet, consider doing both. Working for someone else certainly has its pitfalls, but it shouldn't render you powerless to escape your current financial situation. Sometimes it pays to simply take matters into your own hands.

Need a raise? Don't ask -- just take it.