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WHEN ASKED, MOST people say their most valuable financial asset is their home. But what gave them the financial wherewithal to buy that house, as well as to purchase a car, buy food and pay for vacations? It was their career. Everything that has a financial component in our life starts with our earnings potential.
Take a young adult making $60,000 a year. Assuming a 2% annual raise, he or she would haul in nearly $3 million over a 35-year career. Our objective should be to continually improve the trajectory of our earnings, so we enjoy greater total career income.
Problem is, life often has other plans for us. The coronavirus—with its devastating impact on many folks’ income—is just the latest example. Every day that we don’t maximize our full earnings potential is a day of earnings lost forever.
But there’s a silver lining: Today’s stay-at-home orders, social distancing and self-quarantines provide us with time to reassess our career. We should ponder who we are, who we want to become and what impact we’d like to have on the world. Intrigued? Here are four tips:
Indeed, if you feel stress getting out of bed in the morning, it’s likely that your values and your career aren’t aligned. It’s time to consider a career reboot. To that end, spend time exploring your purpose in life, the passions that drive you to succeed and what career might appropriately compensate you.
Still, if you better understand your natural abilities, and you’re able to articulate how you can apply them to your current job, your employer is more likely to give you the assignments you want—and you’ll have a work life about which you’re passionate and which gives you a sense of purpose.
With that goal in mind, adopt good financial habits. Take full advantage of your workplace benefits, including the employer match in your 401(k), medical benefits, paid time off and so on. Invest regularly in a diversified portfolio and keep at it for the long term. Create written financial and life goals to guide your spending decisions. Build up an emergency fund. Look to protect yourself and your family from unforeseen events with insurance and estate planning.
After 30 years in corporate sales, Ray Giese, CFP, CCSP, MS, launched an encore career with his coaching practice, Career & Financial Pathways LLC. His goal is to help people align their purpose, passions and paycheck so they achieve financial freedom, while realizing greater personal and career satisfaction. Ray’s previous article was Inject Discipline.
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Good discussion about purpose. It took me years to figure out my relative strengths and how to employ them. The problem with relative strengths is that they are often so easy for you that you can’t conceive that it’s difficult for someone else. I now better realize where I am both advantaged and disadvantaged. I’ve modified my career track along the way, but it would have served me well to get there earlier. Luck (or lack of it) was a big factor.
I actually track our conversion of income to wealth. As of the end of 2019, our retirement savings were about 60% of accumulated earnings depending on how one measures it. That doesn’t mean we had a 60% savings rate, far from it. 25% of that was our contributions, 10% Matching, and 65% of that was returns… so we’ve actually saved about 15% of earnings (25% x 60%) to date, which is pretty consistent with our long term savings rate.
I’m not sure how useful this is except to confirm we are doing what we think we are doing. However it does highlight a few things:
1. The importance of saving early and often (to get the ball rolling)
2. That after 20 years it’s typically your accumulated returns doing the heavy lifting, more so than ongoing savings. This points back to the importance of item 1.
3. A good employer match is worth a lot. Without it, and the associated impact on our returns, that 60% of earnings would look more like 43%. This also points back to item 1.
Nice article. Thank you for sharing.
One more. If your ability to earn a living is an individual’s “most valuable financial asset” and if the goal is to “maximize our full earnings potential”, well, you might have added a fifth component – “paycheck insurance”.
Life insurance: Need varies. But for those of us who work for money (unlike those whose money works for them), a family who loses the “most valuable financial asset” to a premature death will be challenged.
Disability: Social Security Disability Income benefits apply to most workers should they become disabled – but only if they qualify: an inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment(s) which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. Less than 40% of SSDI applications are approved. And, the average monthly benefit is $1,236. For detail, see: https://www.cbpp.org/research/social-security/chart-book-social-security-disability-insurance
Unfortunately, only 1/3 of workers have Long Term disability coverage needed to supplement Social Security. For detail, see: https://blog.disabilitycanhappen.org/how-many-americans-have-disability-coverage/
To paraphrase the Capital One ads: “What puts money in your wallet?”