When I first meet clients, they’re excited to talk about those big important aspects of financial planning. Our conversations will inevitably quickly turn to their concerns about retirement planning, investment strategies, savings goals and so on. They often look at me quizzically when I ask them, “Where do you see yourself professionally in five years’ time?” Not everyone immediately grasps the depths to which your career and your financial plan are linked.
You should view your career and your financial plan as two sides of the same coin, or as two roads running parallel to each other. And be warned: a bad driver on one side of the road can knock a driver on the other side off course.
One will always impact the other. Your financial plan needs to facilitate your career path, and your career path needs to facilitate your financial plan. Some of the mechanisms at work here are obvious, right? For example, your career is (in most cases) the biggest driver of your income which makes up the backbone of your financial plan. But the way in which they work together is much more complicated than that. Let’s unpack it a bit more.
A Career Plan and a Financial Plan: Why You Need Both
I think we can all agree that there are two clear purposes to a career. One is to provide an income, and hopefully an income that grows steadily over time. At the very least, as you become more senior in your role and more experienced, you can expect to be compensated more for the work that you do.
The other purpose of a career is for a sense of fulfillment and satisfaction. I think most of us, if we were suddenly overnight lottery winners, would keep on working in some capacity, right? Otherwise life would just seem a bit empty. Work can be a vocation for some of us, a true calling that helps us to find meaning in our lives.
Using a career coach can help you to plan your professional life to bring you the most satisfaction according to your values. Not only that, but working with a career coach can also help you to maximize your income and seek out the promotions that are right for you.
Doesn’t that sound a lot like the parallel role of a financial planner? One of our primary roles is to help you position yourself financially to be able to make the most of your lives, to enjoy what life has to offer with peace of mind knowing that the future is being taken care of. At the same time, we work with you to make sure that your money is growing and working hard for you, maximizing your income and your savings wherever we can.
There’s little point having a career plan if you’re not going to have a financial plan running alongside it, making the most of the income that your career generates. Otherwise, what’s all that hard work really for? And on the flipside, how can you achieve all the goals of your financial plan if your career aspirations are wildly off course or unrealistic? It’s essential the two plans are synchronized, to get you to where you want to be.
How a Robust Financial Plan Supports Your Career
So it’s obvious to see how your career and the income it generates supports your financial plan. It’s what dictates your budget for monthly expenses and annual investments or savings. It’s what helps you to decide what insurance policies you need to take out. It’s a huge driving force behind your financial plan.
But a good financial plan does more than that; it facilitates your career too. Having a high paying career doesn’t come for free, does it? You may have started off your professional life with huge student loans. You need to make sure early on that your financial plan helps you to pay down that debt while still keeping other areas of your finances in check.
And education or upskilling expenses may come at any time throughout your professional life too. Or making lateral moves and sidestepping into other roles could actually be the move you need to take to progress at work. You may even find that you want to pursue a completely different direction after a couple of decades in one career. You’ll find that having a safety net of money that a good financial plan can provide can help you to get the flexibility you need to make the right professional choices at the right time.
Your Career and Your Financial Plan: What You May Not Have Thought Of
When A Pay Raise Leaves You Out of Pocket
You’ve just been given some good news – you’ve got a promotion! You’ve got that pay raise you were chasing. Fantastic! Just make sure that that pay raise is actually going to leave you better off. It could so happen that an increase in income is going to mean you’re facing a higher tax bill, especially if you have other streams of income from investment portfolios that could complicate things further.
But that’s no reason to turn the promotion down – you just need to be aware of your liabilities. Seek some tax advice and speak to an investment advisor about possible options as a way to lower your tax bill. It’s just another good reason to fully integrate your career plan and your financial plan.
Your Employer Might See Your Credit Report
Did you know that 16% of employers run credit checks on potential employees? They’ll need your written permission to do so, and they won’t be able to see your credit score, but they will be able to see your credit history, missed payments, bankruptcies and so on. And they do it to get an idea of your relationship with responsibilities and obligations.
If you’re about to step into a brand new role, you don’t want to be in a position to have to say no to a credit check. You also don’t want it to cast you in a bad light. So make sure that you’ve got no financial mistakes on your record that could jeopardize career opportunities. Check your credit report regularly for mistakes and areas that could be improved.
You Might Not Want All Those Company Stocks
Workplace benefits may well be the deciding factor when it comes to choosing an employer or career path, and they have a huge impact on your financial plan. You may be able to significantly save or divert funds by working for a company that offers generous benefits, be it through insurance packages or retirement savings plans. And many companies offer stock ownership as part of their benefits packages too, and this can often look like an appealing way to invest and generate some extra income.
Be careful though. In many cases, company stock makes sense, but it’s important not to get too concentrated. If you invest heavily in the company you’re working for, you may just find you’ve put too many eggs in one basket. If something goes suddenly wrong and the company gets into difficulties, you may lose your job at the same time your investment portfolio loses its value. So if employee investment programs have been part of your decision making around your career, make sure the rest of your financial plan is robust enough to keep you afloat should anything happen to the company you’re both working for and invested in.
Align Your Career and Your Financial Plan
The most successful people are the ones who set themselves goals, and write them down. Goal-setting is key to a purposeful financial plan, and you need to tailor your career progression to make sure you’re generating the income you need to hit those goals.
But equally important as future goals is the here and now. Many of us spend too long at our jobs to not enjoy them, so our careers themselves must be just as rewarding as our freetime. So aligning your career and your financial plan can do two important things.
It can ensure you are always maximizing your income so you’re getting paid what you’re worth and what you need. At the same time, it will help you to get the most out of your life, both professionally and personally.
To make sure you’re making the right decisions, please get in touch. I’d love to talk through your career goals and your financial goals, and help you to get on track to achieve them all.