Your career is your most powerful investment. An increase in income results in a non-linear increase in your savings, your disposable income, and your lifestyle. For most people, this income comes from their work or career. It makes sense then, that we should focus on our career first by increasing our market value, before anything else.
Still not convinced? Here are five reasons on why focusing on your career is a worthy pursuit:
1. It is the low hanging fruit
Unless you are a successful business owner, most of your income comes from your salary. However, common financial advice says that we should diversify our income, and so we find and invest in other assets. This “diversification” sometimes results in neglecting your main source of income.
Your work is something that you do on a regular basis. You spend at least a third of your day in your job. As something that consumes a lot of our waking hours, wouldn’t it make sense for us to make sure that we get the best return for our time and effort?
Before you research which investment vehicle has the highest return, or which fund has the least management fees, look into how to grow in your career first. Your potential to earn in your career is likely greater than other investment vehicles that you are aware of.
2. Accumulation of skills and experience
To move ahead in our career, we acquire the knowledge and skills needed to make us better and more efficient at our work. We strive and work hard to be recognized in order to get that promotion within the organization. This may take several years of consistent effort, study, and experience.
Perhaps this is why people tend to focus on assets and investments outside their career. It just takes a lot of time and effort to push through work and increase your value. It feels much easier to let others (like fund managers) handle our investments, ride a fad or hype, or FOMO into success.
But nothing you do when trying to grow in your career is wasted effort. All the knowledge and skills you learned adds to your previous lessons and experiences. These knowledge and skills can be transferred from one job to another and ensures continuity in your career. This expertise increases our value to others and enable us to mentor those who are just starting out. And by increasing our value that we give to our work, we can also receive greater value in return.
3. Paying back “lost time”
The compounding effect works by tweaking either (1) the amount of money you put in, and (2) the amount of time you allow it to grow. If you are on the older side and find yourself already halfway to retirement, you might think that it is too late to grow your nest egg.
If you are older, the amount of time you have to grow your investments is shorter. This is the reality and we cannot do anything to lengthen the remaining time. Still, you can reap the benefits of compounding by increasing the amount of money that you invest. This is essentially buying back your time using your money. However, you can only do this if you have that money to begin with!
As an example, let’s say you are spending 80% of your income for your needs and wants. If you are earning P50,000 a month, then the amount you can spend is:
P50,000 x 0.8 = P40,000
Fast forward to some time in the future, you further increased your value at work, and so was able to command a higher salary. This time, your salary has essentially doubled. Now the amount you can spend for expenses, given the same savings rate as before, becomes:
P100,000 x 0.8 = P80,000
If you maintain your lifestyle, the additional money that you save can significantly improve your way of life and allow you to focus more on your other interests. This additional money can be used to exchange for other people’s time, and so essentially you can buy back time!
Not only does your life become more comfortable, the amount of money you can save goes up as well. From P10,000, it now becomes P20,000. As you can now contribute more to your investments, the effects of compounding will make your nest egg larger, even if the amount of time is shorter.
4. Reducing risk by increasing your value
It is said that having one source of income is risky. You need to set up your finances such that you have multiple sources of income with different return drivers. In this same vein, having a job is said to be more risky than owning a business. In a business, you have many clients that pay you, but in a job, you get your paycheck from only one source. If your company fails or you get fired, then you will lose your entire source of income.
While it is true in some circumstances, it only holds water if you are unable to find another job in a reasonable amount of time. For someone who is qualified and skilled, they will have no trouble finding employment again in a different company or industry. The more you increase your value, the less risk you have in losing your income.
Let’s say you are a skilled carpenter. You are sought after by many people as you are very skilled at your craft and can produce quality results. Do you think you will have problems finding customers? Probably not. You will end up having more business than you can handle, and your problem is actually on how to scale it so you can increase your income further.
Your job becomes risky only if you do not grow and advance in your career. Keep in mind that your relationship with your employer is not one-sided: the company needs your skills as much as you need the salary. If the company does not give you their fair share of the transaction, you are free to take your business elsewhere. And this only applies if you are valued in the first place!
5. Ikigai
The last but perhaps the most important reason why we want to grow in our careers is that it moves us closer to Ikigai.
Ikigai means doing something that makes you feel alive and at the same time benefits other people or society. It sounds simple, but it is not commonly achieved. When both are in place, it is a powerful combination as when one aspect grows the other follows as well. When you do something that you enjoy and makes you feel alive, it becomes second nature to learn more and grow on that craft. And as you grow more, the value you bring to others increases as well, which translates to larger benefits for everyone involved.
The opposite is true as well. If you loathe your job and hate going to work, no amount of salary will compensate for the mental stress and distraught you are experiencing.
What if you don’t like what you are doing right now? Perhaps it is time to explore other industries or another vocation. Try to move towards something that is still close to your current industry. If you are not happy being a manager, then there is nothing wrong by going back to being an individual contributor!
By being satisfied with your work, you improve your skills easily. If you are unhappy, then you will not be motivated in moving forward. This results in you not growing in your career, which ultimately affects your income, and thus your financial future.
Photo by Tima Miroshnichenko