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Value Creation Blog

Your Paycheck Is Your Biggest Asset – Financial Planning

Posted by Josh Patrick

financial planning vermontIn the world of financial planning we’re supposed to help our clients manage their assets. I’m curious about one thing. If this is true, why is it most financial planners don’t talk with their clients about managing their biggest asset, their paychecks?

Let’s face it. Under any measurement the amount of money you’re going to earn over your lifetime is far and away your biggest asset.

Let’s start with this assumption.

You’re 21 years old and are going to work for the next forty years. You’re going to average $50,000 per year in salary. This means that over your working life you’re going to earn $2,000,000. Let’s also assume that you’re going to save 10% of your annual paycheck and get a 5% return. This means that when you reach retirement you would have $603,000.

Instead of the assumption above, what if you averaged $75,000 per year for your working lifetime. Instead of saving $5,000 per year, let’s say you were able to save $12,500 per year and again get a 5% average return on your investments. Under this scenario you would have $1,510,000. There aren’t many things you can do that would influence your retirement assets by almost $900.000.

Are you upgrading your skills?

The first thing to do is ask are my skills as good as they could be? If not, make a plan today for what you’re going to do to upgrade those skills. Are you going to go back to school? Are you going to just read some books? Why not consider taking a seminar or two?

Then after you’ve learned the new skill start to practice. Book learning by itself isn’t enough. You’re going to have to be able to demonstrate that you’ve added skills that someone else wants to use.

Do you think about the value you bring to your employer?

This is a question I don’t think many people bother to ever ask. If you don’t know the value you bring to your employer how will you ever know whether you’re making the amount of money you should? Sit down and think about what it is you do. Think about what your employer pays you. Take the difference between the value you create versus what you cost. You then have a rough idea about the value you bring.

If your value is high, what are you doing about it?

If the value you bring is high and I mean much higher than your cost you could be justified in asking for more money from your boss. You might even be justified in asking for much more money.

If you’re not adding value, you better hope you’re not found out. If you’re not adding value you better figure out how to do so. The clock is ticking and you don’t have a lot of time to fix your problem.

In one scenario you get to ask for a big fat raise. In the other you might have to start looking for another job and the next job might pay even less than the one you have right now.

It might be time to look for another job.

Sometimes bosses are block headed. You might have figured out that you’re creating tons of value for the company you work for. You could even have gone to your boss and laid out the value that you’re bringing. Your boss could even look you in the eye and say they don’t care.

Your boss might say nothing, which means they don’t care. This is when its time for you to clean up your resume and start looking for a new job. If this is the road you decide to take, be creative. Don’t just send out your resume. Spend time networking your way into the job you want. And, remember, it’s not only about the money. You also want to enjoy what you do.

What do you think, are you willing to see if you’re adding value to the job you have? If you are, remember your job is your number one asset.

We’ve put together a special report on basic retirement planning. You might want to read this if you’re close to retirement or are just thinking about it. To get this report, click on the button below.

Basics of Retirement Planning

Securities and Investment Advisory Services offered through NFP Securities, Inc. (NFPSI), Member FINRA/SIPC. Stage 2 Planning Partners and NFPSI are not affiliated.

This article is published for residents of the United States only. Registered Representatives and Investment Adviser Representatives of NFP Securities, Inc. may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed. Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed.

Topics: retirement planning, value creation, financial planning

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