your health, insurance, and other miscellaneous needs. Speaking of 401k, are you even sure that you are on track to reach a comfortable retirement.
Many professionals make a substantial salary, without having
adequate savings or investments. The point of growing in your professional life should not simply be to make more in terms of income, it should be to maximize the income you make regardless of what it is. Recently I became aware of a story circulating the internet about a guy named Mr. Earl, who works
as a parking attendant. According to the story Mr. Earl has never earned over $12 dollars an hour, but has managed to amass a net worth of over $500,000. If someone with limited income is able to build their net worth, then what is your excuse. Link to the story: https://www.youtube.com/watch?v=smPWDGT-VFs.
Success with your finances really comes down to having a plan. The same diligence that you place into growing professionally can be applied to how you manage your finances. With so many resources available to make you more informed about your finances you are bound to find something that works. Try looking at a book on personal finance, participating in a webinar, taking a financial challenge or using an app to stay on track. If you have no idea where to start, seeking the help of a professional like a financial planner can be beneficial. Below are nine things for professionals to consider related to their finances.
- Do you have an emergency fund? Not having an emergency fund can put a serious damper on your finances. Professionals tend to have money tied up in investment accounts or other assets that are not easy to liquidate. So when an emergency happens if you have to tap into invested assets its like taking a double hit.
- How are you managing debt? Debt is something that can deteriorate potential profit from investing and sap potential savings. Also carrying too much debt can be damaging psychologically to an individual as
it begins to feel like an insurmountable hurdle.
- Have you talked to your 401k provider or broker? Lots of planning conversations can be had free of charge. Also speaking to someone at the place you invest allows you to be shown new tools that can help manage your finances.
- Are you taking advantage of a company match? If you are not taking advantage of a company match then you are passing up free money. By contributing an equal amount to what your company offers you effectively double your investment at half the cost to you. By contributing more you essentially put more of
your money to work, and give yourself a better chance of being successful in retirement.
- As your income rises how do you plan to use the increase in pay? Most people who have pay increases over the years tend to elevate their lifestyles. They put the extra money toward new homes, cars, vacations, etc. Nothing wrong with elevating your lifestyle, but as income rises so must the proportion of your money going toward things like saving, investing, and debt repayment.
- If you have a spouse, ask yourself how their financial decisions affect you. Some couples choose to plan separately and find success, but to do so you must know how your spouse manages their financial
obligations. When you come together and have open discussions about the finances it is easy to see if
something is off and needs to be addressed. When managing finances apart something can go for weeks,
months or even longer before being detected.
- If you have children are you saving for their education? The earlier you start the better your chances will be to hit those future college financing costs. You should never prioritize your kids education over retirement needs, they can get scholarships, grants, and loans to cover expenses. Starting early to address your children's future college financing costs can help ensure you will not have to prioritize their college costs over your retirement needs.
- Make a list of your short term and long term financial goals and assess whether you are on track to meet them. Most likely you have ideas of what you want to accomplish professionally, and you have probably written them down as well. By writing something down it becomes real, and a reminder of what you intend to do. The same diligence you take to hitting professional milestones can be applied to financial goals.
- What does your estate plan look like? If you have no idea what an estate plan is then guess what you need to figure out. You spend your whole life building assets and when the time comes they should be handled in the manner you intend. Something as simple as updating beneficiaries on your accounts takes less than five minutes, but would save tons of time down the line.