How many of us plan for our financial future in our career? In making any plan, you set a goal and work to achieve that goal. Retirement and financial planning companies are constantly telling you a percentage of money you should put into a savings or a retirement account that will maximize your income when you retire. This always includes the tax benefit analysis and a bit of fear based motivation for a time when you will not be able to work.
Did you ever think that you could plan for the number you are making in the short to mid term or even long term? Most of our career financial thinking is not based on what is possible, but based on covering expenses or making as much as someone else in our circles – neighbors, peers, family. So much so, that most people do not know what is possible for their unique skills, competencies, and purpose. People are most often reactive until they feel undervalued by their employer or have a significant change in personal expenses that they try to address their financial income in the market.
Money is not the goal of your career. Money is an outcome that is an expression from the market of your value. One of your CareerTruth arcs of your career is Freedom. If you wish to maximize your value and income, you are free to make this decision. There are seasons where you may prioritize making more money and therefore have other freedoms you need to invest more time and effort which may result in a life sacrifice, such as time with family due to increased travel for work – these are called opportunity costs. So, in most circumstances, you do have the ability to plan your future financial circumstances by trying to maximize your value through improved performance and making conscience investments of your time and effort that results in some other life sacrifices or opportunity costs. Your financial future depends on YOUR decisions on what you are willing to do that will result in a financial change you want. How much you make is not your company’s fault. This is about your freedom.
So what is a good plan for financial outcomes for your career? It is best to keep the financial plan objectives SMART (specific, measurable, achievable, relevant, and time bound). Let’s start with where you are today or have been recently.
There are many components of your financial compensation to account for including:
-Your base pay rate or salary in annual terms
-Annual variable bonus or commissions targeted pay out
These are your annual cash rewards. These are where most people think about planning their “money” and depending on where you are in life, it is a good place to start.
In certain circumstances, you may have Long Term Incentives such as stock awards or multi year payouts of bonuses to account for as part of your total reward package.
You must also consider the benefits that have financial value to you such as paid time off, health care, wellness care, 401k or retirement savings. These need to be accounted for, but at this time, we will assume these rewards are less about your market value and related more to the programs a company deploys.
In the following exercise you will be asked to consider your current state of financial outcomes to help plan for the type of change in annual cash reward you want to plan for.
With so many variables to consider, you want to have a SMART objective that is likely a three year window into the future. Three years is far enough into the future that you can plan well and close enough that you can create meaningful actions that build quickly and can be adjusted as needed.
Without picking dollar amounts, let’s put some parameters on the types of financial outcomes you may consider. They range from EXPLOSIVE CHANGE to STRONG GROWTH to MAINTAIN to TAKING A STEP BACK.
EXPLOSIVE CHANGE in compensation is more than 80% growth in annual income within three years and requires transformational change in your ability to create value in the market. Simply, if I make $100k in total annual base plus bonuses and want to make $185k total in three years, that is an EXPLOSIVE CHANGE.
To secure explosive compensation growth, your span and scope of responsibility will need to grow substantially. You may be able to achieve this through improved technical skill development, but it is more likely to come with significant growth in leadership span and scope. Sometimes you can have this happen by growing in levels that allow you to enter into a new programs, like stock award you will need to consider, or have added opportunity to increase the annual cash bonuses by going from a 10% of base salary bonus target to a 30% of base salary bonus target.
Explosive changes in compensation requires a very focused effort to develop and perform in a way you are not today…True transformation of your performance and impact. This type of growth most often requires a new level of your performance investment that requires personal sacrifices or opportunity costs that need to be accounted for in this transformation. The time required for explosive transformation is substantial and you will need to reallocate accordingly to scale to Explosive change.
STRONG GROWTH in compensation leads to 25-80% growth in annual income within three years. This growth can come in a variety of ways, but not necessarily a complete transformation. Strong growth requires improvements in performance and likely promotions or added responsibility that make sense. You may not need to make large personal sacrifices or opportunity cost decisions in the same way as EXPLOSIVE, but you need to spend time prioritizing as you will need to design a different work life flow than you have today. This will be the case if you are required to be in the office more often, accept a relocation or other significant personal changes come about. Strong or Explosive growth in annual income is not easy and the entirety of your Professional and Personal Goals will need to be reset to accomplish this type of growth. To stay true to yourself, spend time in CareerTruth reviewing your values and tuning up your Purpose Statement while you reset your professional and personal goals and milestones.
If you are looking to MAINTAIN a similar zone of annual income over the next three years, be careful. Financial outcomes are a large reason as to why we work. As companies and markets continue to change, we need to continuously be motivated to grow and develop. To say “it’s not about the money” or “I make plenty of money and don’t need more” are both great, congratulations.
In the cases where people are trying to maintain or even willing to Take a Step Back in annual compensation in the next three years, your values and your purpose statement needs to be a strong motivator. Take time to document and review not only your purpose statement, vision of success and values, but think about your “Leadership Tree” and building an intentional legacy at work, at home or in the community. Build your development plans with the same vigor you would if money was your driver. Remember, we are always growing and learning and money is an outcome not the purpose.
Now that you have a sense for the implications for three year financial outcomes as either Explosive (80% increase or more), Strong (25-80%), Maintain (similar compensation), or Take a Step Back (meaningful decreasing in compensation), you are ready to create some targets. After you input your current state of income levels in the following exercises, you will be asked to be specific and measurable for your base rate or salary for the year three years from now. You will also have the opportunity to add other compensation you would like to achieve such as variable annual bonus, commissions and other long term incentives. These are features of your annual compensation that your performance and role will directly impact.
If you show a total annual reward number that is 80% or more higher or explosive, you need to make sure you understand the implications of this and make adjustments as needed to your personal and professional plans. Similarly with 25-80% strong growth, you must make sure the objective you are setting is achievable and relevant to you and your Mastery, Freedom, and Legacy. Is this what you want in this three year season of your career that maximizes your abilities while allowing you a healthy work life flow that impacts people the right way? Be Bold. Be Smart.
Heck, it may be that you are underpaid and Explosive or Strong growth is not as hard as we describe. However, for you to achieve the type of annual income you want, you must have a plan that accounts for the best use of your professional inventory today and with development tied to your personal goals.
How much money you make is a feature of your Freedom arc. No matter your age or experience, you are free to choose how you want your financial outcomes to change over the next three years.
No matter your financial plan going forward, share this plan with your current company, your Board of Advisors, your family, your Coach, or other trusted people for feedback and advice. Doing this work is not about changing jobs or feeling limited, this is all about Owning your Career and having a Career Plan with a financial target.