How many of us plan for our financial future in our careers? In making any plan, you set a goal and work to achieve that goal. Retirement and financial planning companies are constantly giving you the percentage of your income you should put into savings or a retirement account to secure your finances for when you retire. This advice always includes the tax benefit analysis and a bit of fear-based motivation for a future time when you cannot work.
Have you considered that you could also make a plan for the amount of income you make in the short, mid, or even long term? Little of our career financial thinking assesses what is possible but instead focuses on covering expenses or keeping up with appearances. Most people do not know what is financially feasible if they utilize 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. Then they try to address their financial income.
Money is not the goal of your career. Money is an expression from the market of your value, an outcome. One of the 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 when you may leverage your freedom to make more money. When you are free to choose, you must also be responsible for those same choices. Therefore when you select one option, a sacrifice is often required. These sacrifices, what you give up when choosing one thing over another, are called opportunity costs.
In most circumstances, you can plan your future financial circumstances by maximizing your value through improved performance, conscious investments of your time, and sustained effort that result in some specific opportunity costs. Your financial future depends on your decisions on what you are willing to do that will result in the economic change you want. How much you make is not your company’s fault. These choices are your Freedom.
So what is a good plan for financial outcomes for your career? 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.
Your annual cash rewards:
- Base pay rate or salary in annual terms
- Annual variable bonus or commissions targeted payout
These are where most people think about planning their money, and it is a good place to start depending on where you are in life. 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.
Additional benefits that have financial value to you:
- Paid time off
- Health care
- Wellness care
- 401k matching or retirement savings
You must account for these as well, but for this exercise, we assume these rewards are less about your individual market value and are more standard within your company. In the following exercise, you will record your current financial outcomes to help plan for the change in the annual cash reward you want to prepare for.
With so many variables to consider, you want 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.
Range of financial outcomes:
- Explosive Change
- Strong Growth
- Maintain
- Step Back
CareerTruth considers explosive change in compensation to be more than 80% growth in annual income within three years. Explosive change requires a transformation in your ability to create value in the market. That is an explosive change if you make $100k in total annual base plus bonuses and want to make $185k in three years.
Your span and scope of responsibility will need to grow substantially to secure explosive compensation growth. You may achieve this through improved technical skill development, but it is more likely to come with a significant increase in leadership span and scope.
Sometimes you achieve this immense increase by growing in levels that allow you to enter into a new program, like stock awards you will need to consider, or have added opportunity to increase the annual cash bonuses by going from maybe a 10% of base salary bonus target to a 30% of base salary bonus target.
Explosive changes in compensation require a very focused effort to develop and perform in a way you haven’t before. You must show the true transformation of your performance and impact. This type of growth most often requires a new level of performance investment that requires personal sacrifices or opportunity costs you must account for. The time required for explosive transformation is substantial, and you will need to reallocate accordingly to experience explosive change.
Strong growth in compensation leads to 25-80% growth in annual income within three years. This growth can happen in various ways but doesn’t necessarily require a complete transformation. Strong growth requires improvements in performance and likely promotions or added responsibilities.
You may not need to make large personal sacrifices or opportunity cost decisions like you would to see explosive growth, but you need to prioritize and design a new work-life flow. You must assess your situation if you must be in the office more often, accept a relocation, or if other significant personal changes come about. Strong or explosive growth in annual income is not easy, and you will need to reset the entirety of your Career Plan in Professional and Personal Goals. 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 actions.
If you want to maintain a similar zone of annual income over the next three years, be careful. Financial outcomes are a large reason that we work. As companies and markets change, we must continuously be motivated to grow and develop.
When people are trying to maintain or even willing to take a step back in annual compensation in the next three years, your values and purpose statement must be a strong motivator. Take time to document and review your purpose statement, vision of success, and values. Think about your Leadership Tree and building an intentional legacy at work, home, or community. Build your development plans with the vigor you would if money were your driver. Remember, we are always growing and learning; money is an outcome, not the purpose.
Now that you have a sense of 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 decrease in reward), you are ready to create some targets.
After you input your current income levels in the following exercises, you will identify your ideal and specific numbers for your base rate or salary for the year three years from now. You can also add other compensation you would like to achieve, such as variable annual bonuses, commissions, and other long-term incentives. Your performance and role will directly impact these features of your annual compensation.
If you show a total annual reward number that is 80% or higher or explosive, you need to make sure you understand the implications and make adjustments to your personal and professional plans.
Similarly, with 25-80% strong growth, you must make sure your objective 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.
If you are underpaid, Explosive or Strong growth may come as easily as a crucial conversation with your leader. However, 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 can 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.