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Most Americans believe a big salary is a sign they’ve “made it.”[1] For many, a big salary transcends money – it’s a way to keep score, a way imply that you possess expertise or knowledge that deserves extraordinary compensation.
Studies show that no matter how old you are, big salary is our “most important” career goal, outpacing the goals like “doing what you love,” “job security,” and a positive “work/life balance.”[2]
What many don’t realize is that while it can represent both a psychological and financial achievement, a large salary doesn’t guarantee wealth. Many high-income households live paycheck to paycheck.
Here’s the secret: not many people become wealthy from earning a salary. What we’ve found is that wealth is more often a result of good habits and wise philosophy.
So, congratulations on earning that big paycheck. Here are some thoughts you should consider as you pursue wealth:
1. You may not be as good at managing money as you are at making it.
Consider how much insight, experience and dedication it took for you to build your current skillset. A “newbie” to your field of expertise has a long way to go before they get to your current state of mind.
Are you a “newbie” to managing money and investments? Wealth management includes understanding the complexities of national and international markets, as well as rebalancing, risk, and reflecting your capacity for risk.
Wealth management likely includes a tax plan that complements your investment strategies and retirement plans. Add to that an estate planning concept that understands the goals you’ve set for your family.
Respect the time and energy it took to get to your level of expertise. Consider an experienced advisor who demonstrates the same independence and insight you possess in your field of expertise.
2. Check your spending habits.
Our team of financial planners would suggest this insight should be number one on this list. Over and over again, we see folks caught in damaging mindsets likely to derail wealth goals, like:
- “Keeping up with the Joneses” – feeling like you need to have the same or better things than those around you. And, now that you’re earning a bigger payday than others, your “Joneses” tend to have more expensive things.
- Spending too much on depreciable assets. Keep in mind all those things that were “state-of-the-art” end up being laughably old way, way too fast. Your phone, your vehicle, your screens all fit this bill. I recently saw a classic advertisement for a Beta video player with a wired remote. Back in the day, I’m sure buying that made you feel like a real early adopter. Today, it couldn’t even serve as a bad boat anchor. See if you can get by with less.
- Assuming you’ll earn even more to cover your spending. It’s part of our culture: we always want more, and we figure that we’ll simply keep earning more to pay for it. Our team will walk you through financial planning scenarios where the future may not be so bright. It’s always helpful to consider if you can sustain your spending in a variety of income conditions.
Each time we meet a goal, we discover a new horizon, and a new set of dreams – and sometimes, a new set of anxieties. Earning a big payday is a significant moment. Make sure you accompany this new reality with a plan that keeps you in line with your goals.
Sources:
[1] The 40 signs that reveal you’ve definitely ‘made it’ in your career, Mirror UK.
[2] Survey: ‘Most Important’ Career Goals Change with Age, Rasmussen College.
