Money or Job Satisfaction: What should you prioritize at the start of your career?
by Rachna Bijlani, CFP®
August 23, 2022
To have stars in your eyes, to be filled with hope and excitement about the future, to harbor a desire to change the world for the better, to have unfathomable energy and enthusiasm; ah, the joy of being a young college graduate! The road ahead is filled with limitless possibilities, and your actions today will carve the path for your future, so choose your path wisely. As you fill out job applications and visualize your ideal job, you probably see yourself as making an impactful contribution in your field of work, and receiving validation and equivalent compensation for your efforts. Alternatively, if you have a great startup idea and you decide to run with it, I assume your end goal is recognition and acceptance of your idea and ultimately, compensation and reward for your brilliance, time and effort. Irrespective of the path you take, you are essentially seeking validation, recognition, job satisfaction and financial security from your career. In an ideal world, you’d be able to check all the above boxes right at the beginning of your career, but not everyone might be as lucky from the get go. Some of you will have to make compromises and let go of certain expectations from your job selection criteria until you establish yourself in your field of work. You and you alone are capable of setting your own priorities, and knowing what job expectations to hold on to and what to let go. Being a Financial Advisor and having experienced life for almost a quarter of a century since graduating from college, I can help you weigh the pros and cons of certain early career choices by shedding light on the impact of these choices on your future financial stability. Let me be your crystal ball for the next few minutes!
The most important concept in building wealth is the “power of compounding”. This is the magic that allows your money to work for you even as you sleep. If used wisely, this tool is capable of helping you achieve financial independence, allowing you to make life and career choices without having to worry about their financial impact; within reason of course. The best way to harness the power of compounding is to start saving and investing early. Aim to save and invest at least 15%- 20% of your earnings every paycheck from the time you start earning an income. You can divert these savings into a tax deferred account offered by your employer, such as a 401(k). Other retirement vehicles such as traditional or ROTH IRAs or even non qualified brokerage accounts can be utilized to invest your savings. In your early twenties, you could start by investing in a low cost index fund that tracks the performance of a benchmark stock market index, if your main purpose for investing is saving for retirement. Reinvest dividends. Set up automatic periodic transfers to your investment accounts to ensure consistency and to reap the potential benefit of dollar cost averaging over the long term. As your portfolio grows and as your financial goals, time horizons and liquidity needs change, make sure to adjust your portfolio allocation to reflect your risk tolerance. The savings rate required to meet your financial goals will creep up higher the longer you wait to save and invest, given that your savings now have a shorter time frame to grow and compound. You might have to end up staying longer in the workforce than you had anticipated, to make up for lost time. As you age, you might panic and try to make the difference in your investment portfolio by taking on more risk than is appropriate for your time horizon, which could prove to be further detrimental to your financial situation. Creating a budget, systematically paying off debt, building an emergency fund to cover three to six months of non-discretionary expenses, and most importantly, saving and investing 15% - 20% of your earnings are good financial habits that will set you on the path to financial independence.
Life has a way of either discipling us or rewarding us, based on the choices we’ve made in our past. The right choice might not always be the easiest choice and might not even seem rewarding today, but it is important to analyze the long term effects of our choices. Starting off with a job in your field of expertise, which is in alignment with your ethics and sensibilities, and provides you the opportunity to grow, while supporting yourself today and working towards future financial independence, might be a sensible choice. You might not be able to check all the boxes on your list of job criteria today, but know that in the long run, being financially independent is highly rewarding. It grants you the ability to quit an irksome job, work on your own startup, go back to school, take an extended vacation, send your child to a good college without burdening her with student loan, pay for roof replacement or other large unanticipated expenses without incurring huge debt, support your elderly parents, and most importantly, financial independence is not having to worry about running out of money to support yourself and your family for the rest of your life. It is the power to take time off to think, imagine, and pursue what’s truly important and meaningful to us. It is the luxury of experiencing life at your own pace. Chasing unrealistic job expectations and failing to save and invest early in your career might cause you to work well into your old age to support yourself and your family. You either work hard and save and invest prudently in the early part of your work life, or grapple with the possibility of having to work for the rest of your life. If only there were a third option! Oh wait, I recently read that the Powerball jackpot is now sitting at an estimated $90million!
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