When you’re growing your career, and you start to bring in a higher salary, your bigger paychecks often come with mixed emotions. Earning more money for yourself and your family is a fantastic feeling, but the additional considerations that come with higher wealth can be overwhelming.
The more you earn, the more questions bubble up:
During this time of life, it’s best to get a handle on the basics of your financial plan. From there, you can start to navigate some of the more complex questions that come up down the road.
This is the #1 thing you can do for yourself early on in your career that will continue to benefit you for the rest of your life. Being realistic about what you spend, and setting clear spending, debt payoff, and savings goals for yourself, can help you live within your means. A budget also helps you to spend according to your values now, while still preparing for your financial future.
If the idea of budgeting feels overwhelming, try to boil it down to the basics. Stick with broad percentages of your income for each category of your budget. An example might be:
Staying within these general guidelines can help you to stay on track by saving and paying down your debt, while still giving you and your family some much-needed flexibility in day-to-day living expenses.
Do you want to retire by 60? Do you and your spouse or partner want to fund a portion of your children’s college education? Do you want to take your family on an international spring break vacation next year?
One of the major components of your financial plan is having a clear understanding of both your short and long term goals and prioritizing them accordingly. Sit down with your spouse or partner, and list out all of the goals that you’d like to accomplish.
These can be big things, like retirement, or small things, like a family trip or buying new living room furniture. Prioritize the goals, and reverse engineer your savings so that you know how much you need to save in order to reach them in your preferred timeline.
When you’re still relatively early in your career, it’s important to save toward a few separate goals:
The more you can save toward your goals now, the more your savings will be able to benefit from compound interest. Additionally, if you start saving for short and mid-range goals now, you’ll be more likely to minimize the amount of debt you take on in the future. Prioritizing your goals can help you to determine exactly what to save for - and how much you’ll need to save monthly toward each goal to accomplish them.
Setting yourself up for success when you’re still early in your career can have a hugely positive impact on your life and finances later in life. If you need help getting organized, or setting goals, please contact us today.
Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs, and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.
"Finance Made Simple" blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.