Well, you do have such an asset. I’ve already detailed how your career is worth millions and is thus your most valuable financial asset.
That’s great news in and of itself. But there’s even better news: you can make your multi-million dollar career asset worth even more than it is otherwise. In fact, you can make it worth MILLIONS MORE!
Yes, millions more.
Let’s run through a few scenarios that illustrate what I’m talking about. We’ll begin with four workers, all starting their careers earning $20,000 a year. Throughout the course of their working lives, they get annual raises at different rates as follows:
- “A” averages a 2% raise per year
- “B” averages a 4% raise per year
- “C” averages a 6% raise per year
- “D” averages an 8% raise per year
Not much difference, right? Simply a few percentage points. Oh, but these differences really add up. Let’s look at the numbers:
- At the end of 40 years, A makes $43,295 and has earned $1,208,040 during his career
- At the end of 40 years, B makes $92,327 and has earned $1,900,510 during his career
- At the end of 40 years, C makes $194,070 and has earned $3,095,239 during his career
- At the end of 40 years, D makes $402,306 and has earned $5,181,130 during his career
The differences are substantial. “A” didn’t manage his career. He simply went with the flow and got raises that were commensurate with an employee that goes with the flow. He averaged raises that were at the level of inflation or less.
On the other hand, “D” was aggressive in how he grew and managed his career. He took the steps necessary to average 8% pay increases by getting raises and promotions throughout his career. And he ended up making almost 10 times what “A” did in salary at retirement and almost $4 million more than “A” over the course of his career.
This simple illustration shows the difference between someone who actively manages his career and someone who doesn’t. It shows that if you work at it, you can make your career worth millions more than it would have otherwise been worth. Sounds like a good use of time, huh?
Can We Agree on 1%?
But some will cry foul at this illustration. They will claim the days of 8% raises are over. They will claim their company/industry/department is raise-proof. They will claim there is simply too much work involved to earning more — that they possibly couldn’t work an extra second.
All of these are false objections and we’ll discuss them over time. But for now let’s address one of the largest objections: that you can’t earn high raises consistently.
I don’t agree with this sentiment (I have averaged over 8% raises over a 25-year career), but let’s say I did agree — the days of “high” raises are over. But do you think we could agree that whatever the going level of raises are, that if you were a “great” employee rather than an “average” employee you could earn 1% more in raises, right? That seems realistic to everyone, correct?
Ok. Then let’s look at the difference a mere 1% makes.
Just 1% is Worth a Fortune
Let’s say Jim is an average employee and he gets average raises of 3% per year. Sue puts in time and effort at managing her career and she averages 4% raises a year. Assuming she and Jim both start work at 22, they both work until 65, and they both start making $30,000 a year, here are their results if Jim averages 3% raises and Sue averages 4% raises:
- Jim ends up making $107k at 65 and made $2.7 million over the course of his career.
- Sue ends up making $162k at 65 and made $3.5 million over the course of her career.
So in this case, the value of just that extra 1% is $800,000!!!! Sue ends up making 30% more than Jim simply by averaging an extra 1% raise over the course of her career. And it seems entirely reasonable to assume that one person could make 1% more than another, right? Of course, we’ve already agreed to that!
Now if Sue wanted to really kick-start her earnings, she could add the following:
- Start at a higher salary. I’ll talk about this later, but this made a HUGE difference in my career.
- Get higher than average raises — higher than 4%. Some people may think that 5%+ average raises are things of the past, but I don’t. There will always be more than enough compensation growth for good employees. Sure, average employees may get 3% (or less), but there are people — people TODAY — who are and have been averaging well over 3% for years now — and they will keep doing so for years to come. The difference? They manage their careers intentionally, delivering above average value. This value then gets rewarded in extra pay.
One thing to note here: I’m not saying that Sue gets 4% raises EVERY year, I’m saying she averages 4% raises. Sometimes she’ll change companies or get promoted and earn 10% more than the previous year. Some years she will only earn 3%, like everyone else. But over the 43 years of her career, she will average 4%.
Another important point: even though their salaries grew at different rates, both Sue and Jim still earned MILLIONS of dollars over their working careers. In other words, your career is worth millions of dollars. That’s why it is your most valuable financial asset.
What If You’re Older?
As I wrap up this post I want to address the people who think it’s too late for them. You may be 20 years into a career and think this post is not for you — that it only holds true for those at the beginning of their career. I have a couple thoughts for you:
- If you start taking the steps to grow your career now, no matter where you are in your career, you will make more than you would have without doing anything.
- Sure, an extra 1% over 40 years is better than an extra 1% over 20 years. But an extra 1% over 20 years is better than nothing extra over 20 years. :)
So exactly what do you need to do to get closer to 8% raises than 2% raises? Good question. We’ll cover those in an upcoming post.