All financial plans need an investment strategy that aligns with the goals of the said plan. A better use of your time and money is to focus your investing strategy on something that creates a huge return for your money, time and effort. That investment is you. When you invest in yourself, you have much more control over the outcome.
Lifetime of your Earning Equals to your Human Capital
You may have come across the concept of human capital. This is a way of saying over your lifetime that there is a certain amount of money that you are going to earn. If you add all this money up, it adds up to your human capital.
If you are 20 years old, plan to retire at 65 and are making $100,000 per year with no raises, you’ll earn $4.5 million over the time in your career. With salary increases, this number will grow. What if you could increase this number even more? If you increase your annual salary by just 10%, it would mean upwards of $350,000 of increased earnings, not including your ability to invest that money and grow it further.
Ways to “Invest’’ in Yourself
The one everyone knows about is education. It has been heavily noted that the lifetime earnings of a college graduate far outweigh those of many people with just a high school diploma or those who never made it through the high school. But there are other ways you can invest in yourself as well:
- Getting advanced degrees in your domain
- Starting a side business to further increase your income, or
- Starting a business and becoming self-employed.
The central idea is to find ways to make yourself more marketable and more valuable in your industry. This way you can command a higher salary and also increase your human capital.
Increase Your Worth by Asking for a Raise
There are other methods to make a financial impact without having to pursue a multi-year course, like getting an MBA. The best way most people can make an immediate impact is just asking for a raise.
According to a study, almost half of the people who ask for raises get exactly what they want, but only about one-third are actually willing to ask.
A minimal of 10% increase in your lifetime earnings would even mean an additional $350,000 for the individual in the above example, but it is only part of the equation. Companies tend to give annual salary increases to keep pace with present rates of inflation. So,every employee may get a pay boost each year. So, your net increase will be on the initial raise you already had and an additional 3% will make it rise even more.