The financial services industry has given many rules of thumb for planning when it comes to budgeting and investment strategies. Save between 10 and 20 percent of your income for retirement depending on your age. Have six months of living expenses stores away in a liquid account. Keep your monthly debt obligations under 36 percent of gross income. One type of asset contribution that is rarely discussed with a rule of thumb is investing in your-self. How much money, time and energy should you spend in developing yourself and likely your greatest asset– your career? Over the next few weeks I will discuss some concepts that can help you evaluate how much and in what ways resources should be applied to enhancing your career condition.
How Much Money Should I Reinvest in Myself?
There isn’t a cookie cutter answer for the amount of money and energy spent for professional development but it would depend on someone’s length of time in their career, their longer term goals and what their current liabilities are. Like any other investment, it should also take into consideration the person’s time horizon and risk tolerance.
With the “it would be different” for everyone preface out of the way and after a bit of research, I would say your professional development investment should be, at a minimum, three percent of your gross salary. If you are running your own business or have big goals for your future, then it must be much more. But a reinvestment of three percent should be the baseline in what you put back in your career development.
If you make $50,000 per year, then that is $1,500 per year towards professional development. In addition to taking advantage of learning from your normal day to day activities in your career, I look at professional development in four different categories:
- Relationship Building
- Individualized Coaching
- Experiences and
- Skill/Educational programs.
In future articles I will discuss ways to invest in these four categories.
Here are my reasons for choosing three percent minimum as a rule of thumb:
- Most employers that offer a retirement plan to their employees will match up to three percent of the person’s compensation. If the company is giving you three percent in “free” retirement money, I believe you can then invest the free match in yourself to boost your income potential.
- Inflation over the past 100 years has been a little bit higher than three percent and many companies offer a three percent raise to their employees each year—for doing nothing- just adjusting for cost of living. If you are not willing to reinvest your cost of living adjustment to eventually get more potent raises in the future, that you will actually feel, then you probably are not too growth focused.
- If you are investing money with an adviser, they normally will be compensated one to two percent of the money they are watching for you. If you are paying, say one and a half percent for your money to make money, you should be paying double for your career to make more money for you. Remember, income is the fuel for all other investments.
Now I do understand everyone’s circumstances and liabilities are different, but if the $120.00 a month (in the $50,000 example) towards the cable bill takes precedent over $120.00 in bettering yourself, where the cable bill will become nothing more than a drop in the bucket, than we may have to calibrate the mindset if you want more career growth.
If you are an employer, give a matching professional development incentive to your employees by matching dollar for dollar up to a cap on approved programs or experiences while they are still working for you!
I will often say that you win at the game of growth by perpetually playing… you lose when you call time outs or sadly finish. What percentage of your income, should you be putting towards making yourself better?
Author Bio and Offer
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Eddy Ricci, Jr., is the Author of The Growth Game: A Millennial’s Guide to Professional Development and Founder of The Growth Game, LLC a professional development company. He has been labeled as “the emerging expert in developing Gen Y sales professionals” by the chairman of Publicis Kaplan Thaler and is also noted as “understanding what motivates Gen Y sales teams. He is on my radar and should be on yours” by international speaker and NY Times bestselling author, Erik Qualman. Eddy serves as the director of a unique training and development collaborative platform that services financial planning firms in the northeast where he has arguably worked with more Gen Y financial professionals than anyone in the country over the past four years. Eddy is also a columnist for Entrepreneur. www.thegrowthgame.com ; @thegrowthgame (recently created twitter).