Maximizing Your Greatest Asset: Why Your Career is So Important

I've written a lot about the importance of managing your career and how it's your single-biggest asset. But I wanted to have one post where I listed the main reasons I think it's so important to your financial health, so here goes:

• It pays all your living expenses. Without it, you couldn't survive.
• It is the source of all of your investments -- retirement, college for your kids, and so on.
• It helps you acquire other big assets like your home and cars.
• In short, it's the source of everything you have financially -- unless you inherited a ton of money -- the source of your net worth. Even though spending less than you earn is the way to getting wealthy, you must have some income (and the higher the better) to spend less than. In other words, even a miser can't get rich spending less than he earns if his income is zero. ;-)

Now, let's discuss how important it is to manage your career well.

I ran a few numbers to compare the impact of managing your career (proactively taking efforts to advance your career and thus your income) versus not managing it. Here's what I did:

• I assumed that there were four college students who graduated at 22 and started with jobs making $25,000 a year each.
• I assumed that Graduate A didn't manage his career very well and only had a 3% average annual increase in income.
• I assumed Graduate B did an adequate job of managing his career and through pay increases, promotions, and job changes was able to increase his salary by 5% annually on average.
• I assumed Graduate C did a pretty good job of managing his career and was able to increase his salary by 7.5% annually on average.
• I assumed Graduate D did an excellent job of managing his career and was able to increase his salary by 10% annually on average.

Note: These are AVERAGE annual increases. In any given year, the amount could be higher or lower, but these are the averages.

So, where did each of these end up when they retired at 65? Here are the results:

• Graduate A ended up making $89,113 the year he turned 65. He earned $2,226,210 in his career.
• Graduate B ended up making $203,742 the year he turned 65. He earned $3,778,575 in his career.
• Graduate C ended up making $560,408 the year he turned 65. He earned $7,699,175 in his career.
• Graduate D ended up making $1,506,002 the year he turned 65. He earned $16,316,019 in his career.

Now before you say these are unrealistic numbers, consider the following:

• Numbers (percentage increases) higher than this can be achieved. I'm 18 years into my career, I'm right at a 10% average annual gain, and I'd only consider myself as having done a good (not excellent) job of managing my career.
• If the percentages throw you, just look at the differences. It's a BIG difference in just working to make an extra 2% per year -- not to mention if you can make 4% or more a year.

So, how can you do this? How can you manage your career to maximize your income?