What you have to know to build your capital base. Savings, job security, and skills help you get an early start
USUALLY in this section we focus on the outgo side of the ledger -- wise management and spending of our money once we've got it. This month we'd like to focus on the income side: how we get the money to build our capital base. Most of us do this with a job.Skip to next paragraph
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``Your career -- your capacity for earning money -- is the most important asset you have,'' says Robert J. Martel, a certified financial planner in Lexington, Mass. Your earnings -- perhaps supplemented with an inheritance at some point -- are the raw material you have to work with when you fashion your financial plans.
``When I sit down with clients at the oval table in my office, one of the first things I ask about is their career: `Is there stability in your field? Do you want to stay? What are your options for a raise? Are you vested?' '' says Isabel Smith, a certified financial planner in Birmingham, Mich. ``And for those further along, I ask, `How long do you expect this income stream to continue? What about early retirement?' ''
The critical thing is to learn to save out of your earnings stream to build capital. Martel's rule is, ``Save 10 percent of everything you earn.'' That's gross, not net.
And once you get up to an annual income of ``around $35,000 to $40,000, you should be taking 15 percent off the top.
``There are always going to be things to spend your money on. But if you can't learn to save, no financial planner can help you.''
And what about developing a larger strategy to ensure that you have the most ``raw material'' -- and job satisfaction -- to work with?
Anna Rappaport, principal at William Mercer-Meidinger, compensation consultants, in Chicago, has a number of ideas for the kind of analysis of your workplace that ``it makes a lot of sense to do about age 30, after you've been on the job awhile.''
She suggests looking around to determine ``the attitude of the company in terms of willingness to let people move. Ask yourself, have able people moved up in 10 years -- or got stuck?''
It's also important to size up the support network. This doesn't necessarily mean elaborate ``career development'' strategies spelled out in the employee handbook. ``Informal human support works as well as formal support.''
Ms. Rappaport adds, ``Learning to recognize when you're stuck is important, especially for women,'' and so is developing ``the finesse to find out whether you have other options within the organization, or whether you should get out altogether.''
If you've mastered your current job, asked for some form of promotion, and got no response, it may be time to look outside. ``A progressive employer, even if not willing to promote you right away, should be willing to plan a strategy'' for your continuing progress.
To assure your long-term success, this consultant adds, ``Be sure you don't ignore communications and `people' skills -- written and oral. This is important to almost everything you do.''
Especially in technical fields, she says, younger workers often find their technical skills are their most important ones as they start out. But later on, the ``people skills'' become more important. Ultimately, someone with moderately good technical skills and very good people skills will outshine the techno-whizes who have let their ability to communicate atrophy. ``That's a common problem,'' says Ms. Rappaport, ``and it's worth investing some effort to build those skills. I tell people to go to Toastmasters,'' an organization that helps people develop public-speaking skills.
Something else you should pay attention to is the way your employer structures jobs. Some employers allow job descriptions to follow the direction of their employees' interests; other companies are highly structured. ``In some places, you're told, `You do X,' when maybe what you want is to do a little X, a little Y, and a little Z.''
It's also important, Ms. Rappaport says, to evaluate whether a company is a growing one. ``If a business has been stagnant for a while, there will be a lot of middle managers with no place to go. And you'll be underneath them.''
Another question is the size of the company. ``Bigger companies tend to pay better than small companies for comparable jobs,'' says Ms. Rappaport. ``But in a smaller company, bright younger people are likely to learn more and have more responsible jobs, and to be better off in the long run. . . . They can see the `big picture' better in a small company than in a large one, and they can parlay their responsibility into a better job later on.''