The Role of Career Planning in Financial Planning

by Sophia Bera on October 11, 2017

When I work with financial planning clients, I tend to ask a lot of questions that don’t seem to be directly related to money at all. Where do you want to live? Do you have any upcoming travel plans? Do you like your job?

Here’s the thing: most decisions you make in your life are connected to your financial situation in some way. Travel can be expensive, and the city you move to affects your cost of living.

One of the biggest decisions you make throughout your life is your career path. Seemingly small career decisions you make today can affect your financial situation 30 years from now in a big way.

Having decades to go until you retire means you can set yourself up now for long-term career and financial growth. That doesn’t mean that you should always choose the job that pays the highest salary, by the way — there are many other factors that you should consider when weighing a job offer. Your happiness is important, too!

So what should you think about as you progress in your career? Pay attention to these factors that could make or break your financial plan.

Income Potential

Research the average salaries for jobs within your field to get an understanding of what job and salary growth would realistically look like for you. What roles are you qualified for today? What promotions can you seek out with a few more years of experience under your belt? What other jobs might your skills also be a good match for?

Whenever you switch jobs, it can be an opportunity to dramatically increase your salary. Don’t neglect to negotiate! I know that negotiating salaries is scary, but an extra $5,000 per year really adds up.

Usually the worst answer you can get is “no.” But if a company takes it further and rescinds your offer just because you tried to negotiate with them (apparently this happens sometimes!), think of it this way: you just dodged a huge bullet and are free to find a job at a company that isn’t run by jerks. Life’s too short to put up with that treatment, anyway.

Company Benefits and Perks

There’s a reason I do annual company benefit reviews with my clients during open enrollment season: taking full advantage of these benefits can really improve your financial situation.

Your overall financial picture will be affected by these job perks:

Employer-Sponsored Retirement Accounts like 401(k)s, 403(b)s, or SIMPLE IRAs. These accounts all allow you to set pre-tax money aside for retirement, which can save you hundreds or thousands of dollars a year in taxes. Add an employee match to these accounts and you’ve got both free money and a lower tax bill!

Some of you might have a Roth option on these accounts, which means you contribute after-tax dollars, but the money in the account grows tax free! This is great for those of you who are in the 15% or 25% tax bracket and anticipate your income going up in the future.

Other Tax-Advantaged Benefits like Health Savings Accounts (HSAs), FSAs, Child Care FSAs allow you to set money aside to pay for qualified medical or child care expenses. Some companies offer commuter benefits that allow you to pay for parking or transit passes pre-tax.

Stock Options and Employee Stock Purchase Plans (ESPP) allow you to become a shareholder of your company at a discount. These programs are confusing to many beginner investors, but I encourage you to learn about what your company offers and take advantage if you can.

Incentive Stock Options have different tax implications from Non-Qualified Stock Options, so make sure you talk to your CPA about how this will affect your tax situation. An ESPP allows you to purchase company stock at a discounted price (usually a 10% or 15% discount).

Cost of Living

Depending on which field you work in, you might be tied to certain cities (or free to live wherever you want!). You might choose to live in a certain place for other reasons, like being close to family, and that can affect your career prospects.

Your career might take you to from Seattle to San Francisco, for example. While both cities are notorious for high costs of living, California has the highest income tax rate in the country — and Washington state has no income tax. Those are the kinds of small details to think about when you decide where to live and how high of a salary to negotiate for.

Sometimes, it might be an amazing career opportunity that leads you to a lower cost of living area, which can have a dramatic impact on your net worth. Check out this Success Story from CNBC for an inside look on a family that made that choice, and how it positively impacted their lives.