I just came across an old, but still very relevant post on Free Money Finance called Your Most Valuable Asset.

FMF says:

I’ve written before that your career is your most valuable financial asset. It turns out that Money magazine agrees with me. Cool!

In the May issue, Money says:

Your most valuable asset is your earning power. Invest in it.

I couldn’t agree more. Money continues:

Anything you do to increase your salary early in your career can keep paying dividends as long as you work. Take a class, pick up a certification, improve your computer skills.

Yep, I agree. A small increase in your salary over decades can really add up. Even if you have “only” 10 years or so left in your working career, it’s still worth the investment of time and money to improve yourself in your chosen field. Doing so can have a big impact on your earnings over a decade.

Now, this is great advice … but, it’s missing a little-something …

If you truly subscribe to the ‘max your career and life will be sweet’ way of thinking [I prefer the ‘ start a business or three on the side so that you can eventually ditch your career then life might be VERY sweet’ way of thinking] then I think you at least need a ‘rule’ to tell you how much of that extra income you need to save and how much you should spend.

For example, you’re probably already ‘paying yourself first’ by automatically putting aside 10% of your salary into your 401k and/or another savings vehicle, right?

Well, if you really want to accelerate to your savings goal, then here’s the secret:

 Put aside 50% of any future pay increases towards (a) debt repayment then (b) savings as well!

Now, this sounds like a lot … and, it is (which is why it ACCELERATES your savings), but you were surviving WITHOUT the pay increase, right?

Surely, you can live off 50% of a pay increase? Think of it as a slightly disappointing pay increase, but an increase nonetheless …

If you can think like this, here’s what it can do for you:

Imagine two people each currently earning $30,000 a year who put their savings into a 401k returning 8% a year and who expect a 2.5% salary increase every year; after 20 years:

The Pay-Yourself-First-Just-10% Guy saves: $165,000

The 10% + 50%-Of-Any-Pay-Increase Guy saves:  $275,000

Once you ‘get’ the idea of going into 50/50 partnership with your future self – your current self still gets to spend it’s part of the 50% ‘pay increase’ anyway it likes (!) – you will start to actively look for ways to fuel this exciting new partnership.

Here’s how:

– CREATE MORE INCOME e.g. get a second job; send your partner back to work; start a part-time business; get creative with this!

– FIND MORE MONEY: e.g. your tax refund check; spare change; Aunt May’s inheritance; lottery winnings; any ‘one off’ or unexpected few bucks that happen to come your way; try and keep your hand out of OTHER PEOPLE’s wallets, though 😉 

This is a guaranteed get richer slow’ish formula … and, should underpin ALL of your thinking from now on, otherwise you’ll just spend the profits that come from the more advanced strategies that we’ll cover in upcoming posts …

… and, over-spending will never make you rich!

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