Personal development

The 3 percent solution for personal development


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Unless you are near retirement or a baby in trust, your career income potential is your greatest asset. Home, cars, and investment accounts are golden eggs that wouldn’t exist without the Goose that Laid the Golden Eggs, your career. Unlike investing in other assets, there is no well-known “invest in yourself” rule of thumb to help you make professional development decisions.

How much money do I have to reinvest in myself? Like any other investment, investing in YOU should consider your time horizon, your risk tolerance for personal accomplishments that are important to you, the length of your career, your long-term goals, and your current liabilities.

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Neither investing nor professional development is cookie cutter, but 3% of your gross pay is a good rule of thumb for reinvesting in yourself. If you run your own business or have ambitious goals for your future, that would be a lot more. Three percent should be the foundation of your professional development, whether through books, classes, one-on-one coaching, new experiences, or relationship building.

To put it in perspective, if you make $ 50,000 a year, then at least $ 1,500 a year should be spent on professional development. If you can pledge $ 125 per month for cable, you should have no problem pledging $ 125 on your own.

Where does the three percent rule of thumb come from? Most employers who provide a retirement plan for their employees will match up to 3 percent of the person’s compensation. If the company offers you 3% “free” retirement money then I think you can invest the same amount in yourself to increase your income potential.

Inflation over the past 100 years has been a little higher than 3 percent. Many companies offer a 3% annual raise to their employees who do nothing more than the same job. Reinvest your cost of living adjustment to help you adjust your career path.

If you invest money with a financial advisor, they will normally be paid up to 2% of the money they are monitoring for you. If you pay 1.5% of your money to make money, you should pay 3% for your career in order to make more money for you. Income is the fuel for all other investments.

Related: The Smartest Long-Term Investing Is You

The next question is to find the 3 percent on a fixed budget.

Pay your loans, then pay your future. After student loans are paid off, use this dedicated monthly payment for professional development. Instead of paying for the education that got you where you are today, pay monthly for new experiences that get you where you want to go.

Intentional tax refund. Do you remember how you used your tax refund three years ago? Tax refunds just mean you have more money in your budget. Use the tax refund you received in the spring to build your career.

Part of the package. If you’re an employee, negotiate a career development allowance in your compensation package the next time you take an exam or apply for a new job. What employer wouldn’t want to give out compensation or match their employees’ funds to make them a greater asset to the team?

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