4 Ways Your Investing Habits Can Affect Your Career Growth

Career building needs a lot of consistent effort and before that a good education. In a way, career is an investment you make in yourself, and it rewards you with money and fame. However, while you are investing time and energy in your career, don’t forget to build wealth as well.

Wealth building is a process that involves earning, saving, accumulating funds that help keep you and your loved ones safe against unforeseen circumstances and financial emergencies.

Why Focus on Wealth As Well?

You have plenty of reasons to focus on wealth building while you raise the ladders of career progress - Family, financial goals and responsibilities and most of all, retirement. However, wealth building is not just about meeting these financial goals.

You need to build wealth if you want to progress in your career. Here are the four situations where your saving habits will define your progress:

1. Constant Feeling of Confidence or Despair: Wealth brings confidence, and that is every bit as true as mentioned. If you have been consistently saving and investing money, you build wealth as the years pass.
   
   
2. Leverage Outstation Opportunities: Many times, you will have the opportunity to attend outstation customer calls and meetings early in your career. Some of these actions require you to shell out the money first. No doubt, your own savings will help.
   
   
3. Continuous Education and Skill Upgrade: In modern times, changes are so frequent that you often do not have the opportunity to get enough via corporate training. So, you need to spend some money on self-education. Also, postgraduate courses like executive MBA can propel your career on a better trajectory. But these courses may need considerable financial resources.
   
   
4. Happy to Work vs. Have to Work: Having your bank account full and a wealth pool at your side can make you surprisingly resistant to stagnation, and more creative in your career. The money can remove the lid of ‘have to work’ and turn your career into a ‘happy to work’ journey.
   
   
5. Career Change due to Market Conditions: Although this scenario is completely different from all the others, it is a practical condition. Sometimes, you may want to switch to a different profession or completely different work profile or start a business. Also, market situations may turn your role too risky and you may have to reskill to continue being relevant on the earning scale.

Investing Habits to Develop for Career Growth:

You need to have a plan if you want to build wealth without being frustrated with constant lack of money. Also, the best time to develop the plan was when you started earning. However, don’t give up hope yet, the second-best time is now.

You need to follow a set process to prioritise your needs, goals and aspirations so that one does not affect another.

Here’s a step by step process to build wealth in the most useful way:

Step 1: Think and List All Your Financial Goals

You need to think of those financial goals which apply to you as of now, and those which you would want to achieve for yourself. For example, if you are single, marriage expenses could be a financial goal for you, but child education will not be. Similarly, retirement will always be your goal regardless of your life-stage.

You will need to define each goal in the following manner:

• House Purchase: Five years, ₹ 5 lakhs for the down payment, budget 40 to 50 lakhs.
• Wealth Goal: 20 years, ₹ 2 crores.
• Retirement Goal: 35 years, ₹ 5 crores.
• Car purchase: 2 years, down payment ₹ 3 lakhs or full cash ₹ 10 lakhs.

If you have children, include there higher education and marriage goals too.

Step 2: Plan for Contingencies

This is an extremely important step if you already have a family and you are investing in their financial goals. You need to do the following for a good contingency plan:

1. Buy health and life insurance covers:
   
   
   • Get a term life insurance cover for self and spouse: The cover should be at 10 to 15 times of your annual income (for both you and spouse if both are earning). Term insurance with accidental disability cover can help you continue the life cover without premiums in case of permanent disability.
   • Secure a health cover for the family: You and your spouse will need critical and Mediclaim health covers while your children will be covered under the same Mediclaim plan as yours.
     Term plan like iSelect Smart360 from Canara HSBC Life Insurance combines both terminal health and life cover benefit under the same plan. So, with iSelect Smart360 Term Plan, you do not need to buy a separate critical health cover.
   • Build an Emergency Fund: Emergency fund should be large enough to take care of your family’s necessary expenses including insurance premiums and EMIs for six to nine months. Thus, you can budget your expenses and save an amount equal to six-nine months of these expenses.

Step 3: Select Investment Plans

You will have three different types of goals to invest for:

• Short-term: Less than 5 years.
  
• Long-term: Five years or more.
  
• Retirement: Retirement goal is different from other long-term goals because you the goal is not just to accumulate a large sum of money but to build a regular pension out of it. Also, you cannot take any chances with retirement savings as the gaps to this goal are the most difficult to fill.

Investment Plans for Short-Term Goals:

If you look at the investment options for short term goals, it’s hard to find investments which are going to save you a lot of tax and provide stable growth. For an investment period lower than five years you can invest in the following options:

• Bank or Corporate Fixed Deposits: Interest earned every year is taxable plus the investment may not provide any tax benefit to you. But the stable returns can help you predict the maturity value safely and plan accordingly.
  
• Debt mutual funds: Debt mutual funds provide steady growth to your investment. However, the return on debt funds is not fixed and driven by market factors. However, annual increment in the fund value does not attract any tax.

  Also, if you hold the fund units for more than three years your returns from the fund are eligible for indexation before tax. Meaning the capital gain will be reduced by the inflation of the period, before tax.

Investing for Long-Term Goals:

Long-term goals give you more choice and freedom to invest in aggressive portfolios. Regardless of your age and risk profile, it pays to have about 50% of your total wealth invested in fixed income instruments like – debt funds, PPF, etc. while the other 50% can be divided into equity and other assets like precious metals.

Long-term investments offer better tax-benefits both at the time of investment as well as maturity. Investment plans like ULIPs from life insurers can help you save for your goals completely tax-free.

You should use ULIP plans for the child’s financial goals as it provides the following benefits:

• Goal protection in case of your untimely demise. The investment continues till the intended maturity even after your death. Thus, the child will have the corpus you intended at the time he/she needs it.
  
• Let’s you build a portfolio (mix of equity and debt funds) best suited to your risk appetite and time to goal.
  
• You can use a single ULIP to meet multiple goals by using partial withdrawal feature.

Recommended Reading: Goal-based investing

Investing for Retirement:

Retirement goal investments need to be a mix of at least two investment instruments - NPS or EPF and ULIPs. Here’s why:

• NPS & EPF let you invest a growing amount of money as per your income. So, you can build a better corpus using these investments. Plus, your employer can contribute to NPS or EPF, which is an added advantage.
  
• You can invest in whole life ULIPs, which you can continue till the age of 100. The benefit is that after retirement, you can withdraw a monthly pension out of the ULIP corpus without switching investments and this is a tax-free pension.
  NPS and EPF will force you to invest in an annuity plan to generate monthly income. However, the pension income from an annuity plan is taxable at the slab rates. That is why adding ULIP to your retirement goal could be beneficial in lowering your post-retirement tax outgo.Thus, not only build a career for yourself, but build a fulfilling career which brings prosperity and wellness to you and your family.