Is your best asset right in front of you?
Move over property and shares, your best investment is staring you in the face
If you’re looking for a low-risk, reliable investment that will deliver high, predictable returns throughout your lifetime, you’re in luck. The solution lies entirely with you. Helen Baker is a financial adviser and founder of On Your Own Two Feet, which encourages women to be financially independent. “Your ability to work, is definitely your biggest asset,” she says. Think of it this way. Average full-time weekly earnings are about $1711.60. That’s around $89,000 annually. You’d need to invest close to $2 million in shares, or a whopping $17 million in a savings account, to earn the same annual return. Yet you have the potential to pocket this money, and more, just from your own effort.
It makes your income-earning capacity a strong foundation for building wealth. Even better, it’s something we all have the power to improve.
The question is, how do you maximise your income earning potential? Investing in your own skill set is a good starting point.
“In an increasingly competitive market, candidates with solid technical skills will always have an advantage during the recruitment or salary negotiation process,” says Andrew Brushfield, director of global recruitment firm Robert Half.
In an evolving workplace, skills need to be regularly updated. “Digital transformation will continue to drive immense changes across every industry and role,” he says. “So, millennials looking to increase their earning potential should embrace a mindset of constant learning and focus on upskilling opportunities.
“Mastering technical skills, embracing automation or pursuing emerging technology, will make an employee more efficient and effective at their role and, in turn, more valuable.”
It’s about education
Without additional skills and qualifications, it’s easy to be left behind. Census data shows more than one in five (22%) Australians holds a degree – a figure that rises to 39% of 25- to 34-year-olds. One in four (25%) holds a diploma or certificate. That’s over half the millennial workforce with post-school qualifications.
According to Brushfield, the beauty of higher education is that it helps students develop a variety of broad skills – learning experiences that can make it easier to pick up new technical skills in the workforce. “The knowledge gained is valuable even if the qualification doesn’t match the technical skills called for in a job description.” Put simply, it’s the education that matters, not just the credentials.
If university isn’t for you, don’t overlook TAFE courses. As Brushfield points out: “A tertiary degree may serve to differentiate a candidate’s application. However, there are no vocational qualifications that will devalue or detriment an applicant’s resume.”
Worth the expense
The downside of tertiary study is the cost. It’s not just about missing out on a full-time wage during your student days or forking out for expensive textbooks. Completing a degree can see you saddled with a HELP (formerly HECS) debt. It’s a similar story for VET students.
That debt is nothing to sneeze about. The average HELP debt is about $23,280 and it takes most graduates nine years to pay off. On the upside, it could be one of your best ever spends.
An OECD report found tertiary graduates in Australia enjoy better job opportunities, lower unemployment rates and a significant earnings premium, especially compared with school mates who end their formal education with Year 12.
Tertiary educated adults in Australia earn 40% more than high school leavers. The OECD found Aussie men gain an 8% return from tertiary education, while for women the return is even better at 9%. The most seasoned investor will struggle to find an investment that consistently delivers this sort of reward.
But investing in your skills may not be a one-off event. “Demographers believe younger generations may have five careers and up to 17 different employers through their working life,” says Baker. “There are job opportunities that will disappear, and there will also be new opportunities, meaning studying is likely for life for some. Staying current and maximising your salary through study should pay for itself, and in some cases employers will contribute to study costs for you.”
Study versus experience
Before committing to a learning program, Brushfield recommends pinpointing the course that will be most relevant for your ideal job. This could include selfdirected learning through online platforms such as LinkedIn Learning, Udemy or Coursera.
“Hiring managers will always prioritise relevant experience over academic qualifications,” he says. He suggests getting some experience through an internship or by volunteering for a role that builds relevant skills. This can mean raising your hand to be the treasurer for a local sports team, or completing a personal project like building a website using the coding language that your dream IT job may demand.
How to score a pay rise
Investing in your skills and qualifications is a proven way to grow your income earning potential. But it’s up to you to convince the boss you’re worth more money year-on-year. A survey of employers by Robert Half found 70% of workers can expect a pay rise in 2021. The trick is to make sure you’re among them.
“Getting a pay rise isn’t as easy as telling your boss you deserve one – no matter whether you’re in the office or working remotely,” says Brushfield. “Millennials need to prove they’ve earnt their increased value to an employer and have the facts to back this up.”
He recommends several steps to build a watertight case that you deserve a salary increase:
• Volunteer to help out on new projects – make a point of participating in forums or meetings.
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Set up a weekly check-in with your manager – it’s a chance to explain your challenges and how you resolved them, so your manager is kept up to date with your achievements.
Younger generations may have five careers and up to 17 different employers through their working life
• Record achievements – keep notes of how you supported the business to be more efficient or profitable by exceeding your personal benchmarks, creating new opportunities, or resolving issues.
• Treat a pay rise as part of a bigger career plan – clearly communicate your professional goals and aspirations with your manager, so you can work together to achieve them.
Is it time to switch?
If the boss won’t, or doesn’t have the budget to, put money on the table for a pay rise, it could be time to explore new horizons.
The latest ABS data show wages have risen just 1.4% over the past year. Inflation is currently 1.1%, so that sort of salary uptick is only putting you ahead by 0.3%.
At present, you have market clout. ManpowerGroup says seven out of 10 employers are struggling to find talent. So if you’re hankering for a serious salary increase, it could be worthwhile heading off to a new job.
The latest Michael Page Salary Guide identifies the average pay increase you could earn as the newest staff member across a range of industries.
Is a side hustle the solution?
If your 9-to-5 income isn’t helping you achieve personal goals, Glen James, host of the My Millennial Money podcast, says millennials can look to a side hustle to rustle up more cash.
“Figure out how many hours you want to spend on your gig work, and ask others who manage full time workloads as well as side hustles. If you gig full time, maybe you need to benchmark someone with a salary in the same role. They may be making more than you with less stress of managing income,” he says.
If you’re interested in a side hustle, a study by graphic design platform Canva looked at work opportunities promoted by the freelance marketplace Fiverr. It found gig workers in Australia earn an average of $766 for each job spanning a three-day period (what the platform considers to be a typical side hustler’s timeframe). That’s the third highest globally, behind Switzerland and Sweden.
But we’re not talking low-skill tasks like dog walking or car washing. The most popular hustles among the freelancers surveyed are reasonably skilled, with proofreading and editing, 3D and 2D modelling, and blog posting topping the list. Once again it comes back to the value of investing in you – not just at the start of your career, but all the way through.