Question: I’m 34 and have yet to begin saving for retirement. I’m considering participating in my company’s 401(k) plan, but I’m unsure whether to do so since my employer doesn’t match my contribution. What do you advise? –Nikia, New York, New York
Question: I’m 47 years old and would like to begin participating in my company’s 401(k) plan. But I don’t know if this is the right time to do so. Do you think I should start now or wait until the economy gets better? –Frank, Brighton, Mass.
Question: I’m 47 years old and would like to begin participating in my company’s 401(k) plan. But I don’t know if this is the right time to do so. Do you think I should start now or wait until the economy gets better? –Frank, Brighton, Mass.
The top job of managers at every company is the same: allocating capital. Should money be spent on internal growth or acquisitions? Should capital be returned to shareholders via dividends or share repurchases?
This is a guest post from FMF at Free Money Finance, a personal finance blog designed to help you grow your net worth. You can subscribe to Free Money Finance here.
Historically, “making six figures” has been to income earners what “becoming a millionaire” has been for those tracking their net worths — a lofty goal achieved by only a select few. And while neither a six-figure earner nor a millionaire can bask in the luxury they could a couple decades ago, there’s no doubt that earning over $100,000 a year still puts you in a select group.
In fact, the U.S. Census Bureau says that only 5.63% of individual income earners and only 17.8% of households had incomes of $100,000 or more in 2006. So despite the drop in purchasing power from the days of old, if you earn $100k or more each year, you’re still in an elite group.
How can you get into the six-figure club? There are many roads to this golden path (lottery, inheritance, take over a family business, etc.), but many, if not all, of these are out of your control. As such, I’m going to focus on what I consider to be the method that will give the most people the greatest chance of earning $100k or more — by developing a career and growing it over time. Specifically, I’m going to tell you how I got to six figures in seven years and how you can use these principles to do the same.
Words of warning
You’re probably skeptical. I’m okay with that at this point. Read on with an open mind and I think you’ll be pleased. And while I can assure you that the tips below are proven and repeatable, I must admit that they’re also challenging. Therefore I’d like to make the following perfectly clear before I get started:
There are exceptions to these principles. Probably many exceptions. Just as with any personal finance advice, people’s situations, skills, opportunities, personalities, likes, dislikes, and so on are different. What works for one person may or may not work for another. (As J.D. often says, “Do what works for you.”)
I’m cheating a bit. Just to be completely honest, the seven years noted in the title are post-college (in my case post grad school.) One could argue that those years of schooling should count towards earning six figures. If you’d like to count them, go ahead. But “Five Steps to Six Figures in Thirteen Years” just doesn’t have the same ring to it as the current title.
These tips will work. They worked for me. This is exactly what I did to earn six figures in seven years. In addition, I’ve had many friends and colleagues do the same, so I know it’s repeatable — if you follow the steps.
I’ll end this preamble by saying I’m not trying to brag (though I realize some of this may sound like it), just offer you a first-hand experience of what worked for me. In fact, if you want to see how much humble pie I’ve had to eat during my career, read my series detailing all the jobs I’ve ever held. In it, you’ll see that my road was not smooth or without its own challenges. But even with those obstacles I’ve been able to live out the principles that follow and lead to a six-figure income. I hope you can do the same.
That said, here are my five steps to six figures in seven years.
Step one: Get a high-earning degree from a good school
It’s a fact of life that certain college degrees result in a higher earning potential. So graduating in one of these fields gives you a built-in jump on the pack as you try to reach six figures quickly. 
If you want to be a teacher, that’s fine; it’s a great and noble profession. But it’s likely you won’t be able to make six figures quickly (if ever). If you focus on the top few degrees (and the professions associated with them), you’ll get a big headstart towards reaching your goal.
Note that I suggest you go to a “good” school. In my opinion, you do not need to go to a top-notch college to make this work. I recommend going to the least expensive school that gets you the degree you need and the initial job you want. Once you do this, the school you attended makes very little difference in your career or earning potential.
I went to a top 25 business school (not top 10 or even top 20), but I left with only $5,000 in debt and the job I desired from my targeted employer. Before I decided to go to my school, I knew the employer I wanted to work for recruited there. You should know the same. Just like a résumé’s main purpose is to get you an interview, graduating from college’s primary purpose is to get you that first job and often a “good” school can do the job just as well as a “top” college.
Step two: Work for a name-brand employer at your first job.
No matter the field, there are certain companies that have an aura of respect around them — companies that are known to be good trainers and that are admired by people in your field, around the country, and, if good enough, the world. Some of these include: Google, Apple, Disney, Nike, Procter and Gamble, the Mayo Clinic, Pixar, McKinsey, and so on.
There are two main reasons you want to work for a top-notch company:
How can you get employed by one of these companies? Simple: go to a school where the company recruits (review Step One again). Beyond that, network with alumni, school administrators, and anyone else associated with your target company (or companies) to give yourself the best advantage of getting hired. I happened to know an undergraduate student that went to my target company during my second year of grad school. I kept in touch with him and he was instrumental in getting me hired (and we eventually became roommates).
Step three: Perform
There’s no way getting around it — if you want to be on the earnings fast-track, you need to be on the high-end of the performance scale. What does this mean exactly? It means you need to find out what your employer expects of someone in your position and give them much more than that. If your expectation is to save the company $50,000, work to save it $100,000. If you need to grow sales 7%, work to grow them 12%. If your goal is to get five new customers ordering your product, work to get eight. If you over-deliver versus your expectations and so consistently and with a variety of different projects, you will be a high-level performer and receive a commensurate level of financial rewards.
In addition, you can really super-charge your performance (and thus your pay) if you work on any of the following:
Of course, these opportunities are a double-edged sword — they can propel your career if you succeed, but they can also devastate it if you crash-and-burn.
Finally, having a good, pleasant attitude is at least a tie-breaker (some say it’s more) that will help you advance in your career. Everyone likes performers with good attitudes more than performers with poor attitudes, so be positive — it might just pay off for you (literally).
Step four: Manage your career aggressively
Big pay bumps, even for high fliers, don’t usually come with the frequency or size that they should. After all, many employers are quite happy giving you the least they can even if you’re slam-dunking projects left and right. That’s why you need to:
The main point I want to emphasize here is you can’t allow your career to be on auto-pilot. If you do, you’ll get auto-pilot raises and auto-pilot opportunities, and you’ll severely limit your chances for making the big bucks. But if you work at it, you can get regular, meaningful salary increases — something that’s even more important than starting with a high starting salary.
Step five: Have some luck
I hate that this is on the list, but I have to be honest: Luck is a factor in the success of your career. The reason I hate it is that it’s the one tip you can influence the least (if at all). Sure, you can try to make your own luck by putting yourself in the right situations, accepting the right jobs, selecting the best employers and so on, but ultimately, much of life and the results of work are out of your hands.
All I can suggest here is to look at all the pros and cons of a job change, promotion, business situation, etc. and consider them carefully — trying to maximize the number of events where luck is in your favor and minimizing the ones where you get bad luck. Also learn to ride good luck as long as you can and cut your losses as quickly as possible when bad luck shows up.
Conclusion
That’s it. Those are the five steps I used to grow my income to six figures in seven years, and they’re the same tips that have helped me maintain my income growth past that point. I can’t guarantee that they’ll get you to six figures in seven years, but I can say that if you apply them to your career, I’m pretty confident that your income will grow much faster than it would have if you had not applied them.
Some of you may be thinking “That’s great advice — I wish I had it 20 years ago.” In other words, you’re past the point where a few of these steps work, so what can you do now to increase your income? My suggestion is to get into the process above at the earliest possible step.
For example, if you think it’s worth it and you have the time and money, consider going back to school (step one) to get a new/better degree. If this isn’t a possibility or not very practical, start networking your way into a name-brand company (step two). And if this isn’t feasible, everyone can at least start with step three no matter where they are in their career.
The later you jump into the process, the less impact it’s likely to have on the goal of reaching six figures. However, applying even just the latter steps (especially three and four) will allow you to grow your income far more than it would if simply left to drift on its own.
Step photo by Lazurite. Graduation photo by Eralon. Clover photo by Cygnus921.
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