David Blanchett, the head of retirement research for Morningstar Investment Management, recently published a paper entitled “No Portfolio Is an Island”. In it he looked at counting your career as one of the most dynamic factors for asset growth, a strategy that’s been validated by other financial advisors.
“You should think of your wealth holistically,” Blanchett says. “If you think of yourself as an entity with these risk exposures, how do you use your portfolio to make [your] overall wealth as efficient as it can be?”
The fact is, everyone expects that their hard work will one day pay off, but most people also realize that they need to continually add new skills to their resume in order to be able to survive the changes that usually occur in the real world. Today staying employed his more than just earning a living and saving for retirement, it’s also his vehicle to stave off financial crises that might damage your retirement or force you to drain your retirement accounts in order to cover other emergencies or expenses.
Blanchett says that “Your ability to pivot into a new job will affect your retirement,” adding that “If you are going to make a change, have more of your portfolio in cash” to pay for classes, certifications and a potential gap in income while you switch to a new position. On the other hand, he also advises that it the position that you are right now is stable and safe, reasonably speaking, you may want to take a bit more of a risk with your portfolio.
Paul Winkler, a financial advisor from Goodlettsville, Tennessee, says that “The future value of your career declines as you age because you have fewer years to work,” and he adds that “If you have a choice between taking $50,000 and investing in yourself and your future earnings through a master’s degree, or put the money into the market, consider the relative risks. Are you getting into a different industry, and so opening up more opportunities and thus minimizing risk?”
Winkler believes, for example, that getting a Masters degree in philosophy or a Master of business administration are both risky but that, if a person were to get a Masters degree in computer science, the risk is minimal. He says that “Your confidence in your career and your willingness to change is a huge,” and goes on to say that “But it doesn’t matter what the risks are you are moving on them.”
Carrie Birgbauer, New York money coach, believes that changing careers only works when the move is synchronized with a person’s other financial goals. She says that “There’s a lot of magical thinking about career changing,” and adds that a person should will “Consider yourself an asset in your own portfolio: How will you source help and minimize costs to gain a sustainable investment?”
One thing that Blanchett advises is that people think of how their everyday decisions about their career will affect their portfolio in the medium-term. He believes that this insight will help people to make decisions about their career, helping them to manage their risk accordingly.