A common question asked by financial advisors of their clients is a variation of, "What is your risk tolerance?" In this context, they are asking how much risk you are willing to accept with the money you’ve already earned – your investments, retirement funds, savings, etc. But how much risk will you take with your income? Our career decisions are not widely recognized in our overall financial risk profile; however, they perhaps are the biggest risk in your financial journey. Whether it’s getting a promotion, leaving your company for greener grass, or even starting your own business, your job can pose great risk/reward decisions. This week, let’s dive into risk when it comes to your career.
Top result from image database for "risky business". Is it risky because they stole the image from another website company?
Pay Raises and Promotions
Perhaps the best way to increase your income is to get a raise. I wrote a dedicated blog last year about this very topic. But, as anything in this arena, they can change over time! When I wrote this early in the COVID pandemic, you may not have had the courage to ask for a raise. But, with wages finally going up as a result of labor shortages, this may be a great time to do so. Each circumstance is different, but make sure you can make a compelling case for your leader before asking. Of course, asking for a raise has risk – your boss could say no and send you packing. Is this likely? No, especially if you explain the justification (years without an increase, extra work performed, etc.).
Your leader may not be enthused about giving you more money for the same work, but perhaps a promotion could provide an opportunity. It could be a completely new role you apply for, or perhaps a progression-type role (e.g. Accountant to Senior Accountant). In either case, the expectation would be you get a pay increase for increased responsibility. And, possibly, more work hours. This commonly plays out in the transition from hourly to salary. There’s a reason they’re giving you more money – they want you to work more! If you’re in a place to do this, it may be a good move. In this situation, your risk is more about being able to handle the additional challenges. You could find you’re unable to accept the tasks associated with the new role and have to accept a demotion or lose your job altogether. But what if you’re really good at this new job – and it leads you to another promotion down the line? Here’s a curve ball – if you’re suggested for a new role, and decline, you may never get these opportunities again. I had a co-worker who declined two opportunities for promotions. Guess what? He never had to make that decision again because the leader stopped asking and promoted others.
NewCo
If you’re at a spot in your career where you either on the job hunt outside your company or get contacted by a recruiter, there is more risk than looking at job opportunities internally. Of course, job seeking should not be publicized to your current co-workers or company. If you are fortunate enough to get interviews, make sure to take PTO or find time in your current work schedule. Because you read my interview blog, you crush the interview and have an offer. Do you accept? Well, if the offer is better than your current circumstances, and you have a good feeling about the new company, go for it! Just understand the risk – the grass is always greener. Your new job – guaranteed – will have headaches and challenges. You’re really exchanging your current problems for new problems. What you really want is to find a better fit – will you feel pride in your new role? Will you be compensated properly? Will you realize better long-term prospects for promotion and continued employment? Also in play is the risk of jumping ship. You should always conduct yourself professionally, including when leaving a company. Don’t burn a bridge you may need to cross in the future – if your new company goes out of business, can you get back to your old company? Also, you never know if you new company and old company end up merging, and all of the sudden the co-workers that drove you crazy at the old company are a couple of cubicles down! Wouldn’t it be best to not tell off Keith from Vendor Management for nuking trout in the shared office microwave before you leave? The risks of departing for a new company are there, but can be mitigated with professionalism and thoughtful consideration.
Businessman vs. Business, Man!
You’ve learned the ins and outs of your industry over the years, and think you can do it better yourself. You’re ready to venture off on your own. Is there risk in this? Yup, big time. As detailed in the franchise blog series, many businesses fail early. Will yours? That’s the question at hand – can you make it as a business owner? Do you have the drive, ingenuity, and vision to realize your own income – and even employ others? Coming from a family of sole proprietorships and working with small businesses every day in my current job, I can tell you it’s grueling and far from perfect. There is no guaranteed income like you had as an employee, and long hours dealing with the tasks you don’t want to pay someone else to do can be grating. However, the reward can outweigh all of this. You are the undisputed boss! You run things the way you wish – set business hours, prices, grow/expand as you wish, and make all the decisions that may require three levels of signatures in a corporate structure. On top of this, there is a sense of pride and accomplishment from venturing off on your own that only an entrepreneur can feel. I greatly admire those with the courage and grit to start their own business. If you are confident in your skills, work ethic, and vision for a new business, go for it! Just recognize the risk you’re taking and be prepared to work harder than you ever have in your life.
Well, this is the final blog of the risk series. I hope it has sparked some ideas on how to manage risk within your financial journey without scaring you away from risk entirely. I believe it was Adam Smith who said “Scared money don’t make money.”
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