We all know a handful of people who seem to define success in retirement: They are financially secure, in a home where they are happy, and mentally and physically active.
How did they get there? Some of that success has to do with luck. But much more of your life's success will come from continual investments you make in yourself, not just your 401(k).
Over your lifetime, your ability to earn and save is worth much more than any returns you make in the market.
So while it's great to be a smart investor, keeping your fees low and putting your money into diversified portfolios, it's more important to be a career-builder and a habitual saver. Here are seven tips for building success by investing in yourself:
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1. Invest in the Education to Win Yourself a Well-Paying Career
The difference between the highest-paying jobs in America, which are mostly in health care, and the lowest-paying jobs, which are mostly in food service and personal care (like manicurists) is huge. In 2012, the anesthesiologist earning at the median made $135,000 and the food prep worker earning at the median made $9.28 an hour, or less than $20,000 a year. But there's a big difference in the middle too so that getting a nursing degree may lead to a salary twice as large as getting a teaching degree. Money doesn't have to be your main guide, but it ought to be a big one.
2. Invest the Time to Figure Out What You Want
The conventional wisdom is to follow your passion, and you will do better in a job that you enjoy. Can you volunteer or explore your passions in some other way through research to help yourself develop a plan for your career that will both earn you enough money and be something you enjoy?
3. Recognize That Now Is Always the Best Time
Investing in yourself as early as you can helps. That doesn't mean you'll have all the answers or that it's ever too late. But if you're toying with the idea of going back to school, start the process now. If you're trying to decide whether to start a company, write a business plan. If your choice is whether to get a job or travel the world for a year, go for the job. Unless, of course, world travel is a higher priority for you than conventional success, in that case, start on your world travel.
4. Keep Educating Yourself, but Keep the Cost Manageable
You can't let your skills stagnate, just as you can't leave a portfolio alone without ever adjusting it to meet your new goals. As your career field or your interests change, stay up to date with whatever education option fits the bill, whether it is a free giant online open course, available from places like Coursera or xEd, classes at a local community college, or a post-graduate degree. If you go for the latter, though, be sure to total up the costs, including what you'll sacrifice if you need to quit a job.
Formal post-graduate education usually pays off, even at very expensive schools, because your earnings rise after the degree and you're eligible for more promotions, but you'll still be smart to consider the school carefully. And don't forget: you can take a class just for fun it might lead to a new interest that significantly enriches your life.
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5. Automate Your Savings
This is old but good advice: Pay yourself first. After you've paid off any high-interest debts, prioritize your savings so that you are putting money into retirement plans, emergency funds or other savings accounts. These are investments in yourself and your peace of mind.
6. Work on Your Spending Habits
One of the smartest investments you could possibly make is putting the time in for a two-pronged effort. Spend some real time reflecting on why you are spending as much as you are. If your purchases aren't adding to your happiness, cut them out. Second, take a look at your budget to see where you can pay less, like trimming your phone bill or cutting out subscriptions you don't use.
Most financial advisors want you to save 10 to 15 percent of your budget. But experts say you're likely to be happier, and give yourself many more options if you can save 30 to 50 percent. The cash stockpile will give you many more options, perhaps to invest in a startup or an expensive hobby, and make it easier to live leaner in future uncertain times.
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7. Take a Risk on Success
Don't go willy-nilly putting money on your credit cards, but a low-interest bank loan or a well-timed loan from your family can help you invest. One of the biggest differences between successful people and those with regrets is the ability to recognize when something is going well, and double down on the success.
As a business takes off, that might mean investing some savings or borrowing money. Or, if you've had a big success with a short story or film you've created, it might mean spending money on a marketing initiative or heading back to school to polish your skills. Does this run counter to #6? Not really. The difference is the presence of success. Don't spend needlessly. Save your money, instead. But if you've created a success at one level, invest to take it to another.