You’re an engineer, you’re bound to be good at math and numbers, and you’re more likely to start your career with a high income. The future looks bright with your engineering diploma in hand, and you can already taste the expensive steaks you’ll be eating and imagine the high-end cars you’ll be driving in.
But before you get too far into it, you have to start securing your financial future as early as now. No matter how large their income is, many engineers still fail to save money after months of paychecks, and most fail to invest their money at all. These are the main reasons why financial planning is so important, especially early in your career.
However, why is there financial planning “for engineers?” Shouldn’t it be the same as with other professions?
According to Wealthfront’s Adam Nash, engineers are math-oriented, more likely to earn higher incomes early in life, and tend to believe that they are more rational. Hence, financial planning can take a different approach for people in this profession.
That said, here are the top financial tips that can help engineers secure their finances early in their careers:
Find the right engineering job
First things first, find the right job. Notice how we said ‘right’ instead of ‘good’ because even if the starting pay is high, it might be a dead-end position. Or even if the job is a great stepping stone, the pay can be unworthy of your time.
Scour through engineering recruitment sites, job-seeking sites, and your own network to find the right job. Income is the main factor but shouldn’t be the only one. Find a job that offers good compensation, but also consider your future with that company. If the pay is high, but your opportunities seem bleak, it might not be worth it. Similarly, if the position is good, but the pay is too low, you might not want to take the risk.
Don’t be afraid to negotiate salaries with potential employers. Ask for the ceiling amount that you can get. Good companies are willing to pay more to gain the right people in their employ, so prioritize employers that can offer pay on or above the industry average. If you’re not sure what’s a reasonable range to ask for, check out Glassdoor, or speak to colleagues in your field.
For many engineers, stock options and other investment opportunities are common parts of compensation. If you are presented with the opportunities to invest early in your career, grab them as soon as you can but not without calculating risks, of course.
Investing early can allow you to build wealth earlier in your career as opposed to investing late. In turn, you can buy a house, buy a car, get married, start a business, and make other significant financial moves earlier than your peers.
However, keep in mind that investing always comes with a risk. If you are not sure how to invest your money in a way that keeps those risks low, talk to financial advisors, bankers, stockbrokers, and other investors that can help you out.
Live below your means
As stated earlier, engineers are more likely to earn a higher income early in their careers. This makes it difficult for many to avoid lifestyle inflation, which is when you increase your expenses because you have a bigger paycheck. It is even harder to avoid inflating your lifestyle when most of your engineering colleagues are also spending more money.
As early as now, make it a point to live below your means. It’s okay to enjoy your hard-earned money, but not to the point that you’re spending all or most of it. Keep your lifestyle reasonable. If you need a car, buy a modest one. If you want to move to a new place, find one right for your budget. Your financial future will look much brighter if you start building responsible spending habits as early as now.
General financial tips
Other than the strategies highlighted above, here are several vital financial tips that apply to everyone, not just engineers:
- Create a reasonable budget and stick to it
- Build an emergency fund with at least three to six months’ worth of living expenses
- Avoid incurring debt as much as possible
- Get insurance while you’re still young and healthy
- Work towards maximizing your 401k contribution
- Consider adding more streams of income, e.g., freelancing, consultations, etc.
Engineering is a lavish career, which is exactly the reason why you need to secure your finances as early as possible. By following these strategies, you can start accruing wealth and making the right financial decisions right from the very start of your career.