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How Much Should You Be Earning? A 4-Step Process for Setting Income Goals That Fit Your Life · Happen To Your Career - Meaningful Work, Career Change, Career Design, & Job Search

• 0:00
  Scott Anthony Barlow: We asked 10,000 people about their target salary and income goals. Almost every person said variations of the same three answers. All three of those answers were causing them to settle before they ever even started. When we first get to work with clients, whether we're helping them change careers, whether we're helping them with lifestyle and career design, we ask the same questions every single time about their goals, about what they want, about what they don't know that they want.
• 0:30
  And one of those questions is, what are you targeting for compensation? And we usually get one of several answers. We either get, "You know, that's a really difficult question. I'm not exactly sure." Or we get, "I know that I don't wanna go below $225,000," or, you know, whatever amount. Or another variation is, "I'm currently earning around 175,000 plus 40% bonus. I don't necessarily need all of that money, but I don't wanna take too much of a drop."
• 0:59
  Okay, in all cases, what we see is that people are looking at it compared to what their current situation is, what they're currently making, and then they're comparing that to what they think is available. All too often do we hear things like, "Well, I could take a little bit of a pay cut if I needed to."
• 1:19
  And the answer is, I don't think you necessarily need to. And we've made several episodes about that in terms of what we see, sharing the data, and how that's not always necessary. In fact, most of the time we see the opposite. The very best time to make an increase is when you're making a transition, a career transition.
• 1:37
  That said, every one of those answers that I just mentioned, when they're anchored to what you make now, and it comes from your current salary, current situation, current perceived situation, that is not the life that you're building, and it's causing you to, by default, settle. Now, I wanna draw a distinction here that's really important.
• 1:57
  As humans, if we're not careful, we tend to make our decisions that we feel are intentional either on default, or instead of intentional decisions, we make what I call circumstantial decisions. Now, in this particular case, that means that we're making a decision based on what we perceive as better in our current circumstance as opposed to what we really want.
• 2:20
  The challenge with compensation or different types of money is that we're often not sure what it is that we really want. And if we start to try to answer really big questions like, "How much does it cost to be able to live the life that I want to build?" often we have no idea, so therefore we operate around what we already know.
• 2:41
  Because as humans, we tend to be drawn towards whatever gives the most clarity, and what tends to give the most clarity is our current situation 'cause we're most familiar with that. So something you should probably know is that when we get to do this type of work around designing really big lives and what people actually want overall, which means drastically different things to different people.
• 3:04
  You know, if you ask 10 different people and you do this type of work with them, you're gonna come up with 10 wildly different types of lifestyles. What's important to one person is not necessarily important to the next person. That said, we're gonna cover the four questions and steps that we tend to use to help people reverse engineer their income goals so that it fits the life that they're trying to build.
• 3:28
  Very difficult to do. Easy to say, and very difficult to do. Okay, when we talk about lifestyle design or career design, some people tend to think that means like, fancy cars or it means buying many houses or, you know, whatever it is that you think is very opulent and, you know, over the top. And it can mean that if you want it to, I don't see anything necessarily wrong with that if that's what you really want and that's what you really value.
• 3:54
  But instead, if you value other things, then that's what we're talking about. So I'm gonna give you a current client example right now, and we're gonna just call her Jenny for anonymity. Well, in Jenny's case, something that was really important to her was later on in life being able to have and support her parents if they ended up living with her, and that's something she wanted to be able to have the space for in her house.
• 4:20
  You know, have that excess space. She wanted to be able to spend that time in a different way. That didn't just necessarily mean that it might cost more because she has more people living in her household. It meant that Jenny, what it looked like an extraordinary life for her, was that she was gonna be able to, you know, not just focus on all the extra household chores and everything like that, but instead spend quality time with her parents when they were there, which meant that she had to budget for, you know, somebody to help out with the daily household chores in her house so that she could free up more of her time and energy to spend with her parents when she got to see them, when she got to take care of them.
• 5:01
  Okay, so we're thinking about this very differently in terms of what is most important to you. For me, my wife and I, we sit down and we revise this every single year in terms of what we want. And about seven or eight or nine years ago, we started anticipating that our kids were going to grow up, move out of the house, and that we were likely gonna wanna spend time with them wherever they were.
• 5:23
  Really important to us, right? So that means that we have to, for our particular extraordinary version of life that we want to live and our work that we want to be able to do, it has to accommodate that. And if we're talking about reverse engineering the cost of a particular lifestyle, then that means we have to understand what that means and be able to plan for it.
• 5:44
  Okay, so those are just two examples, but really it can be anything that is important to you, and that's where this work actually begins. We start with every client saying, "What is the life that you're building someday? What is most important to you?" Now, this design work starts with someday and not 5 years or 10 years or 30 years, and not a fixed timeframe because psychologically, people tend to underestimate what they can achieve during particular timeframes and sell themselves short.
• 6:12
  So we simply remove out the timeframe, and then that allows us to be able to put our focus on what is it that we want, what is it that we value. Now, that's not what this episode is about. So let's pretend that we've already done that design work. The next step is we're gonna prioritize; what are my must-haves, what are my ideals?
• 6:30
  Meaning, what are the things that must be a part of that life in the future that are 100% non-negotiable, and what are those pieces that are aspirational? This helps you to prioritize importance as you're doing that type of design work. From there, we can start to figure out what does each of those cost, and we can stay conservative here.
• 6:48
  We can start from present cost. We can factor in things like inflation. If it's 30 years out, yes, we could be wrong, but we're gonna be a lot closer than if we didn't plan for it at all. By the way, AI makes this much easier now than ever before because AI can help us anticipate what something might cost if we have no idea, and do that research much faster than if we're trying to do it manually.
• 7:09
  From there, we can start to build a plan and we can say, "Okay, what do I need to be earning 10 years out? What does my income look like five years out? What about next year?" And again, we can start to factor in things like inflation, investment contributions, whether multiple incomes are needed. The cool thing here is this really allows us to begin to check the present.
• 7:29
  Is the $175,000 that I make right now, is that putting me on track? If not, that's okay. The point is it helps set those goals and identify those goals right now and not wait till 5 or 10 years out and realize you wanted something else. This can prevent regret in the future. And by the way, I understand that this can feel intimidating, but we're gonna try and keep it pretty simple as we go along here.
• 7:54
  The two goals are to imagine bigger and imagine what you want, and then be able to keep it as simple as possible so that we can plan differently and ultimately move ourselves toward the life that we are trying to build. Let me show you a quick example of how we might do some of this real time utilizing AI.
• 8:11
  Let's assume that the design work is already done. That's actually really difficult to do with AI because that requires you to think bigger, and AI is just not great at that. AI is great at helping to research things that are already in existence, not necessarily just expose you to new things that are gonna be right for you.
• 8:31
  Let's assume that design work is already done. Let's use a couple of mine and Alyssa's goals here for upcoming years and some of the things that are important to us, just as a quick example here.
• 8:41
  "Build out what is going to cost for me to spend approximately half of the year traveling. When I'm traveling, staying in Airbnbs. And then also, at the same time, help me budget approximately $50,000 a year for giving to various charities, and then also help me be able to budget for trying new restaurants and eating out on at least two days a week during the time that I'm traveling."
• 9:14
  Okay, so now I have a few anticipated costs around this. AI has helped me anticipate lean, comfortable, premium. And what I can do is let's pretend that I've already gotten visibility to some of my other current costs.
• 9:30
  "Anticipate there's an additional $164,000 a year, and that our costs are going to increase to approximately $195,000 a year overall, in addition to the cost that we've already anticipated."
• 9:48
  Okay, so this charts it out for me where it's approximately $195,000 for baseline living costs, and travel's about $130,000. Charitable giving is about $50,000 a year. Total of $375,000, which is the monthly equivalent of about $31,300. Okay, so let's say that we wanna do this about seven years from now. Here's what I can do.
• 10:09
  "Help me figure out what it would cost to be able to do this about seven years now. Factor in things like inflation and factor in things like other cost increases that we can anticipate. And then help me understand how much I need to be earning as a household seven years from now to be able to do this."
• 10:32
  Okay, so it gives me a projection for 2033. Now, you can insert your own numbers here in terms of what's true for your situation, but I'm just doing this to walk you through an example of how we can start to plan what we need in the future. So again, your own numbers are gonna be drastically different here.
• 10:48
  In this case, what this means is that I need a total anticipated income, household income, of about $502,000 after tax seven years from now in order to have this type of lifestyle. Okay, but let's say we wanna throw in a few other things here. For example, we're anticipating taxes, pre-income to cover spending.
• 11:10
  That takes us to about $717,000. Let's say that we wanna put 15% of all income for gross retirement. That takes us to about $913,000 total. Okay, this may or may not sound like a lot at this point. I don't want you to get too caught up in the numbers.
• 11:25
  The exercise that I wanna take you through is what this can look like so that you can begin planning for yourself. Okay, I don't ever actually plan on retiring in the traditional sense and then contributing in a way that probably most people would consider to be work. That said, let's pretend that I did. So let's pretend that I want to retire about fifteen years from now.
• 11:46
  "Help me project what I would need in savings and investments in order to retire about fifteen years from now and continue to pull out the salary minus what I would be saving for retirement and minus what I would be not needing in retirement."
• 12:03
  Okay, so here's a projection for retiring in 2041. Then, well, what does that mean I need in terms of size of portfolio to be able to withdraw that much and continue to have it make money for me? Well, it means that at approximately 3.5% withdrawal, that means I need about 22.3 million overall.
• 12:24
  In today's dollars, that means about 10.6 million. Remember, these already are anticipating inflation and other increases in costs. Okay, again, I don't want you to get too caught up in exactly what the numbers are here. No matter what numbers I quote, for some people they're going to appear high, and other people they're going to appear very low.
• 12:42
  Just assume that you're gonna have your own customized version of these numbers. So the realistic target here is I probably need to reach about 900,000 in that range in order to support this type of lifestyle. Now again, yours can be higher or lower. It doesn't matter. You get to make those decisions.
• 13:01
  What this means, though, is that for the plan part, I can start to attach years to this now. So I was looking at 2041, right? Okay, if I want to continue to live that type of lifestyle, then in 2041, when I retire, then at that point in time, I really need to peak out at $900,000 income a year, which again, we're factoring in that inflation and costs and salaries and everything else are gonna continue to go up.
• 13:28
  So this might sound like a high number right now. However, all of these numbers, any numbers, are going to be higher than what you anticipate, and that's the point of this exercise. So if you want to build out the life that you want, then you can start to understand really what it's going to cost and allows you to make different types of decisions.
• 13:46
  That way, when we're saying, "Oh, you know, what do I want in terms of salary?" We're not saying, "Well, I guess I can, you know, drop," which is an uninformed decision because that's based on what you want right now and where you're at right now. Okay, so now we can start to say, "Where do I need to be in five years from now in order to be on track for that?"
• 14:07
  Okay, five years from now is approximately 2031, right? Okay, so there's about a 10-year difference in between that time period. So in order to be on track for that, knowing that it's gonna continue to rise, I need to ultimately get to that 900k plus, then we could estimate and say, "Well, that's probably someplace between 600,000 a year."
• 14:31
  Okay, let's pretend that I was making around $250,000 a year right now. If that was the case, and that's now 250k, then I would need to at least double my current salary in order to get to that point. Okay, so we might say, in order to be on track for at least doubling, where do I need to be next year? What needs to change?
• 14:54
  Maybe I need to surpass that 290 to 320 mark in order to be on track for that next year. Okay, so now we're using really round, really fast numbers. We could start to get much more exact here, but I wanna take you through and just understand that we can start to plan what the trajectory looks like to get up to that 900k.
• 15:15
  Now, the reason again that this 900k is important is this represents what our life that we've designed so that way we can start making it reality. Now, the cool thing here is going through the process of doing this can cause you to realize there's multiple ways that I could get to this $500,000 to $600,000.
• 15:35
  I could continue my work in the way that I want to right now, and I could start a business on the side, start a consulting gig on the side. Or I could say, "You know what? I really want to focus on what I'm the best at, and I really wanna develop expertise in a few specific areas, and that's going to raise my value."
• 15:54
  There's many ways to get to whatever your goals are, whether we're talking monetary or anything else. Now that we know what the goals are and start to assess what are the best ways for me. Now, what we're not gonna get into in this podcast episode is, yeah, how to utilize constraints. We've done other episodes on that in the past.
• 16:11
  We're not gonna get into, like, how do we actually do life design, and we're not gonna get into, yeah, how do you actually get there. I wanted to show you this so that you can understand how we actually begin the very beginning process of mapping out so that we can get to a, "Here's what I need to be making."
• 16:29
  So let's go back to our original question. What salary are you targeting? What salary are you targeting for your next change? What salary are you targeting for next year? What are your income goals? Now, what we've done is we've taken this abstract, "I guess I could be making more," which is circumstantial, like we started this episode with, and now we've started to apply real numbers to it.
• 16:40
  So let's go back to our original question. What salary are you targeting? What salary are you targeting for your next change? What salary are you targeting for next year? What are your income goals? Now, what we've done is we've taken this abstract, "I guess I could be making more," which is circumstantial, like we started this episode with, and now we've started to apply real numbers to it.
• 16:52
  And the cool thing with real numbers is that just allows us to make better decisions all the way around. Let's say that I determine I don't actually wanna make 900K eventually. Maybe that number becomes 600K. Well, then that can have a different trajectory to be able to get to that point. Or maybe it causes me to realize I need to do something drastically different because I'm not earning 250K right now.
• 17:14
  I'm only earning 150K. So that means I need to change my trajectory so it goes up faster. All of those are things that you can influence, but only if you know what the goals are. So 100% of this has to come back to what is the life that you're trying to build? Which is ultimately the kind of work that we do here at Happen To Your Career.
• 17:34
  We help you figure out what is the life that you're trying to build, yeah, how does your work and how you want to work fit within that, and then we can start to attach it to real world things, like in this case, what that's going to cost. I hope it was helpful to see a walkthrough just like this, and if you loved this type of walkthrough, which we haven't done all the time on the podcast, reach out, scott@happentoyourcareer.com, and let me know, or make a comment if you're listening on Spotify or YouTube or whatever your player of choice is.
• 18:04
  Would love to hear if this is something you want more of. And of course, as always, if you want help figuring out what is the life that you're trying to build and making that happen in the real world, that's what we do. It's what we love to do.
• 18:15
  So you can also drop me an email there, scott@happentoyourcareer.com. Put 'Conversation' in the subject line, and I'll introduce you to the right member of my team. We will have that conversation, understand your goals, and then build the right type of support so that you can get where you want to go to what matters most for you. Until next time, I'll see you later. Adios.