How To Manage Your Finances As A High-Flying Professional

The good news is that if you’re already a high-flying professional, you’re quite a long way along the path to the financial success that you want. But, just like everyone else, you need to be careful. Even if you earn a lot of money, that doesn’t necessarily mean you have true freedom. 

Interestingly, nearly half of people earning six figures or more are living paycheck to paycheck. There’s constant competition to maintain appearances and keep up with others. 

So how are you supposed to manage your money if you’re in this position? Here’s our advice: 

Accept The Psychology

The first thing you want to do is accept the psychology of your situation. You need to realize that, as someone in a high income bracket, lifestyle creep is a massive force in your life. It’s incredibly tempting to allow it to creep in, especially if you feel the need to stay level-pegging with other people. 

Many experts guiding healthcare professionals through their financial journey run into this problem. You might have a doctor earning $300,000 a year, but their expenses might be $400,000 or more, putting them into debt that eats away at their quality of life in the long-run. 

Therefore, commit to reducing spending and avoid exceeding your financial limits. Most of the best savers try to put away around 50% of what they earn during the early parts of their careers, spending the rest on their lifestyle requirements. 

Work Around High Income Buckets

Next, think about how you’re going to divide up your income. The best way to do this is to put it into psychological buckets. You want to dedicate around 25% to fixed costs, like housing and utilities, 25% to lifestyle, like travel, and then the remaining 50% to the future. Doing this for even a few short years will often result in massive, outsized returns in the long-run. 

Maximize Compensation

If you can maximize your compensation, that’s also a good idea. The best way to do this is to understand the rules of the game and what’s permitted in your organization. 

Of course, you’ll want to start with the base pay. Then you’ll want to move onto things like bonuses and deferred compensation if that’s available, plus tax-advantaged retirement accounts. 

Sometimes, you can also do things like harvest company stock. When you do this, you can plow the money back into high-return opportunities at home or overseas, giving you more freedom. 

Avoid Expensive Housing

Finally, it’s a good idea to prevent housing from becoming a wealth destroyer. Too many people are stuck in mortgages they can barely afford. 

Therefore, you’ll want to stick with properties that are between 2 and 2.5 times your gross household income. That means you don’t want to be paying back any more than that in the form of debt repayments. If you are, then it usually means that the price is too high. Of course, property prices in a lot of locations are out of control, but professional wages tend to match.