This version of the Money Framework aims to help define the "ecosystem" of your own money and customize the steps for your future well-being whether if you are at the beginning of a career or to reassess your current situation.
There may be some uncertainties or unforeseen situations (accidents, health problems), but in most cases, you will have complete control over your decisions and the next steps.
About 7 out of 10 people considered active in Europe are employed. The rest are self-employed, entrepreneurs or job seekers. According to Eurostat, 6 to 7 out of 10 Europeans have a job which is essential when setting goals for life.
And when there are other sources of income, such as rents, investment earnings, as a primary source or as a complement, the speed that you reach the different levels of our pyramid is different. For example, if the complementary income goes directly to your savings, you can spend all your salary. But if you depend only from your wages, you need to find a way to create some cash reserve.
Define your work-life purpose
Do you want to work in a big company? Do you want to be an independent worker? Do you want to be an entrepreneur, launching your project? These kinds of questions are all prevalent. The least common is to have long-term perspectives of 30 or 40 years ahead. Nowadays, it’s understandable.
The changes that we have seen in the world, in terms of technological evolution, organization of companies and the markets themselves, are so significant that families stop planning the future for long time distances. The world is running so fast that the “Millennials” (and the “Zoomers”) are not preparing their financial future for more than five years. In this context, we are from the “old school”: we recommend you to build a long-term plan, a “roadmap” for your entire life (the Money Framework helps you to make one).
It is worth reflecting on what may be a long-term path, not only at the professional level but also at the family level. We know you won’t be able to predict the future, but if you set out the broad lines of what you want to achieve, it helps the quality of your future life. You can review that plan whenever you want and make changes where appropriate. As we will see at the next level, it will be essential for organizing your finances.
First the diploma, then show what you can do
“First a diploma, then the wedding”, is, or used to be, the standard path in many cultures. Nowadays, achieving a successful career is a top priority. Therefore the “wedding after the diploma” changed to “what you can do, in addition to your diploma”. Is it a case of saying: “study that you will go far”?
According to the statistics, in OECD countries, people with higher education earn 30% more than the average. Those who do not have the secondary level receive, on average, 20% less of the standard. If you are young or have young children, know that the higher your education, the higher your salary, regardless of your profession or country.
It is true; many people have succeeded without higher qualifications. Many entrepreneurs have started businesses, developed professional activities or have skills that have taken advantage to convert them into income. But when we look at the entire working population, the data is clear: on average; success is more guaranteed with qualifications.
However, note that having a diploma and accumulating training courses are no longer enough to enter the labour market. The so-called “soft Skills” rise to the top of one’s curriculum vitae. The appreciation of the candidate’s characteristics, such as communication skills, relationship, adaptation to different environments, is essential for success when applying for a job.
Tip: Do you have an idea of how employers evaluate your “soft skills”? Knowing who you are, it’s an asset for you. Use it well.
Start your own business?
Often, after graduation, the newly graduated feels like launching his project. Every moment can be right, but some settings make it easier. It is not so much the desire to be an entrepreneur to see your idea or your product implemented in the market.
Typically, young graduates do not have to pay home loans or car credits. They don’t have children at their care, and they may still live at their parents’ house or receiving support from them. If that’s the case, it’s the best occasion to risk in the project that will consume time and resources. They should, however, seek the support of more experienced people to address the lack of experience in areas such as business, project or product management.
Some people take a different route. The creation of own business carried after several years of a successful career, 15 to 20 years - or even more -, when you have 40 or 45 years old accruing enough capital not to affect the quality of life and family well-being. In this case, the entrepreneur has the experience, though the margin for mistakes is much smaller. Never forget, the “mortality” rate of new companies is relatively high, studies show that only 4 out of 10 new companies survive the 5 Years mark.
The bet on autonomous work
Self-employment depends on many factors such as the activity developed, the country where it happens, the macroeconomic scenario of the country and existing state support. A demanding market is also essential for a freelance to build his business. He or she also needs to take into account aspects like the family, age and years of experience in the field.
There’s a tendency for many autonomous workers, especially those who provide services regularly to just one or two customers (companies), to compare their relationship with the employees of the companies to which they provide services. Whereas one of the trends in the labour market is the increase in the number of self-employed workers and their decrease in the number of employees, coupled with the trend towards a more flexible employment relationship, we recommend to the autonomous workers to think like entrepreneurs with their micro-companies. Does it make any difference? Yes!
The micro-entrepreneurs approach should be to draw up a “sales” plan and not to find work to pay the bills. It should be a plan using the best exploration techniques, duly adapted to the activity and size of the project, of course, among other management and marketing techniques.
How many times have you turned down work in some periods because you couldn’t meet all the requests? If it happens, many times, why not adopt a “business” mentality? Accept the work proposal with the provision of execution by another self-employed worker. Someone you know and charge him your margin of profit (bigger or smaller, depends on your affiliation).
Of course, this process requires some attention. You must ensure that the delivery is done with your quality standard and that you know well the worker who will collaborate with you, if he/she adopts your way of working - your “modus operandi”- or similar, at least. It’s a way of growing your business, of getting more income and everyone wins in the process, even your friend or acquaintance who would eventually be without work, or with free time and ended up monetizing it.
This is one example, and it illustrates our recommendation: set your mind as a businessperson, as your own boss and not as a recruited staff of that company.
Work as an employee
As already mentioned, it is not possible in a general article to provide a solution for all cases. It is not our intention. The goal is for you to ponder, to self-assessment, with questions like what are my professional goals? What satisfies me professionally? What am I getting at? After 10 or 15 years of career, what have I achieved? Have I used all the solutions and tools at my disposal? In the same post, in the same role and continue to complain about a low salary?
Perhaps it is time to redefine your plan. And above all, don’t just sit back and wait for your distress or discomfort to resolve itself. That won’t happen. Observing successful colleagues and friends is a good starting point before changing and, above all, whatever your situation - good, bad or so-so, do not hesitate to ask for help.
You’ll find that sometimes a simple tip or good advice can make all the difference. Sharing your case with more experienced people or from different areas may be enough to give you the path you were looking for or never dared to take.
Tip: if you’re not happy with your situation, stop complaining and rethink your approach or even your work. And don’t be afraid. “Fortune favours the bold”, there is always an opportunity for those willing to change. Yes, we know, it can be challenging, but in most cases, the change is positive.
To summarize what determines the source of your income (resources) which is the basis of your financial autonomy, present and future, we recall the Canadian writer W. P. Kinsella (1935-2016): “Success is getting what you want, Happiness is wanting what you got”. It is easier to move on to the next steps when you can have a lifestyle-appropriate income.
Don’t hesitate to share your resource-raising strategy with your co-workers. Recommend Euroconsumers Invest in your company’s HR Department. Ask them to contact us and learn more about our counselling services. Texts for investors and for entrepreneurs and directors interested in providing support in Financial Consulting to their employees. Contact us!
Read level 2 of the Money Framework by Euroconsumers Invest: 2. Budget: Make Smart Spendings.