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A Young Career Professional’s Checklist For Building Lasting Wealth
February 23, 2023
Bruce Van Kooten, CFA®, Partner and Portfolio Manager
Chad Clauser, CFA®, Partner and Portfolio Manager

Are you an up-and-coming corporate executive, doctor, lawyer, accountant, or business owner?

As a successful professional, you may be making substantial income now, or have the potential to build significant wealth throughout your career. Let’s say you are bringing in enough income to cover your bills and have a comfortable (and growing) bank account. This is when it is time to have a long-term financial plan in place. But where should you begin?

Why invest

A great place to start is to determine exactly why you want to invest. What are your short-term and long-term goals? Many invest to become financially independent, to create a legacy, and/or to do good things. Other seek to accumulate money to buy a first or second home, save for children’s education, travel before and during retirement, and pay medical expenses for family and for aging parents.

Many high-income career professionals don’t save and invest due to a lack of investment knowledge, lack of discipline, fear of losing money, not knowing how to set clear goals, or simply being too busy with life. We know this is not you.

To get started on the path to building lasting wealth, it’s important to follow a checklist of best practices:

Know Yourself

“Know thyself” is an ancient aphorism, often attributed to the Greek philosopher Socrates. Know thyself essentially means be aware of your likes, dislikes, and proclivities. In the financial arena, the more self-aware you are, the better your financial decisions should be.

As an ambitious professional, you should know your budget and how much you can afford to invest every month.

You should know your appetite for risk and volatility. If your investment portfolio loses 20% of its value in three months, will you lose sleep? Do you want to sell as fast as possible? Or do you view stock price declines as a buying opportunity for maximizing long-term growth? Will you be calling your advisor to ask what they are buying that day?

Do you expect to have a large capital expenditure for your business within the next year or two? Know your need for access to ready cash.

Moreover, know why you are investing—do you want current income, long-term growth, both, or something else?

It’s also important to understand how and where you want to invest. This could mean investing broadly with diversification or focused on selected stocks of businesses, or via individual bonds, ETFs, mutual funds, or on other allocations suitable for you.

Live Within Your Means

You may understand this already, but it’s worth repeating–before starting to invest, make sure you first pay your debts, if any. To maximize your efforts, prioritize paying off high-interest rate, unsecured, and large-balance debt. Many of our enterprising professional clients, for example, rejoice when they’ve finally paid off their graduate or undergraduate debt from medical, law, or business school.

But what to do with dollars previously budgeted for loan payoffs? Think twice about buying a fancy car or taking an around-the-world vacation. Avoid impulse purchases, both large and small dollar amounts. And keep an emergency fund for unexpected expenses.

Invest Early and Often

To maximize your financial—and emotional—security in the long run, you should save as much as you can, as early as you can. The concept of regularly investing a percentage of earnings each month should be a habit. In fact, it’s critical. Time, not timing, is the key to wealth accumulation. A regular and consistent investing framework will help you create an investment plan that helps you accumulate and grow wealth, while also being cognizant of life’s events and contingencies.

Why You Should Start Investing Early

The table below shows the power of compounding over time. Each example assumes a $6,000 annual investment with 6% growth, compounded monthly. The prosperous professional, for example, who started at age 30 grew her wealth to over $1.3 million by age 65. By contrast, the career professional who waited until age 45 to begin investing amassed $240,000, a deficit of more than $1 million. Can you afford to wait?

– AMOUNT ACCUMULATED –
Age Started Investing At Age 55 At Age 65 At Age 70
30 $784,460 $1,359,000 $2,075,316
35 $258,459 $508,000 $784,460
45 $95,543 $240,000 $384,651

This hypothetical example does not reflect the actual performance of an investment. Assumes all earnings are reinvested and excludes taxes and fees. Source: BankRate Monitor.

Invest in a Retirement Plan

Investing while young, and as much as you can, applies to retirement investing as well. That’s why, if you’re not self-employed, you should maximize your 401(k) contribution to help build wealth.

Some companies will match your investment dollar for dollar up to 6% of your income. (Others may match with different amounts.) For instance, for every $100,000 earned annually, you can contribute up to $6,000 to your 401(k)—and the company contributes another $6,000 to your account.

It’s like free money, and tax-deferred.

Similarly, self-employed rising professionals have little excuse to skip out on investing for retirement. Consider setting up a traditional or Roth IRA, SEP IRA, or defined benefit plan.

Know How Much You Need to Save

A realistic time frame is also crucial for building lasting wealth. The longer your time frame, the easier it may be to ride out market losses, which is why it’s sensible to start investing as early as possible.

Determining how much you need to invest should not be left to chance. Different goals may mean different time frames, and each time frame may require a distinct investment plan. A short-term goal, for example, like buying a house, may mean a three-to-five-year time horizon.

Medium-term goals may include saving sufficiently for your children’s education. Depending on the age of your children when you begin to save, and how much education you are likely to subsidize, this may require building a plan spanning 10 to 20 years.

Achieving long-term goals could take 15 to 30 years or more to invest. Goals may include having enough for a more than comfortable retirement, caring for elderly parents, or building an estate or philanthropic plan.

But how do you know if you are setting enough aside to reach these goals?

The Power of Time

If your goal is to accumulate at least $1,000,000, you’ll need 20 years by investing $1,000 monthly. Similarly, if your goal is $500,000, you’ll need 13 years get there by investing $2,000 monthly. Each example assumes a 6% annual growth rate, compounded monthly.

– LONG-TERM INVESTMENT GOAL –
Monthly Investment $500,000 $1,000,000 $2,000,000
– YEARS TO REACH GOAL –
$500 30 40 50
$1000 20 30 40
$2000 13 21 30

This hypothetical example does not reflect the actual performance of an investment. Assumes all earnings are reinvested and excludes taxes and fees. Source: BankRate Monitor.

Note that inflation can negatively impact your plans. An average annual 2% inflation rate means that you’ll need more than $152,000 in 20 years just to equal the buying power of $100,000 today. And today’s inflation rate is much more than 2%. (Source: Consumer Price Index.)

Build and Monitor Your Portfolio

Most thriving career professionals can invest for the long-term, but should allocate investments in a way that when the markets fall, their first reaction can be “What should I buy today?” as opposed to “Get me out of the markets!”

Building and monitoring your investment plan is an important step in creating lasting wealth.

Automatically investing a portion of your income though a monthly automatic deposit plan can add discipline to your investing strategy through technology.

What’s more, a wealth accumulation plan is not something to set and forget. Regularly monitor your investment portfolio. Not daily or weekly….unless you want headaches. The best wealth managers regularly communicate with their clients, either quarterly or whatever works best for you. Whether you work with a wealth manager or are a do-it-yourselfer, continually educate yourself about personal finance and investing.

Choose Your Investment Partner

Should you be your own investment advisor? You are a smart and successful career professional. But investing for yourself can be challenging. Many prospering professionals are invested in building their careers, and lack the time or knowledge to personally invest the wealth they are accumulating.

Or should you seek the advice of an expert wealth manager? You’ll find no shortage of financial planners, registered representatives, wealth managers, and opinions. In Omaha alone, you have a choice of approximately 2,200 investment professionals from nearly 500 firms.

If you choose to partner with a wealth manager, it’s important to consider if they are a fiduciary. By law, fiduciaries must put your financial interests first. Also consider their investment credentials, if their goals are aligned with yours, if their fees are reasonable and transparent, and if the investment strategies they specialize in make sense to you.

In addition, you should also know what may happen to your money if your advisor leaves their firm. The best-case scenario if your advisor moves on is that other advisors within the firm can seamlessly move forward with your strategy.

Although potentially difficult, it’s best to think of your goals beyond today’s headlines. This is where a wealth manager with a clear, time-proven strategy may guide you to stay diligent through the markets’ inevitable ups and downs. Be patient and avoid making quick decisions.

Final Thoughts

At Lawson Kroeker, we spend significant time thinking about your future goals, financial plans and our role in helping you get to where you want to be. We know our clients have many investment options available. We also understand that sometimes life happens and that you need to have resources at hand in case of an emergency.

It is important for professionals on the rise to take all of these considerations into account when thinking about how to invest, how much to invest, and what investments to consider.

We at Lawson Kroeker strive to invest in and monitor the stocks of businesses and bonds to build a portfolio custom tailored to you.

About Lawson Kroeker

Lawson Kroeker Investment Management, founded in Omaha, Nebraska, is a third-generation wealth management firm that helps a select group of high-net-worth clients achieve their life goals by providing investment advice and building custom solutions. Lawson Kroeker’s disciplined, patient investment management process focuses on owning the stocks and /or bonds of a focused group of individual businesses. Established in 1986, the firm has under management approximately $600 million in assets.

Bruce Van Kooten, CFA®, Partner and Portfolio Manager—Mr. Van Kooten has been a Lawson Kroeker Partner and Portfolio Manager since 2006 and has more than 45 years of institutional and private investment management experience. Bruce has worked as a trust investment officer with First National Bank of Omaha, and as a senior investment portfolio manager in Denver at KPM Investment Management, which became Wells Fargo Private Asset Management. Bruce earned the Chartered Financial Analyst (CFA®) designation in 1987 and is a member of the CFA® Society of Nebraska. He has a Bachelor of Science degree in Business and Economics from Iowa State University.

Chad Clauser, CFA®, Partner and Portfolio Manager—Mr. Clauser began his investment career as a senior analyst at an Omaha-based investment advisor Tributary Capital Management, and later as vice president of the New York investment bank Credit Suisse. He earned the Chartered Financial Analyst (CFA®) designation in 2009 and is a member of the CFA® Society of Nebraska. Chad attended the University of Nebraska in Lincoln, where he received a bachelor’s in Finance and completed minors in both computer science and mathematics.