Financial planning for engineers is the key to setting up your future. Considering that the median salary for an engineer in the United States is around $90k, investing and budgeting are perfect ways to reduce financial stress and set yourself up for your future.
Although there are some basic rules about budgeting and saving, such as the 50-30-20 rule of budgeting recommendation, we understand that this is just a limited theory and the best way to budget and save is to create a personalized plan for your unique life circumstances. Financial plans vary greatly based on the needs of an individual. Contacting a financial professional for spending and investment advice is advisable for anyone looking into setting themselves up for their future retirement and life goals.
If you would like to learn more about financial planning for engineers, we have compiled the following list of tips developed from sources from our team of financial planning experts.
Top 6 Tips to Maximize Financial Planning for Engineers
Though the following content is developed by professionals, you should always contact a financial advisor for personalized investment tips. Here are the top 6 beginner tips to achieve your personal financial goals from experts to make the most of your career in the engineering field:
1. Increase Your 401(k) and Health Savings Account Contributions
Start retirement planning as early as possible as interest compounds over time, thus resulting in higher overall earnings. Most 401(k) accounts even let you roll over your funds to an account with a new employer, meaning you don’t have to worry about losing accounts if you switch jobs.
The federal government has raised the 401k contribution limit by $1,000 since 2021. Thus, you can put $20,500 into your 401(k) if you are 50 years old or less. Investing in your 401k is important to retirement planning for engineers, as you can take advantage of compounding interest that will accumulate as you continue to work and save.
You could also invest in a Health Savings Account (HSA). You can invest $7,300 annually for family healthcare and emergencies in an HSA. They are tax-free when paying for qualified medical expenses and lower your annual taxable income.
2. Increase Your Yearly Earnings
If you want to increase your salary/benefits or know that your level of experience could earn you significantly more money, look into increasing your yearly earnings. You could speak with your employer about taking on a higher-ranking position or changing companies.
Maximizing your yearly earnings is the most critical step to accumulating wealth, particularly if you have the skillset for a higher wage.
Some financial advisors recommend taking on a side job if your current one has great benefits (and you have spare time). Side hustles, including investing in real estate or freelancing, can increase your yearly profits.
3. Save and Invest
Save 10-20% of your earned income every month. These savings should also include an emergency fund of about three to six months’ worth of living expenses.
Although there are generic investment strategies such as mutual funds, well-known stocks, and keeping a certain percentage in cash, we suggest speaking with a financial advisor such as ARQ Wealth who specialize in helping high-income earners like engineers work towards their retirement and life goals. ARQ Wealth is currently offering a free no-cost no-obligation financial review, please click here in order to learn more about that.
There’s a lot of free info out there, but those cookie-cutter approaches do not address your unique lifestyle and circumstances that can greatly adjust what the best retirement and financial planning strategies may be.
4. Review Your Financial Investments Annually
Review your investments and long-term life goals annually to stay on track. For example, if you want to retire by a certain age, make sure your investments point you toward that goal. You can always schedule an appointment with a registered investment advisory firm to help.
A common mistake that individuals make who aren’t familiar with the intricacies of retirement planning is that they don’t look at the entire picture. This is where a professional retirement planning firm such as ARQ Wealth comes in – make sure that you’re on the right track and reach out today to learn more about how we can help.
Some common mistakes may include not contributing to retirement accounts, overestimating how much you have for retirement (not accounting for delayed taxes once you liquidate certain retirement accounts), not understanding the volatility of certain financial strategies, finding the appropriate risk tolerance for your age range, etc.
5. Budget for Yearly Financial Goals
Considering yearly goals and purchases is essential to financial planning for engineers. If you have children, you should budget for presents early in the year to not take a hit around the holiday season. It’s also important to plan for hobbies and vacations.
Finally, if you want to buy a new home, start a renovation project, or invest in a car, you should also budget these into your yearly finances. Plan for all excess expenses to keep your investing and savings plans on track.
6. Get Life Insurance and Plan Your Will
Though it may sound distasteful, you should prepare for disaster. Estate planning is integral to ensuring that your family does not lose your wealth if you become incapacitated or pass away.
If you have a family, a life insurance plan can be an appropriate investment and is something that we help individuals out with at ARQ Wealth. Every situation is different, and we can leverage our decades of experience to help you make the best possible decision for yourself and your family.
Planning your will is also vital to ensure that you control the division of funds and belongings. Leaving your family to fight for their rights after your passing can create massive problems for them during a difficult time.
Consulting with a registered investment advisor regarding these topics is purely hypothetical and essential to planning for a potential disaster.
Financial and Retirement Planning for Engineers in Scottsdale, AZ
If you want to take control of your finances by speaking with a comprehensive financial advisory firm that looks at the whole picture, contact us now at ARQ Wealth. We are a financial firm in Scottsdale, AZ that specializes in financial planning for engineers.
If you would like to book a free, no-cost no-obligation financial review with ARQ Wealth, call us at (480) 214-9572 or you can visit the following website link here to learn more.