A typical work life allows most professionals to plan for key financial goals. But not everyone has the luxury of generating a steady income over an extended period of time. Several professional have short careers and work lives.
Athletes, models, air hostesses and actors are among the professionals whose careers typically do not extend beyond 15-20 years. Short careers limit their ability to accumulate savings and build a healthy nest egg.
Also, the income from some of these professions is quite erratic. Uncertain earnings do not allow for regular, disciplined savings. For these reasons, the approach to savings and investments for such individuals has to be different from those with long careers and predictable, regular income. Here’s how they can better secure their finances.
Splurge Later, Focus On Career
While for the salaried class, typically, the earnings graph rises steadily and peaks near retirement, for sports persons, actors, models and others with short careers earnings rise speedily and dip quickly as well. Earnings can peak very early in their careers, while pay schedules and cash flows maybe unpredictable over the course of their entire career and beyond that.
Actors, athletes, models and artistes also face long stretches of time when they don’t have work. Most actors cannot survive on this profession alone in the initial years, unless you can grab a meaty role early on in the career. Dance as a career is very seasonal in nature. I face cash flow issues during festive seasons or vacations, when people usually travel or are busy celebrating.
Save Yourself First
Whenever you fetch your first few chunks of earnings, put aside the money towards securing the next 2-3 years of expenses. Professionals with short careers should wade through the off-seasons by taking on other projects such as corporate and wedding events. During their early years, such professionals should focus on securing their immediate future.
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Put in place a stronger emergency fund because of unpredictable cash flows. Also, in this critical stage of the career, the focus should be on enhancing skill sets and getting a toehold in the profession. For actors, this may mean trying their hand at playing different characters and not getting constrained in a particular role. Athletes should be participating in a range of tournaments to gain relevant exposure at higher levels. Once the skills have been honed, not only will there be greater likelihood of success in the chosen field, but also the room to adopt a more aggressive investing approach for financial security, say experts.
Save More Than You Could
Individuals who face short careers need to step up their savings rate early on in their career. As the runway for savings is much shorter, they have to compensate with a higher savings rate. Even if you start small, it is advisable to hike the savings every year in order to build a sizable corpus by the time the career ends. This also means postponing big-ticket spends to later years. Financial advisers suggest delayed gratification even for those with a longer earning life, as larger savings and investing early on will help build a bigger corpus by benefiting from the immense power of compounding. This is critical for those with short careers.
Will Your Savings Last?
If you career is likely to be over by the age of 35-40, there is a danger of you outliving your savings. When money starts flowing, the tendency of most individuals in these professions is to splurge. A more calibrated uptick in lifestyle is desirable to avoid a cash crunch later. While some of these professionals draw a huge income quite early on, the money doesn’t last forever.
It’s not a secret that some professionals make a lot of money but, for many, the lack of discipline leads to financial troubles in the later part of their life. You have to be able to provide for yourself after hanging up your boots, so what you save makes a huge difference.
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Securing a fat pay packet at such a young age can be intoxicating. Most couldn’t resist living the high life, splurging on a fancy lifestyle. For many years, I put away around 20% of my earnings when I could have easily afforded much higher savings. At that time, I didn’t consider that this high income would not continue forever. Looking back, I now realize that I could have been a bit smarter with my money. I have seen numerous cases where people have lots of funds due to instant success and fame but very few are able to protect the money because lack of financial education.
So, invest more, don’t withdraw soon. Professionals with short careers should invest larger sums and hold back withdrawals as long as possible.
Enjoy!
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