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Your Financial Path: A Five-Year Framework

Oct 9, 2020
Business Money To Finance

You’re facing a very big decision now regarding your career! There are many factors to consider, including the expenses and income associated with taking your first step.

In this short article we’d like to help you think through the financial side of your decision. While it’s impossible to tell you the specific dollars associated with your exact path, we can at least provide you with a framework for thinking about it and give you some blanks to fill in so that you can make a reasonable guess as to how you’ll do in the near term.

We like to think in five-year blocks of time because while it’s not terribly far into the future (such that we have no clue what might happen that far out) it is far enough out that it provides a reasonable way to think about starting your career. As we have said many times on the Trades Hub, we hope you decide to invest in yourself and your career every chance you can. Thinking in five-year blocks helps you to do that, actually, because it provides you with a good opportunity to consider a new educational investment as you are coming to the end of each block.

Here are some helpful things to figure out regarding the finances associated with YOUR first five-year career block:

How much will it cost me to get the technical training I need for the job I want?

  • Use the career training board and the websites for training organizations you are considering to figure out the cost of tuition, books, and other fees.
  • Will you be getting a certificate, diploma, or degree? (Please read this article to understand each of these award types).
  • Be sure to figure out your total program cost, not just the annual amount if it is a two-year program.
  • Enter the total amount here as a negative number: __________ (A)

How much can I obtain in scholarship or grant money to help pay for my education?

  • Use the scholarship board to search for all possible scholarships and grants you can apply for and have a reasonable chance of receiving. Be sure to use the FAFSA form to estimate any Pell Grant money you might receive. (More information on scholarships and grants can be found here.)
  • While it’s difficult to know with certainty how much you’ll receive, enter your best guess here for the total you’ll receive during the time you are in school (not just the annual amount): __________ (B)

How much can I earn in my first job?

  • Use the job board, the career schematics below the day-in-the-life videos, and the career guide to find estimated starting annual salaries for the career you are interested in. If you see an hourly rate for your job of interest, you can easily estimate the annual amount by doubling the hourly rate and multiplying it by 1,000. As an example, if the pay is $16/hour, multiplying by 2 gets you to $32 and then multiplying again by 1,000 means you’ll earn roughly $32,000 annually (assuming you work full time).
  • Enter the estimated year-one salary here: ________ (C) and then the estimated year-five salary (the higher number for each career in the career guide) here: ______ (D)
  • For instance, if you are on the career guide looking at CNC machinists, the starting salary is estimated to be $45,000 and the five-year salary is estimated to be $77,000.

What other costs or benefits will I receive?

Medical insurance costs are very important to consider. If your employer does NOT offer you health insurance, please do a quick Google search to determine how much you think you’ll need to pay to be self-insured each month, multiply that amount by 12, and enter it here as a negative number : ______ (E)

We hope you decide to invest in yourself and your career every chance you get to do so

Now it’s time to pull all of this information together! This will help you estimate what your financial picture will look like at the end of five years based on your specific education and career choices.

Step 1: Add the amounts in C and D together and multiply the total by 2.5: ___________

(This is your total estimated pretax earnings over the next five years.)

Step 2: Add the amounts in A and B together and enter that amount here: ___________

(This is your estimated net cost of education over the next five years.)

Step 3: Multiply the amount in E (if any) by five and enter it here: ___________

(This is your estimated benefit cost over five years.)

Step 4: Add the lines from Steps 1-3 and enter the amount here: ___________

The amount in Step 4 is your estimated five-year net “career-choice” income, or what you can expect to earn after backing out the cost of your education and any uncovered medical insurance. You can use this framework to compare different trades & manufacturing career paths, as well as outside paths. Please remember that you’ll have to pay taxes on your income as well as pay for your basic living expenses, but after that you can start saving and buying things you really want to own!

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