2. Maximizing Income
As you set your goals for your career this year, one of them might be to maximize your income. Maybe you’ve taken the time to invest in yourself by getting a new degree or certification. Perhaps you’ve taken on more responsibility at work. Considering all these things, you might be able to increase your salary. We’ll dive a little deeper into salary negotiation in the next section.
But maximizing your salary isn’t the only thing that goes into maximizing your income – it’s also about when and how you get paid. There are several components to maximizing income:
Deferring income. It might sound counterintuitive, but one way to maximize your income is to defer some of it into the future, which is also called a non-qualified deferred compensation plan. This is a good option for you if you have a high salary and you are in a higher tax bracket. If this is an option for you, weigh the risks and the benefits.
One risk is that if your company goes out of business, you won’t get your deferred income. But if your company is well-established, a benefit is that you don’t have to pay taxes on the total of your salary, just the portion that you are paid that year.
Benefits. Exploring what company benefits you can utilize to maximize your income and earning potential is critical. As this year kicks off, check in with your human resources department to see what your company offers that you might not be taking advantage of.
For example, my company offers our stakeholders a wellness benefit where we are reimbursed up to $300 of gym membership fees. We offer tuition reimbursement, professional development stipends as well as a matching gift program of up to $500 for donations to a favorite nonprofit organization. We also provide an additional $400 deposit into stakeholders’ health savings accounts (HSAs) if they get their annual check-up.
Ensure that if you have benefits like this, you’re taking advantage of them. Also, maximize your 401(k) contributions to receive your employer’s full match. Ask your HR department whether your company offers other benefits like legal services, child-care benefits or other types of benefits that you can utilize.
Equity. In some organizations, once an employee reaches a certain level, equity compensation is a possibility. It makes sense that as you progress in your career and climb the ranks, you ask if equity compensation is an option for you. Your equity-based compensation is likely to cost you less in taxes than ordinary income.
Work with your financial professional to ensure you are maximizing your income. They can provide guidance based on your specific situation.