Question of moneyJeff hates his job the way Sergio Garcia hates Tiger Woods. In his words, the job “dominates” him, “owns” him and often makes him feel “shockingly sorry for himself.”

Jeff is a 28-year-old, well-educated corporate attorney in Los Angeles. And he is feeling sorry for himself. Despite the fact that he makes $160,000 a year, he says, definitively, “the money’s not worth it.”

So why doesn’t he do something else?

“I can’t afford to,” he says, defeated.

Yeah, right.

 

Money…And Regret

My job as a coach is to help my clients make great decisions, to help them better evaluate the personal and professional decisions they face to get to the best possible outcome. The fancy term I have for this is “regret-minimizing decision-making.”

Regret was on the mind of author Daniel Gulati when he interviewed 30 professionals between the ages of 28 and 58 to discuss what, specifically, they would have done differently if they were to start their careers over again and what they regretted most about their careers to date.

The most common regret?

“I wish I hadn’t taken the job for the money.”

Gulati writes, “By far the biggest regret of all came from those who opted into high-paying but ultimately dissatisfying careers.”

Our beliefs (or, more often, concerns) about money are always a factor in our decision-making, but in few areas does it matter like it does when considering a job change.

Like my client Jeff, so many of us bring a specific (but often unsupported) view of how much money we need to make and why. As the lamentations of Gulati’s subjects illustrate, that lack of clarity can cost us—emotionally, if not financially—in the end.

When we take a job “for the money,” we may meet our financial expectations, but oftentimes we are found wanting when it comes to work-life balance, future career opportunities, development opportunities and/or manager quality (among the other drivers of employee satisfaction).

 

How Little Do You Need?

Money should be a factor in your career decision-making, but the key consideration isn’t how much you want, but instead, how little you need.

It may sound counterintuitive in our goal-oriented society (“You are what you earn!”), but starting with how little you need is a more helpful metric for two reasons:

1.     It’s grounded in evidence. As I will explain in just a second, how little you need is based upon real needs today.

2.     It relegates money to a commodity, which it is, as opposed to a cure-all, which many often imagine it to be.

Below, I suggest you answer three core questions that every job seeker should be able to answer. (Warning: simple math required.)

 To get you started, a few simple questions to ask and answer:

 

1.     How much does your life cost today?

In other words, how much do you spend, on average, each month?

Here’s how to do the quick calculation:

  • Review your credit card bill online. How much did you spend between February 1, 2013 and May 1, 2013? (Most credit card companies allow you to view your statements over a specific timeframe.)
  • Divide that number by 3 to get your average monthly credit card spending (as an indicator of monthly expenses).
  • To that number, add your monthly rent, mortgage, car payment and/or other large regular expenses you don’t pay via credit card. The result is your monthly “run rate.”

Average Monthly Credit Card Charges: _________________ +

Rent/Mortgage: __________________________________ +

Car Cost: ______________________________________ +

Other Large Expense: ____________________________

= Average Monthly “Run Rate”: ___________________

“Run rate” is a term businesses use to describe how much money they spend on a monthly basis.

Now you know yours.

 

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2.     What’s your “runway”?

In other words, if you lost your job today, how long could you live without income (before you end up on your parents’/friend’s couch?)

Here’s how to do the quick calculation:

Determine your total liquid assets. To keep it (very) simple, add up these numbers based upon your financial position today:

Checking Account Balance: _________________________ +

Savings Account Balance:     ________________________ +

IRA Account(s): __________________________________  +

401K Value x 0.85: ________________________________

= Total Liquid Assets: ____________________________

A couple of notes:

1.     You multiply the value of your 401K by 0.85 to reflect the penalties you would incur if you were to cash it out early.

2.     You intentionally do not include items like real estate, real estate rents, art or cars in this calculation. The reason? You want the most conservative estimate of how much money you have and how long you could live without income.

To determine your “runway,” divide your total liquid assets (above) by your monthly run rate. This equals the number of months you can live before you run out of money.

This number could be used in two ways:

1.     As a “worst case scenario.” (How long could you survive if you were to lose your job today?)

2.     If you were considering a career pivot, how long would you have to learn a new skill or gain new experience before you needed to earn income again?

 

3.  How much do you need to earn? Why?

Here’s an exercise to help to define and clarify how much you need—and why:

  • On a sheet of paper, write down the number (annual income) you would feel comfortable earning. (For most people, this ends up being between $100,000 and $300,000, but you may be different.)
  • Divide your “dream” annual salary by 12 to get your “dream” monthly income.
  • Now consider these questions:
    • How would you spend, specifically, the surplus income (i.e. the difference between your living expenses and what you are making)? Make a list of the specific things you would do or buy if you had more money today.
    • How long is your list?
    • Does this list excite you?
    • Which of the items on your list require not only money, but more time as well?

 

 A New Reality

When Jeff and I worked through these 3 questions, a new reality emerged:

1.     He “needs” far less money than he thought he did—roughly $3,700/month ($4,800/month pre-tax, assuming an effective tax rate of 30%). All in, that works out to a salary of just under $60,000/year ($100,000 less than he is currently making).

2.      At the time, Jeff had liquid assets of $65,000 (not including his 401K), meaning that he had a runway of just over 1 year ($65,000 ÷ $4,800 = 13.5 months).

3.     At the time, Jeff didn’t want for anything. He was happy living on $3,700/month, with one exception: he wanted to travel more. But, as he acknowledged himself, even though he had the money to travel today, he just didn’t have the time.

Should Jeff quit his job?

At this point, I don’t know—and neither does he.

The one thing he does know, however, is that he can’t let a “lack of money” be an excuse for not exploring new professional options.

In a future column, I’ll discuss another common (and commonly false) assumption potential job seekers make: “I don’t have enough time…”

Image:  Ano Lobb