How Much Money Would It Take For You To Change Jobs? Thumbnail

Last year I was offered a tempting opportunity to join another firm. They offered a 50% pay raise, and guaranteed money for two years. The job was with a start up that was trying to make a big splash.  In the end, I decided to stay with my existing company of over a decade because I was comfortable with my position, enjoyed working with my colleagues, and developed a lot of goodwill.  Besides feeling pretty happy, I was afraid to take any more risk in an otherwise nascent recovery.

As the economy gets better (questionable now), I’m sure many of you will also find new and enticing job opportunities which you’ll stress over.  I went through some serious deliberation for five months before making my decision.  In the following post, I jot down some tips and thought exercises on how to make the right decision that you’ll feel good about. After turning down the sweet offer, I never once felt like it was the wrong choice.  However, I will admittedly always wonder how it would have been.

THE CONSIDERATIONS ONE MUST MAKE BEFORE CHANGING JOBS

Money is a big part of one’s job satisfaction. To deny this would be silly. After making a certain amount of money, however, you care a little less about how much you make, and more about the quality of your life.  That said, making an income that you deserve and therefore not getting underpaid is never far off your mind.

* People join people, not firms. What matters most are the immediate relationships you have in your office. If you enjoy your colleagues, respect their intellect, and have developed goodwill, you should consider staying.  I would say that the people around you make up at least 50% of your job satisfaction.  Don’t take them for granted.

* Think in after tax money. You might get a $100,000 more a year at your new firm, but that’s really only about $70,000 after tax, depending on your tax rate. Make sure you take down the gross increase number by 20-40%, and then decide. A 50% increase a year for two years is really only a 30% increase a year, which is much less enticing once you bake in the stress and moving costs.

* Retirement accounts add up. Part of the benefit of staying at the firm for the long-term is due to increasing company matches and profit sharing. Every time you move firms, you generally have to wait a year, or two, or three before your company match vests. If you lose a year of investment gains, and several years of compounding, you might really lose some big money.

* After your big pay increase, then what? Let’s say you get a two-year guarantee for 50% more. What happens in the third year if you didn’t live up to their expectations for the first two? The company will most definitely normalize you in the 3rd year! Let’s say you get $150,000 a year for two years vs. $100,000 a year for two years if you stayed. At your new job, they might pay you only $75,000 in your 3rd year and 4th year because you disappointed so badly, totaling $450,000 over four years. If you stayed, you might get a raise with the market and make $125,000 for your 3rd and 4th year, thereby also totaling $450,000, but with MUCH less stress and change! In fact, with four more years under your belt at your existing firm, you might get promoted and cherished that much more.

* What’s the worst case scenario? When you leave your stable firm for another, you have to rebuild all your relationships. It’s generally last in, last out during economic downturns or times of difficulty. Your worst case scenario is that you hate your new job, get fired, and need to find another job. That’s not so bad, if you keep up your relationships with your clients and have updated skills. The more confident you are about your own skills, and the more risk loving you are, the more likely you will go for that new job. You just have to know your own risk tolerance and stress levels.

* What’s the best case scenario? After your money contract expires, you might really enjoy your new firm. The firm might love you so much that they continue to give you higher raises than your previous firm, making your move the best financial decision ever.

* How would your spouse and children take the move? If you have a family, and are the main bread winner, you have to think that much harder before you move. Job security with a reasonable income is probably much more valuable than a short-term increase in income. If you have kids in school, you’ll have to assess what such a change will do to their lives, especially if you have to move locations. They might end up hating you forever if you decide to relocate while they are in high school. Studies show that kids are much flexible moving under the age of 10.

SO, HOW MUCH WOULD IT TAKE FOR YOU TO MOVE?

I ask myself this every year, because every year some empire builder with some grand plan wants to have a conversation. Given all the above considerations, my number is 100% a year for two years guaranteed. A 100% increase for two years means that I am saving two years of my working life by leaving i.e. Old job $100,000 a year for two years = $200,000, but $200,000 a year for two years = $400,000 = $200,000 difference or two less years I need to work at old job.  50% more for two years only means I save one year.

The older I get, the more valuable time becomes because I have less of it each day. If I only had 10 years left to live, I’d probably leave for just 50% more, or quit my job all together!

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Never Quit, Get Laid Off Instead. I wrote a 100-page book on how to negotiate a severance package from a job you no longer want to do. I managed to negotiate six years worth of living expenses to pursue my dreams of entrepreneurship. Please take a look at my book, “How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye“. You have more power than you think as an employee. The book has helped thousands of people quit a job they dislike and walk away with money in their pockets.

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I never thought I’d be able to quit my job in 2012 just three years after starting Financial Samurai. But by starting one financial crisis day in 2009, Financial Samurai actually makes more than my entire passive income total that took 15 years to build. If you enjoy writing, creating, connecting with people online, and enjoying more freedom in your life, see how you can set up a WordPress blog in 15 minutes with Bluehost. Hosting costs less than $5 a month.

The actions you take today help create your future. You never know where the journey will take you in 2016 and beyond!

Regards,

Sam