The Paradox: High Income Leads to Early Retirement

High Income

Hello fellow $wanigans! Hope all is well. Today I have a few words of….warning (did you think I was going to say wisdom…you know better than to come to The Green Swan for words of wisdom…:)). And those words of warning relate to the career you choose. The punchline: tread lightly when considering that hard-charging career solely for the means of making more money…but let me explain.

That was me when I was entering the working world. I didn’t immediately fall into a job requiring lots of time, energy and stress…nor was it high paying. But a couple turns on my career journey has led me there…and not by accident.

It Wasn’t a Coincidence

In college, I entered the business school and pursued a finance degree in part because I knew it was a high paying field of study.

I was the type that came into the working world looking for the job and employer who was paying the most and had the best / easiest road to advancement and promotion.

I went back to school to get my MBA as a tool to help me take that next step in my career up the ladder, or perhaps allow me to start taking two steps at a time. I knew that I shouldn’t expect an automatic pay raise just because I now had an MBA, but if I were going to put the MBA to work for me then I would need to strike within one year from graduation.

Looking back I can say it was a resounding success. I completed the program in an expedited fashion in just 18 months. But those 18 months stretched through three fiscal years so I was able to take advantage of my employer’s annual $5,000 tuition reimbursement for three consecutive years! And within that first year of graduation I was able to take a couple steps up the ladder and increase my compensation nearly 60%.

I have always been the one to scour for the next opportunity. As soon as I received a promotion or landed a new job, I was already looking for the next one and what it would take to get there. While I have been constantly looking a few steps up the ladder, I’ve always been strategic in making the next move.

You know what…looking back on it now it is no surprise where those decisions have led me. Yes, a relatively higher paying job. But equally so, it led me to a very demanding job with a lot of hours, stress, limited flexibility, and lots of wear and tear. Should I be surprised?

Where do I find myself now?

Thinking about how much longer I can last. Thinking about how hard it is to take one or two steps down the ladder. Thinking about the nights and weekends away from my growing family. Thinking about delaying my plans to reach Financial Independence and Early Retirement even though I’m on the doorstep knocking.

The conclusion I’ve come to recently is that maybe there is a better road to travel somewhere in the middle. Something with more balance. Not entirely focused on money, but with greater focus on living and enjoying life along the journey.

Look at The Green Swan tag-line for goodness sake. Work harder, work smarter, retire earlier…can’t say it hasn’t worked. But was that the best path for me? Is it the best path for you?

You’ve probably heard before how the marginal increase of “happiness” that comes with a salary over $75,000 is minimal or meaningless. A year ago the cynic in me would say that the author of that study never made more than $75,000. But maybe there is something more to it…maybe I should have given it more than a passing thought.

Regrets?

True, a high income can cure many ills and allow an easier road to financial independence and early retirement.

Do I regret that path I’ve taken so far? Not necessarily. There have been bumps in the road, but that is unavoidable. The path has made me who I am today, it has provided well for the family and it in part defines my life. I can’t say I regret that.

The hard-charging career path has brought the consolation prize of the prospect of financial independence in my early- to mid-30s…it could be worse. I can live with myself and the decisions I’ve made.

I will tell you this though, I will have different advice to share with my kiddos. Maybe after all is said and done, that is the consolation prize. To be able to tell my kiddos to do as I say, not as I have done…I’m sure they’ll listen :).

Your Career is a Marathon, not a Sprint

Even if a hard-charging career will potentially lead to financial independence in your mid-30s, that is still a 15-year career. That is a marathon my friends!

I think anyone can endure anything on a temporary basis. Working 90 hour weeks or more chasing paper isn’t too bad if you only have to do it once a year, but if you are doing it once a month that may be a different story. When that makes up your 15-year career, you’ll be fried by the end!

Think about the long-term. Are the demands from your career sustainable for the long-haul?

Early Retirement Requires a High Income

Many folks emphasize the pursuit of a high income as a necessity. Take my good blogging buddy ESI as an example, which stands for Earn, Save, Invest. He has provided an outline of 7 Keys to Earning More. I’ve outlined them briefly below:

  1. Doing more than expected – A “go-along career” will result in “go-along raises”
  2. Be likeable – Get along with everyone, follow the golden rule
  3. Networking – Reach out first, invest in them first before asking for something
  4. Be Attractive – Dress nicer, pay attention to appearance, “date your career”
  5. Continue to learn and develop skills – Take more college classes, listen to podcasts, read, utilize internal company training programs
  6. Manage yourself – Develop emotional intelligence and soft skills, establish a system for over-performing, find a mentor
  7. Market yourself – To find a new job and get that big jump

No doubt this is great career advice which I myself have followed pretty closely. That advice has served my career well and I’m sure it will serve yours well also. After all, looking back at my ten year career now, my annual compensation has increased over 20% on average per year.

There are two other keys that I would add though in terms of :

  1. Find a career that fits your mentality and personality. If you aren’t doing something you enjoy or can at least tolerate then it isn’t sustainable. A successful career is built on sustainability. Picking a career based on income potential is not advisable.
  2. Your career is a marathon, not a sprint. Pace yourself or you’ll burnout before the finish line. Striving for the extra mile is great, but grinding to the bone isn’t going to last.

These last two points are easier said than done and have evaded me. No surprise that I find myself in a career of over 10 years that I now see as unsustainable for myself.

Don’t get me wrong, I don’t disagree with the importance of a high income at all. I would even go so far as saying that the “E” in ESI is the most important since the degree of “S” and the “I” are dependent on your “E”.

I’ll say it again; your career is a marathon, not a sprint. You need to find a pace that works to avoid burnout.

My caution stems from the point of going too far in finding that higher “E”. I’m reminded of the quote from Oscar Wilde:

“Everything in moderation, including moderation.”

Do what is comfortable, find a middle ground, have some moderation.

The Paradox

The end result is the paradox that high income leads to early retirement. From my perspective, it drives people to early retirement. It doesn’t lead them there t forces people to early retirement.

High Income

In that case, you better be saving a ton from your high income career because if not you’ll soon find yourself trapped in golden handcuffs with a nest egg too small to live on. You’ll be a high income earner with a salary too good to give up and necessary to fund your inflated lifestyle.

Look across the Early Retirement blogosphere and you’ll find plenty of examples, myself included.

“Nobody goes there anymore. It’s too crowded”

Yogi Berra

Final Thoughts

You may think I’m talking out of both sides of my mouth when I spout the benefits of stepping outside your comfort zone and the benefits of chasing paper. There are important points to be made each way and we all need to find our own balance. Part of it is just the natural evolution of life and priorities. Finding that balance is easier said than done, but knowing what I know now I would have paid more attention and given more credence to finding my right pace for career and life.

Everyone is different and needs to find their own way. Take this as just one man’s advice.

Thanks for taking a look!

The Green Swan

 

Red Button / Blue Button Pic Source: Byrdseed.com

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32 Comments

  1. Great post JW – I’m totally with you. There is definitely to be said about a balanced life on the way to Early Retirement versus a grind and don’t enjoy your life instead.

    I personally prefer to balance it but weigh more heavily on arresting expenses that don’t:
    1. Lead to the life I want
    2. Life-time experiences I truly want to enjoy (these are OK if they can be afforded), like going to Niagra Falls

    Here’s an awesome podcast on money: https://www.goodlifeproject.com/money-happiness/

    I believe it was around 30 minutes, you can listen on the bottom right of that page. It talks through that study you mentioned. I found it very intriguing.

    Have a great week dude!

  2. Great post! There is an explanation from basic economics for this paradox: Leisure is a “normal good” so you demand more of it when you get richer. Economists already pointed out this phenomenon among highly educated, high income couples where one spouse can afford to stay home despite the high opportunity cost. The FIRE crowd just takes this one step further and both spouses retire to enjoy more of the ultimate consumption good: Time!

    1. Interesting phenomenon and I can totally understand that. I may have to look more into that explanation. Thanks for sharing, ERN!

  3. I feel like people with high incomes get into more financial trouble than those with a more modest income. There’s a certain income threshold where you almost have to keep up with appearances to keep your job. So I can see why a high income might not always equal early retirement.

  4. Amazing stuff! Great story, great points. This is the same exact situation I found myself inn last summer. I made the move to higher pay, longer commute, and bigger challenges. On one hand it was a smart career decision. On the other, it has affected my life (work is not life) much more than I anticipated. Always keeping my eyes open for that next move, now with a slightly different perspective.

    1. An experience like that can definitely change your perspective! Good life experience either way, and you will learn something about yourself, but maybe not the best fit. Thanks so much for sharing!

  5. I used to think the same thing about the researchers not making more than $75K! Then one day I was making more than that and realized I gave so much at the office to earn it I had neither the time nor energy to spend it and was therefore not happier than when I earned a lot less but had tons of time with friends and family. Hmmm… The good news is that where I was then did not have to be where I stayed. Once we got to the point our investments compounded with more than we were adding annually it was surprising to see that cutting back to a lower paying but lower stress job didn’t derail the FIRE plans as much as I thought. But the biggest key to change my stress level at work was identifying the pressure I put on myself to beat deadlines and dial it back to meeting the external expectations instead of my higher internal ones more often until my boss noticed. She didn’t.

    1. That’s exactly what I’m realizing as well. The FIRE timeline won’t necessarily move much if there is a good base to your investments. And that point where your contributions aren’t as much as the investment gains is what I termed the FIRE-Starter! It can be a game changer.

      How interesting your boss didn’t notice. So you kept the same job but just dialed the intensity back a bit?

      Thanks for the comment, Marie!

      1. Yup, same job. I dialed back my internal expectations around the same time as I volunteered to work on new projects I liked or with people I liked so that could be why she didn’t seem to notice. After a few months I suggested I was too busy with the new work to keep projects I hated. She agreed I could gave some of them up which made a big difference since I then spent most of my time on stuff I liked and very little on stuff that annoyed me and had less work overall. A few years after that I had the opportunity to go “part time” and have enjoyed that for the past few years. Now my “normal” weeks are around 20 hours, the “busy” ones are around 35 and I’ve only had to do a handful of 50+ hour weeks to meet project deadlines in the past year. I treat it like a mostly full time job with extra vacation days and remind them I’m supposed to be part time whenever I need a break. And negotiated to be paid for hours actually worked. It’s been a great workplace.

        I’m a new reader so I’ll have to check out the FIRE-starter. Do you have a link?

  6. JW, I can SO relate to your comment about thinking about “How Much Longer I Can Last”. I’ve been counting the days for several years, and as of today I’m have 326 Days To Go (I know…I have an iPhone app that keeps the tally). I’m thankful for a high income career, but I’m really, really ready to go. At the same time, I’m thankful that my career is giving me the opportunity to retire early. Did I mention I have 326 days to go?

    Thanks for a refreshing view on the topic.

  7. Luckily I’ve been able to progress nicely in my career without too many periods of crazy hours or stress (certainly a few rough times though). That said, I just wrote a post on why I’m not actively seeking any more promotions. I’m at a happy median right now

    1. I love that, N2S. I remember out of college I had the perception that the goal of work is a never ending series of promotions… Well it doesn’t have to be. There can be a point in time where you about being comfortable in the current role and responsibilities and that is 100% fine.

      Thanks for sharing!

  8. I can also relate as I’m in a very similar situation. It’s hard to regret focusing on my career and the money it’s allowed me to earn and save but at the same time, I didn’t have much balance in my life. Everything I did was focused on doing better in school or work.

    Now that I’m FI, balance is becoming much more important and I’m able to make some choices towards that. Unfortunately there are limits since I’m now in a demanding job with high expectations. For example, I can’t simply ask to go part time regardless of the salary cut I’d be willing to take. It’s 50+ hours a week or 0 in this type of role that I’ve worked myself into. It’s an interesting conundrum and I’m still trying to find a way to tailor things more to the balance I’m looking for. It’s likely I will have to fully “retire” since it’s so difficult to partially pull back from a very demanding job.

    Thanks for the post!

    1. I totally understand your situation. It’s a form of golden handcuffs in a sense once you get to that level of position and seniority which makes it very hard to dial back. There are potentially an avenue or two for me… Although not perfect options it is good to have some flexibility. Waiting until full retirement isn’t bad though either.

      Thanks for sharing!

  9. Great post. I can relate to so much of it. I agree that while you are working you should try to follow the list of suggestions posted by ESI and make the most money that you can. Along the way I also try to keep a balance between life and work. It takes effort to maintain that balance.

    1. Thanks FJ! It’s all about identifying your priorities. As family grows, the priorities may change and if it works to change the balance than more power to you. Thanks for the comment!

  10. I can relate. I used to travel 75% of the time for work. At first my children were sad when I left for yet another business trip, and it was tough for me, but in my mind, I was doing it for them. But somewhere along the way, something worse happened. My children stopped caring that I was gone.

    I’ve since moved to a more manageable role and my career trajectory has flattened, but I’m ok with it because I’m beyond FI and I get to spend 90% of the dinners with the family.

    1. That’s tough! Glad you were able to make a switch for the better. Kudos to you for doing so. That’s a sacrifice and can be tough on the ego, but with family as the priority you made a great decision.

      Thanks for sharing!

  11. I see the hours the Directors work, the meetings, people pacing outside their office waiting for them to come back and make a decision. I’m not sure that’s for me. That’s part of my reason for FI – being able to choose how I work. At this job we actually talk succession planning, and my managers are actively giving me work that will earn me a promotion.
    As for the $75k study…I still only have 2 weeks of vacation and still got stuck in an hour of traffic returning from visiting family on Sunday (almost 5 hours instead of 3.5-4 = not happy). Yes, I’m targeting a promotion to earn more, to save more. Making more now will not drastically affect my daily happiness, but it is setting me up for a life of choosing more things and ways I spend my time that does.

    1. That is part of the reason I don’t regret the path I’ve been on either, it has set me up for early retirement and a much more comfortable lifestyle going forward. Some short term pain is worth the long term gain. Thanks Jacq!

  12. This post really resonated with me as I have often found myself in a similar series of thoughts and logic battles. I made the decision a few years ago – coincided with the birth of my first child – that I would take my foot off the proverbial career pedal. Since then my career has a stagnated a bit – not completely, but not moving up nearly as fast as before. Surprisingly though, the path to FI doesn’t seem to be have been impeded or delayed much, if at all. The less I focused on work and the more I focused on time, the more I was able to optimize and improve my life by continuing to prioritize the things that mattered much more than work, which ultimately lead to less spending and more saving – Essentially the same monetary result as those missed promotions would have brought but without the stress and hours. The job related hours and stress are still much more than I would like, but it is certainly less than what I would’ve been experiencing (along with paycheck) had I continued on the previous path. I now look at my industry’s higher-ups that I was once trying to pull even with and I am very glad I abandoned that direction – It’s clear to me the toll that my industry takes on one’s personal/family life and the money is just not worth it. I’m very hopeful to scale back even further in the near future and still achieve FI without much delay to the original timeline. Sometimes you get so wrapped up in one way of thinking that you forget there are other options.

    1. That’s a great way of thinking about it and I appreciate you sharing your story! I’m very much going through this same thought process and reevaluating my priorities. It coincidentally has coincided with the birth of a child as well (although my second kid).

      And the similar conclusion I’m coming to is that it won’t delay my FIRE pans much either.

      If you are willing to share I’d love to hear an example or two of how you optimized your life to cut costs. I hadn’t necessarily considered that into my equation but realize that is doable.

      Your last sentence is right on! You don’t know what you don’t know, but if you continue to explore alternatives you very well may find a better path!

      Thanks again so much for sharing, JL!

  13. I was able to learn early in life that high income does not guarantee early retirement or financial well being. I happened to have my internship in a company that paid its staff mouth watering salary with a lot of benefits attached. Unfortunately, some of the staff there could not exhibit financial discipline. Before the month was over, they were already in debts. Funny enough, they were not spending the money on tangible thing.
    I concluded then that it is not the amount one earns that matters. It is how best we can use the resources we have.
    Thanks for the post.

    1. Very true! I learned that shortly after getting my first job too. Crazy how people see money in their account and feel the urge to spend it. Thanks for the comment!

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