How to Make Less Money

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One of my favorite goals to help clients work toward is how to make less money.

Wait, less money?

That’s right.  After all, a job that pays less is often an avenue to more time with family and friends, regaining control over your email-filled nights, weekends, and vacations, and doing more fulfilling work.  Who wouldn’t want that? Making less can allow a major life shift that brings your day-to-day into better alignment with your values.

But most people can’t afford to take a substantial pay cut, at least not on their current budget.  There’s a mortgage (or rent) to pay, student loans to cover, travel already planned, activities for kids — there’s no extra margin.

Fortunately, with some intentionality and clear-eyed decision-making, it can be done.

Work, money, and you

Studies indicate roughly half (if not more) of American workers are dissatisfied with their jobs.  Perhaps that includes you. The reasons include disengagement, stress, long hours, and lack of control over one’s schedule.

Unsurprisingly, there is a major wage premium for professionals willing to work longer hours with always-on-call availability, particularly for managers and those in professions like finance, law, and consulting.  What is surprising, however, is that this premium has only existed since around 2000. The financial incentive to work a high-intensity job has never been greater.

For most people, aiming to make more money is a no-brainer.  Money creates opportunities, provides security, and finances memorable experiences.  Higher pay means a better job. Working up the professional ladder is part of the American dream.

Money does correlate with happiness, but only up to a certain point.  A recent study pegged that number for Northern America at roughly $105k of annual income for a single person.  Rising income toward that figure means an increasing ability to cover needs and some wants. But beyond that so-called satiation point, overall life satisfaction actually decreased (likely due to the downsides of making more, like less free time and increased stress).

So what does make for a fulfilling career, if not money?  The research non-profit 80,000 Hours analyzed 60 studies on job satisfaction and identified 6 key ingredients for a fulfilling career:

  • Work that’s engaging

  • Work that helps others

  • Work you’re good at

  • Work with supportive colleagues

  • Lack of major negatives (such as very long hours, unfair pay, or job insecurity)

  • Work that fits with the rest of your life

Notably absent from the list is high pay.  Also absent is prestige.

Weigh the cost

How much money would you be willing to give up to have a more fulfilling job or to start that business you’ve always wanted to?  Or to have more time with your family, or weekends and vacations safe from urgent work emails? For most people, quite a bit.

In weighing how much income you’d be giving up by taking a lower-paying job, the good news here is that income taxes work in your favor (for once).  For example, decreasing income from $250k to $150k (assuming a married couple in New York City, maxing out one of their 401k plans) results in a post-tax difference of about $67k — still a substantial chunk of money, but meaningfully less than the nominal decrease in income of $100k.

Also consider what future income you might be giving up by making the change.  Are you taking yourself off a path of professional development that comes with substantial income growth?  If so, that needs to be weighed.

Of course, in practice it’s not money you’d be giving up, but largely spending.  In the example above, that $67k difference probably isn’t just being put into an investment account each year, but is being spent on living expenses and lifestyle. To continue to save toward goals like retirement, it’s your lifestyle that will take the hit in the loss of income.

Lifestyle creep

Many people never get to evaluating the tradeoffs, because taking a lower-paying job just isn’t an option.  Lifestyle spending is like a gas: it will grow to fill up whatever space is available. As your income increases as you develop professionally, your lifestyle spending naturally increases.  You can afford a larger apartment, better restaurants, nicer clothes, more exciting vacations — after all, you’ve earned it!

This lifestyle creep will happen unless you take proactive steps to combat it.  And then you find you’re locked into a lifestyle that requires a high-intensity, high-paying job, and you never quite had a say in the matter.  Pursuing more meaningful, riskier, or simply less intense endeavors just doesn’t seem feasible.

On the other hand, thoughtfully identifying and rejecting lifestyle creep will give you a long-term strategy for building in the financial margin to make the important life choices you want.

Often spending increases as a means to compensate for the stress and demands of work. This is a unique form of lifestyle creep, but people adapt to it all the same. More massages, spa visits, and personal trainers.  Luxury travel. Uber and Lyft — who has time for the subway? More eating out and Seamless — who can cook after a long day? This spending becomes so critical to one’s routine and sanity that life without it is nearly unthinkable.

How to cut back

What if you’re already at the point where you’re locked into a high-income, high-expense lifestyle?  How can you cut back to create some breathing room and some options?

Face the Facts: The first step is to sit down and address the issue with intentionality.  If you have a partner, this will take some serious discussion. What’s not working well? What are the major pain points in your life? What are you willing to sacrifice to fix the problem?  Just because your life is this way now, doesn’t mean things can’t change.

Spending Awareness: Second, develop your spending awareness.  Where is all that money going?  You can’t have a plan for your money if you don’t know where it’s going.

Hard Choices: Third, confront the hard choices. Significantly decreasing living expenses may require moving to a less expensive neighborhood or a smaller home. It might require public school instead of private school. It might require more affordable vacations.  Only by putting it on the table can you start the conversation and evaluate whether the tradeoff is worth it.

Create Your Plan: Finally, have a plan.  This may involve developing a cash flow plan or budget that lays out where your money is going for the next couple years.  However you go about it, write it down.  Keep a record of the decisions you’ve made in a visible place (like your computer desktop or on your refrigerator) so you can consistently remind yourself of your plan and track progress.  Consider getting a financial planner involved. I also recommend clearly detailing your why. Why are you making these changes?  What’s it worth to you? Document your goals and where you’re headed.  When the going gets tough, knowing your why will help you stay the course and stick to your plan.

What I’m Reading

Women Did Everything Right. Then Work Got ‘Greedy.’
By Claire Cain Miller, The New York Times

You’ve all heard about the gender pay gap.  But did you know that women who work in professions with demanding schedules (like finance, law, and consulting) largely get paid the same as men?  The difference is what happens in parenthood: more than 3 times as many fathers work 50+ hours a week as compared to mothers.

This is particularly significant because over the last 20 years a large wage premium has emerged for professionals willing to work long hours with around-the-clock availability.  And what’s behind that premium for extreme hours?

Technology is one reason for the change, researchers say; workers are now more easily reachable and can do more work remotely. Also, business has become more global, so people are working across time zones. A big driver is the widening gap between the highest and lowest earners, and increasingly unstable employment. More jobs requiring advanced degrees are up-or-out — make partner or leave, for example. Even if they aren’t, work has become more competitive, and long hours have become a status symbol.

Don’t miss this article — I found it fascinating. The stories and dynamics laid out describe many of my clients with kids.  And in my experience, this dynamic of one super-working parent and the other with a more flexible job is likewise present with gender roles reversed (with the mother as the high-intensity worker) as well as in same-sex couples.

The Richest Man in China Is Wrong. 12-Hour Days Are No ‘Blessing.’
By Bryce Covert, The New York Times

Jack Ma, the founder of Chinese e-commerce site Alibaba, made recent headlines by extolling the Chinese tech sector’s “996” work culture: working 9am to 9pm, six days a week.  Chinese state media was quick to respond by criticizing the practice as unfair, impractical, and reflective of “the arrogance of business managers.”

This opinion piece takes a different tack, highlighting research indicating that overwork is bad for workers and their employers.

There’s a ceiling on how much more someone can get done by simply spending more time at work. After about 48 hours a week, a worker’s output drops sharply, according to a Stanford economist. Other research has appeared to support this finding. While there may be an initial burst of activity from overworking, people who work more than 55 hours a week perform worse than those who go home at a normal hour and get some rest.

There are other costs to employers. An elder-care facility in Sweden that tried a six-hour workday reportedly found that nurses took fewer sick days and were more productive. Fatigued workers cost employers $100 billion in lost productivity.

If you’re ready for financial guidance, accountability, and an action plan, check out our one-on-one services or online courses.