AAR47 - More Money, Worse Life?

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3:20Andrew Sather:good morning everyone and welcome back to at any rate my name is evan ray and we are here to help you make sustainable financial changes without breaking a sweat and today this morning i'd like to welcome back my favorite co-worker named andrew andrew satyr that is high high praise how are you doing i'm good i am one of one one of one one of one andrew i mean how could you not be happy to hear something like that. Always know how to make me smile. So, so why we're here today, our goal of today is not necessarily to debunk, but to provide a different point of view to the usual financial advice or personal finance advice that, that, that leans around job hopping to pay more.

4:02Andrew Sather:I mean, we've all heard the statistics around, you know, the people who job hopped every two to three years get paid X percent more than people who don't or stay at their job five plus years or whatever it might be. And that's the standard advice. And it's one of those kind of blanket pieces of information that we all just kind of take for granted and hear a statistic that sounds cool and exciting and kind of apply it everywhere that we possibly can. But we never really ask whether that money changes your life, what kind of an effect that money actually has on your life or what kind of progress it gives you, how that job is going to treat you.

4:34Andrew Sather:You know, there's a lot of other aspects to not only your finances, but also just your life in general that aren't really discussed with that statistic, of course, because not everything can capture every single aspect of a situation. So this can definitely be true at times. Of course, if you're looking at a pay raise and you're going to job hop, that's just going to give you an X percent raise and your life is only going to get better and it's going to be a good job and good balance and everything. Then, you know, a lot of the stuff discussed in this episode is just not going to apply to you.

5:02Andrew Sather:That's a fantastic situation and there's nothing wrong with that whatsoever. However, we just want to kind of question, again, provide another point of view to the reflex to just chase higher pay. And a little bit of background for me is that I've had some friends and coworkers go through this kind of a deliberation where they're definitely getting a pay raise. They're definitely working at maybe, you know, a higher and more exciting company. They're definitely advancing their career to some degree. but they by default it's it's very easy to ignore all of the other factors around that or kind of downplay them compared to just the pay and just the job and today we kind of want to highlight all of the other stuff around that so we're going to start with something that if you're a long time listening you probably can guess the very first thing we're going to discuss which is the financial whys it's a big focus of mine the big focus of this podcast in general is what are your financial whys why why do you want more money if you want to have a net worth of a million dollars why do you want to have a net worth of a million dollars if you want to make a hundred grand why do you want to make a hundred grand and and that's not to say that you shouldn't want that that's not to imply that it's not okay to want that or have that goal or something just literally taking the time to to actively think what would this change for me why do i want this is a monumental mental shift over just that high pay sounds good, that net worth sounds reasonable, or whatever it might be.

6:26Andrew Sather:It's a massive shift to say, why do I care about this? Why do I want this? So before you even evaluate the offer, try to figure out what you're trying to accomplish. So for you, it could be retiring early, paying off debt. Maybe you want your partner to be able to stay at home or you to be able to stay at home in the future, purchase a better home, better car, save more, be able to travel, have better mental well-being. where would that extra income actually go? Andrew, do you kind of think that people having their, I think I know the answer to this, but do you think that people have their whys in mind in general when they look into a job offer or do you think they're kind of just chasing bigger numbers?

7:06I mean, based on the internet and my feeds, it seems like the entire world's just gone crazy and everybody's just chasing bigger and bigger numbers. yeah I mean I wish I would slow down and consider my why's also it can be so easy to just get caught up in that rat race right and you're just always chasing more and more and more because it feels good but to your point you know some decisions might not give you what you're hoping for and if it's a little bit of a if you're taking trade offs in other parts of your life then that's something that you might look back on and be like man that was a missed missed opportunity or a mistake um do you feel like you've you've been 100 on thinking about your why's with all your career choices which is cool if you are because that'll be an awesome habit to kind of have in your in your toolkit yeah definitely i mean none of us can obviously

8:12Andrew Sather:ever be perfect so i would never say 100 but i would say a very high percent because you know say i was to get to get a job offer you know at a 10 15 raise just making up numbers whatever the very first thing that i would do is cool that number sounds good it's a raise sounds like you know good progress over the standard you know three percent raise or whatever it might be but my very very next step because i'm a nerd would be opening a spreadsheet or opening my existing budgeting and finance spreadsheet and plugging that extra income into it and saying okay where would i want this to go or where could this go and how much would this really move the needle um you know because just depending on what the what the raise number might be i might plug it in and be like oh you know i could spend a little bit more here maybe i could save a little bit more and oh that's kind of the end of it like the raise sounded great but when i really look at my existing numbers it's not going to move it that far and so now the financial part of it becomes a very small factor compared to all the life stuff but if i plug it in and it's like oh this is going going to be able to, you know, double what I'm able to say, we're going to, you know, I'm going to be able to, I'm just making stuff up before the new car that I've been looking at, whatever it might be, then, then maybe the financial aspect has more weight in the situation.

9:23Andrew Sather:I've kind of proved that out compared to just assuming that a higher number is going to be great for me. So I'm definitely not, not perfect about it, but I kind of have that habit of turning that number into translating that number into the, my life change and my financial changes instead of just the raw number that it starts as. Are we talking color coding here? Like when you're doing a comparison? What kind of visuals are you working with here? This is way too exposing. This is very, very light color coding. We're talking about one color for spending, one color for saving. We're not talking about color coding to the nth degree.

10:02Andrew Sather:Just two colors. I think that's pretty reasonable. Anybody can do that in Google Sheets or Excel. It's not advanced usage. We're all secretly judging you based on what the answer was. So you made the right answer. Good job. I think I ran, I towed the line between nerd and normal person. But anyways, to move on. So once you've evaluated that and you've kind of discovered your whys and maybe discovered what kind of an effect the new pay would have on your whys, it's time to work out what the true cost would be. When we use the word cost here, we don't just mean financial, but we mean lifestyle costs, stress, that sort of stuff.

10:43Andrew Sather:So let's say you're going to get a 10 % higher pay, fantastic rate. It's worth figuring out, obviously, maybe not a literal number percent, but a general sense of X percent higher hours, higher stress, higher workload, higher commute, higher time lost because of that, lower PTO. So accounting for all that and comparing that to whatever the pay might be at least can give you a good sense of things. So say your hours and stress and workload are hardly going to change. Maybe it'll get a little bit worse because it's a higher level job or something, but it's not going to be a crazy shift. And you're going to be getting 10, 15, 20 % higher pay.

11:20Andrew Sather:Then, okay, the financial aspect has a huge weight because the life aspect is very, very, or change is very, very low. but if we're talking about maybe a 5-10 % higher pay so it's not a massive pay bump but maybe your hours and stress and workload are going to get even better and you're going to be in an even more comfortable situation where you can focus on other aspects of your life then maybe that even not massive pay raise can easily be worth it for you so accounting for things come to mind for me are stuff like benefits which can definitely have a dollar value if you want to go in and calculate how much you would have had to to pay for that health care or you know dental care vision care, whatever they're covering, all the benefits, stuff like PTO, flexibility of where you work, when you work, that sort of stuff, work culture, location where it's going to be.

12:05Andrew Sather:All these things do have values. And again, it can be tough to turn these things into exact dollar values or exact percentages, but at least just kind of getting a mental frame of reference or writing down a quick, one sentence note on how you feel about that change can help you look back at that page and visualize everything at once and say, okay, you know, I was really excited about that pay, but when I really start writing this down, nearly every other topic on here has a negative to it. And that can definitely happen to a lot of people, especially there are big, shiny companies out there, big, shiny, you know, tech companies, whatever, large companies out there that will pay their people top dollar.

12:42Andrew Sather:They will pay out the nose for people. But when you write down everything else on that list, you're going to be working your butt off. You're going to be working crazy hours. You're going to be working on the weekends. they're going to have a higher workload all this sort of stuff and it's like that that pay is great and if you know where you want to put that and that really makes progress towards your wise then it could be worth it for you but if your wise are just life flexibility and life enjoyment and you know things in that realm then maybe that pay isn't really going to get you there and instead a job that prioritizes the other things on that list will get you there more quickly are there any other true costs that you think i missed andrew that come to mind i feel like you covered all the main ones.

13:22There's just maybe one that maybe when you say work culture kind of fits in, but if you question what the company does, what they're doing, how they're making money, if that's a question in your head before you're even starting, maybe that's a warning flag. Because it doesn't seem like a big deal when you start, but over time you might feel like, I don't like being a part of this and that could be something that eats at you later on. Just, I don't know, just an idea to throw out there.

13:57Andrew Sather:I actually love that addition because it's kind of to play on the financial whys, it's almost like a job why, an employment why of, you know, obviously why do you want a job to make money to be able to afford a life, of course. But also, that work is going to be going towards something, it's going to be furthering something, whatever that might be. It could be furthering paper sales for all you know, but it could be furthering something that you don't agree with or you're not okay with or you're not comfortable with the directions heading or how they're getting to that direction or to that destination.

14:31Andrew Sather:And if that's where essentially your life's work or at least a period of your life's work is going to go, then that's absolutely worth taking into account because the actions we take and the things we do inside and outside of work have an effect on this world. and it's best if you're aligned with that, at least to some degree. Yeah, that's awesome. All right, so we have some of the costs, we have some of the maybe changes in income and what that would mean, why or what the result is. So what's the next step? The next step is going to be the fun part for me. Well, the next part here is actually going to be my favorite part again, because I'm a nerd like we just discussed, but I know a lot of other people out there, if you're listening to financial podcasts, there's a good chance you're a nerd as well.

15:17Andrew Sather:So welcome. Next step is going to be doing all of the math to go along with this. So I obviously love a spreadsheet. That's a very well-known fact, but if you want to just do a quick pencil and paper, obviously nothing wrong with that whatsoever, but you will need a high level calculator as well. First step is accounting for stuff like commute costs. First easily misstep account for commute costs, not only in terms of fuel, but in terms of maintenance as well. So if it's going to be a significantly longer journey, then that's going to wear stuff like tires and suspension stuff out more quickly than it would otherwise.

15:51Andrew Sather:So definitely account for anything commute related or if you're going to be taking public transit or something like that, then those costs are definitely going to go up the further you go as well or the more often you have to use it. The next is stuff like health insurance premiums. I know I kind of touched on that before, but I just want to make it clear when you're looking at a new job, don't be afraid to ask about the healthcare situation, about the benefit situation and what exactly they are. Being able to see numbers like deductible and everything that goes along with that is completely reasonable to want ahead of time.

16:24Andrew Sather:Obviously, maybe it's not the very first question you ask when you're considering the job, but if you're actually going down the road and getting an offer or something like that, there is nothing wrong with asking for that ahead of time. because healthcare can be a massive dollar figure. Anybody who's ever considered paying for it themselves knows that it can add up a lot. And so the difference between two companies can be a massive dollar figure. And of course, if it has an impact on your health in the end, then that is one of those end-all be-all effects that you want to avoid. Next is a 401k match.

16:54Andrew Sather:If you're a current or new employer, if either of them are paying 0 % match, they just don't offer one. And the next one offers a 6 % match, 5%, 8 % match. That is a significant difference in what you're going to be able to get. That's just 100 % free guaranteed return into your 401k. And then that's going to be able to grow tax-free until withdraw in retirement. And along 401k lines, as well as vesting time, a lot of companies out there have a relatively long vesting time. I've heard of companies of up to four or five years vesting time. And what that means is if you were to leave the company after, let's say, two years, you're only going to get, just assuming the numbers are linear here, you're only going to get two-fifths.

17:33Andrew Sather:of whatever matches they gave you along the way. Whereas if you stayed till five years and it was fully vested, now whenever you left, you got all of the employer contributions, no questions asked. So that can be a big difference, especially if it's a company you're not sure you're going to stay at for the long haul once you're there. Another, again, we mentioned it quickly before is PTO time difference. I think it's a good idea to find this time difference in terms of hourly pay. So if they're going to give you another week off and that's just making up numbers,$1 ,000 worth of your hourly pay added up, then that's essentially a$1 ,000 difference in what they're willing to sort of give you, quote unquote, in terms of PTO, where they'll pay you even if you're not there.

18:16Andrew Sather:Another is bonus. And I want to differentiate between sign-on bonus and normal annual bonus. A normal annual bonus, if it's some sort of an expected percentage or percentage range, I think is very important to include in your math of just what your overall pay is going to be. Not a guarantee, but a likelihood. And that's something good to include in your ongoing pay. But something that I wouldn't put nearly as much weight on is a sign-on bonus. A sign-on bonus is definitely nice to have. It's a big upside, and that's fantastic to get or push for or ask for, whatever it might be. But I wouldn't weigh it so heavily because it's just not going to apply in years two plus into the future.

18:54Andrew Sather:It's going to be completely irrelevant. and that ongoing math is much more much more important in a lot of ways and also a lot easier to make assumptions and miss things on it same i know we've talked about before with something like a car loan or a house purchase or something like that if you think okay i can afford the down payment and so i can probably afford the ongoing payments it doesn't necessarily work that way and so if you do the math to say sign-up bonus is great that's helpful but the ongoing pay isn't going to be that much higher than what I'm currently getting paid, then the math isn't really working out quite the same way.

19:28Andrew Sather:You want to make sure ongoing, you're going to be able to live a better life. And then the last one that I want to mention that I think that people miss the most from my point of view is relocation, not just stuff like cost of moving. I'm not just talking if it's in a different state or something like that, but also if the job is twice as far, it's another 20 30 minutes added on to your commute or something like that that costs to your living situation and of course your vehicle and everything like we discussed before can be pretty huge that is if your commute goes up 30 minutes that's essentially just 30 minutes or an hour if it's if it's both ways lost in the day that goes to absolutely nothing and so basically now your day is an hour shorter in terms of what you can do and you're not getting paid for that extra time And again, you're not able to do anything with that time.

20:16Andrew Sather:So for me, that's one of the easiest things to miss or at least downplay and just say, it's just, you know, it's just 30 minutes longer. It is what it is. It sucks. But when you really think about it that way and frame it that way, that loss of time every single day just isn't worth it in a lot of situations. But is there anything you think I missed or what of this math do you think that people are most likely to miss when they're working through it? We have the inside scoop on something that's absolutely taken over the internet by storm. Live shopping on Whatnot is exploding. I've seen the shows firsthand.

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23:15For a limited time, you can access this research at a discount at einvestingforbeginners.com slash reignite. That's einvestingforbeginners.com slash reignite. I'll tell you which one I missed. Very early on in my career, I didn't think of the relocation. I mean, I thought about it, right? Obviously, it's going to cost money. But moving from... And by the way, sometimes that's something you can negotiate with a new employer. I've heard stories of friends who negotiated or maybe it was even included of having relocation costs be reimbursed. but that was not my situation it was very early on in my career so I had some stock from the company I was working at and it was like 7 grand and I ended up selling it to pay for relocation costs that company was Broadcom which by the way is the 5th or 6th biggest stock I mean depending on what day you look so I've done the math I'm like yeah that's not fun do I regret the decision?

24:21no because it was like one of the best decisions of my life but at the same time like ouch yeah yeah that hurts that 100 percent hurts yeah don't as you kind of quickly mentioned there don't be

24:35Andrew Sather:afraid to negotiate things and be transparent with a potential employer again especially once you're kind of down the road in the process of getting the offer having interviews blah blah blah they vetted you out you vetted them out and you kind of trust each other at that point to some degree, I think it's very important to be transparent and say, you know, I do want this job. I am interested, but I live here and this is going to make this difference on my commute, or I'm going to have to move and it's going to cost me ballpark this much. And maybe that's when something like a sign on bonus could be a huge help for just relocation.

25:07Andrew Sather:Or if you say, you know, my commute's going to double and it's going to cost me like this much, there's a very good chance that that number, you know, to a, to a large company may not be that big of a number and And they might be willing to say, okay, you know, we'll just pay you X amount more to compensate for your commute. That is definitely something that can happen and has happened before. And it can kind of just wash away some of these lifestyle changes. So definitely be willing to have those kinds of conversations. But to move on, so now that you've done the math and you kind of have a general sense of, okay, I'm going to get paid X percent more.

25:38Andrew Sather:And I'm accounting for all these other factors. Now you have some kind of a pay difference. Hopefully that difference is still positive. but now it's time to determine does it does it move the needle so to speak this is for me is the biggest most important most easily missed conversation that i've had with co-workers and friends they've gone through this kind of a conversation again just using random made-up numbers even even a 10 grand raise a year could turn into maybe five or six hundred dollars a month after taxes depending on how much you're getting paid that is definitely a significant amount of money that can definitely be life-changing for a lot of people that can allow people to save or allow people to pay off debt or allow people to afford a reasonable lifestyle without holding back too much but for others it can be you know good money to have a good chunk of change but not really anything that's going to change much about them about their lives and they're not really sure what they would want to or would need to do with that money and so again these raw numbers just don't always tell the whole story.