MONEY IS TIME, QUANTIFIED: 5 things to consider before leaving your high-stress job.
If you have worked your way into a high-paying job—congrats! That typically takes years of high pressure and sacrifice.
But if you are like most people, you probably don’t “love” your job—which is fine. Work is to pay the bills and to support the people and causes you care about.
But it’s also important to plan ahead—for the time when you leave your high-paying job. This may involve sitting on the beach for a while or building a small business that better fits your life.
One useful framework is to think about savings in time instead of dollars.
For example:
If you’ve built a $1 million nest egg that earns 8% per year, that’s equivalent to working a full-time job—40 hours/week, 50 weeks/year—that pays $40/hour.
In theory, both the $1 million nest egg and a 40-hour-per-week job can produce the same income—roughly $80K/year—forever!
But that—of course—is in theory.
In reality, you cannot work the same high-pressure job forever, and there are plenty of additional things to consider about generating earnings from your $1 million nest egg.
5 things to consider before leaving your high-pressure job:
PASSIVE INCOME from investing sounds a lot easier than working at a job you don’t love. But remember that 8% can vary widely each year, and withdrawing 8% during a few consecutive down years for the market can ruin your long-term plans.
PLAN AHEAD: Depending on where you are in your career journey, you can avoid a lot of taxes by having a small cash pile ready. Said cash pile can help you avoid penalties on early retirement account withdrawals and help you qualify for considerably lower income-based healthcare bills—if you do it right.
PERMANENT FINANCIAL DAMAGE: Before you take money out of your retirement accounts to start a small business, consider how hard you worked to earn it—and how much each withdrawal reduces your future passive earnings power. 8% earnings on $1 million is a lot more than 8% on $850K (i.e. if you burn through $150K to start your small business).
MEDICARE & SOCIAL SECURITY: When you hear about your 67-year-old co-worker retiring on $2 million in savings—don’t forget they are likely qualified for a few things you are not. Namely, Medicare health insurance, Social Security income, and penalty-free retirement account withdrawals. If you are younger, those benefits may be a long way off—you need to plan accordingly.
ALTERNATIVE INCOME: We constantly hear stories about people quitting their jobs to build billion-dollar empires. But I am more impressed with people leaving high-stress jobs to create alternative income they enjoy. Whether it’s building a digital product or doing consulting work—a little alternative income goes a long way in protecting your nest egg—and supporting a lifestyle you own.
So before leaving a high-paying job—and before staying at a high-paying job—do a little planning. Owning your work—and your time—is likely well within your reach!