How to screw up your life by getting promoted

http://blog.thestartuptoolkit.com/blog/2012/12/how-to-screw-up-your-life-by-getting-promoted/

by volandovengo • 13 years ago

55 50 13 years ago

blog.thestartuptoolkit.com

unreal37• 13 years ago

Ah yes, the trap of a higher income.

Probably better to take the higher paying job and don't raise your standard of living. Adopt an automatic 25%+ of your income goes directly from your paycheck into savings. For a two income family, one spouse's paycheck pays the bills, and the others goes to savings and doesn't get touched.

jfoutz• 13 years ago

Kinda like Herb and Dorothy. http://www.imdb.com/title/tt1227929/

kosma• 13 years ago

I quit my well-paid, normal, boring job two weeks ago because I realized I fell into this kind of trap. It's been just two weeks and I already cut my spendings in half - no more expensive stuff when cheap would suffice, no more electronic toys which have zero ROI, no more spending just to make myself feel better. No more buying stuff because I'll be traveling a lot soon and just won't be able to take it all with me. I actually ended up putting lots of stuff on eBay because I realized I won't need it anymore.

When you get a paycheck every month, there is zero motivation to save. When you know there'll be no paycheck, you finally get your brain going and you start inventing ways to make money instead of slaving away.

Evbn4• 13 years ago

You can save some effort by using a well regarded way of making money: getting a paycheck.

tjpick• 13 years ago

> Building something interesting requires a surplus of time and money. Salaried jobs provide neither.

Standard negatory bullshit. You should be able to achieve building something interesting, using someone elses time and money. If you can't, maybe you've got an attitude problem, not a job problem.

hkmurakami2• 13 years ago

Also perplexing was this assertion that salaried jobs don't provide a surplus of money, when the vast majority of entrepreneurs fund their projects and endeavors through a salaried position either held concurrently or in the past.

sliverstorm2• 13 years ago

Lies! Our heros would never sully themselves with something as filthy as a salaried position!

smtddr2• 13 years ago

I might be crazy, but because of this I never negotiate salary. When it gets to that part of the job offer, I just tell them what I'm currently making and leave it to them to decide a reasonable increase. As long as they actually go up, I always accept.

Evbn4• 13 years ago

You are severely underpaid, my friend. Surely you can think of a better recipient of your charity than the owner of your company?

smtddr2• 13 years ago

glassdoor.com would disagree with you.... sorta. =P

orofino• 13 years ago

My wife and I save for a trip around the world by avoid "lifestyle inflation" which is what I've heard this referred to in the past (possibly from the Millionaire Next Door[1]). Each time we received a raise, we would increase our trip savings.

The easiest way to describe it is that we lived paycheck to paycheck. Neither of us would be disciplined enough to follow a strict budget, but we can easily avoid spending the money if it isn't in our accounts. So, each month, we had money withdrawn for retirement, trip savings, 529, and house savings. We increased this amount until we were just scraping by with just enough money each month. This meant I could buy whatever I wanted, so long as we'd have enough money at the end of the month to "pay ourselves".

I'm fond of this method, though I haven't found many others using it. I think typically, if people are disciplined enough to save money, they're able to follow some kind of budget.

A word of warning: Be sure not to be TOO aggressive with this, we almost certainly were. We were living off less than 30% of our after tax income. Remember, you should enjoy yourself while you're making money now, not just save it all for the future.

[1] http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/d...

Edit: formatting, link

epochwolf• 13 years ago

I have to do this. 20% of my income after taxes goes to charity and savings. I live off the rest and any income left in my account at the end of the month goes to my electronics fund.

JoshTriplett5• 13 years ago

> We were living off less than 30% of our after tax income. Remember, you should enjoy yourself while you're making money now, not just save it all for the future.

If you can live off of 30% of your income, the future becomes a lot closer: you can retire in ~8.8 years. (Or round it up to 10 or so and you'll have even more income during retirement.)

Try http://networthify.com/calculator/earlyretirement if you want to fiddle with savings rates and find out how long you need to work. Notice that the number of years depends solely on the savings rate, not on the total salary.

Evbn4• 13 years ago

More like 12 years.

If you retire in 10 years, you will need more than 25 years of retirement spending.

jpdoctor5• 13 years ago

That calculator is a terrible way to go about it: They are missing inflation, which will have a large effect on your expenses over time.

There are other problems too, but that one alone make it worth looking elsewhere.

gaboom• 13 years ago

The inflation is better focused on the life, not the lifestyle. I don't put my paycheck in the bank account and have set money withdrawn for my investments. I put my paycheck in my investments and have set money withdrawn for my bank account. I fight hard to make money for my future, and I know that's exactly where it's going. I keep strict records of my work time, and set a time limit on my job, then build myself outside of work hours, investing time in developing myself. If I prioritize some nice things that I want to spend on, i need to be patient, or it comes out of something less important. I find that careless expenses can be more of a burden than a pleasure, so keeping spending equal helps me improve my lifestyle, rather than inflate it.

michaelochurch• 13 years ago

I'm going to relay the depressing news that's behind this dynamic. Many Americans think of business as a risky, exclusive endeavor because "it takes money to make money". What's missed in that is that holding a job also costs money. Lots of it, although the costs are sometimes indirect. You have to live in an expensive location, although you're not getting nearly enough utility (in most cases) to justify paying to live there... except for the better jobs there. If you're serious about your career, you can't do your own cleaning: two-career couple and you need a maid. If you have kids, your bosses will ask where they go to school and it will affect your promotion chances. If a professional job pays $400k, there's absolutely no way you can keep it with less than about a $300k (pre-tax) lifestyle, and that's if you're really good. (The untalented need $500k to keep that job.) In fact, the major reason why it pays so much is because that is the economic cost of doing what the job requires (living in an expensive area, hiring a maid so you aren't distracted by chores). The vast majority of Americans' expenditures (aside from basic necessities) is put toward (a) recovering from negative emotional effects of work stress, and (b) meeting the social expectations necessary in order to succeed in one's career.

What we'd expect based on our knowledge of markets is that people would have to spend $1/year to keep a $1/year job. However, some people have a talent for managing money and saving. If they make twice as much, they save twice as fast. Instead of making $100k (post-tax) and spending $80k, they're spending $160k to keep a $200k (post-tax) job. The more they make, the more they save. No surprises.

However, the financially untalented are the ones who have to spend $120k to keep a $100k job. If they get promoted, they'll be spending $240k to keep a $200k job. They'll burn twice as fast.

This is a deeper problem than people think. It's not just about "discipline" or will. There are people out there who are just severely below average in financial sense and, while they can play the social gymnastics necessary to get the $500k+ jobs, they can't make $1.00 without spending $1.10 (at any income level).

JoshTriplett5• 13 years ago

While I agree with the underlying point that most people grow their spending with their job, I strongly disagree that "it's not just about discipline or will". It really does come down to wanting less and buying less. I don't know in what absurd world you "need" to spend $300k to keep a $400k job, or even $80k to keep a $100k job. Nothing stops you from having a six-figure salary and living like a college student.

That represents one of the most critical financial lessons of all time: your salary and your expenses do not need to correlate, so don't let them.

HarryHirsch• 13 years ago

> your salary and your expenses do not need to correlate, so don't let them.

Wishing it doesn't make it so. In a previous life I applied to a business consultancy in Britain. (Ernst & Young? Andersen? Can't remember. It was long ago.) To get you into the mood, they had a little quiz on their website. One question went like this: "You have worked 12 hours on a report that is due the day after tomorrow and are tired. Your officemates want to go for beers. (This is Britain, and "beers" means many beers.) Will you join them?" Of course you join them says the website, you are supposed to work hard and party hard.

These are the social pressures that michaelochurch talks about, they are very real, and what you do and where you live will affect your chances of promotion. For an insight I do recommend Karen Ho's "Liquidated", it's an anthropological study of Wall Street.

rwallace2• 13 years ago

There are two different mechanisms being pointed out, and it's important to understand the distinction.

The first is the tendency for your burn rate to drift up to match your neighbors. Even when encouraged by your neighbors being assholes about it, that is a matter of discipline; if your discipline is in the top ninety-whatever percentile, it is possible to stop yourself doing this.

The second is the fact that some companies attach to some jobs very high unpaid expenses that they dishonestly don't point out until after your working for the company, e.g. refusing to give you a high-paid job unless you drive to work in an expensive car. There's nothing to be done about that in the first sense; if they won't give you the job unless you spend much of your salary on these unpaid expenses, then they won't. What you need to do in this case is recognize such jobs, subtract the unpaid expenses from your after-tax salary, and make your decision whether to accept the job or walk away, based on your take-home pay after expenses, not before.

rdouble3• 13 years ago

A professional job that pays $400k is being a dermatologist in New Jersey. Even after the nanny and $600K house you are still putting away $200K a year. Your husband's $100K hobby job as a stay at home dad/computer programmer can be used as a slush fund to take care of the parents and keep him entertained with a new iPad every other year. Most high earning situations are not really like an adaption of a Bret Easton Ellis novel.

Evbn4• 13 years ago

You forgot income tax there.

bearmf2• 13 years ago

What if it is a $1.5mil house?

moocow01• 13 years ago

Just to break this down a bit for you at 400k/year, your take home after taxes and extras will be somewhere in the ballpark of 18k/mo.

Your nanny will be around 2500/mo - down to 15.5k

Your 600k house will be around 4300/mo - down to 11k

Malpractice insurance / practice fees is anyones guess but lets be reasonable and say 2k/mo - down to 9k

So were down to saving 9k per month but then there is all the other stuff, food, electricity, entertainment, kid expenses, clothes, etc etc. Id say this usually amounts to about 3-4.5k per month ($100-150 per day) for someone who expects to live decently well.

Anyhow nobody is going broke in this scenario but our rich dermatologist is "only" saving 4-6k per month amounting to about 50-70k per year. Not horrible but not the extravagant wealth that you might expect. Note that I was also pretty nice to our hypothetical doctor - in this scenario they dont even have any student loans or a fancy car.

bearmf2• 13 years ago

> If you have kids, your bosses will ask where they go to school and it will affect your promotion chances.

How can your kids' school affect promotion chances? I can understand buying expensive clothes, cleaning, expensive apartments etc. Although IMHO all this stuff does not really start to kick in before $150-200k.

samstave2• 13 years ago

This is such a profound statement with respect to our industry, and I think it represents an extreme opportunity:

I believe there is an incredible opportunity around providing lifestyle-support services that are NOT looking to gouge the people they serve.

Look at a service like Exec or even a service like Uber: both are fantastic, but both specifically target consuming all disposable income that they can from their userbase.

I think this is a short-sighted and limited model: there should be a lifestyle service that works on a percentage scale that is not seeking to maximize its immediate revenue from each and every user, but to help them maintain and grow.

If we look at the costs of the luxury and wanna-be-luxury sites, they are all myopic. None of them do anything other than appeal to the most base and traditional of consumerist norms: emotionally entice their target audience to spend their income on the service offered.

A parasite model.

Instead, imagine a company that offers a range of services based both on economy of scale, available resource by hour and user need.

Take the Tesla model: offer a luxury, yet newly innovative product which starts out as a high cost consumer item and work towards a more affordable, more widely available offering.

So you start a subscription service where you buy a block of available service hours. You can spend them on anything you want and switch it up each month.

Build a plan that started with an upfront payment for life evaluation.

* what is your situation?

* what are your goals?

* do you need your physical life organized?

* do you need a stylist?

* do you need an admin?

etc etc etc

You build out a profile of needs for N months - and build an intitial plan of action. From that baseline, you then have an available menu of services that the user can select from as needed. They do not have to use up their subscription hours and can accumulate hours for later/higher cost services later.

The company works to bring on 'task-rabbit' like folks for various tasks etc...

The goal is to allow people to focus on what they do without being gouged for premiums for any and every individual service they may need to maintain.

It's really sad that EVERYONE thinks that every service out there should net 100K+ (I took a cab to the airport and the COST to me as an individual was the equivalent to me paying someone $180K per year to drive me to the airport. (I can explain the economics of this in detail if you like..))

rdouble3• 13 years ago

Exec and Uber aren't gouging, though.

Exec is actually cheaper for cleaning than something like Merry Maids. Plus the workers get paid way more.

Uber is more expensive than a cab, but it did not come into existence because the founders wanted to gouge people who needed cabs. It happened because cab service in SF is so terrible, an alternative was desperately needed.

hkmurakami2• 13 years ago

>Strong people fall for this trap. It’s poisonous.

"Trap" is the keyword here, in that it's set up by someone other than yourself. Your colleagues (esp those more senior to you) in these industries will purposely coerce you towards a higher maintenance lifestyle so that you will have an increasingly difficult time escaping.

moonlighter• 13 years ago

I call that the "IV drip". The monthly check is the drip, and it keeps you sleepwalking... doing busywork, and the years keep flying by.

jpdoctor5• 13 years ago

Yeah, but there are days where I wish I could have taken the blue pill.

sliverstorm2• 13 years ago

Building something interesting requires a surplus of time and money. Salaried jobs provide neither.

What? A salaried job is literally a company converting some of its money into time. It may not be your surplus of time or surplus of money, but that doesn't mean you aren't building something interesting.

aplusbi• 13 years ago

>Building something interesting requires a surplus of time and money. Salaried jobs provide neither. Unless the job itself is your dream, stay the fuck away from them.

Yes, it's advisable to just start off with time and money.

Yhippa• 13 years ago

I've observed this time and time again in my friends. One of my buddies and his wife graduated from a top-10 MBA program. His wife recently needed to get a new car and she wanted a Honda Civic which is a car that's got a decent balance between price and utility. He convinced her to get a luxury sedan because being seen in the company parking lot with that is a big no-no.

Another friend increases spending in proportion to income as well. Bigger house, new car, fancy toys. Babies get spoiled with way more than we grew up on.

It's a sad phenomenon. This is "Keeping up with the Joneses" disease. If instead of spending all your money keeping up you become disciplined with your spending you can retire early. And these people certainly don't love their jobs. How could you pass that up?

tkiley• 13 years ago

On solution to this problem is make sure your social circle is weighted with people who spend money in the quantity and manner you wish to spend it.

I don't think I would ever naturally consider a luxury sedan a necessity, but if all my friends had them, I would begin to suffer from lifestyle scope creep.

My wife and I surround ourselves with people who do not spend large amounts of money in traditional ways. We don't budget, but according to mint, we live on just over half of our income.

hakaaaaak• 13 years ago

I swear that I've read this before on HN.

How to screw up your life by getting promoted

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