Is It OK to Make Less Money than You Could?

by Neal Frankle, CFP ®

From the time we are tiny Pilgrims, many of us get the idea that it’s important to make as much money as possible when we grow up. Many of us hold on to that idea for a long time.  While maximizing our potential is super important,there are many condititions that make it smart to earn less than you otherwise could.  Sometimes it’s even shrewd to make no money at all.  How do you know you are in one of those situations?

In my experience, there are basically two distinct circumstances that make earning less money than you could smart.  Let’s go through this together.

1. The Pursuit Of Happiness

I read a book several years ago that later became a movie called The Pursuit of Happyness that illustrates this well. I might be the only one in America to say this, but I was disgusted by the story. (I know most people who saw it think the movie was fantastic, but the book made me so angry I couldn’t even see the movie.) Why was I so upset?

Despite the main character’s declarations of devotion to his children, he pursued his career at the expense of his family every chance he could. He had the opportunity to take a salaried job as a pharmaceutical salesperson. That job would have provided a modest but stable income and a home for his family. He decided to pursue the big-time life of a stockbroker instead. He chose the latter even though it meant homelessness for himself and his son – albeit temporarily. I consider that a selfish choice despite the fact that it worked out well in the end…at least for the main character.

The take-away is that making less money might be very smart if it enables you to have more life and take care of the people you are responsible for.

2. The Pursuit of Moneymake less money

Mushy warm fuzzies aside, it  can be very clever to earn less now in order to earn more later. I made a huge mistake by not recognizing this when I graduated college.  I was offered a fantastic job with an oil company right out of school but I took a dull and boring position with an aerospace firm instead because they offered $3,000 more a year.

Of course $3,000 is nothing to sneeze at – especially when you consider that this was back in 1980.  It’s worth about $8700 today when you consider inflation. But the lower-paying oil company job was by far more interesting and had much better prospects for future advancement. I could have been the Sheik of Shale by now.  Who knows?

In the end I suppose it worked out OK.  I detested that aerospace job so much that I vowed never to work for anyone ever again and that set me on my path to become a financial planner.   But had I continued working in industry, that aerospace job would have cost me big time over the long-run in terms of wasted time and forgone opportunity.  The longer I would have stayed the more difficult it would have been to find a way to get unstuck from a job I hated.

The bottom line is this.  When we access the adult part of ourselves we acknowledge that life is all about trade-offs.  When we say “yes” to one thing, we say “no” to something else.  If you make less money now in order to have more time with your family (as long as you live up to your obligations) that might be fine.  If you make less money (or none at all) in order to build a better career, that might be fine too.  But if you quit your job so you can catch up with the Oprah shows you’ve missed, that probably isn’t a responsible decision and it will cost you tremendously over time.

Of course, sometimes it’s hard to judge for yourself.  Are you making a good decision or just rationalizing your lazy bones behavior?  The best way to know is to run it by a few well-chosen people.  Then listen to what they have to say.

Are you making less money than you could?  Is it a good decision?  How do you know?

 

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