The 3 Types of Jobs

A reader asks:

I just turned 27 and I make $260k at a job that I just started less than a year ago. It was a grind to get here and then the job itself is very stressful. I dread going to work in the morning, but I deal with it for the money and save/invest the vast majority of it so I don’t have to do this forever. For context I have ~$400k total in investments right now. Recently an opportunity came up that’s much more interesting and pays well, just not as well as my current job (around $150k). This is at the intersection of what I do for work and my actual interests, so it could be a tap dance to work situation. But I’m not sure I can stomach a $100k+ income drop and the vanishing years of compounding. So should I continue to grind it out and pack away cash for a few years, or let myself go down the more interesting road?

The first thing I want to get out of the way here is this: Most career advice is useless.

So much of your career trajectory is governed by timing, luck, personality, politics, skills and your network that it’s basically impossible to recreate the same career path twice.

But this question hits on one of the biggest trade-offs you have to consider in your working life — do you want to earn a lot of money or do you want to work in a job you love?

The way I see it there are three types of jobs in your 20s:

1. Learning jobs. Some jobs are more about learning than earning. Learning what you like about certain industries or job duties. Learning the types of people you want to work with in your career. Learning about the types of companies and people you don’t want to work with throughout your career.

And sometimes you just need more experience or on-the-job training before you can start moving up and making more money.

2. Earning jobs. I had plenty of friends in college who picked their first job solely based on the size of their salary offers. You might have to put in more hours and deal with more stress but there is something to be said for setting a baseline in terms of income for salary negotiations with future employers.

3. Dream jobs. A dream job is when you find the perfect industry, company and people to work for. Most people in their 20s don’t find their dream job. Consider yourself lucky if you do.

Obviously, the ideal scenario would be a job that allows you to learn more, earn more and fulfill your dreams.

My 20s were all about the learning route, mostly out of necessity. I didn’t really know what I wanted to do. I didn’t even have a dream job in my head back then.

My first job out of school paid a lot less than most of my friends were making. But I learned a lot about markets, investing, asset allocation, client communication and investment policy.

That first job didn’t pay much but was worth way more for my career prospects down the line because of everything my first boss taught me about this business.

I also know a lot of people who went with the higher stress, higher pay jobs.

One friend went into investment banking. He was constantly working 80 hours a week. The first year on the job he got a grand total of 3 days off. He had no social life, often worked well past midnight and was constantly stressed out.

Regardless of the paycheck, I don’t have the type-A personality to go that route.

The funny thing is he loved the experience. And he used 2-3 years in investment banking as a springboard to get a job in sellside investment research that paid just as well but required fewer all-nighters and weekends at the office.

A lot of this comes down to your personality.

I can sympathize with the reluctance to give up a larger salary. It’s not just the potential compounding you’ll be missing out on from a lower savings rate but the psychological toll it could take on you by taking a pay reduction.

Losses sting twice as bad as gains feel good. You’re likely always going to anchor to your high watermark of income.

On the other hand, you spend a big chunk of your life on the job. Working in a high-stress position in a soul-sucking job might not be worth the money if it makes you unhappy and you know your dream job is out there.

There was a study performed at Harvard a number of years ago that asked students and faculty to choose between the following options:

  • A: Your current yearly income is $50,000; others earn $25,000.
  • B: Your current yearly income is $100,000; others earn $200,000.

They also had to assume prices are constant in both scenarios, meaning cost of living is not a contributing factor.

The results were split right down the middle. Half of all respondents preferred a world in which they had half of the real purchasing power as long as they were doing better on a relative basis while the other half preferred to be doing better on an absolute basis even if this meant they made less money relative to their peers.

Life is full of trade-offs.

I am a huge principles guy. I love my job to the point where you could offer me more money and I would tell you to get lost. I love the people and clients I work with and the freedom I have for creative pursuits.

It’s hard to put a dollar figure on that.

But there is a big difference between turning down a bigger salary and opting to lower your salary after you’ve already become comfortable with that level.

Here are some questions I would be asking myself in this situation:

  • Will your long-term financial situation really change all that much if you make less money?
  • How much do you hate your current role?
  • How much better would other areas of your life be if you weren’t so stressed at work?
  • What are your prospects for advancement in the new role?
  • Are there any other perks in the new role that could help soften the salary blow (work from home, shorter commute, better benefits, etc.)?
  • Will this type of opportunity ever come knocking again?

This question really boils down to this: How much is your happiness on the job worth?

Most people never find their tap dance to work job.

As painful as it would be to give up a higher paycheck, I don’t think you can put a price on happiness.

We talked about this question on this week’s Ask the Compound:

Bill Sweet joined me again this week to discuss questions about finding a CPA for your small business, how to diversify company stock options, how time horizons impact tax planning and how Roth conversions fit into estate planning.

Further Reading:
Why Are People Miserable at Work?

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