Anyone who has read ESI Money for more than 15 seconds knows I am a fan of growing your career (and thus your income). It’s one of the keys that allowed me to retire early and a vital part of the “E” in E-S-I (earning).
That’s why I write posts like Two Huge Reasons Why Your Career Matters which highlights that 1) your career is your biggest financial asset, worth millions of dollars and 2) if you take the right steps, you can make it worth millions more. And then followed that up with How to Manage Your Career to Make Millions More to tell you how to make the most of your career.
In the first post I said:
Even if you only earn 1% more than average, you end up with over a million dollars more! And if you do a bit better than that, you can literally earn millions more during your lifetime.
Based on this, I regularly say that growing your career could earn you an extra million dollars or more over your working lifetime.
Turns out I severely under-estimated.
Career Value
Let’s begin in estimating the value of a career. Let’s assume:
- Starting salary of $40,000
- 3% pay raises per year
- 45-year career
Given these, this person will earn just over $3.7 million during their working career.
If the other two assumptions hold steady but he averages 4% pay increases per year, he earns over $4.8 million during his career.
Carrying on a bit, a 5% average nets almost $6.4 million and 6% yields $8.5 million.
So you see how managing your career to eke out an extra percent or two is well worth the effort?
Extra Earning is the Tip of the Iceberg
But these numbers are just the straight impact of a percentage applied over 45 years. What I forgot to do is add in the value of the extra money each year and what it would be worth if invested.
So let’s compare 3% average raises versus 4% raises. In year 10, Mr. 3% makes $52k while Mr. 4% makes almost $57k. That’s a difference of $5k! What if Mr. 4% took that money and invested it for the next 35 years? And what if he did that for every year where he earned more than Mr. 3%? That would probably add up to a significant amount, right?
Well, I ran the numbers and here are the results (at 8% return): it’s $3.2 million!
So an extra 1% in earnings nets Mr. 4% an extra $1 million over Mr. 3%. If Mr. 4% invests that difference at 8%, he ends up with $3.2 million more instead!
Now some fuss-budgets may say that 8% isn’t sustainable, so here are the results at various rates of return:
- At 5% it’s an extra $2 million
- At 6% it’s an extra $2.3 million
- At 7% it’s an extra $2.7 million
- At 8% it’s an extra $3.2 million
- At 9% it’s an extra $3.9 million
- At 10% it’s an extra $4.7 million
And remember, this is just the 1% difference in earnings. If the difference was higher, the results would be much higher.
Here are the numbers at 8% annual return:
- A 1% difference in salary invested at 8% for 45 years yields an extra $3.2 million
- A 2% difference in salary invested at 8% for 45 years yields an extra $7.3 million
- A 3% difference in salary invested at 8% for 45 years yields an extra $12.4 million
This assumes that the guy earning more keeps his lifestyle the same as the other guy, which probably won’t happen. But with an extra $12.4 million available, he can have some lifestyle increase and have plenty left over!!!
Of course there are lots of variables — the amount you earn over average, the years you work, the starting salary, and the investment rate. They all work together to impact the final number.
But the general conclusion stands:
If you can grow your income faster than average (most people) and invest the difference at a reasonable rate over a working lifetime (or even any decent length of time) the difference is amazing and worth millions.
The Problem
And yet, here is my problem with this issue: when I write about growing your career, taking steps to earning more, and being more financially independent as a result, do you know what I get?
Crickets chirping.
Sure, there are a few “high power corporate type” ESI Money readers that add their great comments and encouragement, but the career posts here are usually among the least read (I can tell by the traffic generated).
Why is that?
Is it that people think if they just “work harder” they will get ahead?
Is it because most people are so exhausted from jobs that suck the life out of them that they can’t bear to think about putting more effort into their careers?
Is it because people think there’s nothing they can do to grow their careers?
Is it because people think my tips stink?
Or something else?
Because the facts are clear:
If you plug along and are willing to accept “average” for your career/income, you’re potentially mission out on millions of extra dollars during your lifetime.
Thoughts on all of this?
In order to grow your career you need to have the incentive that will eventually pay in the long run and you have the “desire”, personality and skills to achieve it. Not everyone is made out to be a boss. They could be one hell of an engineer but make an absolutely lousy boss. If you get an MBA but don’t want to use it then why did you get it? Other traits like being an introvert, socially awkward and not begin a good brown nosier all will impact this also.
I just recently had my review and my boss was telling me with all the new hires, how he is selling the firm is we have a lot of great people that have worked here a long time ( me included) that will work with you and help you to professionally grow and we have some cool project that we do you so will get exposure to a lot. His only problem is can he offer them enough to join. I think it is a great marketing part on his end and he is my new boss and will continue to make it great to work here.
Personally I would not want to be the boss. I could not lay off or fire someone or make some very tough decision in that impact people lives. I once though I could handle a higher position and had a desire to be, but after I got promoted to that position my support system vanished I was put into difficult positions and in some cases screwed up to the point that some wanted me let go. I was not properly mentored on my duties as my boss at the time was clueless and unsupportive. I gave 110% and they wanted 115%, I gave 120% and they wanted 125%, I gave 130% and then I crashed and burned. My company still believing in my capabilities and my worth to the company laterally moved me, I was put in a new position. My new boss knew my value while they latterly moved my old boss because he wanted to please everyone so that means he ended up pleasing no one. I have thrived in my new position but not the way monetary way I would have if I was able to handle my previous position. I have done things that has value to my company and I have thrived to the best of my abilities and an excellent mentor to younger staff. Now I am one of the people first asked by project leaders to work on the project if available and assigned to new hire staff to get them up to speed as quickly as possible.
Also we have a whole new generation who’s motivation is not the same as us from the tail end of the baby boom. Free time, family time and vacation time is more important than money and I commend them for this a these are all very important. The willingness to work overtime might cut into that time have limits and bosses have been told point blank by some millennia’s “ my free time is my time and I will set a limit on over time”. If the compensation is not high enough the motivation will not be there they will not do it. Most have seen their parents work hard for “the company” only to be let go during the Great Recession or G.D. 2 only to struggle in finding a new position. That is why the CEO of LinkIn says we have a whole new generation out there that don’t trust the company and loyalty is no longer existent after seeing how their parents were treated. I don’t believe all that I read or what is said but it has impacted peoples lives. There are people who will go the extra mile and willing to do it but probably not with same enthusiasm you are suggesting.
The final though is that you could make millions more but you also might spend millions more so if you make millions more and don’t save a million of it where are you headed?
A few thoughts:
1. You are correct, not everyone wants to be a boss or is cut out for it. That said, if you had done nothing, you wouldn’t have risen to the levels you did. So working on your career might not take you from entry level to president, but it may take you from entry level to director and you’ll be happy with that. You’re still making a ton more than if you had done nothing and stayed at the entry level.
2. As part of #1, happiness has to play into the decision as well. It’s not all about money.
3. Agree with you on the next generation. Wish I was in it as it would make getting to the top easier. 🙂 Those who go above and beyond will get ahead and in some respects it will not be as hard as it was when we were coming up.
4. Of course on the spending — you can’t make a ton more and then blow it or you’ll be where you began (though some would prefer to do that and have a blast with the extra $$$). I have a series of posts coming up on the book Stop Acting Rich and one is on jobs, income, and spending. Turns out the more you make, the more you spend. Hmmmm…
Even if you aren’t interested in being a boss, you can still benefit from lateral moving if you have the talent.
By shifting to a new “company” (I’m a cop but I try to translate to be more relatable) I kept the same duties I had in my last job, but with 8 years On was making as much as my boss of 20 years at the previous company.
Sometimes looking sideways is the new way up!
I’m curious ESI – tell me what you mean by this:
“3. Agree with you on the next generation. Wish I was in it as it would make getting to the top easier. Those who go above and beyond will get ahead and in some respects it will not be as hard as it was when we were coming up.”
What part is not clear? I was responding to the commenter’s thoughts above.
I guess I was looking for you to expand on your thoughts…
I am not yet convinced it is easier – different, maybe…. but not necessarily easier.
His comments were about the current generation not being as driven to succeed. I agreed. Which means there’s less competition if you want to grow your career and get ahead. Less competition means you can get to the top easier.
As for getting raises these days, read the comments on this post:
https://esimoney.com/value-growing-career-real-life-example/
There are TONS of people doing well today — getting very good raises indeed!
I realize I’m late to the game – but I have to make the point that, being on the older end of millennials, and female, most millennials have both spouses working. That means both are sharing child rearing. That means no one can work 80 hour weeks. Daycares are only open 50 hours a week. It’s just not possible to work that much and have children if both spouses are working. Millennials are much more egalitarian with spousal roles, and therefore, don’t have the luxury of outsourcing childcare to their stay at home spouse. Just another thought for why millennials are non-negotiable on free time. It’s literally just not possible if you both work and have kids.
If one of you works at growing his/her career, then both of you don’t need to work…
That’s true from a financial perspective, but obviously from a life fulfillment perspective that’s not going to work for most people. For instance, I’m clearly the partner who has a brighter, more lucrative career path. I have more education and I work in an industry where I have much higher earning potential than my husband. But, my husband earns a lot too, and he loves what he does. It’s not really fair to say “stop doing what you love so I can become CEO”. Anyway, just trying to give a better perspective on why Millenials can’t work 80 hour weeks. I grew up in Iowa City and would imagine you are from nearby based on your comments about growing up near the Amish. 😉
I grew up about an hour from Iowa City!
I don’t disagree with your thinking. Obviously everyone can make their own choices and there is value in enjoying your work.
That said, I wouldn’t say that something “can’t” be done, rather I would say you are “choosing” what you will and won’t do. That’s perfectly fine, of course, but my comment was meant to illustrate that it actually can be done, some just choose not to do it that way.
I will second Coopersmith’s observation on desire. It is critical to maintaining momentum to continue to advance up the ladder. In my career, I have advanced to about the level I am happy with, any further and I would have to manage people. I have no desire for that headache. The increased compensation would be nice, but at this point in time in my life it is not worth the trade-off. I make a comfortable living, one that allows my wife to work on raising our children, and that living is relatively stress free. I have seen my manager’s job and I don’t want it. 🙂
Ha! Yes, people make life more complicated!!!! 🙂
I sense a post idea coming from this…
” I have no desire for that headache. The increased compensation would be nice, but at this point in time in my life it is not worth the trade-off. I make a comfortable living, one that allows my wife to work on raising our children, and that living is relatively stress free.”
^^^ This is a very good reason to make the most of your career in place. Advancing one’s career doesn’t always mean ‘moving up’ or a new title. Advancing is simply not remaining stagnant.
Agreed JC. There have been a couple of reorg’s in my area the last couple of years where people were restructured right out of a job. My focus now is always providing my employer with great value and a skill set that’s not easily replaced.
I would add that you also need cooperation from employers to recognize the excellent work and give the 3-7% raises you mention. One then needs to be able to keep said raise rather than see it disappear in increased health insurance costs, etc before you even see your paycheck.
I agree with you that your career is your biggest financial asset, on paper your plan looks great
….. Cept it does not take into account that unless you are in management your raises will likely nit be much and may not be equal to the increase in costs. Certainly not in the last decade where the usual pay raise was less than 3% for those who exceed their expectations. Killing yourself for 3%!!!! Is it worth it?
This is my observation based on my experience and of those around me and the news. fyi I am a high performer at the top of my field.. An individual contributor. as you know its been an employer market, this seems to be changing a bit but not enough to increase pay or benefits yet. Because of this the S. In ESI becomes more important..be frugal save invest and let compound interest help you out.
In the next post or two in my series on growing your career I will talk about how you can/should market yourself so employers know your contribution.
And of course if they do not or do not give you appropriate pay increases for your successes, you always have the opportunity to seek out employers who will.
Why is that?
Is it that people think if they just “work harder” they will get ahead?
* This is what many people have been told over the years. I think the culture is changing with younger generations – some high schools are starting to teach them what the working world is really like*
Is it because most people are so exhausted from jobs that suck the life out of them that they can’t bear to think about putting more effort into their careers?
* Yes. Unfortunately, if everyone only worked in jobs they really liked, we probably wouldn’t have some of the industries that are important to our country. On the other hand, a job that you enjoy can still suck the life out of you. *
Is it because people think there’s nothing they can do to grow their careers?
* In some respects, yes. I see or hear about people who think they’re stuck in a caste system and can never do anything “better” than what they are currently doing. There are also those that think it’s too late to learn more, take some classes or try something new. In other cases, like mine at one time, the best option to grow the career I was in was to move to a different state. My wife and I chose to stay closer to family and not take two steps back with the cost of living so we both ended up changing careers and getting another degree. Not everyone can do that, but being close to our families made it possible. *
Is it because people think my tips stink?
* Not at all. *
Or something else?
* Possibly. Confronting one’s career path is not easy and putting forth the effort to advance one’s career requires, umm….effort. The old saying about physics and exercise holds true here as well. “A body at rest tends to stay at rest.” Most people get to a comfortable place and decide they’re OK staying there. *
Not much to add here but wanted to give you a +1 for this comment.
My comment is aspire for more when you are young- you can get more senior level experience early and then have the option to either retire earlier or continue in a career with senior level focus. Of course this means dealing with responsibility but like anything else, it gets easier with time and if you are disciplined you don’t consume your life with only work.
When you are young the “fake it till you make it” strategy can work provided that you are willing to learn and push yourself with a sense of urgency.
Once you have a family sometimes there is more resistance to committing into a challenging role. Senior people I’ve seen who are successful have the infrastructure at home, though a spouse, extended family or other support networks to make sure it all works out.
Being a good leader means hiring and firing with compassion and trying your best to look out for all the people you interact with- even if it means helping them land somewhere else where they may be a better fit. It’s a small world and it’s always best to act in good faith and with fairness to others.
With increasing responsibilities come increasing income. If you are able to save and invest you’ll earn many millions more, just as ESI mentions in this post. But at some point it won’t be only about the money and that’s okay too.
-Mike
“My comment is aspire for more when you are young- you can get more senior level experience early and then have the option to either retire earlier or continue in a career with senior level focus. Of course this means dealing with responsibility but like anything else, it gets easier with time and if you are disciplined you don’t consume your life with only work.”
This is a great point and what I did in my career.
When I was young and not yet married, I worked like a dog (and loved it) and rose rapidly as well as gained awesome experience.
When I got married I still worked a lot, but less than when I was single.
Once we had kids, I dialed it back again, but still working a decent amount, investing in my career, and learning and growing.
As the kids got older, I cashed in all my hard work. I got a job that paid more than I ever made but the company was small and not as sophisticated as others I had worked for. But they were family friendly. I worked 40 hours a week (no weekends), was at EVERY event my kids had, and started a well-known blog. 🙂
Once the kids got older, I moved to a higher-level position at a new company (president) with my highest pay ever. I had more work-hours than my last job, but not as many as I had had early on.
So the path isn’t just straight up. There are twists and turns and seasons in any career. But generally if you can invest heavily early on, you will reap the rewards at some point.
ESI – I absolutely agree with you about your career being your most valuable asset. I hate those people that like to tout that you can’t get rich working for someone else. That is simply a lie, it’s true that not everyone one get rich working for someone else, but that is true of most statements.
Some people are content with being average and that is okay! In fact that is good news for the super ambitious…because the top is never crowded. There is a much smaller pool of people willing to put in the work to climb the ladder.
I agree with Mike H. about aspiring for more when you are young. Grind it out and advance as quickly as possible before you have kids in the way. That’s what I have done. I graduated from college in 2008 and have been grinding really since 2006, so for the past 10 years I have put in 70-100 hour weeks. And if I wasn’t working during those 70-100 hours I was doing some kind of personal/professional development to continue advancing my career.
I have read almost 250 books over the past 5 years.
In 2006 I was interning as a financial analyst earning $13/hour. When I graduated from college I got a starting salary of $58,500 + $5,000 bonus. Fast forward to present day and my comp going into 2017 will be $270K as a C-Suite executive.
Money is just an exchange of value, so if you want to make a lot of money, you have to create a lot of value. The only way you are going to do this in a meaningful way is to put in the work. You have to be a perpetual student!
Most important is you have to be able to translate everything you do into top line and/or bottom line results. That is how you get raisers that are far greater than 3-4%.
Cheers!
Gives me more encouragement to hustle.
“Is it that people think if they just “work harder” they will get ahead?”
The one piece of advice I wish I had been given (and listened to) in the first six years of my career is to “never be the hardest worker.” When I first heard this I thought it was simple BS. But after being the top producer in my division for four years I watched other people with less experience and worse statistics get the promotion.
I wondered why until I realized I spent all my time out in the field, harvesting numbers. I was never back at HQ and though the bosses knew my name and number, they didn’t know -me-.
Since shifting to a new company I’m still a top producer, but make a sincere effort to network and get face time with supervisors. I’ll let you know if it works! Thanks for the insightful article!
Good points. And when you look at 45 years I don’t know why more people aren’t multi or deca millionaires!!
I wonder if the lack of response you’re getting shows that a lot of people are stuck in jobs (or in life) where they can’t move forward in their career. Perhaps they’re still rebounding from the financial chaos of ’08. Maybe they’re too busy taking care of elderly family members. Maybe they’re working two jobs and they’re just not able to find the one job that allows the opportunity to build a career. There’s a lot of dead-end jobs out three.
In my particular case, I’m starting over, and I find the career advice helpful, but due to the particulars of my job, it’s hard to put it into good use (although that’s changing). Using your career to build wealth and savings requires long-term thinking. You have to plan, you have to be mobile enough to make adjustments as necessary, you need to be flexible… and you need a little luck. Not a lot, just a little.
Maybe not all of the readers of this site have that?
And to be clear – I’m not pointing fingers at anyone, I’m just saying it might be a reason why you don’t get a lot of attention on this particular topic.
Really appreciating work.
I’ve obviously run into the same problem as you.. this last month its been much too easy to sit on my hands. I’ve not had to do to much “reaching” this last year. Perfect for new talented guys.
Good tips ESI! In the face of all the personal finance blogs that encourage you to quit your job, I’m glad to see one that teaches you to use it as leverage for building your wealth. The only thing I would add is that working does not necessarily have to be just your job. As most bloggers and writers know, there’s plenty of money to be made by investing in yourself and your side hustles.
I’m very interested in your career posts and here’s why. I’ve got a handful of working years under my belt as well as a few years of exposure to the FI mindset. During that time I’ve responsibly upgraded my standard of living from roommates, to studio apt, to modest 1 brs as my salary has doubled. I’ve banked the difference. I’ve found out where my spending comfort zone lies and now have a better understanding that if I want to turbocharge my FI goals I need to increase my earnings because I’m not happy increasing my frugality. If I want to keep tipping the scales in my favor and hit my goals sooner I need to earn more and keep focusing on my career. Having someone like yourself write down their experiences, insights, successes, and failures is a tremendous resource so thank you for sharing. I’ll comment more on future career posts to return the favor!
Thanks! I appreciate that!
I think people are more reticent to talk about their career earnings growth, than they are their investment earnings strategy and passive real estate portfolios. Career investment is much more personal after all.
ESI – don’t stop posting on career topics just because they’re not ‘hot right now’ – it’s important to be investing where others aren’t yet, and your content creation is your investment.
In 5 years when everyone’s well past P2P lending and resi/commercial real estate, and everyone in FI is trying to get into venture debt and micro private equity, then blogs that analyze career composition, personal/professional skill development, small business investment, and dynamic industries will be highly valuable… 🙂
I don’t have as much motivation to advance my career for the simple fact that I hope to be done working within the next four years. I just don’t want to put forth the effort when my return will be relatively small due to shortened time frame.
On the flip side, I did ask my manager recently if he could check into a pay increase … and it took a little while to work it out but I did just get awarded the extra amount to my annual base. (This is in addition to standard CoL increase.) Sometimes it’s just a matter of putting yourself out there and asking for what you’re worth.
Awesome! Congrats!!!!
I just discovered your blog, I’m a 29 years old woman living in the UK, and saving 35% of my income. Please don’t stop writing on career advancement as it’s one of the most important thing one can do (around my age range) to move forward. The “Earn” bit is the most important for those of us just starting…
Thanks for your advice, I am already binge reading your career series!
Claire
Thanks, Claire, I appreciate that.
Many people seem to gloss over the career posts thinking their pay is simply what it is — but that’s not the case. People can have dramatic income growth if they just put a little work into it and that growth can make a world of difference in their finances.
You career articles are among my favorite. When I first heard you on ChooseFI talking about career hacking, a light bulb went off that this was probably the most important thing (besides a high savings rate which is easy to automate) for me to focus on.
I’d love for you to write more articles on career hacking if you want my little 2 cents.
This is a great article. I only discovered FIRE recently, 13 years after I finished school. I grew my pre-tax salary by 250% and have a few thousand dollars realized annual investment income without actively planning for Financial Independence. I only started tracking my family net worth last month and got 850K. This makes me feel pretty good as a start to FIRE journey.
I had also made choices that set me back financially. I left high-paying Canadian job to work in China for 3 years earning 30% of normal salary in my 20s. I did it to broaden my experience and to solve my identity crisis. I had 2 years of maternity leave when I got government benefit which was less than 1/2 of my normal salary. My husband immigrated from China to Canada. His past education experience was not recognized. So he’s been a part-time student and part-time stay at home for almost 8 years now.
My husband is finishing his study next month. I am a top individual contributor at work. My boss is very supportive and he is teaching me how to grow and become a leader within next 5 years. We will put more efforts into growing our career after reading your article.
We need to choose between staying in low-cost francophone city with my husband earning 20K-50K less than his full earning potential due to language barrier and moving to high-cost anglophone cities when he will earn more but our housing cost and childcare will double. My 140K salary won’t be affected by the move. We chose moving a year ago. Now we choose to stay in low-cost city after discovering FIRE and computed the numbers.