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The difference between 20k a year.

February 17, 2017
8 upvotes

My annual review was completed last week. I'm 2 years out of my PhD and broke the 100k mark. It felt good. 100k was a goal of mine.

Every single piece of advice I've heard from C and D level folks has been - if you like what you do and you're treated well - the money will come. I fully support and buy into this notion. I also separate salary from job satisfaction. I'd say I'm 8/10 satisfied. The 2/10 is really me having to learn how to get the workplace to work for me.

But I was thinking - since I'm a bit of an impatient guy - and know my salary is on the junior end of average, I figure if I put in real effort, I could get a 20-30% jump. So I ran some numbers. Suppose I was making 20k more a year.

For a year - that doesn't really matter. I've broken the salary ranges down into how you can travel.

 50k = vacation  50-75k = couple of vacations a year  75k-150k = you can sit in business class  150k-500k = first class  500k-5mill = private jet  5mill+ = personal aircraft 

But the point is an extra 20k at the 100k mark doesn't really matter.

So I broke it down further. What does it mean in terms of future value.

Year Current Salary Increased Salary Annual Difference Compounded Savings
0 $100,000.00 $120,000.00 $20,000.00 $20,000.00
1 $103,000.00 $123,600.00 $20,600.00 $41,600.00
2 $106,090.00 $127,308.00 $21,218.00 $64,898.00
3 $109,272.70 $131,127.24 $21,854.54 $89,997.44
4 $112,550.88 $135,061.06 $22,510.18 $117,007.49
5 $115,927.41 $139,112.89 $23,185.48 $146,043.34
6 $119,405.23 $143,286.28 $23,881.05 $177,226.56
7 $122,987.39 $147,584.86 $24,597.48 $210,685.36
8 $126,677.01 $152,012.41 $25,335.40 $246,555.03
9 $130,477.32 $156,572.78 $26,095.46 $284,978.25
10 $134,391.64 $161,269.97 $26,878.33 $326,105.49
11 $138,423.39 $166,108.06 $27,684.68 $370,095.44
12 $142,576.09 $171,091.31 $28,515.22 $417,115.43
13 $146,853.37 $176,224.05 $29,370.67 $467,341.87
14 $151,258.97 $181,510.77 $30,251.79 $520,960.76
15 $155,796.74 $186,956.09 $31,159.35 $578,168.15
16 $160,470.64 $192,564.77 $32,094.13 $639,170.69
17 $165,284.76 $198,341.72 $33,056.95 $704,186.17
18 $170,243.31 $204,291.97 $34,048.66 $773,444.14
19 $175,350.61 $210,420.73 $35,070.12 $847,186.47
20 $180,611.12 $216,733.35 $36,122.22 $925,668.02
21 $186,029.46 $223,235.35 $37,205.89 $1,009,157.31
22 $191,610.34 $229,932.41 $38,322.07 $1,097,937.24
23 $197,358.65 $236,830.38 $39,471.73 $1,192,305.84
24 $203,279.41 $243,935.29 $40,655.88 $1,292,577.01
25 $209,377.79 $251,253.35 $41,875.56 $1,399,081.42
26 $215,659.13 $258,790.95 $43,131.83 $1,512,167.32
27 $222,128.90 $266,554.68 $44,425.78 $1,632,201.46
28 $228,792.77 $274,551.32 $45,758.55 $1,759,570.09
29 $235,656.55 $282,787.86 $47,131.31 $1,894,679.90
30 $242,726.25 $291,271.50 $48,545.25 $2,037,959.15

This assumes an annual cost of living increase of 3%, an investment rate of return at 5%.

Over the 30 years, the difference in salary and cost of living increase alone is $1 million. The total difference, assuming all of the increase money is saved and invested, is 2 million.

The interesting thing though is that most of the increase is later on in the career - so as long as I get caught up quickly early on, i.e. I'm rewarded for the effort in the shorter term, the actual difference of the 20k should be negligible.

I guess the point is that a 5-7 year time frame of seeing what a company is willing to invest into me seems like an acceptable trade-off. I think this does a good job of answering the question of "when does money really matter?" with regards to the ceiling/floor salary trade-off.

In any case, the only way to get G6 level rich is to be a successful business owner of a scalable enterprise.

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[–]man_in_the_world0 points1 point  (0 children) | Copy Link

I find it more useful to compare after-tax numbers for income, and full numbers for expenses or cost-of-living.

[–]ford_contour1 point2 points  (0 children) | Copy Link

Congrats on breaking six figures!

And thanks for sharing your numbers analysis.

[–]bogeyd6Executive2 points3 points  (1 child) | Copy Link

I love how you did the math and scaled this out over the years. The problem with more money, is of course more problems. The rap guys were right. The more you make, the more you have in expenses. Of course it's easy to say that "you won't be doing any of that" but the higher up the salary scale and the higher up the org ladder. There are certain things people are expecting and whether you like it or not they will be expected of you. Most people don't go to prep school, but the higher up you are the more people think you have money. You have to carry it like that. You should probably add in there somewhere that you can no longer own a Ford Fiesta and have to instead drive an Expedition, stupid things like that.

Overall 20k a year, minus 28% in taxes equates to about $14400 cash in hand. I think you have the right mindset, play the long game and acquire all your necessities early. Look for better career opportunities when you are now qualified for them.

[–]weakandsensitive[S] 2 points3 points  (0 children) | Copy Link

I'm a numbers technical guy who wants to deliver business value for customers - I have to figure out how to get there. My company offers a fully financed MBA program through a top 5 public university - that, imo, will be worth the trade-off. I'll be honest though, 100k+ at a 35-40 hour work week and a 5 minute drive is not a bad gig. I wish I had more opportunities to travel and interface with customers (what this really means is I'm putting in the work to make this happen in the next year or two - at which point people will be like "oh wow you're so luck you get to travel for work."). I think for me, I'm in a "what will I work for" vs "what will I fight for" conundrum. Let's cast some lines and see what happens.

I get lifestyle creep, but at the end of the day, I'm frugal. I'm a value-proposition guy, not a bottom line guy. What's the cost:benefit ratio? Would I buy a 3k J class ticket to Europe - nope, less than double economy is my limit for 10 hours. 2/3k to Asia, alright now I'd consider, considering the value of RDMs + comfort + future value.

I have no interest in private/prep schools because I don't buy their benefit is worth $20k a year. I believe parental involvement + MOOCs + hobbiest groups (ala meetup for robotics, for example) will be more than enough. We'll see how that mindset changes.

That said, definitely will be buying a convertible this year. Looking forward to looking the part.

[–][deleted] 2 points3 points  (4 children) | Copy Link

At what point does any employees work justify a further raise?

Lets say you get into the mid 100's to low 2's....

Chances are, at that point you will not get a further raise unless you are actively earning more and more money for them.

[–]weakandsensitive[S] 1 point2 points  (3 children) | Copy Link

Market rate. I know I'm under median, but I think I think I'm okay given career stage. Also, early career means bigger pay jumps per year. Personally, I was trying to figure out what level of discount to give my current employer and how that impacts my future, i.e. what do I trade that 20k for. What is my real market value vs. my personally biased perceived market value (parallels MRP SMV directly). For me, job satisfaction, flexible schedule, being well treated, potential for future growth/leadership (i.e. financial catchup) are all parts of my min-max equation.

It was a similar choice for my PhD. Sacrificing short term gain/salary for long term potential. I want to get to the C/D/VP level where I'm contributing to impactful business decisions backed by sound data interpretation and technical knowledge. Everything I've seen is that those types of positions are generally given internally to people with 10-15 years experience - or companies that get bought in. A high level of trust and history of delivering business value to the company seems to be required. I'm sure other guys here who are at those levels can comment on this more.

I figure by low 2s, you should be driving business value instead of technical skillset and ability, even though that could be based on the technical skillset. How are you solving customer problems/delivering customer value (bringing a multiplier to what you're paid).

But I think between the 1s and 2s, the difference is trivial in terms of Quality of Life.

[–]bogeyd6Executive2 points3 points  (1 child) | Copy Link

I figure by low 2s, you should be driving business value instead of technical skillset and ability

I wish more and more people would take this to heart. You aren't going to earn 250k/yr in a job that is not directly responsible for dollars to the bottom line. The real money is in sales or leadership.

[–]ford_contour0 points1 point  (0 children) | Copy Link

I would add delivering sellable product on time without mistakes to this list. Which I guess is a kind of leadership, come to think about it.

[–][deleted] 0 points1 point  (0 children) | Copy Link

But I think between the 1s and 2s, the difference is trivial in terms of Quality of Life.

yes I think you are right, Have recently been in both. Don't know if I will hit 3's in my market, but after low two's, its all the same. Location/culture/job satisfaction, "humanity", leadership, further personal development potential

[–]abdada6 points7 points  (1 child) | Copy Link

The biggest problem I've faced when mentoring dudes over time is that almost none of them apply raises to bump recurring income streams. I'm going to say that about 85% of men who get raises immediately increase their costs of living and the raise means nothing for the future.

In a pretty hefty minority of guys, they actually spend MORE and save LESS when they get a raise because they feel they have future income coming to pay off debt "easier".

The best thing I ever did was what I call "living on income from 2 years ago." For example, in 2016 I lived on money I earned in 2014 and saved for 2016. This gave me a lot of leeway to change customers/jobs/industries because I always had a 2 year buffer.

That $20,000 a year raise is significant because it can be $20,000 you put towards another income source. I don't like acquiring debt, but if I had gotten a $20,000 raise in a year, I probably would have bought a 1 bedroom rental somewhere with a 4-5 year payoff on a note. Or saved that $20,000 for 5 years and bought rental property.

The only real way to get wealthy is to have a lot of other people working for you, and you making $10-$40k a year profit on their work each. But that isn't easier, it's just more likely.

[–]HobbesTheBrave2 points3 points  (0 children) | Copy Link

I'm going to say that about 85% of men who get raises immediately increase their costs of living and the raise means nothing for the future.

Are you expecting that short people are going to reach to the top shelf, without assistance?

Dumber people think about money in worse ways. Smarter people understand math. Height is easy to understand. Longer is additively better. Nice to reach the top shelf. Intelligence, on the other hand, is completely different. It's exponentially better to have more natural intelligence.

Go have your IQ measured/estimated. Then, take a look at how far away you are from average guys. Then, read until you understand what IQ means nationally and individually.

If you're far from the average and the dumber than average, then your choices will look ridiculously odd compared to their choices, as their choices look retarded.

You can kill a man, but you can't kill an idea.

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