Hello Six Figures! My Inexperienced Thoughts On Careers

Even though this blog is about money, and the source of most people’s money is from their jobs, I don’t really talk about careers that much. One reason for this is because I’m not experienced at the corporate game. I’ve never reached the point in the corporate ladder where I got to boss around others. Why listen to me?

Another reason is that I believe one’s salary is not necessarily related to how smart they are, or even how hard they work. Some people are lucky, in that they love to do something that already makes a lot of money. Maybe they love investment banking, and all the numbers, long hours, and competition that goes with it. Others have tougher decisions. Maybe you like working with under-served populations and being a social worker. However, you’ll also have to accept that living in a penthouse loft with a view is unlikely to happen. I’d love to be the newest host on Globe Trekker, but I don’t think I have the talent for it. I think striking a good balance between these three factors is critical to a happy life:

altext

However, once you do decide on a career path, learn everything you can. This could be via an apprenticeship, graduate school, or on-the-job training. Don’t just sit around and wait for things to happen for you. People making a six figure salary have one thing in common: specialized, in-demand skills. (I bet “people skills” count too.)

Also, I’ve noticed that with couples you can take the balance thing one step further. For example, if one person is happy with a stable professional 9-5 job, that might provide enough stability for the other person to pursue riskier activities like starting their own business or switching careers. Otherwise, the person by themselves may not chose to take that risk, for fear of loss of the sole paycheck or losing group healthcare benefits.

Finally, it’s not what you make, it’s what you keep. Of course, it’s also a lot easier to keep more if you make more. On that note, when late summer comes around, don’t be surprised if our net worth charts show some even bigger increases. :D We both now have full-time jobs lined up and both of us have the potential to earn annualized incomes in the six-figures. Unfortunately, we are also moving an area with a cost-of-living that is over 30% higher than where we are now, and housing costs that are 300% higher. So I’m not entirely ecstatic. Looking at houses online is even depressing :(

Comments

  1. this is like the 10th post on the exact same topic. although the lame graphic might be new. you are going to start losing readers.

    like this one. *close*

  2. goldnsilver says:

    once you reached a certain level, your success is mostly dependent on your interpersonal skills.

    Unless you are in a field that REQUIRES professional certification/designation, ex. doctors, lawyers, equity desk traders.

    You don’t need a masters degree or PH D to climb the corp. ladder. (Given that you are reasonably competent in your job), what you do need is people/interpersonal skills.

  3. Omniver says:

    a great post, the venn diagram is right on, i guess ‘fan’ just isn’t living up to his name

    thanks for revealing the problem in such an explicitly clear way

  4. I’ll be interested to see how both of your 6 figure salaries balance with your 300% increase in housing costs. How much do you think your net savings per month will go up in that environment?

    Don’t listen to fan – the post is fine.

  5. DanielR says:

    I like the Ven (sp?) Diagram. There seem to be only 2 places that are optimal or acceptable – where you have the dot currently and perhaps in the overlap of What you’re Good At and What You Like. Anywhere else for the long-term might make for a less than happy situation.

  6. Goodluck and congratulations!

    You are absoultely right about the fact that u dont have to be intelligent to earn 6 figures. Just need to be smart, lucky, adamant + aggressive.

  7. Seriously, what do each of you do to EACH pull down 100k!?! Or am I reading it wrong?

  8. Nony-mouse says:

    After living like students for the past 6 years, we have finally purchased our own home for cash. $300K.
    Some people think we are crazy or stupid to pay the home cash and cannot see the logic for doing so.

    I get tons of advice from people saying I should have taken a mortage so that i can get some tax benefits. This is like paying out a dollar so that I can get 35 cents back. Dumbest argument ever.

    People dont realize that if I took a $300K loan, my interest alone for the 1st year is around $18K. When someone says, I bought my home for $100K in 1992 and sold it for $500K in 2007….they are thinking that they made $400K. Why are certain people so naive?

  9. Your point is exactly how my parents taught me. If I want to be x, why not take it to the next level which pays more? I would just throw in, as alluded to, cost of education. If you can get a job like an accountant (which is what I do) with very little in education costs – go for it. Balancing all of these factors is really key to finding success. My parents did not care if I wanted to make a minimum wage job, but they sure as heck wanted me to know that I could do better and that a job like that wouldn’t get me a lavish lifestyle ever. Quite the opposite. Anyway, today too many people chalk my station in life to luck, when really it took great care and planning, and wisdom and insight from people like my parents, who helped me to choose a profitable career that I would enjoy and not cost a lot of money to get into. Definitely a great post – more people need to think these things through from the getgo.

    Oh yeah – and that is true. My spouse has not worked in years, and is now trying to break into film making. Without me supporting him he wouldn’t so easily have this opportunity. I would hesitate to say he would have no opportunity. But it certainly makes it easier – he can have his cake and eat it too. But for us it just works out that way. I am glad I can afford him to follow his dreams, even if it might not ever amount to much money.

  10. fan: That’s what I like about the net. Total brutal honesty. Don’t hold back, say how you really feel!

  11. I would say that those circles aren’t fixed, and that the things you like will can usually become the things you are good at.

    I also agree with goldnsilver, that a lot of the work needs to put into your self not your professional skills. Qualities like humility, public presence, self reflection, clear presentation of ideas are so important for all areas of your life.

  12. So where are you moving? Somewhere in CA I presume? My wife and I are also moving (to CA) into new jobs (both Six-Figure bases+bonus). I’m a renter for a while that’s for sure. If the house prices go up even more we’ll probably relocate somewhere else after 3-4 years having a nest egg so big we could pay cash for a $1M “mansion” where an average nice house isn’t 15x the avg salary!

  13. SavingEverything says:

    There’s a lot of factors that are involved to make goldnsilver’s comment true. I think it really depends on what industry, occupation and skills you have in the organization along with the interpersonal skills. Other factors that may be stumbling-blocks is the situation of your company: public/private, size, goals, financial status. BUT, the most important is: Who do you know? The more people you contact with, whether at conferences, seminars, meetings, societies, friends, family, whatever; it’s who you know! (imho) that can get you to a “higher” or “better” job. But, I would like to comment that it is important to get specialized training if that’s what you desire–even if it’s in an area that is not highly demanding.

  14. Jon – are you moving to CA? If so what area Obviously areas like Santa Barbara, Beverly Hills, and Laguna Beach are super expensive @ over 300% the national avg COL. But move inland or others and you can find right at the national avg. We’re renting for a while – making 100k+bases+bonuses/etc. for a few years and then decide if we want to stay. If house values continue to go up we probably won’t be staying in CA since it’s 15x salary for an “AVERAGE” house.

  15. Jon,
    Your post reminded me of Stupid, Ugly, Unlucky and Rich: Spike?s Guide to Success. While The author does not equate success with Money (necessarily) it does have some very good points.

    I posted a little review on my site. (also a link to a 3 minute presentation on 8 factors that lead to success)

    http://www.myunbridledenthusia.....press/?p=3

    Enjoy

  16. Mariusz Pudzianowski says:

    Just don’t buy a house in the new area for a few years. The market is going bust like never before… And to the guy who bought his house just RECENTLY with CASH — great idea but unfortunately you just bought at the TOP of the market. You could have waited another 2 years and bought for close to 1/2 of the current cost.

    All that hard work saving and you just set a bonfire to probably about $100K in cash.

  17. Nony-mouse says:

    Mariusz,

    This is definately not the top of the market. Top of the market is a year ago and trust me….this is chicago…it is not like california….where the houses have been inflated. The house i purchased will not even reach $250K in a bad bad market. In the rest of the country, houses stop appreciating in a bad market and only perhaps drop 10 to 20 %……..

    If the house does reach $100K, I would jump and buy 6 of them.
    Your argument does not make sense

  18. Chris in Boston says:

    Buying a house and paying cash is crazy.

    Why? Because in addition to the tax benefit, with todays historically low mortgage rates you can get a cheap mortgage, and put the 300K into the market and get a much better return.

    After taxes a 6.50% rate on a 30yr mortage is really costing you closer to the 5.25% range and you can easily earn 8% or more on your money in a well planned investment.

    Run the numbers through a spreadsheet and you will find that taking a mortgage out and puting your money in a good investmnet will be the better option.

  19. Chris in Boston says:

    Non-Mouse,

    The rest of the country in a bad market ONLY drops 10-20%?

    You should also note that a $500K home dropping 20% in one year will take years to gain back the loss. A 20% drop requires a 25% gain to recover the loss.

    East Boston dropped 15% last year. in the late 80% I knew 10 people living in Providence that ened up upside down on a mortgage, some owing more 50K more than their homes were worth. There is no gaurantee that your home will not drop below 250K. To think otherwise is foolish. Not say it will happen, but saying it will never fall that low is a bit too confident.

  20. Nony-Mouse,

    I agree with “Chris in Boston.” You are ignoring a key variable of opportunity cost when you pay cash outright for a house. Here is an article that details why it is probably better to mortgage a house:

    http://finance.yahoo.com/exper.....gage/30889

    Enjoy!

  21. Nony-mouse says:

    Chris,

    Put it this way……i got my house from an estate sale. The actual value of the house is around $375K. (Bank was willing to give a loan for $375K) (Zillow values it around $425K….remember, if someone is able to save $300K in 6-7 years, that person shouldnt be too foolish to rush in and buy a home that he/she thinks is not worthwhile)

    I cannot keep living my life thinking what if it drops more. If it drops, so be it, I have paid for it. I will never owe more than its worth. Plan to live here quite awhile.

  22. Ted Valentine says:

    We’re making 200k but oh it costs soooo much!

    DINKS and their financial worries. Ha! You want financial courage, try it Ward Cleaver style: stay at home mom and 3 kids 4 and under. And I’m pulling just over a quarter of what y’all make.

  23. Jon Green says:

    I think paying cash for a house is a wonderful idea and I plan to do the same some day. Taking out a mortgage just to put the money in the stock market is stupid. The stock market can do no wrong at this moment in time, but markets fall and sometimes crash. The peace of mind of having my house actually mine and not the bank’s would be so worth it.

  24. I’m an airline pilot and I barely make 5 figures……….

  25. My goal was to purchase a foreclosed property and sell it for profit. I’ve now have a way of determining when a good deal comes my way, and I’ve attended more than 100 auctions. I’ve also reserved a heloc so that I can purchase the property. To date, I have not won at auction, but I am patient and still working at it.

  26. Funny how easy it is for those that do not have $350K+ to tell those that do what to do with it. Chances are that someone who has $350K (minimum) to spend, has an AGI over $150K, and thus does not qualify for fully itemizing anyway (SchedA,line28). And that’s assuming that they aren’t hit with AMT, eliminating any tax advantage entirely…all the while continuing to be taxed on investment returns (albeit at the LTCG rate, assuming it holds for 30yrs and isn’t subject to AMT as well). If investing is a study of risk vs. reward, why take on the same risk at a reduced reward? Would you invest in a mutual fund with a 6.5% expense ratio? If there were guaranteed returns higher than the mortgage rate, why would banks loan it to you instead of investing it themselves? We should all be so lucky as to be able make the “mistakes” that Nony-mouse can afford to…

  27. love the diagram.
    thanks for the great post!

  28. Jon Green,

    Please point me to a 30-year or even a 15-year period where the stock market’s return was negative. In a well-diversified portfolio (including international and asset type diversification), it would be very unlikely to lose money.

    While I would never argue that paying cash for a home is a bad financial or personal move, there are advantages to (reasonable levels of) leveraged financing.

    Don’t forget, housing markets can sometimes fall and crash too. So, putting all of your eggs in one basket (assuming home price is total net worth) is not an advisable move. Spreading out your investments by financing is better from a diversification perspective as well.

  29. Ethan- Wouldn’t your return have to at least beat the rate on the mortgage (after taxes of course), not just break even? As an example consider the most recent 15yr period from 1/91 through 12/06 where the market earned an annualized 9.5%. The average 15yr mortgage in 1/91 was also 9.5%. If you go back to 1/77, the average 30yr return was 9% while a 30yr mortgage was fetching around 8.75% (on it’s way to the moon). And I’m only considering the last 15/30yr period. Sure there are refi’s and tax implications (on both sides of the equation) to consider, but it is not the slam dunk that alot of people here seem to think it is.

    Further, wouldn’t fluctuations in home value affect your net worth regardless of whether or not you financed it? You can’t just walk away from your mortgage during a housing crash and hope to keep your other assets. Therefore market risk on investments and housing here are additive, NOT a diversification strategy.

  30. Chris in Boston says:

    Another argument to consider against paying a house in full upon purchase is the fact that doing so ties up your liquid cash or reasonable liquid assets into an asset that is not easily made liquid. Buying / Selling real estate is a complex transaction.

    I would much rather take a mortgage, preserve my liquid assets and diverisfy those across a mix of investment types to balance risk and liquidity.

    Seems to me it just makes more sense to do that. Unless opf course your have more than 300K in funds to begin with. I assumed that the 300K used to buy the home was all the funds available.

  31. I could be earning 6 figures right now. But I wouldn’t see much of my daughter and my marriage would be stressed. No thanks.

  32. Six figures really isn’t that big a deal anymore. Anyone in IT who has a masters degree can command it from Iowa to Seattle to New York. And in IT your work/life balance is not compromised like it would be in Finance. Of course MBA’s in Finance can work 50-80 hours and rake in 250k+ in bonuses too. Whatever floats your boat. I’m at 102K base with 10% bonus at a large software company where we have foosball, can wear shorts/sandals to work, and take two hour lunches to go surfing or rollerblade. It’s not about face time but about contrubting to the bottom line and getting your job done.

  33. Ted Valentine says:

    I wonder how much longer until all of the jobs like bob’s are gone to India for one tenth the cost? Two hour lunches and surfing? Good for you, but that gravy train ain’t gonna last long partner.

  34. Yep, boohoo we’re DINKs ;) , but won’t be forever. The plan is to sock away as much as we can now.

  35. Chris in Boston says:

    Ted V,

    The gravy train isn’t leaving the station anytime soon.

    In the IT world, the US Census Bureau is indicating that the next 10 years there will be a deficit of skilled workers in the US as Boomers retire. Something like 80 million are retiring, but only 28 Million are entering the work force. This is a HUGE deficit in the up coming next ten years. The ten years after that we will see an even greater deficit as another 70+ million retire and less than 25million enter. So over the next 20 years, employment here in the US should be very very good for those with the right skills.

    I work as Director of Support for a large huge software company that has 4.75 Billion in revenue, while we do have support engineers in India, we have a very high attrition rate in our India call centers. Believe it or not, outsourcing to India is not as cheap as everyone thinks. There are still a ton of infrastructure costs to consider.

    Not to mention that my company is keenly aware of the complaints from customers that want US based support. Since it is so difficult to retain talent in India due to the attrition issue, and our customers want US based support, we have more req’s open here domestically than we do anywhere else.

    My predicitions are that the next 20 years will be a boom period for those seeking employment in the US. I for one feel very confident that I will have a job, and will be offering jobs to people for the foreseeable future.

  36. well ted valentine, i’m guessing while our leading software company continues to return both on capital and investment in the areas of 20% (which oh, is probably 20x the avg manufacturing firm) we’ll be just fine :)

    unstructured work hours do work – just look at best buy – everyone can telecommute there

    have fun at the “office” … LOL

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