Money is multiplied in practical value depending on the number of W’s you control in your life: what you do, when you do it, where you do it, and with whom you do it.” – Timothy Ferriss, author of The 4-Hour Workweek
What’s your formula for calculating your value in the marketplace?
How much should I be making? How much is enough?
Consider these unsettling facts about the marketplace:
- Federal Poverty Line for an individual is $12,880 (family of 4 $26,500 regardless of where you live) This is cruel joke to give us all the false impression that we are making progress on reducing poverty. We have never embraced a “living wage”– a socially acceptable level of income that provides adequate coverage for basic necessities such as food, shelter, child services, and healthcare.
- United Way’s 2021 Real Cost Measure shows that it takes more than $90,000 for a family of 4 to meet the basic needs to live in urban California. No wonder why most of us feel like we are barely making it?
- Federal Minimum wage has not been raised since 2009 $7.25 and hour ($15,080 a year). But if it were indexed against non-inflation adjusted average Wall Street bonuses it would be almost $62!
- Inequity is growing faster:
- Salary growth for top 10% has been 179% vs 28% for the bottom 90% since 1979.
- Current average salary for top US 1% $823,763, top 5% $342,987, top 10% $173,136
- Top to average salary ratios at major corporations:
- 1950 20 to 1
- 1980 42 to 1
- Today 1000 to 1
- According to a study released by Mercer last week, only 25% of employers are factoring in inflation into wage and salary adjustments this year.
So where do you stand? Or better, how do you withstand?
Are you in control or at the whim of the world?
You need more money to “be comfortable” and to sustain the life you are building, am I right?
So more money is not only desirable it is necessary!
Never met anyone, any employee, any candidate who was overpaid. They all want a bump, an increase, to get to the next band or level. No one is average. Everyone has worked hard. Everyone is qualified. But we know better.
Over confidence, high expectations, and a competitive market are a recipe for disappointment. Particularly for new grads, career changers and anyone on auto-pilot until retirement.
Which inflation is driving your need for more money–The Economy or Your Ego?
This leads to Breaking Bad career decisions. Not selling meth! But abandoning what you want to do for soul crushing choices. All teachers know this.
But I can’t make enough money in those types of careers.
Once you understand your financial requirements, your career and life choices broaden.
But there is a Grand Canyon between your financial needs and your wants. Understanding this distinction is essential if you want to design a better life.
Why do we buy things we don’t need with money we don’t have to impress people we don’t like?
Most important you have to know your number—your Minimum Salary Requirement (MSR). How much you have to make to live comfortably but exclusive of any wants. The MSR is a calculation of your needs. Your basic stuff, shelter, food, healthcare, transportation, student loan payments etc.
I used a 5 question email “interview” for more than 20 years ago vetting thousands of candidates. A very effective process of assessing candidates’ seriousness and initial compatibility. The fifth and final question: “What is your minimum salary requirement? If you do not insert a number your application will not be advanced.” Some people could provide their Sleep number, the last 4 digits of the SS#, and even their last salary, but not their MSR. Nothing prevented them from adding a premium for the sector or the employer, or for the geography if a move was required, assuming the applicant had done a modest level of research. So rejected candidates inserted “negotiable.”
I never negotiated a salary that ended higher than we started. A few times I was asked what I needed, I responded based on my previous salary and my expectations. I was always rebuffed. But I always exceeded my MSR. Over my career I sustained four substantial pay cuts to start new jobs and enter new sectors. These were all jobs I really wanted. Yeah, that may have put me at a psychological disadvantage, but these were opportunities that I was surprised they paid me to do them!
The general notion that your salary and compensation will always go up is at best naïve and at worst delusional. If your MSR keeps rising without flexibility then you can be assured of two things: Increasing risk aversity AND decreasing options for career change.
When life is conducted by accumulating financial obligations that grows in lock step with compensation, we never have the ability to fully catch up to have savings for our kids’ college and/or retirement.
I think the Great Resignation also includes a growing percentage of people realizing that their MSR is untenable when they want to realign their priorities both purpose (meaningfulness) and life portfolio (making room/time for other passions e.g family, hustles, and avocations…)
The establishment of your MSR must precede any job search, career transition, retirement–any change in your life must be accompanied by that number. During every transition, both planned and unplanned, I had to calculate my MSR. Perhaps it was my start-up and non-profit experience of constantly thinking about break-even analyses, burn rates and fundraising….
Once you know your MSR, you can use it as a base to gauge the marketplace, the sector and even the specific employer. How much above or below your MSR can you reasonably expect?
For me this is where hustles, hacks and hobbies had to fill in the financial gaps. Yep a side gig or two. I took 200 vacation days to enhance my income and my career prospects. Honing my speaking skills, expanding my network, finding fulfillment, and making money. Rarely could depend on the salary of my occupassion to meet my MSR and my financial goals.
How much is enough? This question is your co-pilot to avoid the mountain of MORE. If you want to be agile and available to what’s next, then you have to keep flying by MORE.
How much does money mean to your sense of success, your status in the world, therefore your ego?
I get asked all of the time: “Can I make a living working at a non-profit?”
But what sector in “non-profits”? Are you hoping to have a hedge fund manager comp package working at a homeless shelter?
It is not a job question, it is a YOU question.
I found you can make a very good living in the non-profit world. Except once, was able to exceed my MSR. When you calculate in the bonus of fulfillment, meaning and purpose, it is a compensation no-brainer!
With an MSR in hand, you can think more about what Tim Ferris’ 4Ws-What, When, Where, and With Whom.
Are you looking for a job that will provide for all your needs? Or are you trying to design a life that feeds your soul and your retirement fund? What is your MSR—Your Minimum Soul Requirement?
Thanks for reading. John
2 thoughts on “What is Your Minimum Salary?”
Sage advice John. The financial challenges presented today, though are often too complex for people to address by figuring out a monthly “nut” and basing their MSR on that. While I agree that some people foolishly spend beyond their means, the costs of chronic illness (and reduced benefits from health insurance), unanticipated private school tuition (when you thought you had moved to an area with great schools and paid more for your house) and the sudden need to support elderly parents can exceed the expenditures you can plan around. I have lived all of those experiences and fortunately have been able to find the resources to address them, but many people find themselves trapped in debt as a result.
Thank you for your thoughtful comments and insight. No question that these times put added pressure on the budget and therefore the source of income. Healthcare is not negotiable and therefore needs to be reflected in the MSR. And you didn’t talk about the most notorious topic — student debt! And when student debt surpassed credit card debt in 2007, we saw the dramatic change in net worth. Private school tuition triggers choices. We had three kids in three private school systems and that broke our MSR, so we moved. When I conducted a study of LA County in 2011 38% of HHs had negative net worth! I think that might be closer to half today. Your point about indebtedness is well taken. So MSR has to incorporate the repayment of that debt in a timeframe that befits other goals. And the management of any new debt. Basic financial planning. MSR is not merely the “nut”, so I apologize if that is the way it came off. MSR is your understanding of what you have to make to make ends meet and beyond. Thanks for reading. John