05 Jun Why I Turned Down A $180,000 Salary

Okay, to answer the obvious question first. Yes, I was making much less than $180,000 a year when it was offered to me. In fact, my salary was almost exactly HALF that. About $91,000 to be exact, if my memory still works.

I was the top salesperson in my region and had multiple offers to different promotions in the company. Now, for full-disclosure…it was probably going to be more than $180,000. That was what we called our “target income” which was a mix of salary + commission since it was a sales position. But at that point in my career, I had always exceeded that number so I knew it’d probably be more since I was earning more than the $91,000 every year in my current position.

So where am I going with all this? Come on a magical ride with me to explore the world of cost-of-living and how the money you THINK you’re going to be making is much less than you ever thought (the magical part of the ride is how quickly your money goes down in many situations). Cost-of-living (COL) is one of the most over-looked and statistically significant factors that people constantly forget (or don’t know about) when they are considering a new job.

The C.O.L. non-calculation

I’ll never forget this conversation. I was talking to a good friend of mine who surprised me with news that he was moving away from the city he had lived in all of his life. He wasn’t the kind of person to surprise you with a birthday cake let alone news he was moving to a different part of the country.

He had been working in the property appraisal industry and had received a promotion. It was something a little different but he had to relocate by roughly 1300 miles from the place he had called home all of his life.

I immediately congratulated him and asked him how much they were going to pay him (see, I’ve never been shy about talking money). He tells me it’s about a $5000 raise. I did some quick calculations in my head and asked if he was taking the promotion for any other reason than the money.

There were additional future possibilities in the move if he served his time and did well, but for the most part, it was the money.

That’s when I had to give him the bad news. He had made a serious non-calculation with his promotion.

We lived in Florida, one of the seven states in America that doesn’t have a personal income tax. He was moving to one of the 43 states that did have one. When I mentioned that, his eyes lit up a bit. Next thing you know, we’re on the World Wide Web searching the depths of it’s knowledge for this state’s tax rate.

It wasn’t even Top 10 for the highest state tax rates in the USA, but it was enough to wipe out his $5000 raise.

And that was JUST the state tax! We didn’t even bother getting into the fact that this city was definitely going to cost more in housing. Just like that, my friend’s promotion turned out to be a demotion in take-home-pay. Total bummer.

How to calculate take-home pay

There’s another term for you…THP. Take-home-pay. This is just what it sounds like. How much money is actually getting deposited into your account on payday.

Well, even though it seems obvious, I’m going to breifly walk through it because so many people still misunderstand this term.

To calculate take THP, consider all of these things:

• Income tax
• State tax (if applicable)
• City tax (if applicable)
• Pre-tax contributions
  • 401k, 403b, IRAs, Flex-Spending Accounts, HSAs, Life Insurance
• Employee Stock Purchase Plan
• Other work incentives (gym memberships, health and wellness accounts, etc)

These are the key components to calculate your new take home pay. At the end of this is what will hit actually your bank account. Too many times I’ve seen people preparing to move somewhere thinking they will bring home $6000 at the end of the month, only to opt-in to benefits and realize it’s actually $5000 and now they can’t afford their new standard of living.

Don’t let this happen to you! Once you know you’re take-home pay and have properly estimated your new COL, then you can adequately assess whether or not a new job position in a new city/state is worth it for you!

So what’s the moral of the story?

Most of the time when someone gets a job offer with a significant increase in pay, it involves living in a large city. Unless you already live in a big city, the difference in cost of living can be dramatic. I’m not saying don’t take it.

What I want is for you to have a proper understanding of what your money situation will be. The larger dollar signs on those salary numbers really pull at the dream station. You start thinking about that new Audi Q7 you could buy or how you could put your kid in a nice private school with the money or how you could take your special person on regular exotic overseas trips!

And maybe you can do those things! But it never hurts to have a true understanding of what this promotion in pay is going to truly mean. Only an idiot would willingly choose to ignore all of these things once they know about it and that’s a recipe for the situation we are all in now.

Droves of young people are fleeing cities like LA and NYC. Why? They can’t save money. They can’t buy a house…or an apartment. They are making tons of money and its being sucked up by powerful forces beyond them before it ever hits their bank account and they are tired of it!

All I want is for you to be AWARE of these forces that are ready to prey on your newly increased paycheck like an innocent baby rabbit out in an open field full of hawks for the first time.

I know you can do it! All you need is a plan and you can make the best decision for your life.

Go forth and conquer!