Taking a Significant Paycut when Changing Jobs Before Reaching FI

[Libertea]

I know plenty of people achieve FI and then take a lower-paying job for love, but I'm curious if any of you have done this prior to reaching FI.  If so, how did you deal with the decrease in income, since this obviously interferes with your ability to reach FI?  And how confident were you beforehand that you'd really love the new job?

In my case, I would need about two more years at my current job to reach minimum FI.  I keep going back and forth regarding whether it is worth sticking it out here for another two years.  I don't hate this job, but I don't love it either, and there is no doubt in my mind that the stress of it is shortening my life span.  I also dislike the current city I'm living in (moved here for the job) and would like to leave.  For sure if someone handed me a million dollars right now, I'd be giving my boss my resignation letter in the morning. 

I do have thoughts about what I'd like to do instead.  The entry level salary of the new job in a different field would be about 20-25% of what I'm currently making.  That is still more than enough for me to live on and even save a bit, but obviously it will significantly slow my savings rate down.  This is my first reason for hesitation about pulling the trigger prior to FI; a part of me feels like I should suck it up for two more years and THEN change fields after reaching FI since I'm already so close.

There is a second reason as well, which is that I don't know for sure that I will love the new field either.  When I think back to all the jobs I've had in the past, I obviously have liked some better than others.  But I don't think there has ever been a job that I have loved to the point that I'd continue to do it for free.  And again, I have to have some appreciation for the devil job I know, which would allow me to reach FI in about two years.  If I wind up not liking the new job any better, I'll basically be accomplishing nothing in terms of improving my happiness, and I'll be unnecessarily delaying FI for no gain.

If these kinds of data affect anyone's advice or input, I'm 40 y/o, female, single, no kids, no debt.  The earliest I could change jobs (due to current contract) is in about a year, so I'm basically agonizing over a one year difference in when to pull the trigger.  If I change jobs before FI and decide I want to go back to my original field later, it would be possible (though not necessarily with the same employer).  It would also be possible for me to change fields and continue to work in my current field PT for some extra money (which may be what I wind up deciding to do). 

Any advice, anecdotes, or cautionary tales are welcome.

[mxt0133]

If I had a nickle every time someone asks this question, I would be FIRE already!  All those threads usually come down to what the individual values more and how they would feel if their 'plan' doesn't work out.  In your case you say that you are two years away from FI.  What does that depend on, is it the stock market or some other form of investment?  How would you feel if in two years you find that you are not yet FI?  Would you regret waiting the two years or would you keep going until you reached that FI number?  How would you feel if in two or three years after reaching FI you are not able to do the things you wanted to do due for some reason or another?  Would you have wished you had went for it or would you be at peace that you made the best decision you could at the time?

The point of these questions are you help you reflect and hopefully help you discover what you truly value and act accordingly.  If you went for it and it didn't work out would you beat yourself up over it or would you learn from it, become stronger?  Some of us are naturally more conservative than others.  My wife can just pick up and go move across the country or the Pacific without much planning if that's what she feels like doing.  She doesn't dwell on the past and just lives in the moment.  For me I need to plan and be at peace that I have weighed the options and alternatives as best as I could at the time.  Even if it doesn't workout I can move forward and not beat myself up too much.  I tend to reflect and see how I could have made a better decision but for the most part I can let it go.

Another common theme that I have noticed in these types of questions are the two polarizing options, for the most part there are options in the middle.  Can you switch jobs without extending your FI date?  Can you somehow reduce your expenses that a job switch doesn't significantly push out your FI date?  Can you get a part-time job or roommate to cover the short-fall? 

Sorry, if it doesn't help you come to a decision but I hope having answers to some of these questions will lead in the right direction.

[Libertea]

In your case you say that you are two years away from FI.  What does that depend on, is it the stock market or some other form of investment?

No, that is solely coming from savings rate.  Given the short timeframe, I don't think factoring in appreciation of my savings is appropriate.

How would you feel if in two years you find that you are not yet FI?  Would you regret waiting the two years or would you keep going until you reached that FI number? 

Again, I am going solely based on the savings rate.  If I keep working at my current job for two more years, and I don't increase my expenses during or after that time, I will have saved 25x my expenses in two years, assuming NO asset appreciation.
 

How would you feel if in two or three years after reaching FI you are not able to do the things you wanted to do due for some reason or another?  Would you have wished you had went for it or would you be at peace that you made the best decision you could at the time?

I don't know how I feel about that right now, let alone how I'll feel about that in 2-3 years.  If I had that kind of prescience to predict the future, I'd be schooling Warren Buffett with it. ;)

In general though, I am not a person who second-guesses or Monday morning armchair quarterbacks.  At each decision point, all you can do is make the best decision you can, with the information you have available at that time.  I certainly don't think it's reasonable to beat myself up over having imperfect knowledge of the future.

The point of these questions are you help you reflect and hopefully help you discover what you truly value and act accordingly.

The problem I have (and the reason why others also have these types of questions) is that I have conflicting values.  When everything lines up nicely in terms of one's goals in life, it's easy to figure out what's best to do.  But when you have two important values that conflict, and putting more effort toward one will interfere with achieving the other, that is the rub.

Sorry, if it doesn't help you come to a decision but I hope having answers to some of these questions will lead in the right direction.

It doesn't help me come to a decision, because I don't clearly value one goal more than the other, and if I do nothing, the whole question will be moot in two years anyway.  But I do appreciate you taking the time to respond.

[RobFIRE]

In summary the 4% SWR / 25x spending FIRE point is normally explained as working full time to reach that 25x invested point, then doing zero work thereafter. That is the logically simple route with a switch from full to zero, and gives you maximum time with no need to work, but prior to that point you are working full time. So it's all the effort up front.

Though if you look at the FIRE financials another way, you could also work full time to reach e.g. 20x from 4% SWR, then have 5 years working part time just to cover your spending while reinvested investment gains took you from 20x to 25x over those 5 years (approximately, and on average; average investment returns in the year with 20x invested will only be 80% of those in the years with 25%, so perhaps it's 5.5 years or so this way). You would then be 25x after working full time then part time for 5 years, with 5 years less of working zero, but you've just had 5 years of working less than full time.

So it's up to you what you prefer. Stay with the logically simple option of full time, 25x FIRE, then zero work required (all the effort up front and all the reward later), or take a middle ground (less effort now, taking some of your reward now, so a bit less reward later). In that sense it is a question of how you prefer to distribute your effort versus reward.

[Libertea]

Though if you look at the FIRE financials another way, you could also work full time to reach e.g. 20x from 4% SWR, then have 5 years working part time just to cover your spending while reinvested investment gains took you from 20x to 25x over those 5 years (approximately, and on average; average investment returns in the year with 20x invested will only be 80% of those in the years with 25%, so perhaps it's 5.5 years or so this way). You would then be 25x after working full time then part time for 5 years, with 5 years less of working zero, but you've just had 5 years of working less than full time.

So it's up to you what you prefer. Stay with the logically simple option of full time, 25x FIRE, then zero work required (all the effort up front and all the reward later), or take a middle ground (less effort now, taking some of your reward now, so a bit less reward later). In that sense it is a question of how you prefer to distribute your effort versus reward.

Yes, this is basically the decision in a nutshell.  Though I do want to clarify that regardless of which route I go, I do not intend to stop working altogether after reaching FI.  I just want to A) be doing something else besides what I'm currently doing, and B) doing it for fewer hours than I'm currently doing.

[mxt0133]

Though I do want to clarify that regardless of which route I go, I do not intend to stop working altogether after reaching FI.  I just want to A) be doing something else besides what I'm currently doing, and B) doing it for fewer hours than I'm currently doing.

If you are going to continue to work anyway then go for it and find a job that will cover you expenses while you stash grows.  If you can't find one that fully cover's your expenses then supplement with you savings until it does.  If it doesn't pan out then go back to what you were doing before.  That way you get a head start on actually doing what you want to do and if it doesn't work you then you go back to your original job/career and save up until you can work part-time again.

[BBub]

In your shoes, based on the info provided, I'd grind it out the extra year. 

You are rocking along with a ~80% savings rate.  You didn't give actual numbers, but say you're making $100k with $20k expenses.  The new job would pay $25k.  You're currently saving more per month than you'd save in an entire year at the new gig.  A good bit more per month, at that.

One year really isn't that long - especially if you know it's your last.  You're on contract this year anyway, you can enter '17 with a renewed sense of peace knowing it's your last, then celebrate new year's 2018 as a financially independent 42 yr old.  Then decide whether you want to take that lower stress job, a completely different job, or do any work at all.

My thoughts would be much different if you were just beginning the journey, maybe a decade away - or even several years away.  But you are talking about one year, 12 months of sticking it out.  Just do it. It'll be over before you know it & you'll be in a much stronger financial position to chart your next move.

[Libertea]

In your shoes, based on the info provided, I'd grind it out the extra year. 

You are rocking along with a ~80% savings rate.  You didn't give actual numbers, but say you're making $100k with $20k expenses.  The new job would pay $25k.  You're currently saving more per month than you'd save in an entire year at the new gig.  A good bit more per month, at that.

One year really isn't that long - especially if you know it's your last.  You're on contract this year anyway, you can enter '17 with a renewed sense of peace knowing it's your last, then celebrate new year's 2018 as a financially independent 42 yr old.  Then decide whether you want to take that lower stress job, a completely different job, or do any work at all.

My thoughts would be much different if you were just beginning the journey, maybe a decade away - or even several years away.  But you are talking about one year, 12 months of sticking it out.  Just do it. It'll be over before you know it & you'll be in a much stronger financial position to chart your next move.

I know.  There is no doubt in my mind that this is the objectively sensible thing to do. :-)

Counting pretax retirement contributions to my 401k and the employer match, my savings rate is actually around 100% of net pay.  I obviously would lose that extra boost from the employer match as well by quitting sooner.

If you are going to continue to work anyway then go for it and find a job that will cover you expenses while you stash grows.  If you can't find one that fully cover's your expenses then supplement with you savings until it does.  If it doesn't pan out then go back to what you were doing before.  That way you get a head start on actually doing what you want to do and if it doesn't work you then you go back to your original job/career and save up until you can work part-time again.

The new job would completely cover my expenses and still allow me to save a reasonable amount, albeit at a much lower savings rate.

[RedmondStash]

Spouse & I are close to FI. I made a career change a few years ago, from higher-paying IT gigs to the lower-paying videogames industry. It has definitely slowed down our progress toward FI.

Absolutely no regrets.

I love my job and would keep doing it even after FI, assuming I still like it then. :) But I need to be active and productive, and I feel and do better in my life when I'm working than when I'm not. Work for me is productivity, usefulness, community, mental stimulation, structure. The paycheck isn't exactly an afterthought, but it is less crucial.

For me, being close to FI meant having the freedom to take lower-paying jobs in order to find something I loved. I went through a few (I freelance a lot) before I found one I wanted to stay in.

My goal isn't retirement; it's happiness. FI is a means to that.

So for you, I'd say it depends on how you can maximize your happiness not just in the future, but now. It also depends on what you really want to do once you hit FI. If you want to retire and travel the world, that might yield a different answer than if you'd take a part-time job just to see other human faces and feel useful.

Good luck.

[SeanMC]

I just made a similar call to switch to the (much) lower paid job.

I am in a somewhat similar situation - roughly same age, single, no kids, no debt.  I'm probably not as close to FI (for my risk level, I'd want to work more than 2 years more), but would be fine living on the lower salary serving as bridge.

My decision was based on a few factors specific to me:

1. The lower paid job itself: It's something I would be excited to do even if I was completely FI. And it's something that I could never get the same experience trying to go it solo as joining an organization/team. I can't predict exactly how it will go, but I tested out aspects of the new job on the side to see how I'd feel about it before switching entirely.

2. Geography: The new job was somewhere I wanted to be. The old job is somewhere I do not want to be. There is some risk, though, because the new job also expect/require relocation. I had to be ok with the idea that I would want to do it even if I wound up in less preferred site.

3. My age: I felt that the window was running out for being an attractive candidate to get this type of job. Waiting for FI might mean not being able to pursue this opportunity.

4. Work/Lifestyle preference: I do better having work to go to. I've had unstructured time before and have found that for me, I am happier having a place to go, where I get to see and work with people I like, devoted to same goals. So even at FI, I would not prefer to be entirely job-free/work-free.

It's a risk. The new position may not work out, and I'll be farther away from FI than if I stuck out the old job. But so is staying in the same position for 3+ years, living somewhere I know I don't enjoy, feeling stressed about things I have no power to change, and maybe not being able to switch over into this other path at the end of it.

Only you can know what's right for you.

[2Birds1Stone]

I have done this as a thought exercise and could see myself taking a position with less pay for higher satisfaction.

The thing is, with only 1 more year after current contract expires I might just suck it up and stay. 12 months is not THAT long and if you know you are out the door with 25X expenses saved up, the stress from work should be minimal.

Such a personal choice, you already won the game. Follow your heart.

[Libertea]

I have done this as a thought exercise and could see myself taking a position with less pay for higher satisfaction.

The thing is, with only 1 more year after current contract expires I might just suck it up and stay. 12 months is not THAT long and if you know you are out the door with 25X expenses saved up, the stress from work should be minimal.

This is my thought too.  Let's face it: the way you reach this point is by delaying gratification, for years (even decades).  And in the whole scheme of things, how big of a deal is delaying for one more year?  Especially if some of the aggravations at the current job can be ameliorated (and they possibly can be).

Thanks for all the anecdotes, guys.  I still have a few months to mull it over, and I'll be meeting with someone who could potentially hire me in the new field next month.  But it's still informal at this point; I haven't actually applied for the position.