Today I was taking inventory of my career, salary and where things are headed with my company. Like what we’re seeing in the rest of corporate America, companies have figured out how to do more with less. On an aggregate level, industrial and service sector productivity is through the roof and corporate profits are at an all-time high. Corporate America is minting cash and interest rates are at generational lows. That has the perverse effect of everyone looking over their shoulders wondering if they’re the next takeout target. As such, companies are likely to continue to remain lean in two ways – headcount and salaries.
Our average salary was the lowest I’ve seen in the 12 years I’ve been here. So, even though I had a good review and can’t complain about the bonus and long-term incentive award, my annual increase wasn’t much to write home about and I expect this to continue.
Here’s Why My Salary Will Never Increase Again
- Annual Increases Likely to be 2-3% Forever – I’m not optimistic that we’ll be seeing the days of 4-6% annual raises like I saw early in my career. In my twenties, I was “hot” enough if you will, that I was even given double digit retention bonuses when I wasn’t even leaving! Just to stay… Now? With layoffs in the industry, healthcare reform and a 9% unemployment rate, employers see no need to retain employees with lavish raises. They have nowhere to go!
- Raises? Maybe 1 To Go – I moved up pretty quickly early on in my career and I’m realistic about the prospects of NOT being a VP or CEO someday. While I might eek out a 5-10% bump once more for another promotion to Director somewhere along the way, that’s a one-time boost I wouldn’t see often prior to retirement. I used to be on the “fast-track” and work tons of hours. Since becoming a family guy and reassessing my priorities, I’m content with a solid middle management role with increasing responsibilities along the way, but I’ve changed my outlook on the C-suite role by 40. That pretty much leaves annual raises as the primary means to increase salary.
- Staying Put – The only surefire way to make a lot of money in corporate America is to jump jobs a lot. It’s a mathematical certainty. If you have no regard for company loyalty, location, and risk, if you continuously have your feelers out for any job offering a 15% raise from your last salary and jump at each offer you land, after a few jumps, you’ve increased your salary to 150% of your baseline salary had you stayed put. For varying reasons, I’m not actively pursuing opportunities with other companies. Primarily, I don’t really weigh the extra income as a necessity. We’re pretty happy where we are, we’re doing OK financially, and we’re putting money into the house and our community. I never moved as a kid and I’m still best friends with my childhood friend since 5. I’d like for my kids to have the same if possible. Moving for money just isn’t worth it at this point. If things were headed south here or something changed financially, then of course, I always have my feelers out the awesome network TheLadders.com where I’m constantly alerted to 6-figure opportunities by job and region. But I have no plans to move, so my salary will likely inch along.
- Increasing Costs – With my salary realities reflected above, it’s now time to get real about costs moving forward. Once again this year, the increase in our health insurance contributions practically wiped out my annual increase. On top of that, inflation is rising. Despite the low government numbers which are useless, the REAL costs everyday people see like gas, food and clothing are all increasing. Global inflation is much higher outside the US as well, and with our global supply chain, that will eventually eat its way into our economy. Not to mention the endless printing of dollars. Just use Gold as a barometer and you can see what the market is saying about US dollar purchasing power in the world.
How to Manage This New Reality
- Fixed vs. Variable Costs – One of the largest recurring costs we have is the mortgage. Fortunately, the monthly mortgage payment is fixed in real dollars, and hence will decline in future dollars. As my annual salary increase, even at a snail’s pace, the mortgage payment stays the same. So, that’s one fixed expense that will decline over time. Most of my variable expenses will continue to increase at least on par with or exceed my annual raises due to inflation. Health care premiums are likely to continue to increase above inflation, but if my wife ever goes back to work teaching (the plan is once our youngest gets into 1st grade but we’ll see if that works out), we could probably hop on her plan. Teachers tend to get golden benefits where they pay very little into their healthcare and pension costs and the taxpayers eat the promised costs. (Contrast In Defense of Teachers with Chris Christie is a Hero and Unions Should be Ashamed).
- Drive Out Costs – I’m always looking for ways to cut costs on products and services we’d normally be paying for anyway, like when I saved over 60% off a new fridge and how I routinely cut my Comcast bill by threatening to leave. The obvious include coupons and avoiding sale gimmicks at Gap when we don’t actually need things. I work under the premise that everything’s negotiable, even when it traditionally isn’t.
- Additional Income – You can only cut so much out of a budget and frankly, we like to split saving for a rainy day with enjoying life in the present. So, to be able to hit all our goals of funding 529s, IRAs and 401(k)s, along with fun vacations, gadgets and activities with the kids, I earn extra money on the side (see the Economics of Blogging). When time permits, I seek out various opportunities to earn extra cash, being mindful that the ROI has to be worth it since I have limited time. One such endeavor is a new CAD Drafting outsourcing firm a friend and I set up. We’ve only been live a month or so and we’re already profitable. So, that’s an example of a great side gig that’s eating up some time now but should pay off in the future as the return/time increases.
- The Wife – We’ve been living off one income for 7 years now since our first son was born. I’m glad we started off our marriage with the ability to do so by driving reasonable cars (fully paid) and not buying a McMansion or keeping up with the Joneses. This way, when my wife delivered and decided she wanted to stay home instead of go back work (surprise!), we were able to do it. So, if and when she gets back into the workforce in some capacity, this will be supplemental income and also act as a buffer in the event of my job loss.
Given the combination of low annual raises and high cost of living increases, in terms of real dollars, it’s likely that I’ll never make more money than I do now in my professional career (I hope to keep growing my blogging income though according to my 2011 Objectives!) . This is the same exact scenario facing millions of Americans, perhaps yourself included.
Have You Faced Up to This Reality?