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Time vs. Money: When to trade DOWN

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When I graduated from college, I had a job offer from Google. They were great, saying, “You’ve been in school for 5 years…you should take a break!” I was like, “Oh I know, I was already planning it.”

Google: “So how long do you need? 2 weeks?”
Me: “Uh, no. See you in 3 months.”
Google: “That’s not gonna work for us…how about 4 weeks?”
Me: “No, I’ve been in school for 5 years. I love you but I need a break. See you in 3 months.”

During that time, I launched a product called PBwiki with a friend, which ended up taking off. Over the next couple months, I agonized over whether to turn down Google or walk away from this new startup.

I ended up walking away from Google.

One of the things that surprised some of my friends was walking away from that kind of money. It was a lot! Especially for a young kid. But I knew I had more important things than money…and if I made the right decisions and met the right people, I could earn that much in a month…or even a day.

Yet it surprised some people, since in our culture, we’re naturally conditioned to think MORE = BETTER. That’s not always true.

That’s why I love today’s “Ask Ramit” question: Helena wants to know if she should take a lower-paying job if it dramatically cuts her commute.

When would someone take a pay cut on PURPOSE?

Watch to see my thoughts…and as you do, see if there are areas in your life where “trading down” would actually make sense for you.

QUESTION FOR YOU: What’s one area where you could do with LESS? (Don’t just say “eating out” since you know you’re not going to stop eating out. What else?) Leave a comment below.

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65 Comments on "Time vs. Money: When to trade DOWN"

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John Garvens
3 years 11 months ago
Great advice, Ramit! I needed to answer this question for myself last November. I opted for the lower paying job. Now, I commute about two minutes to a job that I love. To Hell with the money. My life is awesome right now! Areas I could do with less: – Food: For the past month, I’ve been cooking more meals at home. My eating out has stayed about the same. But I’ve been buying in bulk from Costco, cooking in bulk and eating lots and lots of leftovers. The other day, I estimated that my total cost per meal was… Read more »
Eric
Eric
3 years 11 months ago
Ramit, I appreciate the video and agree with you that Helena essentially has her mind made up, she is just looking for confirmation. About a year ago I came across nomoreharvarddebt.com and decided to take it upon myself to pay off my student loans by the time I was 30 (I was 27 at the time). To accomplish this, part of my process was to figure out what I could live without and either sell that item or downsize. Although this didn’t happen overnight, I sold my $30,000 vehicle and purchased a $2,500 truck and decided to live in an… Read more »
Eric M
Eric M
3 years 11 months ago
This is very similar to my story to. Although my issue what a career change, the actions were similar. I took a cut in pay, but negotiate $10k on top of what the offer came in at. I did a lease swap on craigs list for my brand new $30k+ car and bought a $2,500 truck. Lessening my financial burden is allowing me to enjoy this new career and i’m excelling beyond anyones expectations. I am on track to close that pay cut gap in one year, and from there the sky is the limit. My only debt is my… Read more »
Naveen Dittakavi
3 years 11 months ago
I took a major revenue cut this past year (Sep ’11-Sep ’12) in order to shift more of my business from client services (software) to product creation and sales. It took me 6 months of hard work and a lot less money coming in to finally get new products and services to bear fruit. I moved much of my existing business to a utility/usage based model and brought on new software clients under that model. While revenues are still down from last year to this year, my recurring revenue from the newly implemented utility model is way up, allowing me… Read more »
MBK
MBK
3 years 11 months ago
Thank you for your post today. I’m considering a new opportunity doing the same job I do now, but working from home. I currently spend approx 3hrs commuting each day (ATLANTA) and I am a wife and mother of 2 children. While this new opportunity pays a bit less than I make now (only about $10K), I’m considering the value-add of being able to pick my kids up from school and get things done at home in-between conf calls and projects. I’m hoping to choose TIME over MONEY because it’s more valuable to me in the long run.
Laurie
Laurie
3 years 11 months ago
I did the same thing – took a substantial (10%) cut in pay to work at home in Atlanta. Not only was I able to cut out the 3 hours of commute time, but I found I could do what was taking me 50-60 hours in the office in MUCH MUCH less time at home (less than 40 hours per week almost every week). Added to that – at the time I had 2 young children and my new childcare arrangements were much cheaper (college student in my house). I made up the 15k pay cut I took just in… Read more »
Patricia
Patricia
3 years 11 months ago
Hi Ramit, For the last few years I’ve excepted very low pay raises in turn for tele-commuting (working from home). I now work from home 5 days a week. This is great on several fronts – as a single mom I love the extra time I have with the kids, and the added flexibility to attend their events. Plus, this has saved me a ton in gas money and time since I no longer have the 40-mile/one-hour drive eachway. And, I can have lunch with girlfriends when I want, too. The one thing I can do with less of, is… Read more »
Eleanor
Eleanor
3 years 11 months ago

Love the ‘I dream of Ginie” music. Great question. I’ve got a job where that exact question will come up shortly. So, I’ve decided to save the max possible and w/in 6 months max, shift to something I love and better quality of life.
Good luck Helena!

Eleanor
Eleanor
3 years 11 months ago

“I Dream of Jeannie”

Joe Cassandra
3 years 11 months ago
Great video again Ramit! I think it depends on what position you are in on the career ladder. If you need that experience to be higher up down the line, you may have to suck it up for a couple years. E.g. I do finance work, and to break into say the private equity, investment sector, a couple years I will probably have to work my tail off on the bottom of the ladder to succeed in the area farther down the line. But if you’re financial stable and moving down the payscale some, I definitely agree with that (and… Read more »
Joe Cassandra
3 years 11 months ago

Forget the question:

I could definitely do with less TV time and more time building my site. I use the excuse since I work a full-time job that I “deserve a break”, but it’s really just laziness.

Sean
Sean
3 years 11 months ago

I recently quit a job at Fidelity Investments which was paying 65,000 a year as a data analyst. I quit and went to work for smaller firm taking. 20% pay cut. But I gained so mu h more…

My commute was cut in half by 45 min (giving me 90 more minutes of day for time for myself and family) an I actually get along with my boss and co workers an most importantly ENJOY being at work.

annie
annie
3 years 11 months ago

I left my full-time job for several free-lance gigs. It was a slight paycut, but I average much more per hour, and have 10 times more time to focus on projects that matter to me. It also allows me to be a full-time parent, and the freedom to raise my child, travel, etc. is much more important to me than a title or a few extra $$.

Sara
Sara
3 years 11 months ago

I made this decision last summer and took a job that paid less, but was 130 miles closer to home. I figured that I would save a ton of money in gas and time spent on the road – not to mention my sanity! I am so much happier now and my quality of life has drastically improved. I have even received a couple of salary increases and promotions in my new job and am getting close to where I was before. TOTALLY WORTH IT!

Julia Villanueva
Julia Villanueva
3 years 11 months ago
About 18 months ago I started my own business. It was a hobby-turned-business type of idea and seemed to turn a profit at a fairly steady rate (slow, but steady)….and then I got a job offer that was hard to pass up and made the choice to refocus my time and energy away from my business. I had three related reasons for this. 1) I have debt that I wanted paid off sooner than later so that I wouldn’t even have to think about it anymore, 2) I knew that my husband would be more comfortable with the ups and… Read more »
Karla
3 years 11 months ago
Ramit, the timeliness on this is great! I’ve been asking myself this very question for several months and while you’re right that you aren’t the person to give permission, it’s great to hear someone knowledgeable about PF and careers say it’s reasonable to consider. You have to look at the whole package (money, benefits, time) but sometimes it’s hard to place a dollar value on the “soft” stuff like your time. So aside from the commute-related costs, an area where I could do with less is groceries. A year ago, I was spending much less than I do now because… Read more »
Michael
Michael
3 years 11 months ago
Seeing Helena’s question, I was in the same scenario one year ago, almost to the week. I had even recently been given a raise. But, I was commuting to work early. Traffic. Rain. Carpools. Dread. I was able to negotiate a work from home plan with the company, which they had never done in their history. The plan was to show them that with me working from home, they would see no decrease in work quality, in fact they would likely see an increase. I had to take a pay cut as part of the negotiation, but it was a… Read more »
Sue
Sue
3 years 11 months ago

I could do with less clothes. Wait, that didn’t sound right 😉 This is a good topic for the change in season. Why buy another variation of the same black pants, black shoes or a shirt that isn’t quite right? I think the 80-20 principle applies here, like you wear 20% of your wardrobe 80% of the time.

Allison
Allison
3 years 11 months ago

I totally know what you mean! I wear the same old basic items and yet, I buy things that don’t quite mesh with my existing wardrobe persona or things that I don’t need within the next week, so I don’t even take the tags off. Then I feel really guilty…

I think I just had an epiphany. Thanks, Sue!

Sue
Sue
3 years 11 months ago

Well, as far as meshing with your exisiting wardrobe, before buying something new, I always ask myself if it will go with at least 3 other things I already have. Like pink sweater goes with 1) tan cords, 2) gray skirt and 3) jeans. So there you go 🙂

Kym
Kym
3 years 11 months ago

I love you, Ramit, but I don’t like this new thing of posting videos instead of a written post. I don’t like having to watch a video to get information, I much prefer to read it. What I’m saying is, I want the wall o’text back!

(Or, you know, a transcript of the video. That would be okay too.)

Stephanie
Stephanie
3 years 11 months ago

I second this.

Didi
Didi
3 years 11 months ago

AGREE. Plus i am currently living in Africa and the bandwidth and latency sucks which means it is slow and annoying and I would rather not even bother. Everything from the US is recently video based and it end up just being deleted after a a few minutes of optimistic loading.

beth
3 years 11 months ago
I took a serious pay cut when I stopped teaching in the classroom to start my own business tutoring. I am now back in the classroom, part time, as a substitute teacher. I could have subbed last year but I actually needed the year off to collect my wits and emotionally recover from a very toxic situation. Subbing works for me in several ways: it fills in the economic gap in that my business is paying its bills but not mine. It works as a marketing ploy because as people get to know me they will be more comfortable referring… Read more »
Stephanie
Stephanie
3 years 11 months ago
I had reached the peak of my career as Executive Chef of a large conference center and then I quit after 8 months. My family and friends thought I was crazy to turn away from that amount of money but I could no longer handle the demanding hours and pressure that went along with the job. It was putting a strain on my marriage since I was never home. When I was at home, I was asleep. I missed cookouts with friends, most gatherings with family and forget about ever going on vacation. I quit with no other job lined… Read more »
Lea
Lea
3 years 11 months ago
When I moved back to Los Angeles from NYC two years ago, I made it a priority to work within a 30 minute because I know the grind of driving over 2hrs wears on you mentally and physically. Took some freelance gigs and a part-time job, then finally landed a job right in my city that was 7 mins from my home. Unfortunately that didn’t last as I was laid off 6 months later, but I just landed another gig, 25 minutes away but going against traffic. It has been totally worth it and it allows me to continue pursuing… Read more »
Lea
Lea
3 years 11 months ago
When I moved back to Los Angeles from NYC two years ago, I made it a priority to work within a 30 minute because I know the grind of driving over 2hrs wears on you mentally and physically. Took some freelance gigs and a part-time job, then finally landed a job right in my city that was 7 mins from my home. Unfortunately that didn’t last as I was laid off 6 months later, but I just landed another gig, 25 minutes away but going against traffic. It has been totally worth it and it allows me to continue pursuing… Read more »
Mad Fientist
3 years 11 months ago

I was working remotely for a high-paying financial company but decided to give up the telecommuting lifestyle so that I could get a job at a local university in order to pursue a free graduate degree.

It was definitely difficult getting dressed for work again but I’m half-way through getting a free master’s degree from a highly respected Ivy League institution so it was definitely worth the pay cut!

Sue
Sue
3 years 11 months ago

My iPhone. Downgrade to simple service

Nate
Nate
3 years 11 months ago
I made a similar decision recently when I was forced to quit my job for other reasons. My life revolved around the office and commuting to the office, and it seemed like I had very little free time, so I was paying for things like: – Cleaning service. $170/mo – Eating out ($10 lunch most days of the week): $150-200/mo – Gasoline $100/mo Not to mention the time I was spending getting ready for work, driving to work or sitting in an office all day, whether any work was actually getting done (most office jobs involve a significant amount of… Read more »
Nate
Nate
3 years 11 months ago

BTW I would add that having a significant amount of savings makes it easy to walk away from a situation you don’t like.

Steve
Steve
3 years 11 months ago

Ramit is turning into Marie Forleo with the Q&As. I like it.

Wilbert Rosario
Wilbert Rosario
3 years 11 months ago
Ramit, Excellent post. Now I see things differently. Last May, I was fire from the organization I worked to. Since that time to now, I am working on graphic design, websites and screenprinting from my home place; but last week, the company I used to work to, call me and make me an offer, I told them “I will think about it”. I was getting a weekly paying, that is not the same on being freelance; but with this post I realize that is better to keep going on this road (the freelance one) in order to make my own… Read more »
MainlineMom
3 years 11 months ago
Good video, good answer. My answer would’ve been something more like “your husband is a money-obsessed idiot” which wouldn’t be very nice. As a mother of two kids I couldn’t even imagine commuting 3 hrs a day. Unless you’re the sole breadwinner, there’s no reason you can’t deal with moving from six figures to five for the incredible plus of 3 hrs more time and probably less stress. My husband commutes 2 hrs+ a day and *I* hate how it affects him. I took a paycut when I had kids (not a cut in payscale actually, just hours) and my… Read more »
Aimee
Aimee
3 years 11 months ago

income – the company i work for allows at most 5 tutoring hours per night. i trade 1 hour of work to spend dinner with my family.

Anthea
Anthea
3 years 11 months ago

Strangely enough, with my last job change I cut my commute down to 5-10 minutes, and still wound up making more money (and having more vacation time).

That said, I could definitely use less time spent at work – there’s so much else I want to do with my time!

Tracey
Tracey
3 years 11 months ago
I’m already kind of doing this. It’s been an interesting process. Almost two years ago I started putting some of your techniques to work in getting myself a different job. The one I had was stressful, had a long commute, a crappy benefit package and was not conducive at all to being a mom. The job I landed gave me a small bump in salary, but it’s stayed almost flat since then. I was one of the few people at my company to receive a raise this year, so I count myself lucky for that (btw I also used your… Read more »
Bill H.
Bill H.
3 years 11 months ago

I traded down my full time job so I could enroll in school full time for my first degree. I picked a program of study that interests me instead of a career path. I’m 40 years old and I’m loving every minute of it.

Cliff Samuels Jr
3 years 11 months ago

I would also suggest that if she wants more money is to use your techniques in achieving a promotion and raise. When your current No-Stress Guide to Salary Negotiation is open again, Helena should apply for the course.

Jurgen
Jurgen
3 years 11 months ago

Just took a pay cut for a new job which provides equity. Will probably not get rich with it but there is always that chance… impact of all this: I work 50% more and have no time anymore to go for drinks so probably I actually am left with more money in the end of the month… alcohol is expensive in cold Moscow:)

Jurgen
Jurgen
3 years 11 months ago

Just took a pay cut for a new job which provides equity. Will probably not get rich with it but there is always that chance… impact of all this: I work 50% more and have no time anymore to go for drinks so probably I actually am left with more money in the end of the month… alcohol is expensive in cold Moscow:)

Gary Schultze
3 years 11 months ago

I would like to cut back on my day job and increase time working for my own company. I started selling my products online and am developing a dealer channel and there just isn’t enough time in the day to grow my company while still maintaining FT work to pay my bills. I can’t afford to hire out and I’m not excited about taking in partners. Any ideas?

Susan
Susan
3 years 11 months ago
Your post is so well thought-out. You address values concerns not easily quantified,the intangible not only the material. From my perspective (I’m likely one of your oldest readers) a three hour commute would shred any possibility of family life. Don’t know the details of Helena’s family composition or other income sources, but why would anyone choose to reproduce, or perhaps I should say have a family, if one didn’t commit to the responsibility of rearing the children? Ya’ can’t out source parenting. I have just taken retirement and yes it will be costly in terms of loss of income –… Read more »
Maya
Maya
3 years 11 months ago

Yeap, couldn’t agree more. I’m all about lifestyle design. I had a client once that wanted me to do a 3 hour commute after promising that wasn’t part of the deal, I left, quickly. To answer the question, I recently cut my rent by 1/5 and got rid of my over priced car. I’m doing a reboot and it feels great.

Zach
3 years 11 months ago

I could do with less options and quantity of food in my house.

ken
ken
3 years 11 months ago

Hi Ramit — I rarely bother to watch videos as I prefer to read. However, I really like this video. I hope you make more!

Johnny Wu
Johnny Wu
3 years 11 months ago

Loving the responses to this video.

It’s really nice to hear from so many people taking control of their lives sacrificing, income, etc to live a simpler or happier lifestyle.

My suggestion for drastically reducing cost has been to move abroad from the United States to a country where their PPP( purchasing power) per USD is so much more.

Take your salary from the States and get a value 2-4x as much.

phntsticpeg
phntsticpeg
3 years 11 months ago

Very true but its a BIG step if you’re not well traveled. I’m planning on retiring in Barbados – build a house for 60K and enjoy the weather. Not from there but I have friends from there, they speak English and I love the beach.

No I won’t have all the fancy amenities but I don’t need them, just internet and phone.

Cathy0
Cathy0
3 years 11 months ago

When I had my children I took a dramatic pay cut and moved to part time. My husband also rearranged his hours to work four days a week. We have never regretted being able to spend more time with our kids while they are little. It also shows you how much unnecessary stuff you buy when you earn more.
Things I could do with less of – chocolate 🙂

Daien
3 years 11 months ago

I already live very close to the bone, but, deeply inspired by many of the commenters, have decided to give up my daily wine/beer. I’ll save it for a special treat instead, and will use the saved dollars to pay off some debt.

Mayflower
Mayflower
3 years 11 months ago
Hey, saw your website for the first time yesterday, and already called my cousin who’s a banker for advice on some safe saving options, which I will put into practice Monday. I live in India, and since I didn’t have/raise children, pretty much donated all I earned (I travelled on work all the time so had few personal expenses) till I was 45. Now I’m 47, and have been saving for the past two years, but am aware that I have less time to get a reasonable sum stashed away for old age/illness. Have been working at it, but your… Read more »
David Simpson
3 years 11 months ago

One area where I could do less is “thinking” about risk and include more thinking about opportunity.

Jane
Jane
3 years 11 months ago
I did this 16+ years ago – halved my income as a hospital based physical therapy manager, went down to 2 days a week garuanteed work in a clinic with no stress, gradually built back up to 4 days a week self-employed in my own clinic at a much higher hourly rate, and no commute at all. Now I can afford to work in the sun in greece for 12 weeks every year [ between swimming, sunbathing and socialising…] instead of staying in the UK for so-called summer. Stress is still present – will I be able to pay the… Read more »
Greg Hickman
3 years 11 months ago
I actually used your negotiating to enhanace my quality of life by having my full time employer at the time agree to let me go part time but make the same salary. This was in lieu of a raise. Instead of the raise, I opted to keep my salary which has allowed me to live the way I’d like to grow my own site and create another income stream on the side. It’s definitely not about the money and I’m so much happier now that I get to work from wherever half the week while working on some other things… Read more »
Tony
3 years 11 months ago

MJ DeMarco in his book preaches about how you have to get out of the wealth equation in which money = time spent working. I think it’s essentially saying what we all know in the markets – that you have to make your money work for you, not the other way around.

In business, this generally translates into compounded return because you can hire human resources. In the markets, it generally translates into having more money so you can make more money off the same investment idea.

Jessica@LifeRemotely
3 years 11 months ago
Hey Ramit, It’s about time you wrote this post! I recently did a serious time/money trade. I’m a graphic designer, my husband a web developer, our combined business was on target to make $250K a year. We traded down to travel the world. Currently in Bolivia, we’ve driven 19,000 miles from our home in Seattle. Now we work 10-15 hours a week instead of 60, and make 40K a year, which is exactly enough to sustain our travels. Here’s what I gave up when I traded down: – A second car – $2,500 a month rent – Expensive vacations –… Read more »
phntsticpeg
phntsticpeg
3 years 11 months ago
I did this years ago – I left a corporate job, went back to school and now teach. Yeah I make way less than I did but I’m good. I can live with what I have. And I’m very happy with what I do. Which is why when I get the emails about “negotiate more money at work” I roll my eyes. In my case I can’t but also I have proven to myself that I’m more interested in having a job I love and free time than money. The next goal is to make sure I’m good for retirement… Read more »
Matt
Matt
3 years 11 months ago

Less projects, less todos. I’ve found for myself that the line between feeling balanced vs screaming at people for not using their blinker is surprisingly small. By quitting just one activity, or cutting back on just one project, I can cut out all stress. It serves as a way to continually cultivate the 80/20, stay focused on what is truly important and prune the rest.

Sally Stretton
3 years 11 months ago
I traded down in the amount of money I made for a shorter commute.It was not intentional, but it was a blessing. I was laid off from a job where I was making over $100K a year, but my commute was about 3 hours roundtrip and I worked long hours to avoid sitting in traffic. That job help to ruin my relationship with my fiance because I spent so much time at work. I now have a job that is about a 15 minute commute and I make a lot less than I use to, but my quality of life… Read more »
Smik
Smik
3 years 11 months ago
I believe I’m currently trading down at the moment (in terms of salary) in exchange for experience. I’m a 2011 graduate who decided to work at a smaller IT consulting company as a web developer over a potentially higher paying job at a bigger firm. However, that was a conscious decision and I’m glad I made it; working for a smaller company has meant added responsibility and being able to be closer to the final product as opposed to working with only bits and pieces of it. It’s also meant quicker exposure to newer technologies as my company realizes the… Read more »
Jay
3 years 11 months ago

Ben Franklin was first quoted as saying “Time is money”, most people simply think of that as an expression, but you can calculate how much your time really costs and what you sell it for. I recently wrote a post detailing the various ways you can optimize the value you get for your time.

Sonia
Sonia
3 years 11 months ago
I took a job about 5 years ago with a $10,000 a year paycut to get my sanity back and to keep enjoying waking up each and every day to work. Sure, some days, I would enjoy that extra cash, but when I think of all the non-monetary benefits I have access to, including a home office now, it was worth it. I can see how someone would “ask for permission”, as Ramit put it. So many put a lot of value on pay, status and so on. So many things in life are so valuable, you cannot put a… Read more »
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Joshua P
3 years 11 months ago

I feel as if I should cut down on commute as well. After running my company for 2 years and non-stop work I feel as if sometimes working from home would greatly benefit me. I actually plan on working from home at least one day a week from now on. Considering I’m finally comfortable with all my workers doing their job unsupervised. I can’t imagine cutting off the few times I do go out to eat, though I have cut off part of my entertainment budget in order to make sure I had money to save every month.

Meredith
3 years 10 months ago

Ramit,

I am currently in a negotiation with my boss regarding a raise. I was offered a small hourly increase and bonuses if my overtime hours were to be reduced. I would like to have less time at the office and more time for myself.

This will be a calculated negotiation since both wages and time are being negotiated.

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