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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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  1. 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 around $1.50. So, while I still eat out like normal, the reduced spending on groceries is saving me money–and time.

    Other than that, my life is pretty minimal already. My friends make fun of me for it. I really don’t buy much of anything. And I have loads of free time to do all sorts of extra stuff.

  2. 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 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 apartment with a roomate when relocating for a job. I had equity in both the vehicle and my home that have now been applied to my student loans. Not only that, I now currently have a much higher month-to-month cash flow in which I’m able to apply more to my student loans.

    My lifestyle has changed very little. I do not miss my $30,000 vehicle and I get along great with my roomate. The peace of mind in knowing that I’m making substantial progress to becoming debt free far outweighs any slight downgrade in lifestyle.

    • 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 mortgage and about $5k left on my student loans. I’m 30 now and nearly done paying them off, and in a few months i’ll only owe on my house. Everything else is liquid. My wife and I are thrifty/frugal and know when and where to spend our cash. Budgeting your expenses makes life easy. Following Ramits plan is a great way to simplify finances and then get more out of life. I ask myself, do I want to sustain a lifestyle or do I want to enjoy life… It helps guide me with the bigger decisions.

  3. 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 to continue to develop new products and services and take on fewer software clients. It was through Earn1K’s thorough instructions and Ramit’s push that I was able to streamline my client work better and move some of it and new clients to a revenue model that offers me an ability to maintain freedom to work on my own services and not rely on any one client.

  4. 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.

    • 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 childcare and gas/car expenses. The most valuable perk? I stopped getting sick all the time from not getting enough sleep. I would counsel everyone to live as close to work as possible – I really believe that the stress and time spent commuting is very expensive in terms of health and energy levels.

  5. 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 time at the gym. Seriously. I currently go 6 days/week for 1.5 hours. I can easily walk or ride my bike outside (which I do some times already), and I have my own free weights and do yoga at home. I would enjoy that alternative much better anyway, and it would save me some cash every month (which I could use to pay for my sons guitar lessons).

  6. 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!

  7. “I Dream of Jeannie”

  8. 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 since she had 14+ years experience).

    It may depend on what you what to do down the line.

    Thanks for your videos Ramit!

    • 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.

  9. 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.

  10. 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 $$.