Leaving the 9-5, and the importance of "enough"

Many of you reading this blog are aware that I wasn't always in the financial planning and investment management biz; in a prior life, I was an engineer, happily working my way up through the ranks at Silicon Labs.

I was making good money; why did I leave the 9-5? It's an important question, and it touches on an even more important one: "what is 'enough'?"

The Big Why

When you hear people talking about retiring and/or leaving their current job or career, it's often expressed in terms of "leaving". They're tired, or dissatisfied, or (most often, according to studies) have a boss they don't like.

That wasn't the case with me, though. I loved my job -- I'd been in management for several years, and discovered that I loved just about everything about it, from business analysis to project management to people management. My bosses were invariably smart people whom I greatly respected. I got to travel to places like France, the UK, Japan, and China. I loved the people I worked with, and the work that I did, and I was well-compensated for it. And to this day, I miss all those things.

So...why leave? Why change careers? Why give up security and travel and work relationships and money (so much money) to start this business? Honestly, it was an extremely difficult decision, but at the same time it was a very straightforward one.

Firstly, I really, really wanted flexibility, on multiple fronts. I was okay working within an existing structure, but I wanted to build a business from the ground up, tailored to a very particular vision. I wanted to see if clients and employees would be attracted to it, and if it would be viable economically. I wanted to see if I could build something that I would never want to retire from, simply because of how fulfilling and fun it was. In short, I wanted to create something, using a totally blank canvas!

Perhaps more importantly, as a half-time single dad, I'm painfully aware of how little time I have to raise my children, and I want to make the most of that time now, before they leave the nest. Leaving the 9-5 means I get the maximum ability to choose how much time I spend with them, and gives me the best opportunity to be the best father I can. (Now it's up to me to make the most of that opportunity!)

And, simply put, I want to be able to help people in the most impactful way possible; I want to do work that I'd be happy to do for free, in an ideal world. Being an engineering manager certainly was impactful, but being a financial planner...well, it's only exaggerating a little to say that our job description involves making people's dreams come true.

"All this sounds great", I hear you say. "But how could I possibly walk away from this much income before retirement? It just doesn't make any sense!" And I get it; I literally had this exact conversation when discussing retirement with a young executive. He just couldn't conceive of giving up that much money -- in his case, multiple six figures!

And my answer is this: how much is enough?

The chocolate study

In 2012, researchers Hsee, Zhang, Cai, and Zhang published a psychological study called "Overearning", but I always call it "the chocolate study". The basic premise is relatively straightforward: participants were allowed to either listen to music or a grating noise, and the more they listened to the noise, the more chocolates they got.

In one variant of the study methodology, participants weren't allowed to take the earned chocolates with them; they could eat as many as they wanted when the study was done, but they had to leave any they didn't want on the table. The participants in the "high-earning rate" condition earned over twice the number of chocolates they consumed.

In another variant, the participants still couldn't "take it with them", but they were given an "earning cap": they couldn't earn more than a certain number of chocolates, and thus there was no reason to spend more than a certain amount of time listening to the noise. The participants all still ended up "overearning", because the cap was still higher than most of them were willing to eat, but the ones with the earning cap overearned less and reported greater happiness.

The authors used this study as a test of a theory of "mindless accumulation": the idea that people will work until they're tired, rather than working until they've earned as much as they want. This builds on prior research by others that indicates that people tend to focus on nominal values and/or some kind of points scale ("medium-maximization"), rather than the underlying value, when it comes to earning.

The application to real life is painfully obvious: once we get past the point where we don't have to consume everything we earn in order to live, we tend to just...keep earning, even knowing that we can't take it with us. We like watching the numbers go up! And in my personal, non-research-backed experience, engineers are particularly prone to this phenomenon: we make good money, we really like numbers, and we don't often have a particular desire to drive the fanciest car or live in the fanciest house. In the study's terms: we're high earners and low consumers, which leads to us being particularly high over-earners.

"Enough" makes all the difference

There was a third variant of the study methodology, though. This one used jokes as rewards (so that the participants could be told to "consume" all the ones they'd earned without potential physical harm), and some of the participants were told to estimate how much reward they would desire beforehand. Predictably, the participants who didn't estimate their desire overearned again...and the ones who did estimate did not overearn, and reported more happiness besides. Just stopping and deciding what "enough" was made all the difference.

If this is the only thing you "high earners" take away from this article -- heck, this entire blog -- I will be a happy man: knowing what "enough" is makes all the difference. Now, this isn't as easy as it sounds, because it requires you to answer several other important questions. What do I want? What makes me happy? Who am I -- how much of my identity is wrapped up in my work, or my relationships, or my leisure activities?

These are questions that are often particularly hard for us engineers to answer, because it requires us to assign value in a way that's completely decoupled from any external reference. "How much is my time worth?" cannot be answered in terms of your hourly wage in this context -- that's how much your employer says your time is worth in terms of the value you generate, not how much it's worth to you, doing what you want to do with your life!

As hard as it is, though, it's important. Knowing who you are, what you want, and what "enough" is lets you evaluate tradeoffs not in terms of an arbitrary point system that someone else created, but in terms of the value to you. I was able to walk away from my prior income because I knew my personal "enough", and hence I was able to trade that income for what I wanted most.

Now, that doesn't necessarily mean that my "enough" is your "enough", or that you should quit your fulfilling and well-paying corporate job to start a business. It just means that you should wake up, ask yourself the hard questions, and determine where you want to go and how to get there. Sitting on the other side, I can tell you: you have no idea the awesomeness that waits for you!

Britton is an engineer-turned-financial-planner in Austin, Texas. As such, he shies away from suits and commissions, and instead tends towards blue jeans, data-driven analysis, and a fee-only approach to financial planning.