In finishing the follow up to The Millionaire Next Door, and specifically in working on the chapter discussing work and careers, there is consistency in the finding that most economically successful individuals must take some sort of risk in their careers. The question is: when an opportunity (risk) is presented, who can take advantage of it?
Many of the readers and millionaires next door that have been included in our research consistently refer to two significant stages of life where they took a calculated risk that paid off: the first situation is early in their career when they opted for an experience that was somewhat risky, but proved valuable in allowing them to learn a lot about what they were really passionate about. The second situation is later in their career–often mid-career–where they took a risk after gaining experience and building enough wealth to weather the highs and lows of a small business venture or other drastic career change.
Most of us will change jobs at some point (or at multiple points) in our lifetime. Americans born between 1957-1964 held on average 11.9 jobs between the ages of 18-50, according to the Bureau of Labor Statistics. Given the current state of job hopping, I would expect that number to rise. Taking career risks early in your career, when you have a long runway and fewer household obligations, can help you discover your passions, interests, and abilities. And there’s less to lose.
If you didn’t have a broad range of early career experiences or take exploratory risks in your early years, ensuring that you have financial margin through disciplined spending and saving can allow for career risks to be taken later in life. When mid- to late-career opportunities arise, only those who are financially prepared can take advantages of them. If you’ve reached mid-career, with a high income and high-consumption lifestyle, there is little margin to change the path, to take risks, or to go out on your own. It’s easy to become trapped.
Maybe you know of colleagues and friends, income-statement-affluent professionals, who by all appearances have had a “successful” career, who now, in their late 40s, cannot change careers or start their own businesses because they are living paycheck to paycheck, even if their annual salary is $200,000 or more. I do. As their incomes rose over time, they ratcheted up spending, and now their mortgage, luxury car payments, and economic outpatient care (EOC) to their young adult children require high incomes, something that typically isn’t conducive with starting a business or taking a job that requires less travel or is focused on altruistic endeavors. They are trapped in a lifestyle founded upon income statement affluence, and therefore, trapped in their job and the “security” of a steady paycheck.
Margin allows for risks to be taken later in life. For those who find themselves trapped by their paycheck but wanting to take a mid- to late-career risk, the good news is that behaviors can change, debts can be paid off and downsizing can be implemented. Whether there is universal support from the household for these changes, changes that in the long run may lead to greater job satisfaction and ultimately more economic success, is a different (and more complex) issue.