I received a very long email from “Tony,” a long time reader, who had this to say (among many other things):
I absolutely hate my job but it pays so well that I can’t quit. So I go into work each day dreading it and when I get home at night I am just drained and all I want to do is watch TV and veg out.
Those two sentences struck a real chord with me because they speak directly to the life experience of a lot of people. They are tied to a job that they’re unhappy with for financial reasons, because quitting and moving to a different employment situation would be a financial disaster.
It’s been shown time and time again that job stress is detrimental to quality of life and also to health in various ways, yet many people work in jobs that make them miserable in order to earn a few more dollars. They put themselves in a financial situation where they have to make a certain salary in order to maintain their life and continue making payments on the things that they already have.
If you’ve found yourself in this situation, realize that there is likely no immediate “out” short of bankruptcy; you’ll have to live with the situation while you refactor your life or find another job.
Having said that, “getting out of the rat race” is a legitimate investment goal. If your goal is to work frenetically for several years and save so that you can enjoy a simpler job with lower salary and free time to enjoy your interests, that’s as noble as any other investment goal. However, if you’re currently “locked” into your job, it’s going to take some significant work to get there.
A big first step is to pay off all of your debts. Debts are the biggest factor most of us have in terms of required expenditures each month, between paying off student loans, a car payment, a house payment, credit card payments, and so on. These can be eliminated with focus and commitment.
The “debt snowball” method works well for this. In essence, just take 10% (or greater) of your pretax income each month and directly apply it to debt repayment. Make the minimum payment on every debt you have, then apply the remainder of your debt repayment money to the smallest debt. When that’s paid off, move on to the next smallest, and so on, each time adding to the “snowball” the minimum payment of the debts you’ve already paid off.
Once you’ve done that, focus on investing that snowball in places that will earn a steady income for you. You’re looking for something that will be able to sustain you when you quit that job, so focus in on investments that earn a consistent return. A high-interest savings account is appropriate here. For the time being, keep rolling income from these investments back into itself.
What you’re seeking now is the crossover point: that point in time where your investment income and your new work income can sustain you. When you’re there (or very close), quit and enjoy the freedom!
That sounds like a long way off. It’s only as far off as you choose to make it. Instead of dining out every night and blowing money on entertainment expenses to ease the pain, buckle down and start tossing money furiously at your debts and watch them melt away. As the debts get smaller and smaller and you find yourself reaching financial freedom, it’s amazing how much freer you will feel.