The ‘Golden Handcuffs’

Your job pays you well. Quite well. You have good benefits and your paychecks are sweet.

The problem is… you’re unhappy. Your job is stressful in a lot of ways. Your days are loaded with busy work and you’re not accomplishing anything that leaves you feeling fulfilled.

You’re tempted to quit… but that sweet paycheck keeps you in place. You’re living a bit closer to a paycheck-to-paycheck existence than you’d like to admit. There are no other jobs like yours that pay as well as yours and even applying elsewhere could put your job in jeopardy.

Sound familiar? The common term for this situation is “golden handcuffs,” and it’s a situation I know quite well.

My ‘Golden Handcuffs’

In 2002, I started my first “real job” – in other words, my first job paying substantially more than minimum wage. In fact, this job earned me far more than minimum wage.

During the first few years, I loved that job. I was constantly engaged in solving interesting problems. I worked with a small group of people that were amazing to work with. Paperwork was mostly out of the way. I had a great deal of personal flexibility there in terms of my actual hours.

It was the money, though, that really made the difference. A great salary, especially for someone straight out of college. A really strong retirement plan with matching funds. A great health care plan.

It was a great job that I envisioned myself staying at for a long time.

So I started spending. I already had student loans, but I added a car loan to that. I bought a lot of different things and spent a lot of money. Eventually, I started accumulating credit card debt, too.

In other words, I put on the golden handcuffs.

Golden handcuffs refer to job benefits, mostly financial in nature, that ensure that well-compensated employees stay with the company and don’t move onto other companies or switch careers. Often, golden handcuffs serve to keep people in jobs where they are otherwise quite unhappy.

Golden handcuffs are a great thing when your job is something you truly love doing or you have plenty of money set aside for the future. However, golden handcuffs are a terrible thing if you’re in a rocky financial position and you aren’t happy with your current job and want to move on.

That last sentence described me in 2006 and 2007. There had been a management change at work and, with that management change came a drastic increase in paperwork, a significantly reduced focus on the professional aspects I enjoyed, the addition of several work responsibilities, and quite a bit of unexpected travel. At the same time, we had our first child and I was feeling a strong desire to spend more time at home, not less.

The problem was, of course, that I found myself wearing those golden handcuffs. We had accumulated so many bills in those years that it was basically financially impossible for me to walk away from that job.

Something had to change.

A Plan for Breaking the Handcuffs

Breaking the golden handcuffs and moving on from a high-paying but otherwise difficult job requires two distinct avenues of attack.

First, you have to get your financial house in order. If you are living a paycheck-to-paycheck lifestyle, you’re never going to be able to break the golden handcuffs. When your monthly bills require a high salary due to things like mortgage payments, car payments, credit card payments, huge energy bills, and so on, you’re going to have to break free of those things if you ever want to break the handcuffs.

The biggest step you can take is to simply cut back your non-essential spending. You don’t have to eliminate it and you don’t need to cut the things that you enjoy the most. You just need to reach a point where each month you’re spending substantially less than you earn. Look at your spending and cut back on the things that are least important to you and keep cutting until you’re spending only about 80% of your take-home pay (if not less).

Then, focus on getting rid of your debt. The first step there is to build up a small emergency fund so you’re not relying on credit to handle small life emergencies, then start making big extra payments on whichever debt has the highest interest rate.

If you want to accelerate this, the best method is to downgrade your car or your home. Both of those things are giant money pits and if you choose a smaller home or a different car, your monthly costs will drop rapidly.

The second thing you need to do is to bolster your resume and connections so that you can switch jobs when you’re ready. What are you going to do when you break the golden handcuffs? Whatever your plan is, start working now to make sure you’re primed for that change when the time comes.

There are a lot of ways to do this. You might choose to take classes. You might choose to get certifications. You might choose to start a side business. You might choose to start going to professional conventions. You might choose to devote some of your work day shoring up professional contacts. You might choose to get involved with social media and blogging on professional topics. What options you choose depends on your current job and where you might want to go from here.

How I Broke My Handcuffs

So, how did I break my golden handcuffs?

First, I got very intense about improving my personal finances. As I’ve written about many times, 2006 and 2007 were years in which Sarah and I buckled down incredibly hard. We ate all of our meals at home. We practiced money-free weekends and even money-free weeks. We sold off what likely amounted to a majority of our possessions and then channeled that cash into our debts.

It was thanks to that focus that we were able to pay down our debt so rapidly. By the middle of 2007, we had eliminated all of our student loans and all of our credit card debt and all of our car loans. By 2011, we were completely debt free including our mortgage.

How did that happen? We were just really tight with our money. We were really careful with virtually every dollar that went out of our pockets.

At the same time, I focused my energy on trying to launch several side businesses. I launched The Simple Dollar, of course, but I also started a number of other side gigs. I started an in-home computer repair business. I did a lot of freelance programming and web design. I even wrote a poker-playing “bot” program and used it to win a surprising amount of money playing online poker before the online poker crackdown (it used a really simple algorithm, but that algorithm was very effective at getting in the top few slots in small stakes online tournaments in those days when there were a lot of poor players playing – I’m extremely confident it wouldn’t work today).

It turned out that The Simple Dollar was the runaway success of these options (though all of them earned some money). However, these side gigs as a whole basically sucked up all of my free time for two years. I basically did nothing but work from 2006 to 2008.

By early 2008, our financial position was so strong and I had so many income streams that I was able to walk away from my job. At that point, I was really feeling a distance between me and my kids because of the mix of travel for work, work emergencies that gobbled up weekends, and the nonstop flood of work for my side businesses, too.

Today, my focus is on maintaining my side businesses, but also being a great parent and husband. We kept making positive financial progress which caused us to pay off our home completely in 2011 and today we basically save all of my income and live off of Sarah’s income.

Our goal now is financial independence. Both Sarah and I dream of reaching a point where we no longer have to work for a living.

Final Thoughts

I personally know a lot of people who are constrained by “golden handcuffs.” One person who immediately comes to mind works in law enforcement in a position where his personal safety is directly at risk virtually every day. It causes him a lot of stress, but his spending is such that he can’t even think about walking away from that job. He’s compensated pretty well for that risk… but is it enough to make up for the stress and sadness?

That’s really what the idea of “golden handcuffs” comes down to. What price do we put on personal stress and unhappiness? If a job pays well but causes work responsibilities and stress and a sense of unfulfillment to spread throughout our life, is it worth it?

Eventually, many people cross that line and want to break those golden handcuffs. From my perspective, when you reach that point, the effort it takes is well worth it. It’s a hard path, but there is great personal happiness on the other side.

Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.