Classic debate. Should you change companies frequently to make more money or stick it out with one employer for a long time to cash in. I have wanted to venture down this road for a long time but I am one of those rare millennials that haven’t switched employers yet (approaching 8 years). Thankfully, my wife decided to shimmy up that side of the career ladder and I can attack this post with some more insight and experience.
Two Paths to Doubling Your Income
Looking at our income progression
This is not apples to apples, but it’s worth showing to prove we at least kind of know what we are doing when it comes to increasing our income. Overall, we are both doing well, and the next two lines tell you how we are able to keep pursuing financial independence with kids.
I went from $36,000 to $92,000 in 7 Years – 155% increase.
Mrs. AE went from $36,000 to $85,000 in 5 years – 136% increase
Transparency time, I talk a lot (A LOT) about growing your income. That is $105,000 in combined income growth.
You can’t frugalaze those gains.
Focus on income.
Now onto a few different ways that you can make it happen.
Changing Jobs to Grow Income
Below is my wife’s salary history including how long she was at the company, her starting salary and her ending salary.
- I’st Job – Starting Salary $36,000, Ending Salary $60,000 (3.5 years)
- 2’nd Job – Starting Salary $65,000, Ending Salary $70,000 (1.5 years)
- 3rd Job – Starting Salary $85,000 (1st month)*
*My wife is a money negotiating master after this jump, incredibly proud and happy for her!
Pros of changing jobs to grow income
1 – Bigger Salary Increases/Jumps
The biggest benefit, by far, is the payouts can be much higher by switching employers.
When you don’t have a lot to lose you have a much better shot at winning. This is especially true In a tight job market.
Mrs. AEs last jump was over 21%. That is easily double my highest promotion percentage. That kind of jump might be *possible* at some companies, but it is not common in my experience (or anyone that I talk to who stays at the same company. It might happen when moving from individual contributor to management or higher and/or in certain professions.
2 – Title Advancement/Career Change
If you want to make a move (either up the ladder or to a new ladder) and the opportunity is not present at your current company this is a great option to make that happen. If you can combine this with a nice raise, or even transition to a higher paying path, I would count it as a win.
3 – Open Door to Negotiate
You hold a stronger hand when you don’t work for them already, especially if your short term needs are met through some FU Money or you are already employed. You can be bolder, and set the price. If they don’t want to play you can walk.
For people that are currently underpaid, you can establish yourself closer to the middle (or higher) in the salary range for your title without an HR fight or being told the dreaded “we will get you there” line.
If you are thinking about changing companies, I have seen people recommend holding out for 20-30%. At a minimum, this is not a time to skip the negotiation or take less money than you deserve.
Cons of changing jobs to grow income
1 – Job searches are time intensive
I have watched my wife go through this change twice in the last two years and it is a TON of work. Applying (waiting), screening (waiting), interviewing (waiting), negotiation (waiting).
It can be extremely stressful. You don’t have much control outside of the few hours you spend in the interview room.
2 – 401k Match and Vesting Schedules
The most talked about 401k benefit is the company match, and if you don’t have access to a 401k for the first 90-365 days you aren’t cashing in on that benefit. Going one step further, If you have a vesting schedule (on top of the waiting period) and hop jobs before it matures you are axing all or a portion of that match.
So far we have only lost out on 1 year, at 1% matching. Not a deal breaker but still something to factor in. Her new company offers 3% vested over 4 years. Hopefully, it works out as that % on her new salary will add up quick.
3 – Waiting to get access to company benefits
We have seen anywhere from 30-90 days to get access to health coverage and 90 days to 15 months to get access to 401k plans. Adds a lot of complexity and uncertainty. If you don’t have a partner with a health plan to fall back on, you will have to use COBRA to stay covered (with you paying the full cost of coverage).
Paid Time Off is another benefit that generally accrues with time you spent at the employer. It is negotiable (sometimes only at certain levels/titles). My wife has started the 3 weeks of PTO track over 3 times now.
4 – Dealing with old 401k plans
This isn’t a big deal, but figuring out what to do with old 401ks is something I have never had to worry about. To avoid complexity we use a rollover IRA instead of leaving accounts with old employers. I don’t trust that things will be communicated in a timely fashion if we aren’t working for them anymore.
Changing Jobs Frequently: What to watch out for
A few things to watch out for if you are going to change jobs frequently.
Flagged as a Flight Risk
You can kill your resume with too many job hops in a short amount of time. If it takes 3-6 months to get you up to speed/trained and you jump ship consistently after a year or two it is concerning (at a minimum)
Not looking beyond the salary
Salary is one (important) piece of the career puzzle. Personally, I look at a lot of different factors when evaluating job offers or companies. Many of them show up in the potential cons I listed above. Take into account the salary, benefits, commute, advancement opportunities, job security, and personal satisfaction before making a decision. You might have to live with it for a while.
Growing Income by staying with the same company
I am one of those weird Millennials that has worked for the same company for over 7 years. I am also bad at social media and don’t understand half the shorthand texting language. It’s possible that I have cost myself some big jumps by not looking for a new company but I have done pretty well:
Starting Salary of $36,000 to $92,000 in 7 years
I am due for my raise and approaching year 8 in a few months. This progression did not come easy, it was spread out over 7 yearly raises, 5 promotions and a title change to happen.
Pros of Growing Income by staying with the same company
1 – Time-Based Vacation/PTO accrual
Started at 3 weeks and up to 5 weeks of vacation now. Getting paid to not work is my favorite corporate world employment perk. It has come in handy over the last two years especially. It allowed me to take time off for the birth of our kids, be at all the doctor’s appointments and still have some left over for actual vacations.
My paternity leave for our second child was also based on how long I have been with my company. Got an extra two weeks compared to others who have been there 3 years or less.
Now more than ever I value consistency when it comes to our paychecks, 401k plan, and most importantly, health coverage. With my wife switching jobs, if I had crappy health care options we would be paying a crap ton of money out of pocket. With two small kids, we never really know what to expect to pay each year (FYI – kids get sick a lot). Then there is the “is our current doctor on the new plan” side of the equation.
3 – Expectations, Experience, Flexibility
I don’t quite know what to call this, but it needs to be noted. After working for the same company for a long time, I know how to work the system. I know what it takes to get a promotion or how to negotiate with my bosses/HR for pay raises. There is a lot less guessing when it comes to yearly review time and what is/is not acceptable.
The longer I have been at my company, the more flexibility I have been given. They trust that I will deliver, and outside of that they don’t care a whole lot what I do day in, day out.
Basically, with each one of my wife’s new offers, we have a significant list of questions that I haven’t had to ask in a long time.
Cons of Growing Income by staying with the same company
Slower Salary Growth
It is harder to grow your salary (most of the time) staying at the same company. It is not just my experience, I have had dozens of conversations with managers/directors/HR about this topic and it is not unique to me or my company.
This is especially true if you start on the lower side of your industry salary range. When you start low, it takes longer to work your way into the middle of the pack with percentage raises.
Sticking with a company that has poor advancement opportunities, crappy benefits (or not the benefits you care about), or does not hand out raises without a major fight should be concerning
Growing Income by staying with the same company: What to watch out for
Locked into a Bad Situation
If you are going to go this route, don’t get sucked into a dead end job/company without the pros I listed above. Loyalty is a great quality, but when you start getting taken advantage of its time to stand up for yourself or leave. Sometimes the grass is greener (just ask my neighbor who pays someone to fertilize)
Negotiation is BIG either way
Regardless of the path you choose, negotiation is critical to increasing your income. I was just coaching a family friend on their first job offer out of college on this very topic. The initial offer was actually pretty good, and he was going to accept without negotiating for more. I challenged him to ask for more money and see if a signing bonus was on the table if not.
With one email, he was able to get 6.5% more money and a 5.5% signing bonus. He will continue to cash in on that one email every time he gets a % based raise. salaries compound just like investments do.
Don’t let the fear of them pulling an offer stop you from negotiating. It can make your stomach churn waiting for their answer, but I have never seen it happen. If they did pull your offer for negotiating, is that a company you want to work for anyway?