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Saturday, March 7, 2009

To stay or not to stay?

Couple of thoughts on Tom's earlier blog about the paradox of replacement income...

I believe staying in the corporate world after matching your salary is part of a priority call you and your family made. It's very analogous to someone who decides to take a job that requires longer hours in exchange for higher pay (except in Tom's case, he's decided to keep a job that requires 40 hours a week in exchange for higher pay). If your priority is to leave your corporate job, it requires some planning and a lot of choices to be made. Much like if the decision is made for a woman (or a man) to quit working to take care of the kids instead of having a dual income.

For most people, when income goes up (no matter how you get it), they fall into the "gas" law. A gas expands to fill the space it's contained in. Expenses expand to fill the amount of money you make. The money you make can be from a raise in your corporate job or in your own business.

Tom's entry gave me great insights in my quest for significant income outside of the corporate world... that I need to consciously plan on what my financial priorities are and make the right choices along the way. If my priority is to leave my job, then I need to plan for that. If it isn't, I can make different choices.

Now this point is all moot if you can make your time more valuable... if you can make more money per incremental hour doing your own thing than at work, then you would actually lose money by staying in your job.


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1 Comment:

Jason Cohen said...

A benefit you get by staying employed even when profits (revenues? no, profits!) match your salary is that you can plow all the profits back into the company rather than applying the gas law to yourself.

If you really have a workable company, reinvesting the money should come back to you n-fold. WHEN THAT HAPPENS, of course you're really ready to quit the day job!

This all assumes you're going for something larger than a fun side-project.

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