Obstacles in trading income for leisure

2411122894_9e087bd779_mOver at Grumpy Rumblings of the Half-Tenured, NicoleandMaggie pose what, at first blush, seems like a good problem to have. The one with kids writes that her family lives on her income as an economics professor. Her husband has also been working, but they’ve set their spending level to do fine on one income. They’ve been banking the rest. Now he’s transitioning out of his job. Because of their wise financial planning, they don’t really need to change their standard of living, and they have a fat emergency fund. All is good, right? This is how personal finance is supposed to work!

And yet there’s an issue, which NicoleandMaggie write about in The push-pull of spending/saving/not-working. “The problem is that when you spend XK/year and you make exactly XK/year, you’re living on the edge.  Even when that XK/year is actual money spent including emergencies and not some dream budget, there’s still the worry that some month you’re going to get hit with too big an emergency and you’re not going to make it.” Of course, that’s what the fat emergency fund is for, right? Well, maybe. “Emotionally I’m probably going to end up cutting spending because I hate not having that monthly (flow) cushion no matter how much we have in an (stock) emergency fund.  I just can’t handle it.”

Welcome to the dilemma of attempting to trade income for time. In theory, money and time should be easily traded. Work more, earn more, have less time off. Or take more time off, work less and earn less.

But first, there are the logistical problems. Much of the labor market is sticky, and you can only trade time for money in discrete chunks. A job must be done 40 hours a week…or not at all.

And second, and more important for this post, there’s this psychological issue: people who manage to build up big chunks of wealth by saving big chunks of their income actually like saving big chunks of their income. They want to see their pile grow, not shrink. Even if the goal of building up that pile is to buy leisure (often in the form of retirement) there’s always that little voice saying, well, what if it runs out? And so, despite the pile, the person risks turning miserly in their new leisure time, or decides not to buy the leisure time at all. The goal posts move. Once, $1 million seemed enough to buy you the ability to do whatever you wanted. Then, $1 million starts to seem insufficient when you consider that college is expensive, and runaway inflation could always return, and health care costs aren’t going down, and well, if I worked a few more years, I’d have $2 million…or $3 million…

I’m not sure what the solution to this dilemma is. What’s always striking to me is how the world is divided into savers and spenders. Or maybe “spenders” isn’t the word, but more happy-go-lucky types. I’m firmly in the former camp. I can’t really imagine feeling comfortable drawing down rather than building up. My kids will be getting this from both sides; my mother-in-law, who can have a perfectly comfortable retirement, decided to try living on Social Security for a while, just as an experiment. But then I see stories on TV, or in personal finance columns, of people who blithely quit their gigs with nothing lined up and nothing in the bank, who have worked for years at real jobs and yet have no savings, who base their spending on two incomes and then decide well, it would really be better to have one party stay home. How does this work? I don’t know. I don’t envy the people who wind up in personal finance columns, of course, but as we have conversations in the car about wow, we paid 16 cents too much per gallon for gas, and if we’d driven half a mile farther, we could have saved $3, I kind of envy the mindset. It will all be fine!

True story: my 3-year-old, the other night, said to my husband “I don’t think it’s a good idea for mommy to put your quarters down the toilet.” Much head-scratching ensued. Then we realized that, in the gas incident described above, the phrase my husband had used is “You just flushed $3 away!” I’m impressed that my 3-year-old picked up on that, but also used an appropriate unit of money, and one that could be flushable.

Photo courtesy flickr user wisemandarine

11 thoughts on “Obstacles in trading income for leisure

  1. I love the post you linked to- it describes my situation as well. There are very few part-time/consulting jobs for people in the boonies, but you can live decently on one income. (Our house is paid for.) Moving to somewhere with better job prospects for both of us would also mean much higher costs of living in terms of housing, taxes, childcare and commute times.

    This post reflects the situation that many/most of my friends across the country find ourselves in.

    1. @TG- hence the beauty of telecommuting if it could take off more broadly. You could live cheap…but work where it’s expensive! I wish more employers wouldn’t see this as an either/or thing. People would definitely drive 100 miles one day a week. Imagine the talent pool if you could pull from 100 miles! And seeing people one day a week can make for quite a strong personal relationship. 5 days a week (for office type work) is often overkill.

      1. I think telecommuting with one day/week in the office is on the horizon for software engineers. Unfortunately, even Microsoft and Amazon aren’t there yet. Even if you plan to telecommute, you never know when you’ll have to pick up and go into the office due to server problems, etc.

        There are also legal issues for non-exempt workers. I’m trying for a part-time engineering contract/temp job, and that will have very strict rules about butt-in-seat time and not taking work home.

      2. I’ve had two telecommuting jobs, and in both the employer had realized they could be located in an expensive place but hire cheap telecommuters.

        They also know telecommuters *want* to telecommute and have flex hours, and that we have a hard time finding those jobs, so they can pay less.

  2. This is something I struggle with too. I need an financial cushion for my peace of mind. Yet sometimes I think, “If I paid for someone to do my laundry, that would free up hours each month for me to advance my career, and I would earn more long term.”
    Yet what if I accidentally run over a nail and need a new tire this month? Well, I do have enough in my savings account to buy a tire.
    Maybe the solution is to allocate money each month toward an emergency fund AND a long-term financial wellness fund. Then my short-term and long-term financial concerns will be addressed.

    1. @Susan – I agree that multiple accounts help address the psychological issue, though that’s kind of funny if you think about it. Money is money (though some investment vehicles are longer term).

  3. Thanks for the commentary!

    One note– we did make the big adjustment– DH put in his letter of resignation last fall and will be done in May. So really the big leisure decision has been made. I’m worrying over a much smaller trade-off at this point.

    1. @NicoleandMaggie- True, but it’s a fascinating topic nonetheless, and one I think at least a few folks approaching retirement age are dealing with. If you’ve spent your whole life conditioned to make your savings grow, it’s hard to get in the mindset of drawing it down. Even though that was, at least in theory, the point of saving for “retirement.” It feels somehow irresponsible, and people who diligently make their pile grow are very responsible people.

  4. “What’s always striking to me is how the world is divided into savers and spenders.”

    Hmm… I think there’s possibly also a third hybrid category, because I have a track record of being both a saver and a spender. Or rather, I can adapt according to my economic circumstances. In my youth I was much more of a saver. The older and wealthier I get, the more of a spender I’m becoming.

    1. Definitely. As I reach milestones (no student debt, healthy emergency fund, back on track with retirement, etc.) I loosen up. (I no longer pay attention to gas prices… it isn’t worth maximum 80 cents every two weeks to me to shop around.) We don’t take risks, but we do take calculated risks. Otherwise DH wouldn’t be able to leave one job without another lined up. True savers-for-the-sake-of-saving wouldn’t spend anywhere near what we spend each year (hint: it is above the average median income).
      I’d say for us it’s more accurate to say we have a steeper curve of risk aversion than many folks but as we travel up it (as our wealth increases), we loosen up. Going back down that curve (loss aversion) is always more painful than going up was pleasurable.

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