Is getting that raise even worth it?

February 20, 2012.

We’ll never forget that day because it was the day we first met. It was an awkward interaction because while there were sparks, we were surrounded by several other co-workers. We were a newly formed team all starting our new jobs that day. Our mission was to travel the country, rattle some cages and drive revenue.

It was a fun time and one that had us both on the road for upwards of 50% of the year for about three years. We didn’t get to travel together very often but when we did, we made the most of it and had a boat load of fun in random cities around the country. But that job also introduced us to a powerful concept; distribution.

We both knew the importance of understanding distribution and the role it played in overall profitability but didn’t really think about it until it was at the center of our life. In short, it was our job to drive revenue through specific channels. Not all channels; just the one’s that were most valuable to the company.

Distribution is a concept at the heart of Amazon’s success, McDonald’s success in the 80s and 90s and Chipotle’s demise a few years ago. It’s all about managing and reducing the cost of driving revenue. There are a long list of activities that must happen in the process of selling a product/service and that sequence of events is often referred to as a distribution channel.

Sometimes, reducing the cost of managing those channels has more impact to the bottom line than selling more. Read that sentence again if you have to. Let it marinate.

This is especially true if you own or have control over the pitstops along the way of a few channels. Here’s a simple example for you visual learners.

In the example, it’s clear that selling tee shirts in another store is the most expensiveist of the three options (#2chainz), especially compared to selling them online. The reason for this is because that other store will charge a premium (e.g. 40% of the sale price) to have Jay’s tee shirts on their shelves. Assuming Jay feels he can keep up with production, still serve customers through his other channels and make a profit, this may be a good option for him.

But if the cost of making money by selling tee shirts in another store outweigh revenue through more lucrative channels, Jay will find himself in a pickle sooner rather than later.

Guess what? The same is true for your income.

We’ve been there. You’re making a decent income but you want to make more to achieve your goals. You’re inspired by co-workers who earn more than you because if they can do it, so can you. So you start playing the game in an effort to level up.

You find a mentor across the organization that will give you guidance and insight into upcoming positions. Every week you do a round of lunches and coffee hour catch-up meetings to figure out where and when to pounce on a new opportunity. Finally, you narrow down your path to a handful of roles but you learn you need to have a particular set of skills that you don’t currently have. Uh oh!

If your company offers it, you sign up for a training and certification program. You’re a high achiever so you opt for the in-person after work 8 week intensive while everyone else went for the less expensive online program. This way, you also benefit from the other high achievers in your class and give yourself some options to jump ship if needed.

Three months later, you’re freshly minted with a new set of skills and you apply for an opening with all the confidence in the world that you have it in the bag because you’ve done the work. You met the people, you learned the skills and you went above and beyond. Certainly nobody else has done this.

Unfortunately, things don’t work out as you planned and they went for another candidate. They were younger, had been on the team for a while and were likely more willing to accept the role at the lower end of the salary range. To make matters worse, they hit you with the standard corporate lingo…

“thank you for all the time and effort you put into applying for this role. We truly enjoyed meeting you, learning more about your background and hearing your ideas. It was a tough decision but unfortunately, we won’t be offering extending an offer. We encourage you to reapply for future openings.”

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If you’ve ever gone through this, then you know just how much of a gut punch it can be. To make matters worse, you’re expected to take that punch with grace and humility because there’s a good chance you’ll see all the people who interviewed you in passing. You could almost taste that sweet $10K – $15K pay raise and then just like that, it was gone, along with your belief in humanity.

We’ve all been taught to dust ourselves off and get back in the fight but ask yourself…is this a fools game? Is there a better way to give yourself the raise you were looking for? Like Jay and his tee shirt business, have you examined the real value of the income you were hoping for?

Most people think getting a raise will solve all their problems but they fail to factor in the true cost of earning more at a job. Click To Tweet

The new role will almost certainly come with a ramp up period so you can count on a few months of soul crushing insecurity because you’re learning on the go. This may lead to later nights and earlier mornings for the forseeable future. The raise might also come with a longer commute or push you into another tax bracket which means after taxes, your take home pay is paltry compared to what you thought it would be.

You may also find yourself leveling up on your home, wardrobe, car, cable package, dining out options and other things because now that you’re big time, you can’t be seen in line at Macy’s where the regular people shop. Or perhaps your new coworkers take their children to the boujee daycare and rave about the nutrition specialist they have on staff so you’re considering improving little man’s day-to-day as well. He deserves it right?

Before you know it, even though you got a raise, you don't feel like you did. This is lifestyle inflation at it's finest. Click To Tweet

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But what if there were better, more sustainable ways to give yourself a raise. What if instead of spending a year re-training and networking, you opted to save up a down payment for an investment property that kicks off a solid $400 a month. Or what if instead of spending a couple stacks on a certification program to make yourself more employable, you spent it on an e-course you can use to start a side hustle that earns you a consistent $400 a month or more.

Couldn’t you just as easily decide to spend the next 12 months cooking more at home, not buying any new clothes so you could pay off your car note by Christmas? Wouldn’t that intentional frugality earn you the same in net take home pay as the big raise? Souldn’t investing in you be a quicker, guaranteed and more sustainable way to having more cushion at the end of the month?

A pay raise at a job today can be taken away with a car note, a downsizing, a re-organization, a company being bought, sold or a new boss that’s just not your cup of tea. Conversely, choosing to live with little or no debt is completely within your control and gives you a raise that only you can take away.

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Today, we have multiple income streams from a handful of sources. We have active income, passive income from our rental properties and income from this platform. While we value them all, from a time perspective the cost is far from equal.

At it’s worst, we spend about 2 hours a month on our rental property business and consistently earn a tad over $2K net a month from it. As our traffic to this site grows, we’ve seen an uptick in online income which has no limit. As much as we love getting that bi-weekly paycheck from the 9-5 job, the cost and quality of that income is significantly higher than the others, especially when business travel is heavy.

The point is, we can all benefit from taking a moment to review the broader cost of our income sources much like businesses manage and review the profitability of their revenue sources. You may find that a raise gained through frugality or a side hustle is much easier to sustain than a raise from a promotion.