It feels great to have a raise in income.
When I was new to self-employment, a raise in income meant stability, security, and a hope for a brighter future. With more income, I could save and invest more to build wealth. I also can afford to spend and borrow more to improve my living standards. As such, I spent more time at work to seek income growth. After all, earning a monthly income of RM 10k is better than earning RM 5k a month.
However, I recently have had a slight tweak to such a perspective lately.
I realise that there are instances when income growth could be regressive while a marginal drop in income could be life-fulfilling.
I know it sounds peculiar but here, let’s work it out with a simple, yet highly relatable, scenario.
Assuming that we are living a comfortable RM 10k a month lifestyle. A RM 10k a month lifestyle, in the Malaysian context, is one who lives in a RM 500k home, drives a RM 80k car, could afford a gym membership, occasional meals in shopping malls and overseas travel. I’m not referring to a luxurious lifestyle but just one that we can agree upon to be relatively “comfortable”.
At present, we earn a monthly income of RM 15k a month, 1.5x our lifestyle expenses.
Now, the question is: “If there is a chance to raise our monthly income by 20% from RM 15k to a total of RM 18k, should we go for it?”.
Most may see this as a no-brainer as it is a “+RM 3k a month” in income. This is massive growth in income, a recognition of the value we bring and funding for a lifestyle upgrade. At this stage, it is possible for you to wonder why this article is even necessary, especially if you equate success and self-esteem with monthly income.
For me, I now have a different perspective to this. I want to know the context behind the “income growth” in relation to “time allocation”.
Let’s add more context to this question.
Assuming that our RM 15k in monthly income is earned from working around 20 days per month and 8 hours per working day. In that sense, our hourly rate is RM 78.13 and calculated below:
Hourly Rate
= Monthly Income / Monthly Hours dedicated for Work
= RM 15,000 / (20 days a month x 8 hours a day)
= RM 93.75
The offer to earn RM 18k a month requires a commitment of working around 25 days per month, where you work 12 hours per working day. As such, the new hourly rate is RM 60.00. It is a 36% decline in hourly rate.
Hourly Rate
= Monthly Income / Monthly Hours dedicated for Work
= RM 18,000 / (25 days a month x 12 hours a day)
= RM 60.00
My question is: “Is spending 87.5% more at work to earn a 20% raise in income worth it?”.
Obviously no, especially when the income growth is measured relatively with time, a much more precious commodity than money itself.
Now, here is another scenario. Once again, we make RM 15k a month.
The question is: “If we’re able to earn RM 14k a month (RM 1k less) by working 19 days a month (1 day less) where each day, we work for 7 hours (1 hour less), would we do it?”
The hourly rate can be calculated as follows:
Hourly Rate
= Monthly Income / Monthly Hours dedicated for Work
= RM 14,000 / (19 days a month x 7 hours a day)
= RM 105.26
In this case, it could make sense to go for it despite a RM 1k a month reduction in income. Think of it as buying 27 hours of time a month with RM 1k. Is it worth it?
Personally, I think it is worth it if the time is spent on resting, exercising, kids, spouse, pursuing a hobby, a passion, upskilling, vacations, community works, or accumulation of life experiences. In that sense, it is possible for us to be more balanced, fulfilled and satisfied in life as we allocate a regular portion of our time on life aspects that really add quality and meaning to our lives.
So, when these factors are factored in, we can see that not all “+RM 3k a month” income growth are worth pursuing.
To conclude, what are some key takeaways to this discussion?
There are several.
First, income growth is more critical, if your annual income is low and you are struggling to provide a comfortable lifestyle.
Second, there is a threshold, where a rise in income does not add equivalent meaning, quality and satisfaction to life. For instance, you may feel a lot of happiness at a time when you can first afford a decent car. But, if you reach a stage when you own 5 luxury cars and you are looking to buy the next luxury car, the level of happiness could be lesser.
Third, if your current income is 1.5x and above your current lifestyle, you can be flexible on what and how you wish to spend your time rather than just growing income. If you are sub-par when it comes to your health and your relationships with your loved ones or you have passions, hobbies and other desires to pursue, you may focus on earning more time, instead of growing income. In this sense, you can move towards a more fulfilled and purposeful life without compromising your finances and current lifestyle.
