Would you rather have a stable job with lower income, or a position with fluctuating, but potentially higher income? This is something my family and I have wrestled with a few times over the past 3 years. Now, we’re in that position again. It takes a lot of consideration to sort through all of the variables in order to make the right choice for our family and our future.
Fixed vs. Variable Income
Most people who are self-employed or work in sales earn some form of commission that allows them to make more as they sell more. You can earn a lot more than most standard salaries by working hard and providing good service.
For 8 years, my husband did just that. He became known as a person of integrity in his field, and he was able to sell premium products at premium prices.
By 2007, however, we began to see a change was coming. The economy was overheating and looked like it was ripe for a severe correction. My husband was our sole financial provider in our family living off one income, and I was a full-time stay at home mom. I did earn some income helping my husband with his business, but he was on 100% commission, so if his sales were zero, our income was zero.
We became very concerned that sales would dip significantly as customers wouldn’t be able to afford the premium products. In 2008, my husband left the company to take a position in which his salary would be guaranteed for one year. Unfortunately, that job didn’t work out, and he has been through several others since then. That brings us to today.
A few months ago, my husband secured a position with a company in a related, but new industry.
He has a set salary without a commission component. The benefits are great and the health insurance premiums are paid by his employer. The company pays for all of his expenses, including gas, and a generous car allowance. While the salary is enough for us to live on, I’m not sure we’re putting away enough for education (e.g. through a 529 college savings plan) and retirement savings (401k and Roth IRA), and there’s no potential income boost if he is successful and increases his sales.
The Dilemma with Job Opportunities
Recently, my husband has been offered a position with a company in his former industry, but it’s based on 100% commission. There’s definitely the potential for earning a lot more than he’s making right now, but there are no guarantees either. Further, we will have to incur some expenses, including benefit premiums, gas, home office expenses, and of course self employment tax.
Here’s the dilemma: should my husband stay with his current employer in anticipation of salary increases down the road, or should he swing for the fences and take the other job, even if it means more risk and less stability?
As we’ve contemplated our own personal bird-in-hand conundrum, we’ve thought about several important factors. If you’re facing, or may face a similar dilemma, here are five things you might want to consider.
How many working years do you have before you retire? If you’re in your 20s, you may be able to take on a little more risk. If, however, you’re in your 40s or 50s, you probably need to think about how easy it would be to find another job that will provide enough income for retirement savings.
For the record, my husband will turn 40 imminently. This puts him in the middle, which has added to our dilemma.
2. Single or Dual Income
If you are the sole income-earner for your household, you may not want to take on the risk of a variable income position. If, however, your partner’s income is sufficient to provide you with a nice cushion, you may decide to swing for the fences after all.
3. Savings Status
How much do you have in your emergency fund? Is it enough to cover at least 6 to 12 months of living expenses in case you get off to a slow start or experience a dip in sales? How much do you have in retirement savings? Are you way ahead of the game or in need of a boost?
4. Personal Situation
Everyone’s personal situation is unique. Do you have children? If so, how old are they? Do you want to spend more time with them? Do you care for aging parents?
These, and many other personal variables, will carry some weight in your decision. If you’ve recently been through a tumultuous period, you may crave the simplicity that a more stable job has to offer and happily give up some income to achieve it. Or, you may feel like you’re at a point in your life where you’re ready to pursue new challenges.
5. Desirability of the Position
Which job would you rather do? With which one would your family be more comfortable?
For us, a move back to straight commission would mean a lot more bookkeeping for me. I’ve always handled the tracking of expenses and deductions for tax purposes. It has often been very time consuming.
For now, we are opting for stability. No one in our family wants to feel as uncertain about our future as we have over the past 3 years.
In the meantime, we can use our stability to reduce debt and plan our future. We will likely pay off our mortgage early in 2011. This will leave us completely debt-free, and allow us to accelerate our savings considerably. I’m earning a little extra side income and hoping to grow that each year. Additionally, we have ample time to spend with our children. Even though they’re a bit older now, our time with them is no less precious.
In regard to this almost universal dilemma of choice, there are no right or wrong answers. Either option could turn out to be the better one, and there’s no way of knowing that in advance. I’ve told my husband that I wish our life story was like a choose-your-own-ending book. It would be great to skip to the end and see the results.
Alas, we don’t have that option. Instead, we’re making the best decision we can with the information at hand. We aren’t closing any doors either, but we’ve chosen this path for now and will work hard to be successful. This seems like the right choice for us right now.
Have you ever been faced with a similar dilemma? Which path would you choose?