The Marginal Utility of the Next Dollar

Last October we made the decision to move to Virginia. As part of the plan, I would quit my job and we’d give Coast FI a try.

Being a research chemist, I didn’t think there was much chance of scoring a remote role. But my company, apparently valuing my contributions over the past 15 years, asked me to stay on after our move. I’d serve in a temporary capacity until they figured out if there was a more permanent role for me. I said yes. To me, it was a chance to stash a few more paychecks, and had little downside.

Last week, the VP of Marketing came to me with a new opportunity. He offered me the chance to join our commercial team as a business development manager, expanding business in our highest growth, highest margin sector. This would be a promotion, with eligibility for quarterly bonuses, and I could continue working from home. They’d provide any training and support I needed, and give me every chance to succeed in the role. For someone looking to break into management and climb the corporate ladder, this is a golden opportunity.

There’s just one problem: I’m completely unmotivated by this offer.

What Motivates You?

To my thinking, there are three things drive people: status, purpose, and money.

I’ve never been motivated by status. I’m not really sure why, but it could be related to my upbringing. My parents have always lived modestly, and I think they’ve instilled that sense of modesty into me. I have nothing to prove, and gain nothing by inflating my appearance of wealth.

While my work can sometimes be rewarding, the feeling of purpose is fleeting. More often than not, I feel like a tiny cog in a global machine. Because that’s what I am.

So that leaves money. Early in my career, I was absolutely motivated by money. Why? Because I didn’t have any. Money was a necessary tool for subsistence. As such, I accepted any special assignments and additional responsibility that could help me get ahead.

As I began to earn more money, I started saving it. At first, it was an emergency fund. Then I started making 401k contributions, opened a Roth IRA, and eventually an after-tax brokerage account.

Over the years, those investments have built up, and compounded. It’s reached the point where the earnings on our investments outweigh our contributions. In other words, the quantity of money we save has reached a point of diminishing returns.

Which brings me to the point of marginal utility.

The Marginal Utility of the Next Dollar

In economics, marginal utility is defined as the benefit gained from consuming one additional unit of a good or service.

In effect, it’s another way of framing the receding value of getting more of something once you already have enough. What’s the marginal utility of a second Ferrari, or a sixth chocolate donut?

Whether it’s sports cars, or decadent desserts, there comes a time where “one more” is no longer worth it.

Even money suffers this fate. At some point, the opportunity to earn more money is no longer attractive, especially if it’s weighed against harder work, more responsibility, or some other detractor.

How do I determine what “one more dollar” is worth to me? That’s simple: how much closer will it get me to my FI goals?

Coast FIRE as a Compass

Coast FIRE is the point at which you can stop saving and still be able to enjoy a traditional retirement.

The higher your savings rate (the lower your burn rate), the faster you build that nest egg, and the sooner you can cut the cord from corporate life.

We’ve been saving and investing at least half of what we’ve earned since 2014. Combine this with a never-ending bull market, and we’ve seen tremendous gains in our net worth over the years.

More importantly, our spending has not differed significantly during this time. Yes, we spent an ungodly amount of money on childcare last year, but our core spending has been surprisingly consistent through the years.

The lack of lifestyle inflation is the key: as our incomes rose, so too did our investment contributions. Every extra dollar goes to savings, not indulgence.

If you’ve followed our story, you know we are well along on our path to FI, but I haven’t really quantified it lately.

Coast FI Projection

Let’s do a quick assessment of where we currently stand. I will use numbers based on “X” dollars of annual spending, to simplify and make it more broadly applicable.

Projected Annual Retirement Spending: X
Current Net Worth: 20X
Safe Withdrawal Rate: 3.33%
FI Number: 30X

The spending figure I used in this calculation is actually about 20% higher than what I’ve projected, and I’m also using a conservative 3.33% SWR to stay on the safe side. Here’s a grid I’ve constructed, which projects the “Years to FI” (30x spending) as a function of real return rate and savings rate.

I see two immediate takeaways from this projection:

  1. If we stop saving today (Coast FI), we will likely hit our FI number in less than 10 years, even with sub-average annual returns.
  2. For a wide range of savings and returns scenarios, we’re looking at 3-6 years until we can fully retire.

The second item bears repeating: regardless of our savings strategy and market returns, we will most likely hit FI in the next few years.

This also means that grinding it out for more money has a marginal impact on our FIRE timeline. Hence, a low marginal utility of higher earnings/savings.

Thanks, but No Thanks

Armed with the knowledge that a significant boost to our earnings (and thus savings) would have a limited impact on our FI timeline, my decision was easy to make.

I told the VP I wasn’t interested in the job.

OK, I didn’t say it exactly like that. I fed him some lines about focusing on family and not being able to fully commit to the demands of the role, including frequent travel. Actually, I was telling the truth. Time is my most precious commodity, and I will not sacrifice my life for my career.

So what’s next for me? I’m not really sure. I think my company will want to retain my services, but I can’t be positive of that.

At this point, I’m just running up the score during garbage time. I’m gonna keep padding my stats until the whistle blows.

What say you? Would you take a big raise and sacrifice a little quality of life to hit your FI target sooner? Or would you tell your boss to shove it? How do you view the opportunity to earn more, at this point in your journey?

17 thoughts on “The Marginal Utility of the Next Dollar”

  1. good for you, man. i could put myself in your shoes being in the same industry with the same frustrations. i think about it as too little too late. back when you had the energy and enthusiasm to work towards a role like this they may have been able to hook you with the bigger bucks. i know i would have had more loyalty if not constantly feeling blocked from progress and chiseled on salary in the earlier years. it must drive “the man” nuts to know they don’t own you!

    any time you wonder if you made the right choice go and put on “the cat’s in the cradle” by harry chapin. just keep on running up the score for now. hell, you can always go back to work once your kids are teens and cease to like you.

    • That’s how I look at it. From aggregating feedback from various early retiree blogs, it seems that many of them say that they could/should have retired earlier. I’m happy to continue working (for now), as long as the arrangement suits my situation and doesn’t cause me to compromise my other familial functions. If the situation isn’t to my liking, I’ll take some time off and test the FI waters. It feels good to have flexibility, for sure.

  2. Man, that’s awesome that you’re at a point in life where you are in the drivers seat. Good for you and your family. That’s what this FIRE thing is all about, it’s having options and control over your time. You’re able to put some things into perspective that not many of us can or are willing to. It’s awesome you are going to be there where you’re kids are young, rather than chasing money. I don’t think you’ll ever regret that choice.

    I’m not at the point yet where I can turn down a higher paying job. I still see money as my motivator. I’m about 5 years away from my FI goal, depending on the markets. I haven’t hit that point yet where I can ease down on my savings rate–we aren’t in cruise control yet over here, still going uphill. I think its more the scarcity mindset of future work in the construction industry that keeps me pedal to the metal.

    Anyway, great post.

    • Thanks Noel! I really should draw attention to the fact that my wife’s job is a major enabler here. I don’t want to pretend that I could do this on my own. Either way, we are at the point where we don’t have to accept shitty work choices if they conflict with our values, because our nest egg has grown enough. Keep plugging away, you’ll be really close to your FI goals faster than you think; that’s certainly been the case for us. And maybe start planning your exit from CA!

  3. Nice article. Congrats on the offer of promotion. It’s always nice to be asked to the party as I frequently say, even when you decline the invitation. It’s also a testament to the power of FI, in that you have the ability to make a choice. There were many times in my career where I took a promotion with huge sacrifices to my life quality (traveling internationally weekly, never being home, etc) because I wanted the $ to reach my FI goal. So it was worth it then and being retired now for 3 years, it was worth it now.

    That said, there is legitimacy to your argument of the dollar’s marginal utility at a certain point. I’m not interested in working hard to earn more because I’m good with what I’ve got. I do however work on rare occasion, but it’s always very short, fun projects to help people I like or others who have previously helped me.

    • Thanks Mr. Fate. I think all of us have to sacrifice on some level when weighing our career/earning potential against our quality of life. The right balance is different for each of us, and it sounds like you are now reaping the rewards of your earlier sacrifices. I’m thankfully at a point now where I don’t have to say yes when I don’t want to. That being said, there’s definitely a difference between working because you “have to” and working because you “want to.” No shame in putting in the hours on something that matters to you.

  4. That’s what FU money is all about–passing on a great opportunity for the great opportunity you already have in front of you–to spend more time doing things you want to do. Polite FU, of course. Love that you were able to come to that decision!

    • Thanks! It’s pretty clear that I would not have this option if we weren’t pursuing financial independence. I’d still be in the mindset that I always needed to earn more, and I had 30 more years of work left.

  5. I think you just have to figure out what a promotion entails. I always took mine because they didn’t lead to more work, in fact they led to letting me delegate most of the work and my life got easier. I think that’s kind of rare and I was just plain lucky. Everyone assumed I was working my tail off but I really wasn’t. And it led to not just better pay but twice as much pay or more, so it did move the needle for me, but I was a special case and they had shown me their roadmap for my future so I wasn’t having to do any guess work as is usually the case. I don’t think there is a general rule on stuff like this, its an individual call each time and sometimes the promotion path and climbing another rung or two on the corporate ladder does make sense, and sometimes not. The key thing is you are living intentionally which puts you way ahead of most people, another great post!

    • Thanks Steve. You’re definitely correct that a promotion doesn’t necessarily entail more work. In fact I had the same experience. In my case, previous promotions really just meant more accountability and making “harder decisions.” I wasn’t as busy, I was just spending more time thinking about problems, which I really enjoyed. The problem with this particular role was that it was too customer-facing for my taste, and would require frequent customer visits, post-COVID. As you know, excessive travel has been my proverbial line in the sand.

  6. That is so awesome that you got an offer like that, and even more awesome that you were able to turn it down. I’ve been thinking a lot about Coast FI lately and how I might reorganize my life to pursue that instead of FIRE through savings/investing. It seems like a lot of people in the PF community are going this way these days, and I can’t blame them.

    Even on my worst days, I love my career and having a J-O-B as Freddy always says. haha! During nursing school, when I was only going to class and basically felt “retired,” I was miserable! It solidified my desire to work for a very long time and never pursue early retirement. Of course, that could change if I have children, etc., but my identity is wrapped up in my career and I value it immensely right now. I’ve worked very hard for it and I don’t think I’ll want to give it up for a long time. That gives me just enough time, I think, to save for Coast FI and be in a solid financial place if the time comes for me to turn in the towel.

    I do value flexibility though, and you’ve shown many times how you and your wife have had flexibility in your careers through savings etc. Thank you so much for chronicling it all here!

    Congrats again on the power you wield over your job! Definitely something for me to shoot for in my own life.

    • Thanks Liz! That’s great that you’re so passionate about your career, and you enjoy the work. It definitely makes things easier. I don’t think you really need to decide between FIRE and Coast FI, just keep working, saving, and investing, and re-evaluate your priorities every now and then. Without a doubt, things changed for me when we had kids. I started to value my time much more, especially nights and weekends that were previously consumed by traveling for work.

      When it comes to flexibility, I think you’ve chosen the best possible career path. In healthcare, you can work 9-5 shifts, 12-hour rotations, and even per diem. You will basically be able to choose exactly how you work, and how much (maybe not yet, but soon enough). If and when you want to cut back and coast, there will definitely be opportunities. Good to hear from you, and it sounds like things are going well!

  7. Well, that’s quite the offer—and the story to go with it!

    I think it’s great to share the “inside baseball” on a decision like this. As Steveark mentioned, sometimes it can turn out to be an even easier ride moving up the food chain than it seems it would be. But it could also be a terrible surprise.

    In my mind, it’s a little like investing (in individual stocks). You up the risk, but also the potential gain. But to the whole point of your post—if you’re already happy with where you are and what’s going on at work, you’ve got a solid timeline to reach your money goals, etc… Why take the risk? Sure, it could be a better position. But it could be worse. And on the upside, the primary motivator would almost certainly be money for you it sounds like—and that likely has little additional utility.

    I recall doing something similar (and it’s why I’m down here with you instead of the DC area). I looked a huge salary and cushy job in the eye several years ago and said no. I went with something more interesting, more challenging, and what I thought would make me happier. And at least initially, for lots less money.

    I can’t know what the other “me” might have encountered, but I know I’m happy with how it all worked out.

    Congrats on the offer itself, a little validation doesn’t hurt. 😉

    • Thanks Chris! Honestly, if this same situation caught me in a different stage of life, I would have probably treated it very differently. I just feel like it doesn’t make sense for us in our current state. And speaking of states: being 400 miles from our support network also makes it much harder for me to agree to the travel aspect of the position. That was definitely the sticking point.

      Haha, I do wonder what all the other ‘me’s in the infinite multiverses are doing right now. Probably many of them are doing better than me. But a handful are dead! So I’ll stay happy with the only me I know right now. Cheers.

    • Thanks! It does feel good to realize that our previous choices, saving etc.. allows us make these moves later in life, and not be subjected to someone else’s decisions.


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