Job Hopping – Short term vs long term effects

Job Hopping – Short term vs long term effects

It's only fair to share...Share on FacebookPin on PinterestTweet about this on TwitterShare on Google+Email this to someoneShare on RedditShare on StumbleUpon

It’s that time of the year again when Christmas trees are lit up, presents bought, credit cards maximised and employees’ feet get itchy after bonuses. 😀

When trying to build up savings, it’s quite common to read tips that include maximising one’s earning potential. That could mean taking on more responsibilities to get that coveted promotion or changing jobs and getting a nice salary bump while doing it.

While getting a new job might be the best case for most people, I thought of sharing my personal experience and thought process when deciding whether I should venture out to another job or stay where I am.

What are my options?

Let’s start with the base case. I’m currently working in a role that gives me a very good work life balance (by SG standards), decent income, minimal annual pay increases (boo…), and work that keeps me interested. 🙂 I know, it sounds like a pretty good deal (except for the salary part). It is, however I could be earning a lot more if I job hop and not too long ago I was approached by a head hunter for exactly that.

The new role would have come with a 30% higher salary, added responsibility and pressure and almost certainly longer working hours due to the need to entertain and develop the business.

Should I take on this new job? It depends on a few other factors. Let’s review them.

1) Time to retirement

Because we are in the fortunate position of having saved for years, we are not too far from early retirement. Therefore, there is no pressing need for me to get frequent salary increases to achieve FIRE. If I was just starting out in my job or just planning to embark on the journey to retire early, then yes, getting a higher salary is extremely important because of the longer time-frame to retirement.

2) Opportunity cost

Somewhat related to how close a person is to retirement, a 30% salary increase may not equal the opportunity cost of changing jobs. That could mean the potential Alpha (the incremental return above the market benchmark) that can be generated on a portfolio of a substantial size. Let’s crunch some numbers so it is easier to understand.

Assuming you want to have a portfolio that allows a 4% p.a. withdrawal rate equal to your salary, eg: Singapore’s median monthly salary of S$4,056, the portfolio size would be S$1.2m (S$4k x 12 mths / 4%). If you’re close to FIRE and already have a portfolio of say S$1.1m and you save S$24k annually (50% savings rate), should you take on that 30% salary increase?

A 30% salary increase on a S$48k annual salary is around S$15k. But what if your trade off is less personal time, hence less time to research stocks and resulting in the lost opportunity of a 2% p.a. alpha (for eg)? Just an extra 2% on a portfolio of S$1.1m is S$22k, which is more than the salary increase you could get with time to do more active investing. (caveat below)

Maybe your opportunity cost isn’t the investing alpha, but as long as you use your extra time to do side hustles (blogging, ecommerce, teaching tuition, etc) then there will be opportunity cost if the new job takes that away from you.

3) Passion/Plans to occupy your retirement life

Some might say, okay what if the salary increase is around the same as what I can get from my side hustle so there’s no lost opportunity? Thinking longer term, what do you want to do in life? Maybe your passion is in researching companies and value investing like me, or maybe you wish to start your own business, or maybe you want to pursue pottery as a passion and for some side income. If so, why wait until early retirement?

Yes, I could focus on earning more and savings more and learn to invest once I’m retired and free. But is that wise at that stage? I would not have any active income coming in to cover the very likely investment mistakes rookies make and such losses would hit my portfolio. Therefore I’d rather start polishing my investing chops now because even if I fail to beat the benchmark…I can always work a bit longer to cover any losses, go with passive index investing and settle on another hobby. Haha.


To me, these are considerations that drive longer-term value for SippingCoconuts so that’s why I decided to focus on building my investing muscles rather than take on a job that would likely consume all of my free time.

Am I unique in thinking this way? Have you rejected a job offer despite a higher salary and what made you do that? Do share in the comments section!

Author: Mr.C

Mr.C – our resident investment expert and the muscle behind this entire movement for Sipping Coconuts. When his nose is not buried in anything financial, he’s either sailing or cooking or with the kids and always with a beer or a coconut nearby!

It's only fair to share...Share on FacebookPin on PinterestTweet about this on TwitterShare on Google+Email this to someoneShare on RedditShare on StumbleUpon

6 Replies to “Job Hopping – Short term vs long term effects”

  1. Hi Mr C,

    I guess for most people, it’s hard to be certain and confident about the alpha from investing. It does take some time before one knows whether the outperformance is due more to luck or skill. Maybe that’s why most people do not hesitate to get into a new role with higher pay.

    Another good way to look at things is to calculate the increase in salary from the $/hr metric. If it’s still more than 10/20% after accounting for the longer hours, it should be a good tradeoff for someone quite a distance away from FIRE.

    1. Yes, if a person is still far away from FI then getting a higher paying job makes sense.

      For those who are near FI or where their portfolios dwarf their active earnings (great work for those in this position!), then the answer isn’t so clear cut and it depends on the circumstances.

      My thinking behind wanting to focus on generating alpha is because that’s going to be my hobby when retired. So I’d better start testing if I’m okay at it. Haha.

  2. Hi Coconut

    I am at the same precadiment as you.

    I am at the role where I think Ive settled in well, decent income and work life balance etc until another opportunity knocks on my door and offers me higher position and a 20% increment. Suddenly no problem becomes a problem. First world problem but considering the situation around, I think a rather blissful position to have.

  3. Hi,

    I enjoy reading your blog. Thumbs up and keep these good posts coming.

    Would like to share my 2 cents on your post:
    1) Point 1 – You are also running the risk of hopping into a “fire pit or s***hole”. I’ve personally hopped jobs to find myself quitting in less than a year due to the toxic environment (in a bid to regain my sanity and human dignity). Any hiatus in your career due to the abovementioned point will inevitable put a dent into your FIRE plans.
    2) Point 2 – Depending on the time of resignation, you may be forgoing upcoming bonuses. To add salt to the wound, bonuses in the new organization may be pro-rated or skipped till the following year, if the employment start date is messed up. The salary breakeven period may range from a couple of months to even more than a year, notwithstanding the amount of added pressure that you have to put up during this period.

    1. Hi Mr.R

      Welcome and thanks for the on-point comments! Happy new year!

      As Charlie Munger would say – “I have nothing to add”. 🙂

Leave a Reply

Your email address will not be published. Required fields are marked *