Is your company incentivizing you to stay (in a job you don’t really like) with a stock vesting and bonus schedule that makes it difficult to leave?
If so, you are not alone. We got a lot of questions from readers about the golden handcuffs.
We respond to every question we receive. Since we receive so many questions about breaking free from the golden handcuffs, I decided to write a post about the topic.
I’m going to do this in a case study style, by sharing one person’s story. If you can see yourself in this story, I hope you find the ideas and considerations helpful.
Here is the case study question we received.
“I am married with 3 kids. My husband stays at home with the kids, and we have reached Coast FI. I usually enjoy working but have found myself in a function that I don’t particularly enjoy.
I’ve also reached a higher leadership role and have the golden handcuffs.
If I stay until May 2024, I will get ~$115K in stock transferred to me along with a ~$50K bonus.
I have 3 kids, and I’d like to pay for college (assuming they want to go). The $165K that I’d receive next year could round out the rest of the kids’ college savings. It seems like easy money to stick around even though I don’t particularly like the work.
Each year after that I’ll likely have ~$75K in stock transferred along with a $50K bonus. At some point, I’ll just have to walk away from it.
My retirement is funded. Staying one more year would top up the kid’s college funds. Staying two more years would allow us to pay off our house, which is our only debt.
The work isn’t terrible but not something I’m passionate about either. I typically have enjoyed working though, and I don’t enjoy this. I’m passionate about using money to create my dream life and hope to do something different in the future.
I’m also in the process of getting my MBA. I’m not sure what I particularly plan to do with the degree, but I got a full scholarship and figured it could provide me with some opportunities for the future.
What would you recommend?”
Are there aspects of this story that sound like you? If so, keep reading!
Case Summary and Assumptions
All I know about this person is what she shared by email. To make it easier, I’m going to refer to her as Jennifer.
First, I know that I need to make a few assumptions and draw some conclusions based on what she shared.
Jennifer shared that she and her husband “have reached Coast FI” and that their “retirement is funded.” Based on these statements, I am going to assume that they have surpassed their Coast FI number. This means that they don’t need to add another dollar to their retirement accounts. But, they do need to cover the cost of their everyday expenses and non-retirement financial goals between now and retirement.
Jennifer is also working in a job she doesn’t enjoy. It’s not terrible, but it’s certainly not great. She wants to use her money to create her dream life, but it seems like she doesn’t yet know what that would look like.
Lastly, her company is incentivizing her to stay in her current role. If she stays until May of 2024, she will receive $165K in stock options and bonus payout (in addition to her regular salary). Each year after that, she’d likely receive an additional $125K in stock and bonus.
Unlock the Golden Handcuffs – Recommendations and Considerations.
It can be incredibly difficult to walk away from a financial upside like this. To be clear, I am not advocating that she do this. What I want to share is a series of thoughts and questions that could help Jennifer (and you) think through the trade-offs.
Jennifer is not stuck. She holds the key to the golden handcuffs. She has a choice to wear them as a bracelet for as long as she wants, but she can take them off whenever she wants.
Recommendation #1 – Consider the Opportunity Cost
To be clear, it is completely valid to stay with a job for a period of time that gets you past some sort of “cliff” where you’ll get extra benefits. In fact, Corey stayed at his job for a few extra months before quitting, so that he’d receive his bonus. This bonus is helping to cover his year off.
It sounds like Jennifer has some specific financial goals that she’d like to achieve with the money that she’d receive for staying. These goals include:
- Funding her kids’ college
- Paying off her mortgage
Both of these are valid goals.
But, the main question I’d ask Jennifer is, “What is the opportunity cost if you stay?”
I’d want to know if the job is impacting her mental or physical health. Is it impacting her relationships?
And, is there something that she’d rather be doing with her time? It sounds like she doesn’t enjoy the work. Is there anything that she feels like she’s missing out on because of work?
Lastly, I’d ask, “Is fully paying for the kids’ college and paying off your mortgage in the next two years worth these opportunity costs?”
It might be, but she won’t know until she asks.
Recommendation #2 – Explore What You’d Like to Do Instead
It’s really difficult to make a change when we’re solely focused on what we want to move away from. Without a clear vision of what we want to do instead, it’s easy to stay stuck.
Luckily, you don’t have to completely upend your life and job to start exploring what you’d like to do instead. In fact, I don’t recommend this (unless something is so bad that you need to get out immediately for your mental health and well-being).
In Jennifer’s case, I’d ask the following questions:
- Do you have ideas for what you’d like to do instead?
- Do you have time to start experimenting with these ideas?
Experimenting with ideas will make the path forward a lot clearer. It’s hard to take action when you only have a push. When you also have a pull, it becomes a lot easier.
To learn more about experimentation, I’d encourage you to check out this blog post or watch the video below.
For example, Corey originally wanted to keep working in a traditional job until we reached $1M of invested assets. Spoiler alert: We didn’t get there before he quit. The biggest thing that helped him quit before we got to this milestone was that he had already experimented with a new lifestyle.
In 2021, we experimented with vanlife by renting a campervan. From that experiment, we decided to buy and build our own campervan. This vision for a location-independent lifestyle along with a desire to have more time to dive into his hobbies and interests – pulled him to quit.
He wasn’t enjoying his job, but I’m not sure the push factors alone would have given him the confidence he needed to leave.
Most people say that their current work situation doesn’t provide them with the time they need to explore new options.
If this is the case for Jennifer (or you), I’d recommend starting small. Over time, you could start scaling back work (or simply scaling back the mental energy you put into work). This will give you more time and energy to dream and experiment.
Here are a few recommendations I have to help you start scaling back:
- Set boundaries around the time you spend working (or thinking about work).
- Take ALL your vacation time.
- Use your vacation time to take 1 day/week off for a month or two.
- Negotiate a non-traditional schedule, like working four 10-hour days.
- Scale back and work part-time (3 or 4 days/week).
- Request a sabbatical or a period of unpaid time off.
Scaling back the time and/or mental energy that you spend on the work you don’t enjoy will provide space. This space can help you figure out what you really want and create a vision for what you want to move toward.
With that vision, it’ll be easier to take out the key and remove the golden handcuffs. As a bonus, this vision will make the transition a whole lot smoother too.
Recommendation #3 – Consider What is Truly ENOUGH
Companies have an incentive to get good employees to stay with them for as long as possible. Bonuses and vesting cliffs are tools that they use to control employees and make them feel stuck.
Knowing how much is truly enough allows us to build financial freedom and confidence in ourselves to unlock the golden handcuffs.
Since Jennifer has reached Coast FI, all she needs to do now is cover her actual expenses and save for non-retirement financial goals.
The first question, I’d ask her is, “How much of a priority for her is it to fund her kids’ college and pay off her mortgage in the next TWO years?”
The answer to this question would likely depend on a few things:
- Does she want to completely scale back after leaving this role and only cover her actual expenses forever? OR
- Could she make enough money in the future (doing work she enjoys) that she’d have a surplus that would allow her to save for these other goals?
From my limited knowledge of Jennifer, it sounds like she’s a pretty ambitious person. She’s reached the upper levels of management in her company and is currently getting her MBA (with a full scholarship!).
Based on this, it seems pretty unlikely that once Jennifer finds work she loves, she’ll struggle to cover her expenses and save in the long term. But, if Jennifer has the desire to scale back completely and only cover her actual expenses she may want to work in her current job for a bit longer.
One final question I’d ask Jennifer is this, “Once you make it through the two years and pay off the mortgage, would you come up with another reason you should stay?”
This is classic one-more-year syndrome brought on by golden handcuffs, which is exactly what your company wants.
Figure Out the Right Balance
To make a decision like this, it’s all about finding the right balance, between:
- Your goals (financial and otherwise)
- What enough means for you and your family
- Any push and pull factors
We could have stayed working full-time and in traditional jobs for longer. But, at a certain point, the trade-offs were no longer worth it. We both had things that were pushing us away from the roles that we were in. We also had a vision for the life we wanted pulling us toward it.
We have reached Coast FI and trust that the work that we will do in the future will meet our needs and allow us to work toward our goals.
Will the work necessarily look like what we’re doing right now? Who knows? But, we also trust in our ability to be resourceful.
I’d encourage Jennifer (and you) to reflect on the trade-offs and decide which ones are worth it to you. Lastly, I also want to remind you that you can choose to make a change simply because you want to. You hold the key to the golden handcuffs. You do not need something external to push you to make a change.