If you are a NBA fan like me, you know that it’s free agency period in the NBA right now. Many of the superstars are evaluating their options and there are a number of rumors flying around that several players will take huge pay cuts to play on a team that has a chance of winning a championship.
While there appears to be mixed feelings about what a professional athlete should and should not do, it has got me thinking if I would do the same.
Should an employee turn down larger offers to work in a preferred setting?
How Big of a Sacrifice are We Talking?
Earlier this week it was unclear how much LeBron James, Chris Bosh, Dwyane Wade, and Carmelo Anthony will accept, but here’s some of the rumors that were flying around:
Rumor has it that Chris Bosh has been offered a four year max contract with the Rockets valued at $96 Million, or about $24 Million per year. While I’m not a CBA (Collective Bargaining Agreement) expert, it’s not unreasonable to think that Bosh could accept $15 Million per year. There are other rumors that he would agree to a four/five year contract at about $11 Million per year, but that’s just a little too far-fetched for me to believe at this point.
So, if Bosh were to accept $15 Million per year, instead of $24 Million, how much is he giving up?
Simple arithmetic says that he would be giving up $9 Million per year, or about $36 Million over a 4 year period. That may sound crazy to most of us, seeing as I will never see $9 Million in my entire life, let alone $36 Million. But really, that’s “only” 37.5% of his highest earning potential.
How Much Would You Be Willing to Give Up?
When I first figured out how much Bosh would be giving up by staying with the Heat, I couldn’t believe it. I wanted to call him stupid among many other names. (Even though I believe that the highest paid job isn’t the best one)
But, in reality, we all make sacrifices in pay for things that are more important to us. The $36 Million dollar price tag may exaggerate the point, but when you look at the percentage, it is much easier to compare.
I currently work for a nonprofit organization. I do this for many reasons, most notably:
- I enjoy contributing to a better world – as cliché as that sounds, it’s true.
- The people I work with care about what they do – and it’s not just about the money. It’s a much better work environment.
- My job is pretty flexible. I have deadlines, important meetings, and so forth, but otherwise I can work remotely if necessary and make special arrangements if necessary.
By working at a nonprofit, I automatically take a pay cut. Operations Managers that work for corporations or for-profits earn 15-30% more than me easily. So, while I never turned down a job offer that would have paid me 37.5% more, I am taking a pay cut in a way.
Again, it’s slightly different and I’m not sure if I would take that big of a pay cut to continue in my role (if it were offered to me), BUT I probably would turn down a raise of 20-30% without blinking an eye if it meant a horrible work environment. For me personally, I think 40-50% is where I start to consider taking a job that is less than ideal. Of course, Bosh is most likely choosing between a good work environment and a great one, but the questions is still a valid one for all of us to consider.
However, this is only half of the equation.
The other half of the equation is how much makes you happy.
How Much Do You Need to Live a Happy Life?
While I tried to convert the millions of dollars into a percentage in order to make his decision relatable to everyday folks like you and me, there’s another component to these free agency deals. If you make millions of dollars each year, you have more than you need to live a comfortable life.
This can be much different with someone earning $50,000 with a family to feed. Where I live, a single person struggles to survive on $50k a year unless they live with a lot of roommates or have a partner who also earns money. A boost of 40% may be the difference between earning just enough and saving aggressively for retirement.
I know that the same applies to my wife and I. If we were to start earning 40% more a year, that would be a huge difference. We are already saving a little money after we pay for the normal expenses, so any future raises can go directly to retirement and towards a down payment.
While I am really happy where I’m currently at, as I’ve mentioned, thinking about the option to be able to significantly increase our retirement savings, retire a few years earlier, enjoy nicer vacations, contribute more to great causes, I start to wonder when it’s worth it.
I don’t have the answer. I’m not sure when it’s worth choosing the job of your dreams regardless of salary.
Readers, what would you choose? What goes into the equation for the best job for you? If you had to choose between the ideal coworkers and work environment AND an okay place to work and a lot more money, what would you choose?