My Career - What Is It Worth?

Many of us start off as employees with a monthly paycheck. My career - including the salary and the related benefits - was my best investment early on, and the same may be true for you. Your regular salary is the return on the investment you made into your education, job, and career. Due to the effort most of us put into our jobs and careers, our salaries tends to dominate our incoming cash flow early in life. But is being an employee really a good investment, and what value - in dollar terms - should we assign to getting a regular monthly paycheck? What about the fact that the time spent working in a job is away from other alternative - and potentially more rewarding - pursuits? Also, what other aspects should evaluate when estimating the financial value of our careers? Isn't there a way to valuate a job so that it would be directly comparable to an actual financial asset?

Yes, there are ways to valuate your job just from the financial point of view and make it comparable to an actual financial asset. This will help you to concretely understand what the role of your job really is in your million dollar plan. I'll show you two different ways to do this, using two different bases. First, I will estimate the future incoming cash flows from the job and calculate their NPV (Net Present Value) and declare this as the financial value of my job. Second, my alternatively method will assume pay checks simply as returns from my investment into my career and, applying an appropriate rate of return, calculate the value of the investment that would be giving this kind of returns. While my career is worth more than just the money, and the intangible benefits may be important - see the last two paragraphs below - I still primarily work for the money and assume the same applies to you too. So let's see how we can estimate the value of the money part of our careers in two quick and simple ways.

Corporate Job

I'll first show - through an example - how to estimate the value of a job on the cash flow basis. I'll make the following assumptions:
  - I make $6,000 a month to begin with
  - I receive an additional annual bonus of $3,000
  - My salary and bonuses grow by 5% a year
  - I have 35 more years to work until I retire
  - I have no employer-paid retirement benefits
I will use a corporate-level interest rate as a discount rate - 10% - as I figure my job is about as risky as companies in general. With all this, the estimate for the value of my career and job is almost exactly $1,000,000. More than you thought, isn't it!

To get another slightly different estimate for the value of my career, I will use the same assumptions as above, but
 - only focus on my salary and bonuses as they are right now
 - assume nothing about my salary growth rate - no growth expected
 - make no assumptions about my retirement age
I'm using the same interest rate - 10% - for the same reasons as above and assume that my annual income is a result of an investment that yields returns at this rate. Accordingly, the second estimate for the value of my career is $750,000. This is a bit less than the first one, which intuitively seems to make sense as this method made no assumptions about any future salary growth.

Based on these estimations, it seems fair to say that my career under the above-mentioned conditions is equivalent to an investment of nearly $1M. Of course, my career being an intangible asset, there is no actual concrete assets involved (which is too bad, isn't it, as otherwise you could sell your career to someone else when you retire and make some money with it!). Thus, no matter which method we use for the valuation, the estimated value is simply the current value of the near and far future cash that the job pays over a long period of time.

Why Does It Matter?

"Why does this matter?", you could ask? "My career is my career - does anyone really care what value some arbitrary method puts on it?" Well, you should care - even a lot - and here's why.

On your journey towards your first million and beyond, you may at some point be tempted to quit your job. When you've already made a lot of progress in your finances, you may start feeling that your job is just an extra burden and that paltry salary simply isn't worth the effort anymore. You may well be right - or maybe you are wrong. By valuating your job - like we did above - you will have the facts: if the value of your job is still significant vs. your net worth, you might want to sit tight and keep the job for a few more years until the situation changes.

Weighing Time And Money

Of course, if the value of your job really is rather small compared to your net worth, then it's just a matter of judgement whether the job is worth keeping or not. If you are sure you don't need the money and think you could manage without your job, you should then look at your job from a few different perspectives in order to decide:
  - Are you learning anything valuable in your job?
  - What's the value of the human contacts your job offers?
  - Does your career give you other valuable intangible benefits?
  - What is the opportunity cost of your employment?

Regarding the last point, you should ask these questions: "What opportunities am I forgoing because of my career and the job I'm in? What might be the value of those opportunities?" If you give up your payroll job, will you be able to use your newly available time for something else that would pay back in some way - cash, capital gains, or other financial benefits? Obviously you'll need to weigh all this along with the more qualitative points above. It might be, for example, that the things you are learning in your job will be of great value for you as an investor or for other things later in your life. Similarly, the human contacts from your job can be important for you now or later, and the same could be true for some of the other non-tangible benefits of your job.


Luckily, you are the best person to evaluate and decide on the actual value of your career - both the financial part and the other aspects. In fact, you are the only one who really knows the answers to the questions above. If you are facing this decision just now, it is certainly worth your while to consider and evaluate all the points above. This will help you both to understand the parameters around your decision and weigh the quantified criteria along with the qualitative ones. If it is a close call, err on the safe side and stay put for now - and keep saving and investing to grow your other assets. Do re-evaluate the situation in the near future, though, when you are again further on your million dollar journey.

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