Today is my first day back at work after a one-week “unpaid” vacation. I’ll earn less this month than I did in the previous few months, since I only worked three-fourths of the time.
This is because I trade my time for money. I have a huge limitation on how much I can earn.
Everything I do these days – including my pledge to invest 100 percent of my income – is intended to cut the relationship between time and money. I’ll have “real” wealth the day I can unplug for one year without suffering a hit to my income. Wealth is measured in time, not dollars.
Some people believe that they already have stints in which they get paid to do nothing. They refer to this as “paid vacation.”
I’ve written before about my belief that paid vacation is a myth, but its such an important concept that its worth devoting a post to.
There’s No Such Thing As Paid Vacation
Casey searches for a job with paid vacation.
“Can you imagine?,” she says. “Laying on the beach and getting paid for it?”
She finds a job as a marketing assistant. Her new gig pays $50,000 per year, plus three weeks of paid vacation, health insurance and a three percent retirement match.
Casey is elated. During her first year on the job, she jets off to Aruba, visits friends in West Hollywood and goes skiing at Whistler. As she cruises down the slopes, she thinks, “Wow. I’m getting paid for this.”
Except … she’s not.
Casey’s boss, Shannon, launched the marketing company 10 years prior. For the first few years, he worked round-the-clock with only meager pay to show for it.
Shannon watched in jealousy as his friends enjoyed their steady flow of paychecks, paid vacations and company-sponsored happy hours. At times, he contemplated quitting. But he continued to build his business.
After two years, he was ready to hire his first employee. A year later, he hired a second person. Today, a decade into the company, Shannon has eight employees.
Casey became employee number eight. Shannon estimated that her efforts would help the company’s revenue grow by an additional $100,000.
So Shannon made an agreement with Casey: I’ll pay you for 49 weeks worth of effort per year. I’ll pay $53,300 in total — $50,000 in the form of paychecks, $1,500 in the form of a three percent retirement match, and $1,800 worth of health insurance, which has a fair market value equal to a $150 monthly premium.
In other words, I’ll give you $1,087 for every week you work for me. ($53,300 divided by 49). I estimate that my investment will add $2,000 per week in value to this company, so I’m happy to give you half.
For the sake of simplicity, Casey, I’ll space those payments out in regular two-week intervals. It makes the bookkeeping a heckuva lot easier.
And hey, Casey, if you take time off at the end of the year, then I’m paying you in installments for work you’ve already done.
Shannon Gets Real Paid Vacation
With eight trained and talented employees, a well-organized system and strong client relationships, Shannon isn’t worried about the day-to-day management of his company anymore.
He jets off to Aruba, West Hollywood and Whistler, just as Casey did. Shannon’s company turns a strong profit, even while he’s away.
Each of his employees create an additional $1,000 per week of net earnings, so Shannon collects $8,000 every week that he’s on vacation. He can do this, in perpetuity, forever, barring any sort of catastrophe. When he returns, his company is running even more smoothly than it was before he left.
Shannon gets a true paid vacation. Everyone else just gets paid in installments.
