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It’s a slippery slope.
At first, the salary takes the edge off. Being paid handsomely for your challenging job seems like fair compensation. Initially, it gives you a little more financial freedom, and you enjoy the sweeter things in life that you can now afford. You can breathe a little. However, as time wears on the difference this makes begins to fade. The gruelling day to day reality of the job begins to bite and the extra cash is no longer enough of an inducement. You’re paid well for someone in your industry and you doubt that you’ll be able to earn the same salary elsewhere. There’s just one problem. You’re unhappy in your job and it’s making you miserable.
You find yourself playing the same internal dialogue about leaving: “I’ll think about it seriously when I’ve paid off the credit card…..”; “I need my bonus this year…..”; “I promised my partner the new kitchen/ holiday to the Caribbean/ that the kids could go to that fancy school……”
The thing is you dread every day. You have no passion, drive or motivation. You feel unfulfilled and trapped by your salary. You’re well established, you have the pension, the holidays and the bonus, but you are burned out and you feel backed into a corner. In short, much as you’d love to, you simply cannot afford to leave a job that you hate.
Welcome to the world of golden handcuffs.
Golden Handcuffs Meaning
Although they might sound appealing, golden handcuffs are far from attractive in the cold light of day.
First coined in the 1970’s, the term refers to the financial inducements and benefits paid to keep skilled employees in their role for long periods of time. Commonly paid above the local market conditions, golden handcuffs effectively stymie movement. People don’t leave because they can’t get the same benefits elsewhere. They grow accustomed to, and model their lives around, their inflated salaries and benefits, effectively trapping themselves in the job.
Gold handcuffs can come in different formats including:
- inflated salary
- stocks and shares
- tied bonuses (for example, paid after a certain period of time)
- extra holiday
- flexible working conditions.
Golden handcuffs are often used in markets where there is a shortage of labour – where the demand for skilled staff outstrips supply. There are not enough people to do the job and so it’s cheaper for the organisation to pay over the odds, than readvertise posts and risk losing good people to the competition.
Put on the Golden Handcuffs with Your Eyes Wide Open
It’s important to enter into golden handcuffs with your eyes wide open. The benefits offered are tempting because the implication is that if you accept, the quality of your life will increase. For example, you might be offered a bigger salary, share options or an enhanced retirement plan, all of which safeguard your ability to provide for your loved ones and secure their financial future.
However, the reality has to be faced. If you are being paid over the market rate for your role there is a reason why. The job is likely to be time consuming, exhausting and, even worse, against your moral principles or values. It may be a way of life – rather than just a 9-5 job.
Some companies will even hire legal staff to draw up the initial paperwork where penalties are imposed if the contract is breached. It is common for such contracts to contain clauses relating to non-disclosure agreements (NDA’s) and also non-compete clauses where you are unable to work for a competitor – even after you have left.
You Never Even Noticed
Sometimes, the act of putting on the golden handcuffs takes place gradually, right beneath your nose.
When you land your first well-paid job the relief can be overwhelming. For once, you can eat out, treat yourself to a nice car, maybe even a holiday. Your family starts to grow so you stretch yourself to buy a bigger place. You live pretty much month to month in order to fund your lifestyle but at some point in the year, like Christmas and holidays, you have to put a little on the credit card so the debt starts to build up.
It’s possible to stomach this kind of existence when you love the job. You simply tick over every month, making sure you keep on top of your debts. However, problems arise when something changes at work which causes you to have a change of heart. When you no longer love the job, the financial commitments that once never bothered you now sit on your chest like a dead weight. You start to resent them deeply.
In other words, you put on your own golden handcuffs.
Trapped by Golden Handcuffs?
Many people feel firmly trapped by their golden handcuffs. They feel cemented in, and believe that they have no choice: there is nothing that can be done.
This is actually not true. It’s all boils down to perspective – and we certainly have control of this.
The reality is that many of us have a warped relationship with financial reward that we fail to notice. Because of this we often get stuck in a negative cycle.
When you no longer love the job, you feel the need to ‘reward’ or ‘treat’ yourself because you ‘deserve it’ for putting up with such a difficult situation at work. Instead of saving, you buy a bigger house, go on holiday or eat takeaways constantly to ease the pain of the job. We fool ourselves into believing that all this ‘stuff’ is going to make us feel better – we hope against hope that we might learn to cope and even fall back in love with the job again.
This is far from reality.
You’re just tightening the handcuffs. Nobody ever gets true fulfilment from material possessions. The positive impact of this unnecessary expenditure is very short lived.
The more you spend, the more trapped you become.
How to Get Out of Golden Handcuffs
1. Needs and Wants
Everyone one has needs and wants. Needs are the thingst you cannot survive without in reality: water, food, shelter, warmth, for example. Wants, on the other hand, are the added extras on top – the things that make life sweeter: the bigger house, the fancy car, the tropical holidays on white sandy beaches.
The issue here is that you get them confused. Wants are not needs. However, you need to decide works for you in reality. How far are you really prepared to go to rid yourself of your golden handcuffs?
There are people all over the world who live very happily without material possessions. Then there are others who believe that they cannot survive without the latest version of every invention on the planet. The reality is that we can all live with less. You just have to decide what works for you.
2. Get Perspective: It’s not all about the money
Everyone knows this, so why don’t they listen?
Well, because it’s hard.
It’s like asking a smoker to quit when they don’t want to. Of course they know that smoking 40 cigarettes a day is slowly killing them but unless they truly want to change deep within themselves, they are fighting a losing battle. The same is true of golden handcuffs.
The reality is that you are not really stuck. You have a choice. But can you really look this in the eye and see the choices for what they are?
You need to decide which is the better option. Is it:
a. Doing a job that exausts you, is actively taking years off your life and means that you are away from your loved ones – BUT gives you a nice car, wonderful holidays and financial security; OR
b. Doing a job that fulfills and rewards you, makes you feel happy and content – BUT means that have to give up the luxuries and financial security; OR
c. Devising a plan to move on, taking on some risk, not knowing where you will end up.
Obviously, there are lots of choices and more than those simple ones listed here. However, first of all you have to confront the fact that no-one is really stuck.
Sometimes we all need to sit deep within ourselves and contemplate this. Ask the dreamy 8 year-old you, would s/he be happy with how her/his life has played out? What would s/he say? Alterntively, if today was your last day alive is this enough? Are you OK with your life as it is?
Only you can really answer these questions.
3. Let’s Get Real – Get Your Act Together
The fact is that there is a connection between money and happiness – up to a point. For starters, earning a sizeable wage means that you can easily secure your families needs as we discussed above. Additionally, money can buy you a lifestyle of luxury and comfort. It would be naive to say that this doesn’t positively affect your quality of life. If you can afford to travel the world in style, provide for your loved ones and sleep at night knowing that you can pay the bills this is going to be tough to walk away from. Society teaches us that there is something wrong with making a positive connection between wealth and happiness. The reality is that money can make you happier – up to a point. You just have to decide when you’ve reached that point – see 1 and 2 above – and all you’re doing instead is securing more debt for the mini hits of pleasure to take away the underlying pain.
You have to decide what your financial tipping point is. If you’re seriously considering taking off the handcuffs you need to face up to your finances. Moving to a lower paying job can be stressful and it’s important that you are prepared for this.
First you need to get your finances under control and work out your tipping point – in other words, the standard of living that you are realistically prepared to accept. In many ways this is the hardest part and the place where people feel that they are ‘trapped’. But you have to be firm with yourself: you do have choices, you are not stuck, but the reality is likely to mean that you cannot have it all.
If you are surviving ‘hand to mouth’ and living from one monthly salary to the next you will need to take action. If all of your wage is taken funding your lifestyle, without room to save, then you are going to have to resolve this first if you truly want to break free of your golden handcuffs.
4. Cut Back
Simple in idea, much tougher in reality. However it is the first step if you are serious about walking away.
Take a long hard look at your finances and identify the things that you can effectively cut out – the non-essentials. Trent Hamm, from The Simple Dollar gives a great account of how he and his wife effectively achieved this.
Non-essentials include things like: eating out, shopping for frippery like clothes, gym membership etc. You can also look to trim things down like your mobile phone contract, can you car-share to work to cut down on fuel costs? When you look really hard it’s amazing where you can find savings.
You don’t have to live like a Buddhist monk, instead take it one step at a time and see how far you can go. It’s probably not a great idea to cut out everything right from the start as this is likely to make you miserable. Try to get a balance and enjoy the feeling of being in control of your finances – rather than them controlling you.
As Hamm says “look at your spending and cut back on the things that are least important to you and keep cutting until you’re spending only about 80% of your take home pay (if not less)”.
It’s important to have the right frame of mind when cutting back. If you approach this from a negative standpoint, where you feel resentful about giving things up, then you are doomed to fail. However if you do this with a sense of excitement, where you know that you are going to get control, the feelings can actually be positive.
A Note to Parents
As parents we want to provide for our kids and we might feel guilty if we’re cutting back on things that affect them. First of all what your children want and need from you is not actually about money – it’s love, care and affection which cost nothing. Secondly, explain to them what you are doing and why using language appropriate to their age. Thirdly, involve them in the process: try and plan activities that are free, see if you can plan a cheap meal together in the supermarket, ask them for suggestions on how you can save money. Teaching kids to be frugal and respect money is a valuable life skill that will stand them in good stead for years to come.
Remember why you’re doing it in the first place.
5. Get Rid of Debt and Save
Once you have eliminated unnecessary expenditure it’s time to get rid of your debts. Devise a plan for how you are going to tackle these and start to pay them down. Putting timescales on your plan can give extra momentum and provide inspiration when then things are tough.
It’s a good idea to set aside a small fund for emergencies. This way you can use this when needed so that you don’t have to add anything further to your existing debts.
If you are really serious about paying off debts quickly review all of your expenditure: do you really need the fancy car or can you trade it in for something cheaper? You can also apply this to your house. You could also consider additional income streams – could you start a side hustle, take on a part-time job or find another creative way to make some extra cash?
Once the debts have gone, begin to build your emergency fund. Take some time build up your savings so that any transition you decide to make can be managed effectively. The more you save the more freedom you are buying yourself.
6. Start to Plan Your Next Steps
Whilst you are getting your finanical affairs in order its important to plan what it is that you want to do next and what you really want from your career. You will also want to consider your values and motivations and what it is that you really want from life. You might even want to employ the services of a career coach to help you with this.
There are also practical steps that you can take to increase your options: network widely, start to work on your CV/resume, consider any professional development opportunities that you might want to explore further. The world really is your oyster and it all depends on where you want to go next.
A note of caution: If you work for a particularly ruthless organisation, or have no-compete clauses in your contract, you need to be careful when networking and enhancing your CV/resume. Be careful not to bite the hand that feeds you until you are ready.
Hamm, T. (2020). The ‘Golden Handcuffs’ – The Simple Dollar. [online] The Simple Dollar. Available at: https://www.thesimpledollar.com/financial-wellness/the-golden-handcuffs/ [Accessed 27 Jan. 2020].