A Financial Wake-Up Call
On today’s episode of “What the Hell Have I Been Doing With My Life”, we will be talking about “Income Trajectory”, a concept that never crossed my pretty little head until a few weeks ago (thanks to a new smarter-than-me coworker) and the ugly reality that is Age Discrimination in the workplace. Now that these two terms, Income Trajectory and Age Discrimination are on my radar, I want to explore how these things are connected, and how they, in conjunction with one another, constitute what I affectionately refer to as a ticking time bomb for 30-somthings like myself.
Not long ago, I was having a career development conversation with a new hire mentee. She shared with me that she wasn’t sure if the company we work for is going to keep her on the income trajectory she had envisioned for herself. It was a striking revelation for someone so young – I was impressed with her forward thinking. After dispensing what I’m sure was sage-like career advice, I was left thinking about my own income trajectory.
In that moment I realized that I needed to reevaluate how I was approaching my own income and career aspirations.
Finance Bitch Becca
Up until that point, I’d treated my income and earning potential as somewhat out of my control. I would accept promotions, or move to a different company if there was more money involved but I never created goals around it, or held myself accountable to achieving a particular income. Meanwhile, my new mentee had not only done that, but was thinking DECADES down the line of her own career and retirement. She knew what income and titles she wanted, by what points in her life and was ready to make tough decisions to make sure she got there. In that moment I realized that I needed to reevaluate how I was approaching my own income and career aspirations.
Shortly after the conversation with my mentee, I happened to hear one of my peers talking about our company’s recent update to the annual review and compensation process. She was explaining how the new process made it easier for the company to discriminate against her and other older employees. She pointed out how certain aspects considered in the compensation evaluation lend themselves to favor younger individuals while penalizing older folks who were perceived as less likely to leave the company. While I cannot speak to whether or not she is being discriminated against because of her age, some of her arguments may have some merit.
In my young and naive years, I thought age discrimination wasn’t really a thing. My views have since been corrected, as it absolutely is a thing – it’s just really hard to prove and is often disguised as something else. My peer’s concerns got me thinking about my own age and I started to wonder two things:
When does age discrimination start and how does that compare with my income trajectory?
As it turns out, there is a lot of data on earnings and age. In this context, a person’s income trajectory is really more of an arc – visually representing the way a person’s earnings grow and then decrease over their lifetime. Not surprisingly, considering the known pay gap between men and women, a women’s income trajectory varies from that of a man. Not only is a woman’s peak earning potential considerably lower than a man’s, but a woman’s income arc starts to flatten out far earlier than a man’s. According to a three year study (2016-2019 ) conducted by PayScale.com, women’s income arc starts to flatten out around age 37-38, while men enjoy increasing earnings into their 50s. Additionally, the study found that women typically hit their peak earnings at age 44, and men at 55, showing yet again how the male of the species is valued differently than females.
So, it looks like statistically, I probably have precious little time to enjoy the upward trajectory that my earnings are currently on. Now I know that there are always outliers, and I by no means take this data to mean that I can’t or won’t be able to remain on an upward trajectory longer. I am taking it as a reality check though – that I should not continue to plan my financial future based on 5% raises into perpetuity, when that clearly wont always be the case because…
Age discrimination is a thing and it starts at 40
At least that’s the age that The Discrimination in Employment Act 1967 designated as worthy of protection. The US Department of Labor explains that the act seeks to protect individuals aged 40 or older against “discrimination on the basis of age in hiring, promotion, discharge compensation…” Despite these protections existing, discrimination still occurs. My peers’ comments about age discrimination may have been more accurate than I gave her credit for. Being passed over for raises and promotions was the top of her list for ways she felt she’d been discriminated against – and it’s the top of the list for ways that employers discriminate against their more mature employees. Now to be fair, it can always be argued that a persons contribution or lack thereof, is really at the root of being passed over for a pay raise or a promotion, but for purpose of this article we’re going to take the somewhat jaded view that ageism is alive and well and that I too will eventually fall victim to it.
From where I sit right now, it looks like I have two very real risks to my income and where I want to be in life. My soon to top-out income trajectory and the ever-present threat of age discrimination are both right around the corner, ticking like a time-bomb. I am not where I want to be financially. I’m not on track for retirement, I’m not on track to pay for my kids’ college and my financial thought process which was largely geared around, “I’ll keep getting raises and eventually be able to afford all the stuffs” has clearly not done me any favors. It’s time to get my financial shit together.