As featured in The Wall Street Journal, Money Magazine, and more!

Real Financial Progress Requires Quantum Jumps

This article was written by in Career and Work, Wealth and Affluence. 11 comments.

I don’t completely agree with the “get rich slowly” theory. I accept the fundamental advice, like paying yourself first, making conscious decisions about big financial decisions as well as the full series of small financial decisions, and setting long-term goals, but there is a fundamental flaw with taking this theory as the sole approach to building long-term wealth.

By the time the future comes around, your financial target has moved. The million dollars you’ve saved over thirty years is now worth what $400,000 was worth when you started thanks to inflation’s erosion of real value. With $400,000 in value, you’re certainly better off than you would have been if you didn’t start aiming towards a million dollars, but the finish line isn’t nearly as meaningful as you thought it would be when you began.

I understand that there are many definitions of the word rich. The goal has different meanings. Let’s look at financial independence instead: the amount of money you need so that the choices you make in life aren’t affected by your financial condition. Or perhaps financial independence is the amount of wealth necessary to prevent you from needing to work ever again.

It’s a number that changes as time passes; today that number might be $2 million, ten years from now it may be $8 million.

Calculating that number can be difficult. You may think you could live the rest of your life with $1 million, and maybe you can. With $1 million invested in stocks and bonds, the safe withdrawal rate of 4% gives you an annual income of $40,000, increasing with the rate of inflation each year. Withdrawing that amount gives you a good chance of having your money last 30 years, regardless of most market conditions.

$40,000 is a decent income, especially if you’re not trading your time and effort for income — that is, working — but it may not be enough to consider yourself financially independent. It may not be enough to have the freedom you want. And by the time you get to the point where your investments total $1 million, that annual $40,000 might be just around the poverty line.

Getting rich slowly calls for gradual progress, but gradual progress alone won’t get you rich. It can’t lead you to financial independence. Gradual progress needs help from quantum jumps.

A quantum jump (or quantum leap for those who remember the clever television program) is when electrons moves from one quantum state to another, resulting in a change in the atom’s energy level. It’s not a big change in the physical sense as the term leap might imply — it’s something that happens on a subatomic scale. Quantum jump are very small changes relative to a person, but they are incredibly significant to an atom.

Quantum jumps in finances are what make financial independence possible. If it’s not clear, I’m not talking about physics now, I’m talking about personal behaviors and attitudes, using the quantum jump as a metaphor.

The improvements I’ve made with my finances over the past decade or more were not a result of just making better choices with my money on a daily basis. The success thus far did not come from saving ten percent of my income, reducing my propensity for dining out, asking for raises, or visualizing future success. Success came from quantum jumps — significant moments of change.

The first quantum jump is awareness. It was easy remaining ignorant of my financial situation. It was getting worse on a weekly basis because I was earning barely enough money to pay for my commute, making it even more difficult to handle things like food and rent. I protected my emotional state by ignoring my problems. That could only last so long before I’d be in serious trouble.

I used free software to help me get an accounting of where I was financially. It took some courage to face reality for the first time, but this change in attitude made success possible over the long term.

You can’t improve financially by staying in the same job. In my last job before quitting to pursue my own businesses full-time, I had a few colleagues who had the same job for over a decade and had no plans for advancement. There’s nothing wrong with this. If you’re comfortable in a job that you like and you have no need to make financial progress — perhaps you have a spouse who is also earning money and who has a stronger desire for financial success — there is no need to make changes.

But when you do stick around in one job, waiting for someone else to promote you or just looking forward to incremental raises each year, you end up barely making progress for financial independence if at all.

What pays off is changing jobs, and in some cases changing entire career paths. After college, I worked in a non-profit, as I’ve written about many times on Consumerism Commentary. Financially, I was moving backwards and it was clear I was not destined for advancement within the organization. The quantum jump was leaving that job and working in a more stable environment.

With a new job, I was working for a solid company. The compensation was a big improvement, but still not great. I stayed with this company for eight years, about seven years more than I expected. Again, I wasn’t making big changes. My salary increased by nominal amounts year to year.

I experienced a few bigger jumps with promotions and with two job changes, but the changes weren’t big enough to significantly accelerate my progress towards financial independence. A quantum jump, a jump to a new level, might have been moving from a staff type position to a management type position, but it can be very difficult to move across that barrier within the same company. And even if you do, the pay increase isn’t often commensurate.

Again, the quantum jump was leaving that company to work for myself full-time, something I regret not doing sooner.

There have been a few more quantum jumps since then, mostly pertaining to my approach to my business. Had I just persisted with incremental changes, waiting for raises and only looking for opportunities for growth within one company, I would be a long way off from being financially independent.

Quantum jumps aren’t limited to the revenue side of the wealth equation. The same concept applies to expenses. You’re not going to make a significant dent in your overall quest for financial independence just by cutting out your daily latte. You will have a noticeable positive effect by making these quantum jumps:

  • Reset your attitude towards spending overall. consciously deciding whether each choice will be good for your finances. It’s an attitude adjustment that effects everything, not just lattes. When you go from someone who doesn’t look at their money to someone who puts in the effort to be frugal, this is a quantum jump.
  • Move your family to where there’s a lower cost of living. This can be a major change for a household, just like a quantum jump is from the perspective of an atom. Maybe you can earn much more living in a different city or maybe your earnings will go farther for you if you change location.
  • Quit your bad habits cold turkey. You can’t ease yourself out of bad behaviors. Changes like that are rarely permanent. Every former smoker I know who successfully quit didn’t use nicotine gum or any other gimmicks. They realized their health was in jeopardy — and maybe that came from hospitalization for another issue or from some other health incident — but when their backs were against the wall, they made the immediate decision to overcome cravings and dependencies. Smoking isn’t the only expensive bad habit. The cold turkey approach is the quantum jump, an immediate shift.

Are you willing to make quantum jumps to reach your long-term financial goals?

The gradual progress that comes through making better decisions about money — the “get rich slowly” approach — is the baseline. It will get you to the point where you can build immunity to financial setbacks. It will help you grow a nice emergency fund and eliminate debt. That’s a good place to be, but it’s only mediocre goal. It’s just a landmark to pass when your’re on the way towards your ultimate goal, financial independence.

The quest for excellence, in the case financial security at a level beyond mediocrity, requires not only the baseline gradual progress but also these quantum jumps. The significant moments in which you change your entire approach to a topic or you overcome inertia by making difficult decisions that require changes in your life are those moments that are most effective for bringing financial independence within reach.

Photos: Flickr

Published or updated October 4, 2013.

Email Email Print Print
About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 11 comments… read them below or add one }

avatar 1 Anonymous

This is great advice.

I had to quit a couple of jobs I really liked, because my pay had stagnated and I was earning way less than I should have been. Companies will hire new people who have very little experience and pay them more than their loyal and experienced employees. Sometimes, you just have to make a move, for the sake of your family.

Reply to this comment

avatar 2 Luke Landes

I’ve seen the preference for hiring from the outside in my experience, too. This is the way it is — so play that game by being ready to move to another company to take advantage of that outsider boost. (Company-jumping too often could be a career liability, though.)

Reply to this comment

avatar 3 Anonymous

If you define financial progress as increasing income, then sure, staying at the same job is generally not going to give that progress in most (more than half of) cases.

Also, if you are in a job that doesn’t pay well enough to save a significant portion, has you living paycheck to paycheck, or has you going deeper into debt just to pay living expenses, then obviously that is going to hold you back.

However, if you start out in a career that pays well, and save diligently and significantly from early on, you can make a lot of progress towards financial independence without having to make quantum leaps. I can give two examples – RetireBy40 and Mr. Money Mustache. Both worked at high rates of pay at a small number of employers (only 1 in RB40’s case), and saved a huge percentage of income. They were able to reach financial independence far sooner than even the average investment banker, pulling in mid six figures but spending it all.

Reply to this comment

avatar 4 Luke Landes

I don’t know much about Mr. Money Mustache and RetireBy40’s early life. There may have been quantum jumps that don’t necessarily require going from one company to another. Once someone’s life becomes a “motivational example,” you can expect some embellishment… history becomes story. I’m not saying anyone’s lying, just that storytelling is an effective motivational tool, and the more interesting that story is, the more motivational it can be.

A change from one company to another for an income boost is just one example of a non-incremental life change. If one starts a career earning six figures without a home culture that breeds that type of living (wealthy parents have a tendency of developing wealthy children), look earlier in life for evidence of quantum jumps. Even breaking from the philosophical approach of one’s parents or one’s environment towards money is a quantum jump.

If you’re a product of multi-generational wealth, you’d probably need to make quantum jumps in order to avoid developing financial independence on your own.

So the extreme saving approach to early retirement — that’s a quantum jump for anyone who sees that type of success, doesn’t currently focus on that approach, and wants to emulate it.

Reply to this comment

avatar 5 Anonymous

I couldn’t agree more. While continual, incremental changes are certainly helpful, real progress comes from big changes. As one example, I changed jobs a few years back and was able to score a 45% increase in salary. Such opportunities aren’t common, but are incredibly valuable. It would take years and years (and years!) to get to the same place based on annual raises. And when you eventually get there, it will be worth much less thanks to inflation.

Reply to this comment

avatar 6 Anonymous

I think it’s a bit disingenuous to not point out that this sort of “quantum jump” is extremely rare. You were lucky in the sense you entered the personal finance blogging space very very early. No matter how good you are at that if you tried to enter it now you’d almost never be able to make a decent living at it. The market is saturated and the barriers to entry are to high.

Most people that start new ventures are not successful – it’s good to try and if you have the ability and means to try over and over you may very well get lucky…

Your choices for getting rich this way are legitimately figuring out something will be popular and getting in at the ground floor (which is akin to winning the lottery) or being so good at something you can command an enormous salary. That’s about it.

You could take an established concept without too high a barrier to entry, and if you are good at it’s execution you should be able to make more than perhaps working for someone…but it’s a huge risk.

If you make a decent salary and could be assured of amassing a few million in assets over your working life at “regular” jobs over time and with smart investing. Or you could try and “hit it big” with a very small win percentage. But if you do so…you’ll end up with 10’s or hundred’s of times more assets…however failure means working much longer. I suspect most people would pick a stable job and a modest retirement over the looming possibility of no retirement.

Reply to this comment

avatar 7 Luke Landes

You’re right; I’m very lucky. My financial independence came quicker than most, but financial independence can still be a long-term proposition for most and some will have some luck, like I have had. I’d also like to point out that it’s only part luck. It’s not like I started blogging at the precise moment at which it would become big with potential for earning a living. I’ve been blogging since the beginning of the web — earning zero dollars from 1994 until some time after I started Consumerism Commentary.

There have been other personal finance bloggers who did not get in on the ground floor but who have far exceeded my success. They are exceptions — we are all exceptions — and that’s the point. Sometimes it takes being exceptional to bring long-term goals closer.

You can stay on stable paths and still reach financial independence. A quantum jump doesn’t necessarily mean doing something risky with the potential for high reward. It’s making a well-considered change in your life or your philosophy rather than settling for incremental, small advancements that come your way.

Reply to this comment

avatar 8 Anonymous

We moved to a lower cost of living area from a higher cost of living area and kept somewhat decent salaries. It is amazing how much better we can live in the Florida panhandle compared to the DC suburbs. Day and night difference!

Reply to this comment

avatar 9 Ceecee

At my first job I had $25 taken out of each paycheck. That was more money back in the day than it seems now. That was my GRS route. After a few short years, I used that money as a down payment to chip in with a relative and buy a house=quantum leap. Sold the house ten years later for double the purchase price.

BTW, you should catch Mr. Money Mustache—he has some interesting stuff.

Reply to this comment

avatar 10 Anonymous

I agree with everything except for the fact that you should quit your habits cold turkey. That’s easy to say but if you ask someone to do it, there is a greater risk of them failing. Instead, go the sure way of quitting one habit at a time.

Reply to this comment

avatar 11 Anonymous

Our quantum jump occurred over in 2009 when we moved to a low-cost, rural area. We stayed there for three years and really made it count by maxing out every retirement account available to us. During that time we also became super frugal; we’re amazed how little basic necessities cost. As a result, all future work will be strictly for savings, not consumption. Every year we teach (as a couple) we should easily save at least $100,000.

Reply to this comment

Leave a Comment

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed. Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these terms and conditions.