Compromise...all successful relationships are based on compromise, even if they are professional, personal or financial. Your professional relationships…
might be growing but it won’t necessarily hold true for your financial relationships. Sometimes you will have to compromise on the amount of money you make, to take a better position or get your dream job. Although it’s definitely not a condemnable act, you will have to keep some things in mind. Here is the straight scoop on taking a pay cut and a lower salary.
Seek And Destroy
The most obvious effect of bringing in less money is that you will have to modify your lifestyle. If you had the tendency to eat almost all of your meals out, then you’ll have to squash that habit and start chef-ing it out at home. If you loved your expensive couture and spent a little more money than you should on it…then you might want to start browsing at Old Navy. Much like any career decision you’ll need to weigh the pros and cons. How valuable are the luxuries a higher salary can afford you? Do they outweigh the benefits of pursuing your dream job or being self-employed? Best way to do this is to compose a list of items:
Pros of Not Taking Pay Cut/New Better Job
Freedom of Purchase
Reduced Financial Stress
Cons of Not Taking Pay Cut/Better Job
Decrease in Feeling of Self-Worth
Feeling of Being Under-implemented and Under Employed
As you can see the Pros are primarily financially related where-as the cons weigh heavy on the emotional side of things. Ultimately, you will probably find in the long run though that the emotional side of things will often outweigh the financial side of things.
Change Your Lifestyle
For most people their biggest reoccurring expense is food and housing. If you are considering taking a job with a lower salary you might want to find ways to cut down on those two costs, by taking on a roommate, moving to more affordable housing or even (oh the terror) moving back home. Food wise you might need to visit the dreaded Big Box stores and buy things you prefer and frequently eat in bulk…I know this seems like a huge downgrade from eating organic, but keep an open mind and be observant some big box stores offer organic alternatives, even if they are selling it in bulk.
Always make sure when taking a lower paying position that you stay up to date with your financial obligations. Sustaining and maintaining a healthy credit score, will help you once you make more money or when you are in a bind. This is especially important if you are starting your own business which may need a line of credit at the beginning. The good thing is that you can pay the minimum payment on your cards and still sustain a good credit rating, of course on the other hand you will only be paying the interest on the card.
Put It To The Side
Remember that no matter what your decision there hopefully will be a time in your life were you would like to retire, so skimp on other things but never on retirement and emergency funds. Most financial advisors say that your emergency fund should be about three months’ worth of expenses and that you should put away about 10% of your salary for retirement to varying levels of financial insanity according to the linked article on Forbes.com. In any case, squirreling away money for the future or those proverbial rainy days is always a great idea. If you’re bold you might even consider investing in stock and bonds, but it’s probably better just to play it safe.
The Switch Factor
Say you were in the banking sector and after the death of your beloved parquet Lord Fancy Feathers Von Beaken, something inside you snapped and you decided to foray into the world of Theatrical Production. When you’re switching careers, you will definitely need to take a lower salary because by switching you are forgoing all your experience in a non-relative field. You might even be forgoing your education! So you are essentially entering an industry on the ground floor again like you did years ago in the banking sector when Lord Fancy Feathers Von Beaken was just an egg. Are you prepared for the decrease in salary and potentially respect? Can you deal with having people above you that might be a fraction of your age? These are all factors you should consider when making a career shift.
Internal Pay Cut
If you were one of the unfortunate souls to have been employed during the Great Recession, then you were lucky you received a pay cut, if you were unlucky you probably got fired. If you are of the lucky few and got a pay cut, then you should immediately start your job search. Sure you could quit, but would that really make it better? Looking for a job while having no income is no picnic. Keep your job but keep looking; it’s not dis-loyalty in the end of the day because your priority is to sustain the lifestyle that you have been accustomed to.
Do you feel over worked? Under loved? Drained and Tired? Well I have the solution for you! Take a job with a lower salary and fewer responsibilities…I know that sounds slightly absurd but there are a lot of people that do it and are happier because of their decision….again it’s all about weighing the pros and cons.
Do you know anything else people should look out for when taking a salary cut? Let us know in the comment section below.