But is it ever worth it to take a pay cut?
Let’s say you’re in a job that you hate. Sure, it pays well, but you dread going to work every single day. Maybe your job is simply boring and you don’t feel challenged. Maybe you’re working in a toxic environment. Maybe your job is stressful and you find yourself bringing that stress home every night. For whatever reason, you are miserable at your job.
You start looking for other jobs, you start applying for other jobs, and you get offered a position that seems perfect for you. Well, almost perfect. At this new job, you will be making less money than you currently make. Is it worth it?
Do the Math
First and foremost, take a hard look at your budget. What are you making now and how are you spending your money? If you’re already living paycheck-to-paycheck, you will likely struggle if you’re making less money. But you need to look at more than just your bottom line. Where is your money going?
I know that I can be an emotional spender. After a rough week at work, I sometimes think “I should treat myself” and I spend money on something I’ve been wanting to buy. Now, I’ve gotten pretty good at only spending within my budget. But if you are coming home from work every day super stressed, is that causing you to spend more? Maybe you’re not making emotional splurges, but you’re getting a lot of take-out or delivery food because you’re just too burnt out to cook.
Don’t Forget About the Other Job Benefits
Jobs are about more than just paychecks. What are the other benefits to your current job and the new job? Do they offer comparable health insurance? Does one cost significantly more than the other? What about retirement benefits? Is there a 401k plan? Is there a match? What about paid sick leave and vacation leave? Number of holidays?
Will One Job Cost You More?
While we often don’t think about commuting costs when we look at jobs, it definitely should play in to your decision. Is one job farther away from your home than the other? What is the difference in commuting costs? Do you have to pay for parking at either job?
What are you required to wear at each job? Is the attire required at the new job the same as the old job or will you have to buy new clothing?
What are the advancement opportunities at the new job? Will you be able to move up the ladder and make more money? How long will it take you to get back to your old level of pay, if at all? If there’s a good chance you may only be making less for a year or so, that is very different from a situation where you will never get back to your old level of pay.
Your Mental Health is Important
If you are at a job that you hate and you can take a job that you love for less money and you can afford to make less money, I absolutely think that the job change is worth it.
I have two good friends who went to law school and started out in big firm jobs with big firm paychecks. But the stress and hours required of them was just too much. (Note – some people absolutely love the high stress job, so to each his own.) Both ended up switching to lower paying jobs, one in a smaller firm, one in a non-profit, and both are absolutely pleased with their decisions. Yes, maybe they can’t afford to take huge vacations and maybe they won’t retire quite as early as they wanted, but you aren’t just living for the future – you’re living for today. Life is about balance. You have to work hard to achieve your goals, but you also should be finding some enjoyment in your life as well.
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.