We are almost hardwired to pursue ever increasing pay levels. Each job should, ideally, give us a salary bump. Yearly evaluations should result in increased wages. In pursuit of ever higher pay, we sometimes miss out on opportunities in life that require us to take a pay cut or to forego money entirely for a time. But to pursue anything other than higher pay goes against what we’ve been taught. But is a pay cut always a bad thing? Not necessarily. Even involuntary pay cuts can turn into blessings.
Reasons to Consider a Pay Cut
Taking a pay cut is never easy but if you have sound reasoning behind it, it could change your life for the better. Now, if you need every cent you currently make the thought of any reduction in pay can bring on panic. But for many of us there is some room to do things that pay less than our current jobs, or to forego a raise if we can get something even more valuable. Here are some reasons to consider a pay cut:
- To take a job you love: If you have the chance to do work you love, to work with people you love, or in a place you love but you have to take a pay cut, you have to ask yourself which is more important: Overall happiness or money.
- To start your own business: If you want to go out on your own, you’ll probably have to work for less than you’re used to, at least in the beginning. The upside is that you may end up making far more later on and you’ll be doing work that means something to you.
- To get better hours: If taking a pay cut means that you can stop working nights, weekends, uncompensated overtime, or holidays, it may be worth it if you value free time and normal hours over money.
- To trade pay for more vacation time or other benefits: Sometimes a job offer will come with less pay, but better benefits such as more vacation, better insurance, a good employer 401k match, or stock options. In this case you may find that, although your actual pay has gone down, your overall compensation has increased. If these benefits are worth it to you, the pay cut is a good idea.
- To take a sabbatical: You may reach a point where you decide to take the family to live in Europe for six months or to pursue some long held dream. You may not have to quit your job, but you will likely have to agree to greatly reduced pay, or no pay at all. If the reason for the sabbatical is important to you, giving up your pay may be the only way to go.
- To move to a lower cost of living area: If you want to move to an area with a lower cost of living, you’ll likely have to take a pay cut. The good news is that you won’t need as much money since your living expenses will be reduced in the new area. This can result in a much bigger savings opportunity over the long term.
- To take a “learning job”: If you want to change careers, you’ll probably have to take a pay cut to get your foot in the door with an entry level job. However, you’ll be learning the ropes of your new career so it may result in more opportunities later on.
- To get a job in lean times: In tough economic times you may have to take a pay cut just to get a job. When jobs are hard to come by, you may have to take what’s offered no matter the pay. Some pay may be better than none.
- To keep a job in lean times: In tough economic times, many employers slash or freeze pay. If your only choice is to quit without another job lined up, you may have to just take the cut until things turn around.
- To get a shorter commute: A shorter commute can save you a ton of gas money. If you can get a shorter commute your lower pay may be offset by your gas savings. You’ll also have more free time and maybe be able to sleep a little longer in the morning. That’s worth more than money.
- To get a better chance to move up: If your current job doesn’t have many opportunities for advancement, you may have to find another employer. This can result in a pay cut, but if there are more opportunities for advancement you may be better off in the long run.
- To save your health (physical or mental): If you hate your job or your boss is a toxic SOB, you may be better off taking a pay cut to go somewhere else. Your mental health is worth more than money. Similarly, if your job isn’t safe or you work around toxic materials, you may be better off leaving to do something else. You can’t replace your physical health.
Not everything has to be about money. Yes, it’s nice to get a raise. Extra money can give you more breathing room or a chance to afford some things you’d like to have. However, there are cases, unique to every individual or family, where a pay reduction may not be the disaster that we’ve been taught it is.
Photo: José Carlos Cortizo Pérez