There was only one problem with accepting the best job offer I had ever received: It meant taking a $12,000 pay cut.
As attractive as the role was, I had to wrap my head around making such an unconventional career move. In the end, here’s why I decided to switch jobs for less money — as crazy as it sounds.
4 reasons why it was worth taking a pay cut
There are all sorts of natural reasons to take pay cuts. You might be transitioning into a new career field and starting at the bottom of the food chain. Or you might be starting your own business and keeping your company’s expenses low.
More likely, you’re taking a smaller wage because you have to, whether because you need the work in your current city or because you’re moving to a new one.
In my case, there was no single reason for deciding to cut my salary by $12,000. In fact, there were four.
1. I was attracted to a better fitting role
Working mostly in digital media, I have been a producer, an editor, and a content marketing strategist. But I had never been paid to write full time. Tired of jack-of-all-trades jobs, I wanted to jump at this new opportunity because it fit my desire to type words like these on a daily basis.
For me, it wasn’t just about the opportunity to write. It was the opportunity to specialize.
I understood that I’d have to lower my salary expectations. After all, you typically work your way up in pay by taking on more responsibility, not less.
Maybe finding your better fit isn’t about a role but is instead about a better fitting environment. You might be willing to deal with a lower salary, for example, in exchange for rewarding work at a mission-driven nonprofit or for-profit company. Feeling like your work matters might erase your concern about being paid below market value.
2. I couldn’t turn down a unique workplace perk
Often in the case of small companies and bootstrap startups, employers know that they’re offering less money than you can get elsewhere. They’re not fooling themselves. So, they try to make up for it.
In my case, my new company offered me the ability to work from home, from a co-working space, and on the move. I now have colleagues based in every corner of the U.S., Chile, and Russia. A few of them travel the world as they work.
To me, this closed the deal. I’m not the only one who thinks so. The average professional would be willing to sacrifice 8 percent of their pay to work from home, according to 2017 research from two Ivy League professors.
Similarly, a 2017 survey performed by Qualtrics found that 37 percent of millennials would take a pay cut between 6 and 12 percent for flexible work hours.
My company’s flexibility when it comes to location and hours is important to me because it helps me achieve a better work-life balance. The “work wherever” policy allowed me to work from California when my sister gave birth. It allowed me to play beach volleyball on a Wednesday morning before putting in Uber driver-like hours in the evening.
When evaluating job offers, look past the salary to other perks. Decide for yourself if there’s something you can no longer imagine living without. That’s how I feel about working remotely.
3. My pay cut wasn’t as big as I’d thought
As nice as it is for your company to show it values you in other ways, your salary is almost always a primary consideration. At the end of the day, many of us do what we do because we get paid for it.
In fact, 47 percent of employed Americans describe their job as “just what they do for a living,” according to a 2016 report from the Pew Research Center.
Although I have had the fortune of enjoying each of my post-college jobs, I’m like any young professional. I want to keep enough money coming in to pay off debt, cover current expenses, and save for the future.
Thankfully, my big decrease in base salary — $12,259, to be exact — wasn’t what it initially seemed. That’s because my new job offered five financial benefits that my previous one didn’t:
- 401(k) matching contributions
- No premiums on health care coverage
- Stipends for education and wellness expenses
- Bonuses for the company’s performance
- Annual raises for experience and inflation
Even if you’re math-wary, it’s not difficult to put a dollar figure on all of these benefits.
Imagine the dividends for 401(k) accounts. If your company matches 5 percent of your contributions, you’re essentially giving yourself a 5 percent raise.
Similarly, if a company is offering to cover 100 percent of your health care plan, the arithmetic is simple. I had been paying $85 per month for similar coverage at my previous job, for example. My new job would save me $1,020 per year as a result.
Run the numbers of your potential benefits package. Also, consider other factors like whether you’d be switching to a lower federal income tax bracket.
All told, you might find that your potential pay cut isn’t as significant as it appeared at first glance.
4. I could potentially make up the difference later
The most difficult part about giving up salary is that you could be stunting your long-term salary growth. Enter your information into any lifetime earnings calculator, and you’ll see that what you’re earning now invariably affects what you’ll be making five, 10, and 20 years from now.
All things being equal, giving up $12,000 per year could cost me more than $775,000 between now and my 65th birthday, according to a Calculators.org’s tool.
No amount of benefits — even the disappearance of commuting costs — can change that. But here’s what can: If your new job puts you on a better trajectory to earn more over time.
My $12,000 pay cut, for example, could be lessened by climbing the ladder more quickly. I could eventually get back to my original salary number by excelling in my role or earning a promotion.
Assess whether you might be able to rise through the ranks faster at your next employer. If you have to take a lower salary in the short-term for a better opportunity to advance in the long-term, the decision could pay off.
This is especially true if you move to a company where you can successfully negotiate regular raises.
Don’t always rule out a pay cut
Take a look at your overall financial health before deciding to either take a pay cut or chase a bigger salary by job-hopping. If you’re burdened by student loan payments, for example, maybe you need to put off a better fitting role for a higher paying one.
But don’t rule out a lower paying position in the future. You’ll know the right opportunity when you see it. Sometimes you just have to look past the dollars and cents.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.36% APR (with Auto Pay) to 7.82% APR (with Auto Pay). Variable rate loan rates range from 2.41% APR (with Auto Pay) to 6.99% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 17, 2019, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/17/2019. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for SoFi.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.45% effective May 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.41% – 6.99%1||Undergrad & Graduate|
|2.41% – 7.89%2||Undergrad & Graduate|
|2.43% – 6.65%3||Undergrad & Graduate|
|2.38% – 6.81%4||Undergrad & Graduate|
|2.41% – 8.19%5||Undergrad & Graduate|
|2.60% – 9.60%6||Undergrad & Graduate|