Is A Job Change with a Reduction in Salary Worthwhile?

by TTMK on July 31, 2017 · 0 comments

The following post is from Melissa Batai

For 10 years, I had a job that I didn’t like.  Don’t get me wrong, the first three to five years were fairly good, but then, the last five years, well, each year seemed to get worse.  I was miserable.  Many of my co-workers were miserable, too.  I frequently heard from the old timers, “After a while, you make so much money that you just know you have to stick it out until retirement.”

True, my job did have room for significant advancement, and many of those old-timers were making $100k+ each year.  Yet they were miserable.

In the end, I decided to quit the job and walk away from the money.  But, I’d be lying if I didn’t tell you that every single year, I sometimes wonder if I made the right decision.

If you, too, are miserable at your job, you may be thinking about switching jobs, even if it means a reduction in salary.  Only you can decide if this move is right for you, but keep in mind, a reduction in salary has long range implications.

What You’ll Lose Up Front

Reduced Life Style.  If you’re used to making $100,000 a year, and a new job will only net you $70,000 a year, your lifestyle and expenses will have to change.  As soon as you have an inkling that you may be switching jobs, start cutting extraneous expenses and finding ways to lower the budget.  Trust me, this is harder than it seems.

Reduced Retirement Savings.  Many jobs offer a retirement savings match, but if you’re making less, that means less money going into your retirement account.  In the short term, this may not matter much, but if your salary will never match your old salary, this will make a difference in the long-term.

What You May Gain

Of course, your salary is only one part of the equation.  Initially, you may take a significant pay cut to change jobs, but you’ll also need to ask yourself what the future holds.

Can You Advance?  Some jobs may start with a lower base salary, but there is more room to advance than at your old job.  If this is the case, taking the new job at a lower salary makes sense, especially since the lower salary is likely only temporary.

Is the Health Insurance Better?  Health insurance can take a large portion of your salary, especially if you have high co-pays and deductibles and if you have a family member who needs more medical care.  If the new job offers better health insurance, you may find you are still netting roughly the same even with a reduction in salary.

Are There Other Benefits?  Also, consider other benefits such as the retirement matching offered.  If the company offers a larger retirement match, over time, this is a significant perk that can make up for a reduced salary.

Carefully Consider Other Perks Offered.  My husband works at a university, and one of his benefits is that our children can attend that university at 25% of the regular tuition cost.  As our children grow older and get closer to college age, this is a huge financial perk.

Did you decide to take a lower paying job?  If so, are you happy with your decision?  What did you take into account when you made the decision?


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