Is It Ever a Good Idea to Take a Pay Cut?
Taking less money is a hard thing to consider (especially if you have a family) but there’s so much more to a job than just the actual salary. When I eventually decided to take less money, I factored in so many other benefits into the equation, the pay cut seemed worth it to me.
- When You’re Making A Career Change
I think one of the major reasons why people consider a pay cut is when they are switching careers. It’s unreasonable to expect to receive a large salary when you’ve moved into a job where you have little (or no) experience. And in some cases, changing industries and location could come with a permanent slash in salary. Bigger cities often come with bigger salaries, and different industries just might not have the funds to pay top dollar for the position you’re looking for. For example, when I moved from investment banking to a tech start-up, I accepted a 95% pay cut. That might be a bit drastic for some people, but I knew it was the right path for me to take.
- When you start your own business
Self-employment is a dream many people have. But with that dream comes a lot of risk, and that could include taking a massive pay cut while you get yourself established, as well as having to hustle harder to get work. When I started Project Eve, I didn’t take a salary for 3 years. I reinvested my sweat equity back into the business, which was a huge risk. Eventually my bet paid off and now things have somewhat stabilized. I am able to take a draw and live the life I always wanted to live. There are ways to mitigate this risk. Angel and early stage equity investors can help bridge the monetary gap but it is unrealistic to expect high compensation for an unproven venture.
- When You Want More Work-Life Balance
For 15 years I worked 80 hours a week. I knew it wasn’t something I could do long-term, and eventually I gave up the extra hours (and the extra money) in favor of more work flexibility and time with my children. I am significantly happier now that I have time to dedicate to what I really love in life – spending time with friends and family, being outdoors, and having more time to focus on myself. And although, I do miss the money, I definitely don’t miss the stress.
- When You’ve Hit The Salary Ceiling
If you’ve maxed out your salary potential and your career path is blocked, then it might be time to look for another opportunity. Taking a position in a fast-growing company, may lead to multiple opportunities for career growth and salary increases. A short-term salary cut may simply be seen as an investment in better long-term career prospects.
- When Perks Make Up for The Salary
Great perks can really start to add up. Having a shorter commute will allow you to save on gas and, if you can telecommute, you can save on multiple expenses. Half-day Friday’s in the summertime may not have direct financial value but they sure can help your emotional state.
Loving your work is a battle for most people all their life, if you can be happy at work, and make it work financially, I would say do it!