You took a lower-paying job on purpose. Now what?
Here’s how it usually goes: As you gain work experience and move up, your salary grows in step—at least through your prime earning years. But career paths aren’t always linear, and there may come a time in your working life when you find yourself facing a pay cut.
Often it isn’t by choice, but even when it is—say you’re starting at the bottom in a new industry—a lower salary can put major stress on your financial life. Yet many young workers are willing to take it on for the sake of a new career. Surveys show millennials are most likely to job-hop, and that on-the-job learning and growth can be more enticing factors than compensation.
Benji, a 30-year-old graphic designer, recently chose to take a pay cut of more than 50% when he switched careers in Chicago. In an email interview, he opened up about weathering the financial change and explained how he’s preparing for the future.
Tell us about your big career change. Did you know you’d receive such a big pay cut?
For the past few months, I’ve been the lead designer for an animal rights organization. Before that, I worked in internal communications for a big national insurance corporation for four years. My salary then was in the low six figures; now it’s less than half that. There’s no way you move from a corporate job like that to a regional nonprofit and don’t take a pay cut.
What led you make the switch?
It was a hard decision that I put off for a long time. My old job had great benefits, and I worked with a team of really smart people who I looked forward to seeing every day. How rare is that? Plus, I was good at it, which meant that I was given more responsibilities and ended up working longer hours. Ironically, that was my downfall. I’ve been involved with a local volunteer animal rescue group for the past several years, and I was getting too burned out at work to put in the time there—time that basically translated to self-care. Plus, when I tried to picture myself being in the insurance industry 5, 10 years down the line, the idea of spending so much of my life doing something I wasn’t passionate about started bumming me out.
Why did you feel you had the flexibility to leave your high-paying gig?
I know this choice isn’t available to most people. Fortunately, my personal circumstances helped. I don’t have kids and don’t plan to in the near term. I’m not financially supporting any other relatives. I made my last student loan payment two years ago, and I don’t have other debt. Combined with my husband’s salary, our income is still above $100,000.
What have been your biggest financial adjustments so far?
Spending, mainly. I’ve been packing lunch; $12 salads three days a week are a thing of the past. I’ve also been shopping more sales and making our grocery budget go further by not wasting food. There are some adjustments I still need to make, like canceling some of our digital subscriptions (we’ll have to give up either Hulu or Netflix) and decreasing some recurring monthly donations (which feels particularly painful in these crazy times).
Because we’re recently married, my husband and I have also moved toward sharing more of our finances. We have a joint checking account and a credit card for shared expenses so far, but in the future as we think about buying a house, etc., there will be further merging. I saved a lot at my old job, so while I built up my financial contribution to a hypothetical down payment over the past few years, he’ll take on more of the savings for the next few. That’s a comforting thought when I get anxious about my reduced saving capacity.
So how has the pay cut affected your retirement savings?
I know I should make my savings work harder by investing more of it. I’m just way less able to save now. After all my monthly expenses, depending on credit card spending, I’ll have maybe $100 or so left to save. But still, I know that will add up, and it’s a lot more than many people are able to put away. I try to keep my anxiety in perspective. My retirement benefits aren’t as good at the new job, either, with fewer options for fund allocation and a much lower match. I’m contributing up to match amount right now, which is 5% (never say no to free money!) but I’m thinking of opening a Roth IRA that I can fund with some savings and (hopefully) next year’s tax refund. With a Roth IRA, I can be choosier with my investments.
Was there anything you did to financially prepare before you left your old job?
Back before the corporate job, I was patching together freelance work as a designer. Oddly enough, adjusting to this recent pay cut reminds me what it was like to adjust to that pay increase. Back then, I used the additional income to save and to pay down debt, rather than, I don’t know, blow it on a fancy car. I maxed out my 401(k) contributions every year I was there; I saved a lot otherwise, and when I got a bonus I put it toward my student loans. My rent was also below $1,000 for most of that period. Looking back, it’s like I was unconsciously preparing the whole time I had a high salary to eventually go back to making less.
Once I started getting serious about leaving, though, I did think about whether there were some big expenses I should get out of the way first. I got a couple of medical things taken care of while I still had really good insurance; I replaced the laptop I’d had since college; and my (now) husband and I put down a deposit on a wedding venue.
Congratulations on getting married, by the way! How did your husband react to your career move?
He’s been 1,000% supportive the whole time. The fact that we could plan and pay for a wedding while I was in the middle of a stressful job change tells you everything. I’m really lucky. Every time I’ve freaked out about money in the past couple of months—which has happened a lot—he’s told me to chill out and remember that I worked hard for years to take this chance now.
So has the switch to a lower salary been worth it?
Let me get back to you in a couple of years! Just kidding. I do like my new job, and even in a couple of months I’ve had many learning experiences. Plus, there are plenty of opportunities for advancement, whereas I don’t think I would have been happy if I’d kept getting promoted at my old job. And I get to hang out with rescue dogs whenever I want!
I’m sure this isn’t universally true for everyone at my salary level, but it seems like what I’ve lost in money has been balanced out in time and energy for life outside of the office. It helps that I’m in a field that I’m passionate about. But I’m also required to take an hour lunch break every day, which is new to me; that enforced time to read, walk around, and get away from my computer screen actually makes a big difference to my mental health. When I was making a lot more money, I felt like I had to be “on” all the time—including early mornings, late nights, and weekends. I may be making less now, but I feel more human!