Half of Global Workforce Would Accept 20% Pay Cut To Improve Quality of Life — What Would It Entail?
Written by
Tina Nazerian
Edited by
Nicholas Morine
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If you feel like you’re constantly working to the point where your job is draining you, you might be looking for a change — to the point where you’re ready to get paid less in exchange for a better work-life balance. If so, you’re not alone. According to a new survey by the Ford Motor Company, “Half of the global workforce would accept a 20% pay cut in favor of prioritizing their quality of life.” The majority of respondents indicated that while they feel “connected to their roles at work,” the stress “simply isn’t worth it.”
Their reasoning is understandable. Research has shown how low work-life balance can harm mental and physical health. A pay cut might put less money in your bank account, but can give you more peace of mind. But if you don’t strategically tackle your finances beforehand, you might end up stressed out financially — which also can take a toll on your well-being.
Taylor Kovar — CFP, founder and CEO of Kovar Wealth Management — told GOBankingRates that prioritizing work-life balance over pay can be a “great decision,” but stressed that prior to making the switch, you should take several steps to safeguard yourself financially.
First, Kovar recommended that before you commit to lower pay, you should sit down and analyze your existing budget to see which expenses you can curb in accordance with the new income.
“This might involve reducing discretionary spending or finding more cost-effective alternatives for services you use,” Kovar explained.
The Importance of an Established Emergency Fund
Next, you should check to see how your emergency fund is measuring up. Kovar emphasized that when you get paid less, having a “strong emergency fund becomes even more critical.” He recommended having at least three to six months’ worth of living expenses in your emergency fund.
“This fund will provide a financial cushion and help manage unexpected expenses without causing stress,” he suggested.
Debt Is the Enemy
Then, there’s the issue of debt. Kovar advised that if you’re in debt, you should try to lower it or pay it off before signing up for less pay. Your future self will thank you.
“Lower income might make it more challenging to manage debt repayments, so addressing this beforehand can ease the financial pressure,” Kovar noted.
Additionally, you’re likely currently saving money for the future. Maybe you want to buy a home in a few years, or to make sure you have a comfortable retirement. Kovar explained that you should take another look at your savings goals before accepting a lower paycheck.
“You may need to adjust the amount you save each month,” he explained. “While it’s important to continue saving for the future, find a balance that works with your new income level.”
Consider Your Benefits Before Making a Move
There are different ways you can pursue a pay cut for improved work-life balance. You might explore staying with your current employer — either by reducing your hours or taking on a new role that pays less. But, Kovar advised that if you decide to move on to a new employer, you need to think about how your health insurance and other benefits might change.
“You may need to budget for higher healthcare costs or look into alternative insurance options,” Kovar explained.
Finally, Kovar recommended sitting down with a financial advisor to review your situation before taking action.
“They can provide personalized advice based on your financial situation, helping you make informed decisions about your income, savings and investments,” Kovar noted.
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