Over 47 million Americans quit their jobs in 2021 in search of better work-life balance, better benefits, improved work culture and in some cases, higher pay. But for a surprising number of Americans, pay was not a factor in their decision to leave their jobs.
A recent survey conducted by Clever found that 53% of employees who had a job lined up before resigning reported that they took a position with a lower salary. Survey respondents reported an average pay cut of $8,000, but many would accept a greater pay reduction. Employees who quit but are still looking for jobs would accept an average pay cut of $23,000.
While this is a significant reduction in pay, in some cases, taking a pay cut could be “worth it.” Here are some ways that having a lower salary could actually make you richer.
You Want To Enter a New Field or Industry
You might want to switch to a new field in which you hold little experience. In this case, a lower salary is appropriate until you have acquired a certain skill level.
If your new job is in a growing field or industry, your salary could increase rapidly. A change of career might improve your quality of life and provide a more flexible lifestyle, both of which can be worth more than a bigger paycheck.
If you’re hesitating to make a career move because you’re worried about paying your bills, consider taking a loan to cover costs until your salary reaches a livable level. Research job options carefully, and talk to people already in the field to make sure your goals are achievable.
You Make a Lateral Move
A lateral move — one where you keep the same title, duties and pay grade but gives you the opportunity to acquire new skills and knowledge — might not involve a salary raise immediately. But, it can lead to one in the near future. Assuming different responsibilities can open up opportunities. A wise lateral move can expose you to someone you can learn from, and the value of that knowledge might more than compensate for a temporary drop or lack of change in pay.
Take Ryan O’Donnell, for example. O’Donnell is currently a senior project manager at Avalara. He left a teaching career to take a marketing internship and has not looked back since.
“I started my professional career as a high school mathematics and computer science teacher,” he said. “It only took six years for the business bug to bite me. With MBA in hand, I left teaching and took an internship to get my feet into the world of marketing.”
Although there have been ups and downs in his new marketing career, the amount O’Donnell has learned and the knowledge and skills he’s gained were well worth it. “It’s been like a second education,” he said.
Although a big change like this can involve a pay cut, try negotiating extra vacation time, bonuses or stock options that might compensate for the financial loss.
You’re Not Progressing in Your Current Job
This is one of the signs you’re in a dead-end job. A job that offers no future growth is frustrating and can be financially disastrous. Your company might be too small and unable to offer career progression. In this case, it is time to part ways. Otherwise, you might grow resentful and unproductive, and your employer might want to hire someone with fewer skills at a lower cost.
A lack of career growth opportunities might also be a reflection of poor management rather than firm resources or needs. If your work environment seems dysfunctional, the business will likely not be sustainable, and you should pursue other options. Poor leadership will not change quickly, and you might have no ability to control your professional situation.
A move to a larger company with greater scope and resources could provide you with a brighter financial future despite a temporary cut in pay.
Michele Jennae is a healer and coach who experienced poor management in her attempts to gain additional exposure and skills that would have benefited both her career and the company that employed her.
“I once offered to demote myself from operations manager to field manager, as I felt it would allow me to do a better job for the company,” Jennae said. “They declined, and I resigned.”
Your Health Is Suffering
This is a no-brainer, but it’s surprising how many people suffer through miserable jobs without realizing the damage to their health and the people around them. Having to do a job that you dislike is stressful and, over time, that stress can compound.
A study by Grazia magazine found that hating your job can affect your relationships and sex life. Stress also can affect your ability to sleep, which, in turn, can further stress your immune system and contribute to ill health. A 2016 study by Ohio State University showed that by age 40, people with consistently low job satisfaction showed mental health issues like excessive worry, a higher level of depression and more sleep problems than job-satisfied participants. These problems could be a precursor to physical problems that show up later in life, such as cardiovascular or other health issues.
Having a less stressful job would, therefore, save you money on healthcare costs in the long run, as well as in the short run. The study showed that those dissatisfied with their job reported worse overall health, such as more colds and increased back problems, costing them more out of pocket for doctor’s visits and days absent for those without paid time off.
If you would be much happier and less stressed with a job that can provide a more flexible schedule, a salary cut that brings improved health could improve your quality of life overall.
You Relocate To a Place With a Cheaper Cost of Living
A high income isn’t everything. If you’re living in an area where the cost of living is high, such as New York or San Francisco, you might save money by taking a pay cut and moving.
For example, a move from San Francisco to Fresno, California, just three hours away, will slash your cost of living by more than half. Overall, Fresno, California is 57.7% cheaper than San Francisco, according to Best Places. So even if you take a significant pay cut, chances are you’d still be coming out ahead.
Your New Job Offers Better Benefits
There are some benefits that go beyond the paycheck. In fact, some benefits can save you money in the short run and grow your wealth over the long haul. A job with cheaper health insurance, expanded health coverage, tuition reimbursement, child care assistance and more paid time off can put you ahead of the game — even if you’re making a lower wage.
When deciding whether to take a lower-paying job, ask your prospective employer for a total compensation statement, which breaks down the value and costs of the benefits package on paper. If the company won’t break it down for you, you’ll have to do the math yourself.
Only add in the value of those benefits you’ll use. For example, if the employer offers child care assistance but all your children are in middle school or older, it will be of no benefit to you and shouldn’t be calculated into determining what your benefits package is worth.
Your New Job Is Closer to Home
Each mile you drive to work costs you additional money when you figure in all the maintenance, fuel and the cost of your time lost behind the wheel.
Not only that, but trimming the miles you drive can save you big money on your car insurance rates, depending on where you live. Californians driving 20,000 miles or more annually pay an average of 25.7% more than those who drive just 5,000 miles per year, according to InsuranceQuotes. However, the discount doesn’t hold true across all states: In North Carolina, Georgia and Rhode Island, the difference in savings is less than 2.5%.
Other factors that can make a sweet difference when you work closer to home might include the ability to go home for lunch, less money spent on child care and more time to make extra money from a side gig.
You Can Work From Home
You might take a pay cut to work from home, but you can come out richer in the end due to your lack of commute. The principle of coming out ahead by working remotely if your company offers the option can even work if you telecommute part-time.
You’ll also save on laundry and dry cleaning. The average professional shells out up to $1,000 each year — about $4 per workday — to maintain his clothing. A job where you can telecommute twice weekly saves $416 annually on laundry costs.
Subtract the cost of daily lunch at $8 and a $3.50 latte twice a week, and you’ll save another $600. Save even more by reducing child care hours on the days you’re home.
You’re Starting a Home Business
Not only will you save on your commute to work by setting up business at home, but you’ll also reap tax deductions on every mile you drive for your business.
Apps like MileIQ automatically keep track of your mileage and ask you whether each trip was deductible or not. You’ll also be able to deduct $5 per square foot for areas in your home used for business up to 300 square feet, and other business expenses like office supplies, furniture and inventory.
You Get One Step Closer to Your Dream
Trading in a job that just pays the bills for one in your field of interest might not pay as much, but the happiness you get from pursuing your passion just might be worth the cut in pay.
For example, if you’ve always wanted to be a photographer, trading your office gig for a job as a photography assistant, baby photographer or school portrait photographer can get your foot in the door. Most companies provide training, including posing and lighting techniques. You can develop your skills and portfolio, expanding into side gigs that will eventually lead to fulfilling your dream.
Besides developing the skills you need to advance in the field of your dream career, you might want to take a lower-paying job to just get your foot in the door. Apply for a job at a company you’ve always wanted to work for, or work with a supervisor who is a Goliath in the industry.
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