When it comes to job offers, most of us are encouraged and conditioned to follow the money. And why wouldn’t we? Adding even a few hundred bucks to your annual income can help you widen the gap between what you spend and what you earn.
Plus, your starting salary can have a major impact on your long-term earnings, because that figure has a way of compounding on itself. For example, if Jim starts a position at $40,000 while Ron starts off at $50,000, and they each receive a 5% raise annually, after three years that wage disparity will only get worse: Jim will be earning $46,305 while Ron’s making $57,881.
And when we search for a new job, we typically use our existing pay rate as the baseline for the dreaded “salary requirements” employers ask for. That means just a few years into their careers, Jim may jump at a job paying $50,000, while Ron will confidently hold out for $65,000 or better.
So a lower salary can actually follow you from job to job for years. Research has shown that college students who graduate into a recession — and are thereby forced to take lower-paying first jobs — can experience the negative effects on their incomes for up to 10 years before their pay finally catches up.
The Case for a Pay Cut
But while it sounds counterintuitive, taking a pay cut — even a pretty big one — in the right situation can help you earn more money in the long run, and in a more fulfilling career to boot.
“There are times when the best decision could be accepting a job offer that pays less than your full earning potential,” says Amada Helfand, senior assistant director of Undergraduate Career Services at Bentley University.
Helfand says alumni who choose lower salaries have typically done so to pursue a dream job or an opportunity in their preferred industry — from accounting students more interested in startups than the Big Four accounting firms, to a finance major who turned down more lucrative offers from financial services companies to join Disney.
Moreover, doing what you love means you’re going to work harder at it and with a more intense focus — which puts you in a better position to succeed over time, regardless of starting salary.
“When students align their careers with their strengths and interests, they’re able to more quickly climb up the corporate ladder – and across the corporate lattice through strategic lateral moves,” Helfand says. “While initial salary point certainly can impact an individual’s future income, taking a lower starting salary to follow one’s passions often provides lifelong financial and personal benefits, as long as the individual is driven to pursue them.”
I can tell you from personal experience that she’s completely correct.
Climbing the Wrong Ladder
For years, I worked as a layout artist, formatting textbooks for educational publishers. It wasn’t what I’d ever intended to do for a living, but I fell into the job and discovered I was quite good at it, and the pay wasn’t bad.
However, after a few rounds of layoffs and budget cuts, most of the work I enjoyed doing — actually laying out pages, which was akin to low-level graphic design — got outsourced to vendors around the world. I received a promotion, too, and after a while my job evolved into simply checking the quality of the vendors’ work and hounding them about errors, instead of actually doing the work myself. It was miserable, well-paid tedium.
It turns out, many people in the workforce encounter a similar problem. Career coach Phyllis Mufson says many of her clients get promoted into a higher-paid position they don’t enjoy.
“I’m working with an architect who originally had a real affinity for his job when he was working hands-on with building contractors and getting his own hands dirty– he was very happy,” Mufson says. “And then he worked up to where he’s at a desk all the time, and now he’s miserable. His salary is higher, but he doesn’t want to do that work day in and day out.”
The other problem was that I really wanted to work on the editorial side of things (like every employee at every publishing company everywhere), and the longer I stayed on the production side of the process, the more pigeonholed I became. Most editorial higher-ups at the time assumed that anyone capable of using design software gracefully probably couldn’t write a coherent sentence. Meanwhile, production jobs paid well early on but had a pretty low ceiling, whereas senior editors could make up to twice as much money later in their career.
I realized I was climbing up the wrong ladder.
That moment when you realize the ladder you’ve been climbing doesn’t go where you want it to.
Downshifting
Forget the ladder metaphor — I was on the wrong road entirely. And what do you do when you realize you’re driving the wrong way, even if you’ve been cruising along nicely with no traffic? You slow down, get off the exit ramp, and turn onto a different road that’s headed in the right direction – even if it’s at a slower speed.
So that’s what I did: I downshifted. Or if you prefer, I climbed down the ladder.
Even Jack Donaghy, the charmingly ruthless NBC overlord on “30 Rock” played by Alec Baldwin, once admitted that at times you need to take a step down to keep climbing upward. “Sometimes the way back up is down,” he said.
To change course, I sustained some short-term losses in pursuit of my long-term goal of working as an editor or writer — namely:
Working for free
First, I started writing on the side, for free or next to nothing. I taught myself HTML and started what amounts to a blog, and I hustled to land a side gig editing and rewriting a local guidebook — a nine-month project that probably paid 25 cents an hour after everything was said and done.
This didn’t cost any money — and in fact the book paid a small advance, which was thrilling — just a ton of time and energy. (We didn’t have a kid yet, so I had both in spades!) The key was that I did my absolute best on these projects, even though the pay was lousy or nonexistent. The whole point was to build some excellent, relevant experience.
Taking a big pay cut for the right job
Once I had a decent portfolio of writing and editorial work — done completely on the side of my day job — I started looking for jobs that bridged the gap between my established production skills and nascent editorial endeavors.
By some miracle (and a helpful recommendation from a college friend), I was offered the perfect career segue gig that required both writing and web production know-how. It was the right role for me, at a locally famous nonprofit — the only trouble was, it meant a 10% pay cut, even after I negotiated the salary upward. Still, it didn’t take me long to realize the opportunity was well worth a pay cut, so I took the job and never looked back.
Working my butt off at that job
Once I had the job, I went all in. It helped that I loved it: This was work I’d been craving to do for years, but no one would let me. I actually enjoyed Mondays for a while, and I gave it my all.
Think about the math here: This company was paying me less to do more work, and I was delighted about it. That’s a win for everybody. As Helfand says, aligning your work with your passions can allow you to advance more quickly.
Then the Great Recession hit, things went haywire, and those of us still clinging to our jobs were left to do the work of several people at once. It wasn’t as fun anymore, but I still worked like crazy, logging endless hours of what I guess was unpaid overtime.
After three years of proving myself at a respected institution — and taking another pay cut of sorts, as during the recession all employees were required to take a one-week, unpaid furlough — I landed an even more editorially-focused job at well-known, national website. This time, a pay cut wasn’t necessary: The job paid an obscene amount of money by comparison.
Opportunity Costs
Yes, this whole transition took a solid four years, a ton of work, and some very lucky breaks — not to mention thousands of dollars per year in lost wages. That’s a pretty steep cost, to be sure… but spending the entirety of a 40-year career in a field you dislike or can’t advance in could prove far more painful.
Consider: In 2006 I was hanging on to a job I loathed — one that offered very little advancement opportunity or long-term stability. By 2010, I was living my professional dream, editing for a living in an invigorating environment, and making 36% more money to do it. I recouped the lost wages from those three years of lower pay in about a year’s time, and that job set a new baseline for my salary requirements going forward.
Happiness Matters
More important than any of this? I was finally happy and professionally fulfilled. It improved my quality of life in countless ways and opened up opportunities I couldn’t have imagined.
Taking a pay cut was easily the best career move of my life. And to be honest, even if it hadn’t led to a higher-paying job down the road, it still would have been worth it — because I was finally doing work I could feel good about. It wasn’t like we couldn’t pay our bills on the lower salary. (Okay, maybe we couldn’t pay all our bills — but we weren’t destitute.)
“Past a certain point, pay doesn’t make a whole lot of difference,” says Mufson, the career coach. She’s right: Studies show that a higher income generally corresponds to an increase in reported personal happiness — up until about $75,000 a year. After that, the “happiness” effect from a higher income virtually vanishes.
So when it comes to job offers, why split hairs over a few thousand bucks without taking into account other just-as-important factors? What will your commute be like? What opportunities will this job open up to you down the road? Is there flexibility in terms of how, where, or when you work? How good are the health care and retirement benefits? And most importantly, would you enjoy the actual work on a day-to-day basis?
“The most important thing is to find out what you really want to do,” Mufson says. “That’s clear to some people, but if it’s not, take the time to figure that out.”
Whether you’re just starting out or you’re stuck in a career rut, my advice to you is this: Find a job that aligns with your long-term goals. Take it, even if it doesn’t pay as much as you’d like. Then do a really good job at it (this should come pretty easily if it truly aligns with your goals).
The money – and the satisfaction – will follow, and more quickly than you probably think.
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The post Why Taking a Pay Cut Was the Best Career Move I Ever Made appeared first on The Simple Dollar.
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