Should I take a pay cut to change careers?

Achieving Goals, Career Discovery, Career Enrichment, Career Transitions, Life Coaching, Self Awareness

06/17/24 - Tricia Gehl

“What I’d really love to do is X, but to do so I’d have to take a pay cut…so forget it”

If I had $1 for every time I’ve heard that statement from a client, friend, or family member, I’d be typing this from a yacht in the South of France.

Yes, there might be instances where making a career change or changing jobs does necessitate taking a pay cut. But before you start rationing your fancy wrinkle cream in sacrifice to your new career, let’s look at the bigger picture.

There are a lot of resources out there to help you navigate the potential financial implications of a new career path (see Ama La Vida’s Instagram post on this very topic!). Before you begin your research, let’s take a step back and explore some of the reasons why we might anticipate a pay cut in the first place.

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Table of Contents

Common reasons for pay cuts

Anticipating a pay cut stems from both legitimate and perceived (hello limiting beliefs!) instances and scenarios. Here are some common instances where people are most likely to consider a pay cut (or think they’ll need to take a pay cut):

More opportunities

Let’s say you work for a small, family-owned company with 100 employees. The pay is great, but there are no clear opportunities for growth and advancement.

Moving to a company of 1,000+ people, with multiple departments or functional areas and more long-term opportunities for promotion and career growth, might be a more attractive option, even if it requires a pay cut in the short term.

More flexibility

Perhaps you’re working for a company that requires staff to be in office 5 days a week, with a long commute on both ends of your work day.

If achieving better work-life balance is one of your main drivers for seeking new employment, you might be comfortable taking a pay cut to work for a company that allows staff to work remotely.

Better benefits

Maybe your current company offers all the standard benefits (health insurance, vision, dental) you’d expect, but nothing more.

You might be comfortable accepting a lower salary at a company whose benefits package includes things like: IVF fertility coverage, long-term care insurance, gym and fitness membership allowances, and reimbursement for your Ama La Vida career coaching membership.

Switching industries

Not all industries are incompatible when it comes to salary offerings and ranges. However, there are instances where you might need to accept a pay cut to move to your desired industry.

Consider this example: You’re an ER doctor at a big city hospital, but it’s been your life-long dream to be a stand up comic. Moving from a doctor’s salary to that of a stand up comic who is just starting out in the industry might require a downgrade in pay.

Not keen on taking a pay cut for a new job? There are ways to minimize the possibility.

How to minimize (or avoid!) taking a pay cut for a new job

There are things you can do to avoid taking a pay cut.

Transferable skills

Consider your current job and how the skills, tools, and strategies you regularly use align with the responsibilities of the role you’re looking to step into. Things like:

Project management (planning, executing, and overseeing projects)
Sales and marketing experience
Owning, managing, and growing client relationships
Leadership (coaching and mentoring staff, decision-making)
Technical knowledge (data analysis, digital literacy)

These universal strengths can be applied to almost any job with just a small amount of customized upskilling based on industry or field.

Upskilling

Looking to pursue additional training as a means to beef up your resume and potentially mitigate the pay cut that might result from that skill gap? Check with your current employer to see if tuition reimbursement is an option.

Stay put (sort of)

Feeling stagnant in your role but love the company you’re working for? Consider looking internally for your next job. Leveraging your current salary and knowledge of the business work in your favor when negotiating a new salary internally.

As covered in Ama La Vida’s Instagram post, it’s not always simply about salary.

For those who are thinking about, or are in the middle of, a career change
Support you in clarifying short- and long-term goals
Help you identify the direction of your next career move

The above process helps clients uncover exactly what they want and create a strategy to attain it.

How to negotiate your job offer to maximize your compensation package

It’s important to think beyond salary and instead consider the full compensation package.

The idea of a lower salary and having less money each month can be a scary thought for most of us. But, it’s important to evaluate the big picture to see what we might stand to gain outside of dollars and cents.

For example, the bonuses and regular raises paid to employees at the new company you’re considering might be significantly higher than the annual percentages you’re entitled to at your current company.

Or, maybe the amount of paid time off you’ll receive right out of the gate is double what you have at your current company.

Another thing to consider is the amount of work you’ll have on your plate compared to what you have now. Will your workload and other responsibilities be reduced considerably?

The new role may also bring a drastic difference in your out-of-pocket benefits expenditures. Will your health benefits come at a lower cost to you personally, with coverage that is in line, or even better, than what you have at your current company?

Lastly, there’s always wiggle room to negotiate any of the above, in addition to salary, no matter what a recruiter or hiring manager tells you. Don’t be afraid to (gently) push back and advocate for yourself.

So, what other questions might you need to ask yourself before considering a pay cut?

Questions to ask yourself before taking a pay cut

Woman talking to another woman near a window

As with any financial decision, taking a pay cut is a deeply personal choice that requires thorough investigation into your own unique financial situation and circumstance.

How will this career change serve me in the long run?
What is the cost/benefit of accepting this new opportunity at a lower salary?
How will this decrease in salary impact my current living situation and standards?
Who in my network has gone through this same situation and what advice can they give me?
What financial management tools or frameworks can help me fully understand how this decision might impact my financial future?
What responsibility do I have to include others who might be impacted by this change in the decision-making process?
Will this decision create a clearer path to my dream career?

Honest introspection and exploratory work will ensure you’re accepting a pay cut with your eyes wide open.

Whether you’re exploring new professional possibilities or navigating your existing career, next steps aren’t possible without a clear career vision.

What other benefits are you getting in this new job?

It’s important to consider what tradeoffs might be at play when contemplating your decision to take a pay cut.

What are the mental health benefits of taking a new job at a lower salary that offers your ideal work-life balance situation?
How might your peace of mind increase if your health insurance benefits are drastically expanded, despite costing you a bit more money out-of-pocket?
Where might it make more sense to compromise on the long-term career prospects of your current company to experience the incredible company culture you’ve been craving?
Does it make more sense to give up the familiarity and ease of your old job in order to gain new (and possibly stressful to learn) professional skills, all while taking a cut in pay?

Again, only you can answer these questions and determine whether or not a particular tradeoff is worth it.

Let’s shift and focus on the pay itself.

How of much pay cut is too much for you?

Woman writing in journal and looking at laptop

Considering a pay cut requires you to be honest with yourself about your finances and what they can handle. Let’s start with the present or short-term considerations:

Will your budget take a significant hit or will a pay cut require only a minor adjustment to your monthly expenses?
How might this pay cut affect your social life and what you’re able to afford when spending time with family and friends?

Now think about some of the longer-term implications of the pay cut:

What will this pay cut mean for your personal finance portfolio and your saving capacity each month?
Will this pay cut require you to take a significant risk financially, potentially impacting some important future spending decisions (i.e., college tuition in the next 10 years)?

And, how much is just too much for you to even consider?

Would that be a $20k pay cut?
A $30k pay cut?
Or, is a $5k pay cut as far as you’re willing to go?

Establish a “no-go” zone for yourself upfront so you’re clear about the financial risk lines you’re unwilling to cross.

Reframing a pay cut

Ultimately, your worth isn’t determined by your salary, your title, or anything else you have listed in your LinkedIn profile. And, the value in taking a pay cut is something only you can determine for yourself.

Leaning into your “why” or what’s truly driving your decision to make a career transition in the first place will impact your comfort level with accepting a reduced salary.

Have you always dreamed of working for a specific company, and this pay cut will finally allow you to do so?
Is the promise of future growth and a clearly laid out progression line to the role of your dreams more tantalizing than keeping your current salary?
Will a lifestyle change or your own personal sense of wellbeing be impacted for the better if you take this pay cut?

If you answer “yes” to any of these questions that might be all the reframe or justification you need.

Setting yourself up for long-term career success

Let’s say you’ve decided to take the pay cut and stride boldly into that brand new career path. What now?

Well, starting a new job certainly isn’t the last step! It’s merely a next step, with the real work only just beginning.

It’s now your responsibility to take an active role in making sure this new path remains positive and worth the pay cut it took to get there, and that it sets you up for the future you envisioned before taking the plunge.

Now is the time to begin mapping out your new career plan and take the steps to build a meaningful career for yourself.

And, times will undoubtedly get tough, as there are always stressors or stressful periods even in the most idyllic roles or companies.

During these times, it’s essential to remember why you’ve made the choice to be here and where you’re headed because of that choice.

Ultimately, whether you take a pay cut to change careers is not a simple decision

Remember that this is a highly personal decision, with many personal, professional, and financial drivers and factors at play.

Consider what you stand to gain or leave behind by taking a pay cut, and what other tradeoffs you’re negotiating.

Think of all the tools in your arsenal and what you bring to the table as a means to mitigate any cut in pay.

Don’t shy away from asking yourself the big questions, like:

How might this career change impact my life in the long run?
How will moving to a new industry that’s more aligned with my values and purpose make taking a pay cut wholly worth it?
How can I avoid letting my job title or position define who I am?
Where am I simply managing when I could be thriving if I take the leap into something new?

Remember, you don’t have to go it alone! Solicit advice from a trusted mentor or leader. Or, consider working with a coach to help you sift through all the variables (click here to schedule a primer with someone on the Ama La Vida team!).