Income

Could You Welcome an Income Decrease? 10 Takeaways from the Pay Cuts in My Life

Could You Welcome an Income Decrease? 10 Takeaways from the Pay Cuts in My Life
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The up and down, jagged outline of these rock formations resembles my earned income over the years. Find out why. Photo by Carol (that’s me!)

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Graduating from a well-respected college with a degree in chemical engineering as a female in the late 1980s, I set myself up for a lifetime income trajectory that could have been onward and upward for my entire career.

Chemical engineers often appear on the top 10 salary lists for best jobs for new college graduates. The curriculum is difficult and challenging, and those who complete the degree can be rewarded with lucrative salaries after graduation.

However, a recent look at my W-2 wage history from the Social Security Administration shows a wage history that resembles a jagged line and includes some zero income years.

What happened to that brilliant career choice of mine? What can you learn from my experience?

For the most part, the reason behind my income drops were bright spots in my life.

Always try to keep your income moving onward and upward. However, I am suggesting there are times when you could consider accepting a decrease in your annual income. Consider the following scenarios:

You are working too much and want or need to make more time for life and personal relationships

I earned more money my senior year of high school than any summer of my college years (and I had a pretty good job during each summer of college). The difference was due to the number of hours worked.

Having moved from a very small town, where jobs for teenagers were not plentiful, to a big city, I was slightly obsessed with the ability to work hard and earn money in my final semesters of high school.

That final semester, I worked at two jobs, and then I had two jobs that summer, including a full-time job at an oil investment company.

I didn’t focus on developing many friendships during those final high school semesters. Perhaps I thought my interactions with co-workers were social enough. The result? I only keep in touch with one person from that big city high school, and it’s mostly because we went to the same college.

It’s perfectly fine to work hard and hustle to get ahead. Commit to as many hours as possible, especially if you’re trying to get out of debt.

But know that eventually you will need and/or want a break and your relationships with family and friends are more important than those paychecks.

You know the old saying about being on your deathbed and not wishing you’d spent more time at work.

You want to cut back your hours to focus on higher education

When I started college, I quit both jobs to focus on an engineering curriculum at a difficult college. In theory. In hindsight, some part-time hours at a job probably would have helped me schedule my time better.

You know yourself better than anyone. A job can help pay for college and help you manage your time better. A job may interfere with studying. It’s your call.

You need to accommodate a significant life change (e.g., you’re getting married and relocating)

When I got married, my husband was living in another state. At the time, I earned more than him. Why didn’t he quit his job and find a new job by me?

He was in the military. His college education was funded by a Reserve Officers Training Corps (ROTC) scholarship. Upon graduation, he was commissioned as a Second Lieutenant and was obligated to serve four years in the military if the Department of the Defense (DoD) activated him. They did.

He couldn’t fulfill his commitment in my city. His type military unit is not on every installation, and he certainly didn’t get to pick where he was assigned.

The decision about where we’d live was an easy one. I would join him at his military installation, and I was excited to do so.

However, that decision introduced another challenge as it’s not always easy for military spouses to find employment in their chosen career fields, especially if the installation is in a remote area.

Your job offer has a lower salary but comes with an incredible training opportunity

After moving to my new home on a military installation, I sought and received a job offer from the federal government, an employer not usually associated with high salaries.

I first wrote about my career path in this post for The Grounded Engineer. Before I married, I worked for a few years at a manufacturing company and figured out that I wanted to focus more on environmental engineering.

The opportunity before me was a two-year environmental engineering internship. Ideally, you could get the incredible training opportunity without having to take a pay cut.

The benefit? The ability to attend pretty much any training course related to environmental engineering that I requested, plus some great hands-on experience working in that installation’s environmental division.

The downside? A two-year pay cut and being labeled as an intern.

I pointed out my years of experience and reiterated my current (higher) rate of pay.

I questioned the Civilian Personnel Office (CPO) about the injustice of this. I questioned why I had to regress to intern status, and I questioned why I had to take a pay cut.

They didn’t care about my ego.

Their offer was the offer. I could take it or leave it.

I accepted the offer. Unless I wanted to seek jobs in cities that were more than an hour’s drive away, it was all I had.

That job turned out to be such a valuable experience. And, as an example of how things often have a way of working out for the best in the long run, it was that job classification of ‘intern’ that allowed me to transfer my position within the government to another location when my husband left the military.



You are relocating to a lower cost of living area

I’m not sure how much the area cost of living (COL) adjustments factored in to my salary as I was on the government’s engineering pay scale, which is higher than many other civilian white-collar General Schedule (GS) employees.

However, the government and other employers use area COL adjustments to retain the talent needed and to enable their workforce to maintain a standard of living in an expensive region of the country.

I’ve never worked in human resources. It’s not my area of expertise. But I do know you can afford life with a lower salary in a lower cost of living (COL) area  than a higher COL area such as New York City or San Francisco. Do an internet search on ‘cost of living calculators’ and you will be able to compare your locale to others.

You want to accommodate a significant life change (e.g., you’ve had a baby)

I finished that internship and start climbing that engineers’ GS pay scale. A few years later, I gave birth to my first child.

While on maternity leave, I realized I didn’t want to return to work full-time. I asked my boss if I could work half-time and give the other 20 hours per week to a job-share partner (you can read about that here).

With his approval, I cut my schedule and thus also my paychecks in half.

The bright side: I immediately gained more time each day with my newborn. Then my toddler and a second newborn. And then my two preschoolers.

You need or want to accommodate family needs (____you fill in the blank____)

For you, it might be helping aging parents or taking care of your own health issues. I wrote about the non-monetary reasons people might work fewer hours in my very first post.

For us, it was the logistics of two spouses and two kids going to four different locations each day. Add in one of those spouses going to graduate school after work on evenings and weekends. It was too much, and life was stressful.

I resigned my government position to be a stay-at-home mom, a domestic engineer, the family manager. My salary went to zero. Kids grow up so quickly. I would do it again, and I’m thankful I had the opportunity. Because my husband and I are a team, as I shared in this post, our family could handle it financially because his income was continuing to grow.

You’re trying to get back into the work force after time away

This one can be difficult and I wish it weren’t so. Someone needs to figure out how to welcome stay-at-home moms back in to the work force with less of the so-called motherhood penalty. Unfortunately, depending on the number of years you were away, you may find it difficult to return at the same salary.

My advice is that you while you are out of the professional workforce, you get and/or maintain any needed professional credentials, you continue to network within your industry, and you somehow ‘keep at least one toe in the water’ to keep your personal marketability high and your skills current. As I said in this post, you know not what your future holds, and it’s good to keep your options open.

You’re switching to a professional field where you are less experienced

This scenario is frustrating if your potential new employer doesn’t seem to be giving you enough credit for your years of experience, your maturity, and your related background.

Your choices include declining the job to keep looking elsewhere OR accept the job and try to negotiate some scheduled raises.

However, it also depends on how big the career switch is.

Some people call ‘almost financially independent (FI) but you need a little income for living expenses’ barista FI.

But, for example, I can’t apply to work at a coffee shop and expect to get paid the same rate as a chemical engineer.

However, if I (or you) don’t care about that former salary and would be happier at a job that pays less and demands less and maybe even fulfills more, why wouldn’t I (or you) consider it?

You’re earning less because your workload decreases (or disappears) when the economy struggles

Economy-driven pay cuts are tough, especially when the fix is completely out of your control. I know this wouldn’t be a welcome scenario for many or most.

All I can share here is my own story, which I know is not the same as getting laid off or fired in an economic downturn.

During the recession years of 2008-09, I had temporary, on-call status with a consulting firm. The ups and downs of my job’s workload actually coincided well with my family’s life, including time spent providing foster care for children. Thankfully my husband’s job provided stable income.

I worked quite a bit the next few years, but when my workload basically dried up again, I found a new job so I could resume earning regular and predictable paychecks.

 


Any scenarios in your life where you welcomed or tolerated an income drop? Please share in the comments below!

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18 Comments

  1. Angela @ Tread Lightly Retire Early

    There are so many legitimate reasons to take a pay cut – but also some terrible ones, so be sure you’re getting something in return for it 🙂

    2.5 years and counting with my pay/hours cut and I haven’t regretted it one second.

    1. Part-time is such a great option for combining a career and parenthood. I’m glad you get those extra hours with your son! 😃

  2. Vicki@MakeSmarterDecisions

    I took almost a 50% pay cut going from being a school administrator to being a college professor. It was worth every penny (or every penny I lost!) The stress was gone, my workload was cut in half and my options doubled! Love this post. So many reasons to cut back and try new things!

    1. That was a big cut! But I love how you said worth every penny you lost. So important to evaluate if the extra stress is worth the extra pay. For me, it’s not worth it. Thanks for your comment!

  3. My wife took one because of her age although they didn’t state it when she looked for another job. They wanted the youth.

    1. Hi Mark. Thanks for stopping by and commenting. I’m sorry she had to take one that didn’t feel right. That’s a different story than when you’re willing to earn less by working fewer hours. Thanks again for reading my post.

  4. Thanks for this list! Money isn’t everything. I just recently left my job for what some call a mini-retirement. I always saved enough to have the flexibility to leave a job and it has been well worth the 100% pay cut to give myself time to reevaluate my career and passions.

    1. Hi Heather! That’s great you saved and gave yourself that flexibility! Work can be so consuming and leave people with no time or energy for their passions. How exciting you’re on a mini-retirement. Definitely a good reason to welcome a decrease in income. Thanks for you comment.
      😃

  5. I’m actually considering taking one next year so this was a great reminder of all the other options out there 🙂

    1. Catherine, thanks for visiting and commenting! I hope you’re able to work something out that feels like the right decision. Take care!

  6. My wife chose to be a stay at home mom which was a pay cut to zero. But she nor I ever regretted it. I’m a Chem Engr too, as is my son. One of my daughters is an environmental engineer with two engineering degrees. As you said chemical engineering is highly paid and I was on the high end of the pay scale living in an extremely low cost area so achieving FI and retiring early was easy for us. I consult a day or two a week for entertainment and still bring in a 6 figure income. I never experienced a pay cut except when I retired.

    1. You’ve done well, even in retirement! If we ever meet at a conference, I’ll have to ask about the amazing salaries I walked away from. 😉 I don’t regret my part-time or stay-at-home-mom years either.

  7. Smile If You Dare

    Life is more than looking at annual salary, for sure! When we make these decisions because we weigh the alternatives and consciously decide what to do, we are so empowered. We know we are making the right decision.

    I took a very steep salary cut in my forties to switch careers, and I am glad I did it. Otherwise I would have always wondered “What if…” (or even worse: “I should have..”!)

    Living fully with as few regrets as possible means peace of mind. That is worth more than the money.

    1. Yes! That not wanting to always wonder about “what if….” or think “I should have….” is why my husband gave up his beautiful salary a few years ago to start a new company. I should have linked to that story too.

      Less stress and peace of mind is something I value and, for me, the solution has been working less than full time. No regrets, and credit to my spouse who is happy to be the primary breadwinner for our family.

      Thanks for commenting! Take care.

  8. I left a frustrating job as a physician, burnt out from asking for equal pay and equal promotion rights to regain a love for working by traveling through Southeast Asia for 4 months! Now that I’m coming to the end, I realize that my energy spent in anger at work is better directed to working less, letting go of the inequality frustrations that I cannot fix and finding greater satisfaction in my hobbies and loved ones! Big lesson learned from a lifetime of thinking that happiness and work should co-exist.

    1. A four month trip sounds fabulous! Sounds like you have good plan for your return, Kathy. Best wishes for more happiness with your hobbies and loved ones! Take care.

  9. I took a “major” pay cut when my job was eliminated in 2016. Instead of taking another job, I started consulting part time. In 2017, I made about 25% of what I earned the previous year. But it was great. I was able to pay the bills and worked part time for only 6 months. This year, I’ve had much less consulting work but my wife was diagnosed with cancer. I’ve been able to be with her for every doctor’s visit and test. It’s been well worth the “pay cut”.

    1. Your ability to be with her at every appointment is so good and I’m guessing so appreciated. That is what I would want too. Ya, sometimes the pay cuts aren’t in our control but it’s good when you can find a positive lens to view it through. Thanks for commenting, Steve, and take care!

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