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  • Antoinette Minor

Can You Afford to Take a Paycu


I took a pay cut and my family thought I was absolutely crazy!  Taking a pay cut seems to be a taboo issue that no one talks about much.  We automatically assume that taking a pay cut is a bad thing when there are many reasons why a pay cut can be an essential to success.  For example, changing industries, changing job titles and happiness are all reasons why you may need to take a pay cut in your career to move ahead.


It was an extremely hard decision to make and what I found is that there were a limited group of people and resources I had in order to help make this decision.  I ultimately went with the change because my happiness was worth more than a check but I also kept these four tips in mind when determining whether or not I could afford to take a pay cut.


1. Budget

Take a look at your budget to determine how much money is needed to make ends meet.  If you don't have a budget, now is the time to create one!  When I took a look at my budget I realized the money I was losing due to the pay cut was not needed at all.  I had a reality check because at that moment I also realized I was spending way too much money on unnecessary items.  Don't forget to include items such as savings, gas, food, spending cash and student loan payments to your budget as well.  I miss the money but I'm doing just fine without it.


2.  Benefits

I used to always laugh when my employer would add the total costs of my benefits into my salary during reviews or salary increases but now I realize the benefits are a very important factor related to income that is taken home.  It's not just to make it look like you make more money than you do.  For example, when switching careers I considered the costs of health care at one company as opposed to the other.  My health care costs decreased by $60 per pay.  That's $60 in pay that I would actually not be losing as part of the pay cut.  Other benefits that may decrease the pay gap are paid time off, tuition reimbursement and student loan repayment.


3.  What Will Your Paycheck Look Like?

A good girlfriend of mine gave me insight on how to calculate what my new pay may be.  With taxes, 401k contributions and other factors that impact the amount of money taken home for each pay it can be hard to figure out what your new weekly pay amount would be.  Use this tactic for a close estimate of your take home pay.  For someone who is paid biweekly, assume your paycheck will decrease by $20 for every $1,000 in the pay cut.  For example, if you have a current annual salary of $50,000 and your new salary is $40,000 your total pay cut would be $10,000.  $20 x 10 = $200.  You can expect your biweekly pay check to be about $200 less than what it is now.


4.  Travel Costs

Where is your new job? Will you travel by public transportation or need to use your car? Many people don't consider how location of a job can impact your budget.  For example, my new job is located in the city which meant a new cost of public transportation and/or parking fees added to my budget.  This was a cost I didn't have in my last position.  Transportation can be expensive depending on where you live.  If I wanted to take a train into town that would be a monthly cost of $143.00!  Thankfully I have discovered cheaper ways of getting to work but I've also saved money in other areas of transportation.  I no longer have tolls to pay and my gas usage has decreased.  Technically, I could probably get rid of my car and rely on public transportation.  That would save me hundreds of dollars per month!


Taking a pay cut is not as scary as it seems and if you take the time to really examine your finances you will find that you will probably be just fine. Take it from someone who has done it!  If you are considering a pay cut and need some additional help you could also go to a financial counselor.  There are plenty of free agencies across the country!  


I hope my journey helps you to make a decision on whether or not to take your dream job although it may come with a decrease in pay.  Just remember, this brief time of living on a tight financial rope can really set you in the right space to move forward in your career.  There is a reason and a season for everything!


See you at the top,

The Young Professionalist