Taking 17% Pay Cut

[MSC]

Has anyone ever considered switching jobs and taking a 17% pay cut in the process?

We're not talking huge amounts of money (going from about $41k to about $34k). The job I'm currently at is a teaching job and requires an incredible amount of work for ten months of the year with just under two months off in the summer. The new job, even though year round, is hourly and requires approximately 288 hours less work each year (the equivalent of 24 work days!) and offers significantly more vacation time at a local community college. The new job is also union and provides for regular step/cost of living increases where my current does not.

After some simple calculations the hourly difference only amounts to $.49/hour.

My main goal is to reduce stress and improve quality of life--if we can easily absorb the financial differences, am I crazy?

EDIT 1: Commuting distances are also equivalent.

[AZDude]

If you can afford it, then sounds like a good first step to leaving the stress of the education system.

[big_slacker]

Sounds like a no brainer to me!

[mdharmandm]

I don't think it is crazy at all. Money is great, but quality of life is more important. You just have to ask yourself, "Is the money going to provide me more benefit than the extra free time?" "Can I do something else that would be more productive or more fulfilling with that time?"

[MSC]

For what it's worth, some more numbers!

There's no guarantee how much I'll be making at my current job in eight years (or if it'll even be around), but at this new opportunity I did some other calculation at future value and it's looking even better--if only I were to stick around.

[johnny847]

Also factor in that your 17% reduction in salary is actually reduced by 7.65% for payroll taxes, 15%? (assuming you're single) for federal taxes, and 5% (if I remember NY tax brackets correctly) for state taxes.

So that's really only a 12.3% reduction in net pay.

[MSC]

Also factor in that your 17% reduction in salary is actually reduced by 7.65% for payroll taxes, 15%? (assuming you're single) for federal taxes, and 5% (if I remember NY tax brackets correctly) for state taxes.

So that's really only a 12.3% reduction in net pay.

Great catch! Since the new job has higher retirement contributions the tax difference is actually greater and after taxes the difference is only $5400! That definitely seems less painful!

[Tuskalusa]

I took a pay cut for similar reasons a while back. The one thing I realized in retrospect is that I could have probably negotiated a little better starting salary in the new role, which would have narrowed the gap a bit.

Great idea to go with your passion and less stress. Do you think there might be a little room for negotiation, just to narrow the gap as much as possible?

[HPstache]

I took a ~10% pay cut about 7 years ago to pursue a job I was much more interested in.  So happy I did.  I am still at the job today and have a love for my job that I probably would not have ever experienced in my last career.

[MSC]

I should add that right now this is all hypothetical. This is a position which I've applied for in the past and have been offered interviews, but had to decline due to military reasons. I just didn't want to waste on more time on on the process if my thinking wasn't logical.

Thanks for all the feedback!

[samburger]

A colleague of mine just left my employer for a ~17% raise. The job gives him 2 weeks off instead of the 6 he had, and while the work is similar, it's going to be significantly higher intensity (call it going from 35-hour weeks to 45-hour weeks).

Dude's crazy for selling his well-being for so little. You definitely wouldn't be crazy to choose well-being over a few grand.

[OutOfTheAbyss]

I just took the plunge and took a 30% pay cut. Until recently my ego would have made me horrified to give up a $135k job for a $95k job, but then this forum made me realize that 95k is affluence. There is a huge tax drop, and I no longer have a 3-4 hour a day commute that entails paying $1000/mo for a pet sitter, tons of car maintenance, etc.  I chose my family, my health, and my happiness over money & misery. I expected that I might regret it, but not at all! I have a better 403b match, $600 less per month in health insurance premiums, and a faster vesting schedule. And I work less than 10 miles from home. It's true I could have retired faster at the other job, but it also made 5 years seem like an eternity of anxiety, depression, anger, and no time with my family. All my dreams and hobbies were an impossibility, and now they are a source of potential income.  I'd gladly extend the retirement time frame to  8 years to do something I love and get to take a lunch break, be home in the evening, etc.  Your reasons seem sound.

[Spork]

Twice.

Most recently: I moved with no job in sight to a virtual tech desert while looking for a tech job.  I spent a few years out of work, then took one with a 40% pay cut.

Further back: wife in a living hell at work and just decided to quit, effectively meaning a 40% household pay cut.

Both worked out great.  When the wife quit was the time in our lives where we sat down and really looked at our spending.  We restructured our lives in a way that that 40% cut was the biggest raise we ever got.

Go for the one that makes you happier.

[UKMustache]

I feel I can speak with some authority on this as I took a 41% pay cut when I changed jobs back in October.

My old job was a 55 hour a week stress fest with a lot of pressure (admittedly in hindsight this pressure was partially in my head).  I spent every Sunday dreading going back to work and I was miserable during the week.

My new job I work 37 hours per week.  I have flexible working so I can turn up and leave when I want; I can accrue hours to take time off (so since Christmas I've done my hours Mon-Thu and I take Friday off).

The new employer is also paying for me to do some professional qualifications in my new field which should enable me to push my earnings back up in the future.

I was petrified when I handed my notice in and though I knew we could afford it I questioned whether I should just keep going to help increase the stash.

Since I started the new job I've not regretted my decision for a second.  I get to the gym 4 times a week, I'm sleeping better, my mood is much improved and I'm sure the wife will agree I'm easier to live with.

My advice would be to do it.  Look for savings you can make to coincide with the cut; I had a company car in the last job so giving that back saved me tax (about £90 per month) and fuel (about £150 per month) that really helped take the sting out of it.

[Chris22]

The only thing that would give me pause is is there a pension you're walking away from, and if so how close are you to being vested? 


Other than that, going from what appears to be a public school teaching job to a CC teaching job seems like a quality of life no-brainer.  My theoretical retirement plan is to go teach business at a lower-end state college or CC some day.  I had a number of adjunct professors in grad school who were doing that and they seemed to really enjoy it.  You don't make a lot but you don't stress a lot either.

[MSC]

The only thing that would give me pause is is there a pension you're walking away from, and if so how close are you to being vested?

No pension, only 3.5% match with less than a year of service on a 403(b) so no huge loss.

Other than that, going from what appears to be a public school teaching job to a CC teaching job seems like a quality of life no-brainer.  My theoretical retirement plan is to go teach business at a lower-end state college or CC some day.  I had a number of adjunct professors in grad school who were doing that and they seemed to really enjoy it.  You don't make a lot but you don't stress a lot either.

It's a semi-public teaching (charter school) job to a para-professional community college job, so not exactly apples-to-apples but locally the higher-education scene provides a ton of further opportunities.

[ulrichw]

To make a decision from a financial perspective would require more information, IMO.

In particular, because you have a certain amount of non-discretionary expenses, the impact on your discretionary income (and savings) has a multiplier effect.

Example (ignoring tax effects for the moment):
Current compensation: $41K
New compensation: $34K

Difference in compensation: 7K or 17%, as you computed.

However, let's assume you have $25K of non-discretionary expenses per year (this is a made up number - you obviously need to plug in your numbers).
In that case it looks much worse:
Current money available for savings & discretionary expenses: $41K - $25K = $16K
Money available with new position: $34K - 25K = $9K
The difference on this portion is 44% - so more than double the 17% on your overall income numbers.

Note that I didn't consider taxes - the actual computation should be done after taxes are taken out. The principle is the same, though your marginal tax rate will go down, which has a mitigating effect on the multiplier.

Things like pre-existing savings, etc. would have an impact.

So what you basically see here, is that from a strictly financial sense, it would be difficult to justify the move.

However, the other arguments that you've put up:
- future mobility
- more pleasant job
- safety of future pay increases

seem like they're likely to trump the short-term financial setback.

The main point I wanted to make is that this is not really a financial decision - it sounds like you have other strong reasons to want to make this change.

[MSC]

To make a decision from a financial perspective would require more information, IMO.

In particular, because you have a certain amount of non-discretionary expenses, the impact on your discretionary income (and savings) has a multiplier effect.

Interesting perspective. My wife and I consolidate our income, expenses, and savings. Together, we'd be going from $106k to $99k. Our non-discretionary expenses run around $46,600 (includes utilities, mortgage, insurance, taxes, food, and debt--is that high?). If my math is correct that represents around a 12% decrease "spending" money--better than we originally though.

Thanks!