There is an article over at money.com on when it pays to take a pay cut. This struck a chord with me immediately because of the large monthly cut I have voluntarily taken to try and make the websites my full time job. According to the article, these are the times when taking a pay cut may make sense:
The new job is in an area where the cost of living is lower and your money will go farther
The new job offers more than your current job in tangible benefits like health insurance, 401(k) matches, and paid time off.
When you’re young and inexperienced.
When you’re not so young and feel stuck.
When your list of unfulfilled desires is long.
When you need a break.
I don’t really fall into any of these groups for the reason I chose to take a large pay cut, so I would also add:
When you see the potential for much larger earnings in the long run.
This is often a difficult one to express to others. I know this from experience close to home. My wife thinks that I’m crazy and we’ve had many a “financial disagreement” (ie – argument) over the subject. This usually comes about toward the end of the month (oh, look where we are? – doesn’t that seem appropriate) when money is tight and she knows if I would spend my time doing other work, the monthly budget wouldn’t be tight at all.
There are various ways of bringing in extra cash to help with the monthly budget and if those methods enable you to take a pay cut without feeling guilty, it may be worth looking into. Weâ€™ve bridged this issue by my agreeing that I will bring in a minimum amount of money each month which means I do need to spend a few days each month working on auctions. For the readers in the UK you can actually get a low maintenance job and work for the government for a few hours a week and bring in extra cash this way. Still, it can cause a lot of problems when one person canâ€™t see the other personâ€™s vision. This is even compounded to a greater degree from others looking from the outside or when you switch from a job that pays well that people understand to an area that pays a lot less and with which people arenâ€™t familiar.
While I see very little risk in making this move (I can always go back to what I was doing before this if it doesn’t work out and the value of the sites will have grown, produce a better monthly stream of income and be more valuable), trading a larger salary for a smaller one goes against the common sense of many people no matter what the underlying reasons may be.