WHEN IS IT OKAY TO TAKE A 30% PAY CUT?
Leaving Management Consulting behind
I recently took a 30% pay cut, it still hurts to say that, having left the world of strategy consulting behind.
Quitting a more than 200k a year job. Was I crazy to do this?
Well 2 months after quitting, I recently started a new role with a 30% less in my pay-check coming in every month…. and I couldn’t be happier!
I am more content in my decision to leave the big pay-check and stressful work environment behind and follow my interests and passion.
In fact I am kicking myself that I spent so long in the job before I finally got out.
So it got me thinking, with the Great Resignation in full flight,
When is it acceptable to leave a job and take a significant pay cut to your salary?, as high as 30% in my case.
I’ve included 6 key justifications for when taking a significant pay cut for another role is acceptable and actually should be encouraged.
Taken from both my personal experience and also colleagues/friends and research I have engaged with.
Let me know in the comments if there are further areas I have missed.
1) The work is impacting your physical/mental wellbeing
If your job is having a sustained impact on your mental health over time – get out now!
I know every job is stressful in it’s own way, there are always bad managers, rude clients and unrealistic deadlines. This is to be expected, unfortunately for most jobs today.
But if your work environment is having a continued impact on your mental well being it’s time to take the other role – regardless of how big the pay cut.
In my previous job in Management Consulting, I remember the absolute worst Sunday night scaries to the point my whole weekend was practically ruined.
Monday morning I was a ball of sadness and lacked any motivation.
I would need 3 espressos to just start my day due to the avalanche of pressure and sheer amount of work I knew was coming my way that week.
This went on for 3 years! Until I finally built up the courage and left, taking a 30% pay cut in the process, and leaving behind an industry I had spent more than 8 years in – management consulting.
Don’t wait as long as me, there is light at the end of the tunnel! Take the first step and start updating your CV and reaching out to recruiters now, life is too short.
2) You want to pivot industry
If all you know is one industry and you have lost all interest in it. The time has come to accept a big pay drop just to get your foot on the ladder in a new industry.
I had a friend who worked in Mining for 10 years, he was pretty senior at that stage – director level managing a group of employees. But he confided in me over a pint one evening that he didn’t want to stay in the industry anymore, in fact he hated it.
From the ‘lad’ culture, to the exploitation of countries’ resources, to the impact on climate change – he wanted out.
So an opportunity came up in another industry. The industry he was really passionate about, namely communications and media, but the role was at an associate level, a pretty steep drop from director level.
He took it!
Huge change in title and salary but it got him a foot in the door at a company and industry he was genuinely passionate about.
He hasn’t looked back since, already up to manager level just 2 years in. In fact he can be tough to be around sometimes due to his overuse of the phrase “I just love my job”.…spare some thought for the rest of us.
3) You want more personal time to pursue your passion
According to Zapier – 1 in 3 Americans have sides hustles. 1 in 3! That is mind-blowing and what’s more is that 61 million Americans (24 percent) plan to start a side hustle this year.
The trend is only going one way.
If you want to free up more of your time to pursue a passion project or side hustle, taking a pay cut can be a great way to achieve it.
Taking a less stressful, better work/life balance job will give you more time to just do that.
There is generally a direct correlation between how awful your work / life balance is and the amount you are paid. Just ask any investment bankers or lawyers out there. (or strategy consultant in my scenario).
My one piece of advice before doing this. Start the side hustle or passion project first. Try and squeeze it in with your current job before making a decision to leave.
Prove your concept out, determine if it can generate money and actually verify you have a genuine interest in it. I used to think I was passionate about photography until I walked around with a camera all day and tried it. Turns out, it wasn’t for me!
Don’t blindly leave your job for another job with less hours so you can pursue a side hustle without actually getting your feet wet first.
I did just that with this blog. I thought I would be an overnight millionaire through ad revenue, affiliate links, sponsored posts, and my own merch (one can dream).
I am so thankful I started it while I was working and realised how much time and effort it requires to put in. This helped me reset my expectations and ensured I prioritized my main source of income coming in every month.
4) You found your dream job
This is a no-brainer.
If you’ve always wanted to be an actor or musician and you’ve just landed a role. Your dream role!
Take it and run.
Not many people get to follow their dream, and if you are one of the lucky few who actually get that opportunity, hold onto it for dear life.
According to CNBC’s recent survey – just 7% of Americans say they have their dream job. That means a whopping 93% of us are not – pretty depressing statistics to say the least. This is America too, the typically painted home of the American dream!
If you land your dream role, don’t worry about the money or taking a pay cut. Just grab it.
Imagine the feeling of waking up every morning excited to go to work, this is a feeling money can’t buy.
If you love what you do, you will never work a day in your life.
5) You’re moving country
This one is particularly relevant for those on the financial freedom journey.
Given the recent explosion of remote working – relocating to a cheaper low cost of living city is becoming a viable option for a lot of people.
For example, I knew an ex colleague who moved from the US to the UK.
He was offered a 20% pay deduction for a similar role in London, which he decided to take.
The reason why?
Well he weighed up the benefits of not having to pay for health insurance for him and his family with 3 kids (healthcare is free in the UK), education is also vastly more affordable and for his particular circumstances the tax benefits were also better for him and his family.
I also have friends who recently moved to Portugal, they took the plunge as it is drastically cheaper than North American cities for food and housing and typical life expenses.
The weather is amazing, with beautiful beaches and sea views. One major plus is also that the working life is so much more relaxed and seen as less stressful.
In fact Portugal has recently made it illegal for your boss to text you outside of working hours. Hopefully the rest of the world follows suit!
If you are interested check out this awesome blog I came across on the advantages of moving to Portugal.
6) You’re financially secure
This is something I have learned recently, as my net worth has grown (I track it monthly here) I suddenly became less worried about my job and my salary.
I was in a situation recently where my journey to financial freedom was impacting my motivation to work, and was a small part of the reason that eventually led me to quit my job.
I’ve found on the road to FIRE (Financial Independence Retire Early), as you become more financially stable and build up your investment portfolio, work starts to become less and less important.
Both because the contributions you make from your pay-check every month become less than gains from just stock market movements, and also the feeling of control you take back now that you’re not living pay-check to pay-check.
This gives you freedom, options and choices regarding how you spend your time given that the financial reward isn’t as important as it used to be.
You’re more comfortable with taking enjoyment and happiness over monetary payment. Thus becoming financially secure gives you the freedom to take a pay drop of any amount if that is where you want to spend your time.
What do you think?
When is it acceptable to take such a significant drop in pay for another role?
I am interested if there are others who are contemplating this, let me know in the comments.
As always, I hope you find some of these areas helpful in your own journey to whatever your goal is. Make sure to follow along on my journey on how this thing called life and my goal of financial freedom works out, I keep my net worth updated here.
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Catch you soon,