10 times taking a pay cut can make you richer

Money shouldn't be the only motivator when deciding on a career, and taking a job solely because the pay is appealing can increase the likelihood that the job will not work for you in the long run. Moreover, a potential employer will most likely sense if you're not passionate about your role.

"During a recent conversation with a candidate, it became clear that his primary motivation was a pay raise," said Amy Perrone, an associate with Shelli Herman and Associates. "It was a big red flag. Taking a job primarily for money is a poor short-term objective that, once achieved, has negative long-term implications for everyone involved."

Perrone said that a smart job seeker is motivated by opportunity and fit, as money can lose its appeal very quickly. Keep reading to find out if you should take a pay cut, and get tips to make a career change.

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10 times you should take the paycut
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10 times you should take the paycut

You Want to Enter a New Field or Industry

You might want to switch to a new field in which you hold little experience. In this case, a lower salary is appropriate until you have acquired a certain skill level.

If your new job is in a growing field or industry, your salary could increase rapidly. A change of career might improve your quality of life and provide a more flexible lifestyle, both of which can be worth more than a bigger paycheck.

If you're hesitating with a career move because you're worried about paying your bills, consider taking a loan to cover costs until your salary reaches a livable level. Research job options carefully, and talk to people already in the field to make sure your goals are achievable. 

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You Make a Lateral Move

A lateral move — one where you keep the same title, duties and pay grade but gives you the opportunity to acquire new skills and knowledge — might not involve a salary raise immediately. But, it can lead to one in the near future. Assuming different responsibilities can open up opportunities. A wise lateral move can expose you to someone you can learn from, and the value of that knowledge might more than compensate for a temporary drop or lack of change in pay.

Take Ryan O'Donnell, for example. O'Donnell is currently the director of marketing for Avalara. He left a teaching career to assume a marketing internship and has not looked back since.

"I started my professional career as a high school mathematics and computer science teacher," he said. "It only took six years for the business bug to bite me. With MBA in hand, I left teaching and took an internship to get my feet into the world of marketing."

Although there have been ups and downs in his new marketing career, the amount O'Donnell has learned and the knowledge and skills he's gained were well worth it. "It's been like a second education," he said.

Although a big change like this can involve a pay cut, try negotiating extra vacation time, bonuses or stock options that might compensate for the financial loss. 

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You’re Not Progressing in Your Current Job

This is one of the signs you're in a dead-end job. A job that offers no future growth is frustrating and can be financially disastrous. Your company might be too small and unable to offer career progression. In this case, it is time to part ways. Otherwise, you might grow resentful and unproductive, and your employer might want to hire someone with fewer skills at a lower cost.

A lack of career growth opportunity might also be a reflection of poor management rather than firm resources or needs. If your work environment seems dysfunctional, the business will likely not be sustainable, and you should pursue other options. Poor leadership will not change quickly, and you might have no ability to control your professional situation.

A move to a larger company with greater scope and resources could provide you with a brighter financial future despite a temporary cut in pay.

Michele Jennae is an executive coach who experienced poor management in her attempts to gain additional exposure and skills that would have benefited both her career and the company that employed her.

"I once offered to demote myself from operations manager to field manager, as I felt it would allow me to do a better job for the company," said Jennae. "They declined, and I resigned."

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Your Health Is Suffering

This is a no-brainer, but it's surprising how many people suffer through miserable jobs withough realizing the damage to their health and the people around them. Having to do a job that you dislike is stressful and, over time, that stress can compound.

A study by Grazia magazine found that hating your job can affect your relationships and sex life. Stress also can affect your ability to sleep, which, in turn, can further stress your immune system and contribute to ill health. A 2016 study by Ohio State University showed that by age 40, people with consistently low job satisfaction showed mental health issues like excessive worry, a higher level of depression and more sleep problems than job-satisfied participants. These problems could be a precursor to physical problems that show up later in life, such as cardiovascular or other health issues.

Having a less stressful job would, therefore, save you money on healthcare costs in the long run, as well as in the short run. The study showed that those dissatisfied with their job reported worse overall health such as colds and increased back problems, costing them more out of pocket for doctor's visits and days absent for those without paid time off.

If you would be much happier and less stressed with a job that can provide a more flexible schedule, a salary cut that brings improved health could improve your quality of life overall.

Make Money Without Stressing: 15 High-Paying Careers That Won't Kill You 

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You relocate to a Place With a Cheaper Cost of Living

A high income isn't everything. If you're living in an area where the cost of living is high, such as New York or San Francisco, you might be money ahead by taking a pay cut and moving.

For example, a move from San Francisco to Fresno, Calif., just three hours away, will slash your cost of living nearly in half. The average San Francisco lifestyle requires $93,600 to maintain, while you can afford to live off less than $50,000 in Fresno.

A software developer in San Francisco averages $107,500 annually. The same job pays less in Fresno, just $78,750. But if you take the lower-paying job, you'll be ahead financially. That's because in Fresno, your take-home pay after taxes will be about $55,567. With living expenses estimated at $45,500 for the city, you'll have $10,000 left over for things like savings, investments and vacation. That leaves you more than $30,000 ahead of the game than if you'd taken the San Francisco job.

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Your New Job Offers Better Benefits

There are some benefits that go beyond the paycheck. In fact, some benefits can save you money in the short run and grow your wealth over the long haul. A job with cheaper health insurance, expanded health coverage, tuition reimbursement, child care assistance and more paid time off can put you ahead of the game — even if you're making a lower wage.

When deciding whether to take a lower-paying job, ask your prospective employer for a total compensation statement, which breaks down the value and costs of the benefits package on paper. If the company won't break it down for you, you'll have to do the math yourself.

Only add in the value of those benefits you'll use. For example, if the employer offers child care assistance but all your children are in middle school or older, it will be of no benefit to you and shouldn't be calculated into determining what your benefits package is worth.

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Your New Job Is Closer to Home

Each mile you drive to work costs you the equivalent of $795 annually, according to data from Strong Towns, an organization promoting metropolitan change started by civil engineer Charles Marohn. Living just 20 miles from your job could cost you $31,800 annually when you figure in all the maintenance, fuel and the cost of your time lost behind the wheel.

Not only that, but trimming the miles you drive can save you big money on your car insurance rates, depending on where you live. Californians driving 20,000 miles or more annually pay an average of 25.7 percent more than those who drive just 5,000 miles per year, according to InsuranceQuotes, an insurance comparison site. However, the discount doesn't hold true across all states: In North Carolina, Georgia and Rhode Island, the difference in savings is less than 2.5 percent.

Other factors that can make a sweet difference when you work closer to home might include the ability to go home for lunch, less money spent on child care and more time to make extra money from a side gig

Photo credit: Getty

You Can Telecommute

You might take a pay cut to telecommute to the office, but you can come out richer in the end. The principle of coming out ahead by working remotely if your company offers the option can even work if you telecommute part time.

For example, an in-office customer service professional makes a median salary of $36,360, while a telecommuter in the same job makes $32,718. The salary evens out if you commute even two days per week.

You'll also save on laundry and dry cleaning. The average professional shells out up to $1,000 each year — about $4 per workday — to maintain his clothing. A job where you can telecommute twice weekly saves $416 annually on laundry costs.

Subtract the cost of daily lunch at $8 and a $3.50 latte twice a week, and you'll save another $600. Save even more by reducing child care hours on the days you're home. 

Photo credit: Getty

You’re Starting a Home Business

Not only will you save $795 per year on every mile you used to commute to work by setting up business at home, you'll reap tax deductions on every mile you drive for your business.

Apps like MileIQ automatically keep track of your mileage and ask you whether each trip was deductible or not. You'll also be able to deduct $5 per square foot for areas in your home used for business up to 300 square feet and other business expenses like office supplies, furniture and inventory.

Photo credit: Getty

You Get One Step Closer to Your Dream

Trading in a job that just pays the bills for one in your field of interest might not pay as much, but the happiness you get from pursuing your passion just might be worth the cut in pay.

For example, if you've always wanted to be a photographer, trading your office gig for a job as a photography assistant, baby photographer or school portrait photographer can get your foot in the door. Most companies provide training, including posing and lighting techniques. You can develop your skills and portfolio, expanding into side gigs that will eventually lead to fulfilling your dream.

Besides developing the skills you need to advance in the field of your dream career, you might want to take a lower-paying job to just get your foot in the door. Apply for a job at a company you've always wanted to work for, or work with a supervisor who is a Goliath in the industry.

Next Up: 15 Secrets of Getting Your Dream Job

Caroline Banton contributed to the reporting for this article.

Photo credit: Getty 

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