Millennial Money Man

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April 21, 2016

Would You Take a $7,600 Pay Cut for Work-Life Balance?

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Would You Take a $7,600 Pay Cut for Work-Life Balance?

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Work-life balance has been a major point of emphasis for young people lately, and the numbers surrounding the phenomenon don't lie. According to a recent study administered to 1,500 working professionals by Fidelity Investments, 4 out of 10 millennial workers are willing to take an average pay cut of $7,600 to achieve a better work-life balance.

Not only are young people wanting to spend more time living life and less time working, but they are willing to take less money to do it too?!? I'm sure somewhere out there, a Baby Boomer is rolling their eyes and thinking: “I'm so tired of these lazy kids that are ruining America”.

Here's the deal – I don't think this is about a generation that just happens to be lazy. There's more to this thing.

 

When I was a band director before starting this site, I remember being worried about the work-life balance fairly often. A lot of people wouldn't think that band directing is a high-workload job, but you'd be surprised. I regularly clocked 60-70 hours a week, and sometimes closer to 80. It was exhausting in relation to the pay.

I didn't have kids, but when I do I want to spend time with them. I wanted to hang out with my wife before 8:00 pm every weekday. I wanted more time. Here's what work-life balance is really all about:

Work-life balance is about efficiency

I'm not afraid of being a hard worker, but if I'm working hard I want it to be efficient. I want to make as much money as I can in the least amount of time possible. While this might seem like a foreign concept to people past their mid 30's, it's completely achievable and desirable for millennials.

We are surrounded with more information than any generation before us with the emergence of the internet, and here's the scary thing – we know how to use it.

There are seemingly thousands of stories of millennials leaving the 9 to 5 grind and working for themselves from wherever they want to, and it has Gen Y's attention. In fact, I'm one of those stories. I work MUCH less than I used to from basically wherever I want, and I make more money. It's generally awesome, and other millennials want a piece of the pie too.

We've learned from the Boomers' mistakes

I'm not trying to start some kind of generational war with older people, but in my opinion a lot of millennial behavior has a cause/effect relationship with the Baby Boomers. Boomers were all about rolling up their sleeves for 30+ years until retirement (after the whole hippie drug thing in the 60's). It's their badge of honor to be labeled a hard worker.

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Here's why millennials don't care about all of that: Where has it really gotten the majority of that generation? Boomers are notoriously struggling to retire, and sacrificed time with their kids (millennials) and their spouses along the way because of their generational approach. Millennials are watching baby boomers delay their retirement, so there is a bit of the “what's the point” mentality.

If you are going to work forever, you might as well have better hours and enjoy life, right?

Millennials need to be careful

Even with all of that said, taking a $7,600 pay cut when you are young has consequences. That amount of money if invested with even a lowish 7% return in the markets could turn into $57,853.14 after 30 years. A couple of years at that type of reduced pay, and those numbers start to add up quickly. Bye-bye retirement.

Having $150,000+ later down the road could help you achieve the ultimate work-life balance sooner (You know…not working at all). As much as we don't want to have the same fate as the boomers, making less money isn't exactly the smartest option.

Replace hours with passion

If you are one of the people that is striving to create that better work-life balance at the cost of less salary, don't just sit around twiddling your thumbs if you make that choice. Replace work you didn't like with work you do like. Pick up a part time job you enjoy, or even start your own business like I did! Just because we aren't as obsessed with hard work doesn't mean we shouldn't be smart earners.

Before we go I'm going to hit you with a little secret that most bloggers won't tell you.

 

Working from home or way less hours is kinda boring sometimes. I've literally achieved the work-life balance that millennials want…and it's not really that special after the first few months. I'm trying to figure out how to do MORE work so that my days are full. I know that is some serious #firstworldproblem talk, but just trust me. Keep focusing on growing your career (and making more money), or fill your time with more work you enjoy. The grass isn't always as green as you'd think.

Live differently. Your bank accounts will thank me later. ~M$M

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Learn more about attacking debt, making more money, and creating an awesome life you love.

Comments

  1. I did for years when I was launching my own business – a much bigger pay cut actually. I still worked hard but was able to fit it around my life better. And it’s not as bad when it is yourself setting the schedule, not some boss.

    Reply

  2. Hey, MM. I love it! Don’t worry starting a generational brouhaha. We baby-boomers need a good kick in the arse every now and then. Your thoughts on work-life balance are spot on. I took a 30K salary cut by moving from New York to Charlotte. And it was well worth it. Less hours, less commuting, less hassles.

    I think there are excellent opportunities for millennials to create the proper work-life balance. But to do this, they have to be adventurous. Lower pay works best in a lower cost environment. Millennials should thus avoid big cities. Forget New York, Boston, San Francisco, and Los Angeles. They’ll have a better shot at happiness in Austin, Nashville, Pittsburgh, and Atlanta.

    And you are so right about trying to start your own business. Having a work-life balance that is a little out of whack is a lot easier when you’re making yourself rich rather than someone else.

    Thanks, MM, for this very thoughtful commentary. You made my Friday!

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    • I guess I don’t know what the proper balance is honestly. I used to think that living in a form of retirement where money just rolls in would be nice, but now I think that would be REALLY REALLY boring haha. I can see why some people actually hold off on retirement. Have a great weekend!

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  3. Personally, I would never take $7,600 pay cut for work-life balance. Maybe this is because I am young and I am going to be working at a big four accounting firm after my graduation that I expect to work long hours. However, the great news is that many companies are adapting to the millennial trends and are giving flexible hours, work arrangements extra. I go into great depth about this on one of my articles if you ever wanna read. $7,600 would be a substantial pay-cut for anybody under 100k. Obviously if you leave your job to start your own business, website etc. this kind of cut should be expected 🙂

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    • If I was a salaried employee still, I don’t think I would either. I actually suspect that when the time came to actually make that decision, many of the millennials in the study wouldn’t pull the trigger. It does show how strong the desire for work-life balance is though! Fortunately I only had a salary cut for about 2 months after I quit, but I was prepared to go a full year with no income.

      Reply

    • Hey Millennial Budget,

      It sounds like you’re maybe in college about to graduate (just based on the post – wasn’t sure whether MAcc or MBA or UG) and head off to the land of the Big 4s. If you haven’t signed an offer letter, I’d really encourage you to look more closely at regional accounting firms. I made that choice, and I was paid better (below manager level) than my Big 4 peers, felt better supported/ had a more close-knit team, and had a much better work-life balance even during busy season.

      I’ve met a lot of people now that I’m in private who came from Big 4 that have the most horrible stories about 16 hour days and back stabbing coworkers. While I do take it with a grain of salt (since they did leave, after all), it does seem like a pervasive culture. They treat people the way they know they can, because there are always new bodies to fill in. At my regional firm, you had to perform because it was a smaller team – no one carried dead weight and you felt like you were necessary each day.

      While I did leave (because I moved further out into Northern VA), I felt like I built a network of friends that I still have to this day – the partner at the firm still emails me asking how things are. I’ve never heard that about Big 4.

      If your mind’s made up, I wish you the best of luck and congrats on the upcoming graduation! Keep those study skills sharp for the CPA. ;P

      Reply

  4. I definitely wouldn’t do it, and here are my reasons. I have massive student loan debt,
    my salary is relatively low (especially in proportion to my debt), and I already have pretty good work-life balance at my current job.

    If I didn’t have any debt, or I had a much higher salary, or I had to work 80 hours/week at my current job, my answer would probably be different.

    Reply

  5. I’m a 40 year old GenX’er – I recently took a 15K annual pay cut for a better work life balance…and we have over 230K in debt.

    I did it for 2 reasons – I was tired of constant travelling and missing out on time with my husband and son. Also the company I was working for made me question my integrity on several occasions (I am in the environmental field).

    Money is a bit tight, but I sleep much better at night 🙂

    Reply

  6. I’m about to take a $100k pay cut for a better work-life balance and a dream job. Of course, I am not super young any more and have saved 80% of my goal, and I am not super old, so that I still have 25 years until traditional retirement age to let my money grow. That is the benefit of saving a lot when you are young – gives you more flexibility mid-career.

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  7. I think the freedom and passion aspect are spot on. My wife has become disenfranchised with her company and recently took a 6 figure paycut so she could be a professor. The income change will have little effect on our early retirement/lifestyle change plans because we’re already so far along saving for that, and we were already living off of just one salary anyway. It will totally positively change our current lifestyle to one with more flexibility and more time to spend with our kids too.
    While most people might not make that choice, for us, it was win-win. We get better work life balance and she gets to follow her passion.

    Reply

  8. Great read! You’re absolutely right that it’s not about being lazy, but rather about maximizing your efficiency. I think our generation has realized that working smart is better than working hard.

    And often this pay cut comes with leaving a job you don’t fully enjoy, doing something that doesn’t excite you on Monday mornings, to work for yourself doing something you love.

    I’m one of this list (as are you it sounds like). A few months back I finally left my finance job that required far too many hours to do my own thing, and it’s great! If you’re smart about it you can minimize the risk and reduction in pay initially, and then you can ultimately control how much you make in the end.

    Again, great article! Thanks for sharing.

    Reply

  9. This is so true for us. The Hubs offered to go part time and take a 50% pay cut just to help with our work life balance. In the end they declined, so 8 months later he quit to take a year off. It has been amazing! If/when he or I go back to work, there is no way we would give 50+ hours of our life to a job. They are so many other important things- like 5 kids!- that need our attention now.

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  10. A short story to answer you question: I’ve had jobs where, once my paid vacation was exhausted for the year, I could, with supervisory approval, take LWOP–leave without pay, basically unpaid vacation. I did this once to participate in an adventure with some buddies. When I mentioned during the adventure I’d take LWOP, one buddy observed: “Wow–so this is costing you $XXX in lost wages!” This puzzled me, and I quickly figured out why and replied like this: “Actually the way I see it every hour I spend at work costs me an hour of life-time.” I value life-time more than money, up to a point of course.

    Reply

  11. I would 100% take a pay cut to achieve a better work/life balance. I think a lot of us worked like crazy throughout school and now we are a little bit burnt out. I did 60-80 hours / week in grad school making just enough to pay rent, and then several years as a trainee at my current position making 1/3 of everybody else. Now that I’m set it a “permanent” job, but still working long hours, I just feel…tired? It’s hard to explain.

    Reply

    • Haha I totally get it – I was burnt out at my teaching job. I went through a bit of a phase where I didn’t feel like I had a lot of motivation, but I surround myself with good successful friends to keep me going!

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  12. Twenty years ago, work / life balance was barely an afterthought in the medical field. Today, it is at the top of job applicant’s wish lists, along with location and lifestyle (which is kind of the same thing). Salary is somewhere down the page in the list of priorities.

    I see this as an overwhelmingly positive development for physicians and their patients.

    Cheers!
    PoF

    Reply

  13. One thing I wish the Fidelity study included was the average pay of the individuals taking the $7,600 pay cut. Personally, that would factor in my decision for the work/life/balance argument. Making 100K vs 50K makes a difference, but also just as important is the current individuals monthly expenses, while I know that’s hard to put together on a survey, on a personal level that makes all the difference. Speaking as a millennial….but like the old man millennial who yells at kids for walking on his freshly cut lawn millennial.

    Reply

  14. I agree with replacing hours with passion. Long gone are the days of a 40-hour work week that pays above minimum wage. I left my job as an operations supervisor of 7 years for a lot of the reasons mentioned above. It was good money & benefits, but it was no longer worth the 70-80 hour weeks I would be putting in for the rest of my life as it was a dead-end job. Now my wife & I both work & took a large paycut to find work that fulfilled our passions, but it’s allowing us to be home more often to raise our family.

    Reply

  15. I did! And it was so worth it! I previously worked in Biglaw and my time was not my own. I moved in-house and my salary is lower but it is still a respectable salary and I have my LIFE back. 10/10, would do again. Full disclosure: My current gig does come with a fully funded pension that even if I retire early would still provide me with significant income that narrows the gap a bit.

    Reply

  16. Absolutely, if it meant lowering your hours in order to develop your own business on the side. Companies are no longer loyal to long time employees – look what happened to Kelly Ripa. Also, I think 2-3 income flows is ideal based on available time per week.

    Reply

    • If I had been in the business world instead of teaching, I would definitely be worried about getting canned right before retirement. That HAS to be something keeping Boomers up at night!

      Reply

  17. I would take a 7,600 for work life balance but at the same time – I am trying to save as aggressively as possible right now/pay off some debt at the same time. Now that I’ve been bitten by the FIRE bug I want it as soon as possible! Not sure if I would make trade-offs now unless my work life balance was horrible.

    Reply

  18. The answer to the question for me is simple, NO WAY. Because I do not want to be dependent on anyone else but myself when I retire and I want enough money to live in a life style that I have now. The only way to do that is to save and invest starting when you are young and if you don’t, you must depend on other forms of income (social security, pension, 401K that can be taken away or reduced at any time) Pension plans are going bankrupt at an alarming pace from mismanagement.

    If you take a pay cut now for a “better life style”, you are sacrificing your future life style at a time in your life that you can’t work or don’t want to work. Ultimately the choice is yours, work now or work longer later in life, and trust me you will get old someday even if you don’t think so now. The next 30 years will fly by before you know it and then it will be too late. Just do it now, and be done with it. But what do I know.

    Reply

  19. I’m a GenX’er and 4 1/2 years ago I took a 20% pay cut, which was more than the $7,600 mentioned here, because I didn’t have a good work life balance and the job demanded way too much out of me. I was stressed to the point of being unhealthy and was extremely unhappy. Although I am currently making less money, my happiness and sanity are so much more important and I have never regretted my decision. My current employer values work life balance and I am even able to take long lunch breaks to go work out or leave a little early if I have something that I need to do. Money definitely does not buy happiness.

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  20. Yes, I am actually about to take a similar pay-cut in just over a month. I am at a stage where my current salary has allowed me and Mrs. Superhero to be in position to wipe-out our non-mortgage debt. Even with the loss of salary, we will be able to invest well and make-up for the loss by engaging in side hustles, which will be way more fun than staying in my current stressful position.

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  21. I have not been willing to do it yet. That is partially because my girlfriend has a short term (under two year) really high intensity job. I am trying to organize my life so that we both have more free time when the job ends. So now I’m investing in working my butt off so that I can focus on her and us when it is possible without ruining my retirement.

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  22. Last year I requested to go per-diem at work so I could free up time to pursue other things. BEST decision I ever made. I do side work outdoors for people which always makes me smile and I simply have more time to hang with my honey, play in my garden, be with my family. Life is good! Nice post!

    Reply

  23. After 5 years in a big law job, I would happily take up to 50% pay cut for work life balance (which is substantially more than the $7,500). For me work-life balance would still include a lot of work, just not so many all-nights, weekend work, working on vacation, etc. etc. Money is an unlimited resource which I can always make more of. Time with my kids, not so much.

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  24. Investing $7600 once with an return of 7% would yield $57,853 after 30 years, but investing $7600 every year for 30 years at a 7% return would return $775,377.

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  25. My husband has been offered a position that would double his pay (to a six-figure salary before bonus), but he turned it down because it would require him to work 7 days a week. This is going to sound very greedy of me, but that would drastically change our lives for the better and help us meet our goals so much faster if he took the job. He sees how it would benefit us in the long run, but he isn’t willing to sacrifice so much time for more money. I can see his side too, I just want to meet our goals faster so that we can have the freedom to work for ourselves instead of for someone else.

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  26. I did exactly this, left my salaried job for an hourly, full-time position in a similar-but-different industry. Paying bills was difficult for a time but I was infinitely happier being out of a position that sucked my soul away for 13+ hour days and nothing really to show for it. Less than a year later and I was offered a promotion with the same pay I was making before – but this time with the much better, more flexible hours and infinitely better commute time. I have SO much time left in my day that I went back to school to finish my degree, and I’m still home before I used to be when I was working the old job. “Pulling the trigger” was certainly the hardest part but we’re enjoying a much better work-life balance!

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  27. I recently took a $40-50k a year pay cut and quit my job. After 16 years of full time retail management, I was done. Terrible hours, mandatory weekends, eating dinner at 8 pm, missing important family events. Luckily, my husband makes enough to support us, we’re saving a ton by not eating out twice a day, and my mental health has improved 100%. Up and quitting your job is scary and not the right move for everyone, but for us, it’s been a lifesaver.

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  28. Just took a $5200 pay cut. We have started farming mote and i run a welding shop out of my barn adter work. I’ll make up the income in no time. Mid level manager at Fortune 250 utility company 34 yr old. We have $650k in debt $1.2 assets though.

    Reply

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