Taking a paycut

[Milton]

I am ... concerned that staying in a role that isn't challenging and is not helping develop skills for my career is a bad career move to make, just to stick around and pay off my loans.... I worry that sticking this job out until I am approaching age 39 will make it harder to switch career paths. Plus bonuses could suddenly disappear for various reasons if management wanted it to.

The above is a very realistic appraisal.

AI is becoming increasingly important in banking / finance. Repetitive, high-paying jobs like your are very much an 'endangered species', and you have very little job security where you are.

I believe you need to do whatever you have to to move forward to a more challenging and rewarding career. If that means a pay cut, that's unfortunate but better now than in three or four years (kicking the can down the road is not really viable in your situation: you're a long way from FIRE, and it will be increasing difficult to find alternative employment as you age past 40).

 

[Dd852]

I think too many respondents are over-fixated on th OPs $80k of student loan debt... if the OP's mortgage was $80k higher would anyone give a care? If not, then what is the d.ifference? Debt is debt... so IMO the student loan debt is a factor in the decision but not an overwhelming one.

I admit I’ve always been hugely debt averse. I paid off my student loans as quickly as I could and then was overjoyed when I could rapidly pay down my mortgage to zero. A true “financial engineer” would certainly say I should have been more rational and invested in equities or ventures with a payoff higher than the interest, but that never “interested” me - I always felt freedom meant freedom from debt. So yes, my advice was very much a product of my personality and predilections rather than being strictly rational. So in the OP case, the “right” advice comes down to personality too - the amount of ego wrapped up in a salary figure, the tolerance for debt, the love of the occasional luxury etc etc.

 

[Milton]

Have you read this book?

My role itself is not challenging and very soul sucking. The work that the job requires does not require me to really use my brain. The way day to day "essential" tasks are structured makes it difficult to pursue creativity and alternate solutions myself. I have found some ways to inject more creativity and skill development in the job, but it is not always possible or easy to do so.

 

[DrRoy]

Something else to consider is the cost of living where the new job is. It's important to evaluate not just the money, but also what that money will buy where the job is located.

+1. Also look at it after tax. You might not be giving up as much as it seems at first. I won't give an opinion overall. Only you have all the info to decide.

 

[cyber888]

Well, i just did that to avoid a toxic environment. I quit my old job in Sept 2016 and got a new job in Jan 2017. I had a $138k salary and now $120k. So, an 18k cut before taxes, or around $12k less in take home pay after taxes. I enjoy my new work environment better with less stress. To close the $12k gap, I got rid of one car (save about $1300 a year in insurance and property taxes), quit going to the movies and minimize eating out (save another $1200 a year), downsize cable TV ($500). I immediately cut $3,000 in expenses, per year. Then just invested my after tax savings in dividend earning funds. My nest egg has increased by $130k since i qui m old job ... no sweat. Its all good.

 

[badatmath]

I took a paycut once - was not at all worth it. Sure I made back the money and then some but the job was not "better" - esp after about 2 weeks when novelty wore off.

 

[Jerry1]

At your age and given the fact that even with a cut, you will still be making good money, I would give serious consideration to leaving. The difference in pay should be minimized as much as possible through belt tightening so you and DW can spend as much time with DD as possible.

The most important thing is that you leave to improve. That you go towards something, not run away from your current situation. Future employers will not care so much that you took a pay cut as long as the rest of the story is about how you changed jobs to (you fill in the blank). Things like professional growth, interest in some new endeavor . . . Only you can say. If your only story is that you left because the job was soul sucking, that’s not good. If I was hiring you, I’d say that you weren’t creative or engaged enough to make your situation better.

So, if all you’re doing is running away, look in the mirror and ask yourself if you’ve really done all you can do to make your situation work. It’s gut check time. If there’s really a new world out there that you think has the possibility to be your passion, then almost no amount of money should stop you from going for it. You’re 36. Get your mind right and the right thing to do will be clear.

 

[Meadbh]

I took a pay cut twice. The first time I finished one contract and took the next one at a lower rank, specifically to advance my career. That was totally worth it. The second time, I moved to a geographically different area and took a pay cut because I planned to RE there. That job was a disaster, but I ERd successfully shortly thereafter. So the answer is......... it depends.

 

[RobbieB]

I've taken lots of paycuts.

I got fired and found a new job at less dough.

Less dough is always better than no dough -

 

[scrabbler1]

I never changed jobs to take a pay cut. But I twice asked to reduce my weekly hours worked, along with any benefits associated with working fewer hours and earning less pay.


The first time was after 16 years of working full-time, in 2001. My company had just moved from lower Manhattan to Jersey City, New Jersey, and what was already a long, tiring, lousy commute became even worse. I reduced my weekly hours worked from 37.5 to 20 and worked some of my reduced hours from home, greatly lessening my awful commute. My benefits were pretty much intact but somewhat reduced. I remained eligible to be in the company's group health plan and continued accumulating those valuable shares of company stock which continued to skyrocket for the next several years. I was living on just over half pay compared to before, but because I had paid off my mortgage in 1998 my expenses were greatly reduced, too. I had been living the last 3 years on one of my 2 biweekly paychecks per month, so halving their amounts didn't slow me down.


But in 2003, the company ended the telecommuting part of my part-time working arrangement. I could still work 20 hours a week, but I had to fulfill those hours at the office. This returned some of the horrors of commuting to 3 days a week, up from the one day I had for just over 2 years.


After 3 1/2 years of that, I had to reduce my commute some more. So I asked for and was granted a second reduction to my weekly hours worked, from 20 to 12. This eliminated most of my remaining benefits, including eligibility in the company group health plan. But by this time (2007), my ER plan was taking shape, and I was very sure that by the end of 2008 I would be able to retire.


I was still earning enough to cover my expenses, not by a lot, but I had enough. I was now working 2 days a week and getting home about an hour earlier than before. It was an improvement, but it didn't take long to realize that I soon needed to reduce my commute to ZERO.


And when the pieces of my ER plan fell into place in the summer of 2008, I gave my notice and left. But it did take 2 paycuts in the last ~7 years to get me there.

 

[Yarnstormer]

Honestly, I can’t say I was challenged for most of my career but I hung in there. Look for satisfaction in your reducing debt and keep that high paying job. When you are closer to FI, that is the time to look around and consider changes. The devil you know and all that...

 

[Jeffman52]

I have a pretty toxic job. The pay is good but the job has just gotten to where it eats up too much of my personal time and gets more and more demanding each day. So over the last year or two I have been networking within the same company but different areas. Eventually a job came open in a department that I have worked with for years that has all but said they would love me to join their team. A few phone calls to the Hiring Director and four interviews later and I will be making a change.

I am taking a title change and one step lower in the corporate ladder.
I am getting a significant raise and moving to an area where the cost of living is pretty much the same as it is where I live now.
I negotiated a travel package to pay for all relocation expenses.

So less hours, less stress, better work/life balance, more pay and a new boss that has my back. The job title is no big deal. I cant spend a title in the grocery store and it gives me the opportunity to move up to that level again and get yet another increase.

That's going to help significantly in making my way to early retirement without pulling the switch too early.

 

[HI Bill]

If your plan is ER, then think of yourself as a mercenary when it comes to work. Go for the highest salary you can obtain at a job you can stand, and with the ethics you are okay with. With your debt and age, and the pay cut you are contemplating, you'll take years to recover to your current salary, if you ever do. I've fought for every raise/promotion offered to me, a settlement that some of my coworkers received that I didn't until I asked about it, and took on management responsibilities to gain a higher salary. In return, my salary is now 274% of what it was just 18 years ago, and I can FIRE any time I want. Tough it out, just find something to do to make the days more tolerable!

 

[YVRRocketSurgery]

There's consideration on where you are in terms of your overall plan.

My current role is kind of driving my bonkers but the total compensation is more than enough to meet my savings and spending requirements.

I've hit my base numbers and am about 4 years away from hitting my stretch numbers. At this point, I would consider taking a pay to have bit of an easier ride for these final 4 years with the net result of slightly smaller numbers. But the situation would have to be completely right to avoid the grass isn't greener regret. Otherwise, I feel I'd rather just tough it out or have megacorp push me since they normally offer a nice separation package.

 

[dvalley]

I got rid of my toxic 24/7 on-call job for a $25k paycut. I couldn't be any happier. The work life balance and my happiness have improved that I wouldn't trade for any amount of money. The interesting part of it is while on paper I took a $25k paycut but after doing the 2018 taxes the difference was $5k in my case. The reason being I maxed out my 401k and HSA with the new job and my tax bracket dropped. For me, it worked out both financially and for an improved quality of life.

 

[Klubbie]

Thanks for all the feedback. Sorry it has taken so long to respond. Shortly after I posted this my daughter got sick (nothing big, just one of this 18 month old colds that can throw a house in turmoil) and then my wife and I followed suit and I just have had a hard time finding decent enough time to sit down and reply.

A couple of themes I wanted to reply to in the thread and respond to and include an update.

Did we buy too much house?
Obviously this is subjective, but in my opinion we did not. We certainly could have put more down payment then we did, but we got into a conventional loan at a 4% fixed rate with no mortgage insurance. Our PITI is roughly 14% of our gross take home pay and around 20% of our net take home pay. In my opinion it is not an issue of having too much house.

More generally speaking, the question of how a paycut would impact the household was raised. We have somewhat of a buffer in discretionary spending that we could cut back more if needed. A 10 to 20% paycut in base salary would be tight but likely doable.


Student Loan
Our bonus pays out in March and I took most of it to pay off a chunk of the loan. It's down to about $65,500 right now. I am hoping to make some extra payments over the course of this year to reduce it even more.

Will I make this kind of money again?
Several people raised the question of whether or not I could expect to make this kind of money again in the future if I took a paycut to go elsewhere. Honestly, I don't know. But I am willing to bet on myself to be able to make the kind of money I make now at some point in the future. Even if I never quite reach that level it would not be the end of the world.

One of my bigger concerns in my current role is that I work for a financial institution that could be directly impacted by the rollback in regulation. And my job is very closely (if not directly) tied to said regulation. So basically if Dodd-Frank goes away, my job could be in jeopardy. Even taking the potential change in the regulatory environment out of it, I just would prefer to be in a different type of role then a cost center/regulatory driven role.

Other Developments/Considerations
I initially wrote this post when I was hoping to get two job offers. One of them was with another megacorp where the company had strung me along for months. They had initially contacted me before Thanksgiving about making an offer for a position I had interviewed for, and the offer never came because their internal bureaucracy was never able to get the offer approved, and then they had an internal re-org and there was no longer a position for me. I also had been speaking to another company about a position that would have put me in position to do some consulting work in the data and analytics/big data space with a start up. I was excited about that potential opportunity, but it would have been a paycut. It never panned out, they went in another direction. I was disappointed, but I made it to the final round of interviews and it was between me and one other. Sometimes it doesn't work out.

Since then I have had a couple internal interviews at my current company that may pan out (I still contend I would prefer not to stay with my current organization but I also am trying to keep my options open about a new role). I also have one role that I am interviewing for with another organization to do the same job I am doing now. I will only take that position if the compensation aligns. It makes no sense to me to go do the same job elsewhere for less money. The one caveat being that I'm not sure the new employer would buy out my 30k of RSU. But I could probably be convinced with a big enough increase in base salary since that's guaranteed money.

The last thing, from a development standpoint I am trying to consider is that my current manager has indicated that my current employer would be willing to pay for some professional certification. Even though that would likely keep me bound to the company for longer, that has me considering sticking around another 2 years to pay off my loan, and leveraging additional training in the process. I am contemplating getting some Big Data certifications and/or coding training (SAS, R, Python) as a way to gain some credibility in that field from a technical standpoint. I have some experience that would translate well enough, but my technical skills aren't quite where they need to be.

The "Corporate Mercenary" concept
A couple folks mentioned the whole concept of being a corporate mercenary if my goal is to retire early. I would like to retire at 55. Or at the very least be positioned so that my wife and I can cut back to part time work. That is probably the more realistic/likely scenario.

She is going back to school to be a nurse pracitioner, which is nice because her career field gives us a little job security and flexibility if something would happen to my me in my career (downsizing, etc).

More generally speaking we have about $285k in tax deferred accounts (401k's, Roth, HSA, and her lump sum pension).

3-4 months of cash in an emergency fund, and almost about 2.5K (in addition to emergency fund) invested in taxable since we haven't used all of our taxable space.

We will see what happens with some of the roles I am interviewing for. I am kind of reaching the point where it almost makes sense to stay put to pay off my loan. Tomorrow is May 1, which means this year is almost half over. Our bonuses pay out in March, but they are decided in January. Basically, if I can't find a new position by end of the year I am just going to stick it out OMY and then focus on finding something different. By the time my student loan is paid off (2020) my daughter's daycare expense will be roughly $300 a month less. Or potentially gone if my in-laws retire. They have said they plan to move by us when they retire and have already offered childcare. That combined with paying off the student loan frees up almost $2500 a month for us.

So the TL, DR version is I am still looking for a job and considering taking less for the right opportunity. Those have encouraged me with their stories, but I also see the other side. The closer we get to 2019, the more I am focusing on "OMY" at my current employer to be debt free (except for mortgage).

 

[MarieIG]

Just found the update on this thread which I remember.

I see some of the student loan has been paid down since the initial post, which is great, and that you are looking to improve skills - also great.

House debt seems reasonable.

I still would like to see that student loan debt off your back. Less expenses leave more room for options.

When you wife gets employment as a nurse practitioner, presumably, your household income will skyrocket. To the extent more student debt is incurred for that, she should be able to easily absorb it. Her higher income at the point, will give you yet more options vis-à-vis your employment choices.

Good luck.