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Changing jobs used to be simple: find a new employer, negotiate a higher salary, and move on. Today, career decisions look much different.
Some people are finding themselves deep into their careers, realizing they want a different life and are now having the courage to go after it! Whether it’s leaving their high-paying job for a better work-life balance, making a career change, taking a few months off to recharge, caring for family, or furthering their education, they are taking the risk of earning less to pursue a life they want. Though all of their reasons are different, one question remains the same: can their finances support the life they want to build? If this is starting to sound like you, we wanted to provide you with a few financial considerations that can help you make the transition with confidence.
The Job Market Has Changed
Recent labor data shows that overall job-switching and quitting are down; however, a majority of those who are leaving their jobs are changing their careers entirely, not just their company. USA Today found 64% of workers from 2022-2024 who switched jobs also changed careers. Their motivation? 67% stated they want to work remotely. 52% wanted a better work-life balance. 48% seek a more meaningful and fulfilling career.
Unfortunately, wage growth has slowed compared to the rapid increases seen a few years ago. That means changing jobs no longer guarantees a significant raise. In many cases, people are willingly accepting similar or even lower pay in exchange for greater flexibility, improved work-life balance, or more meaningful work.
Instead of asking, "Will I make more money?" Many professionals are asking, "Will this job improve my life?"
What's Driving the Change?
Before evaluating compensation or benefits, identify what’s most important to you.
Maybe you're hoping to:
Once you can pinpoint your top priorities, it will help determine what financial trade-offs you’re willing to make.
Build Your Budget Before You Make the Move
Whether you're taking time off or accepting a lower-paying position, review your current living expenses to create a target compensation plan that you will be planning for.
Start by reviewing all of your fixed monthly expenses like your bills, insurance premiums, childcare expenses, and debt payments. Take some time to really go over your discretionary budget like groceries, shopping, and dining.
Once you have an idea of your expenses, review all of your current savings. Are you saving to investment accounts? 529 plans? Keep track of all of this!
This exercise helps answer one of the most important questions: can this new income support the life I want? If the answer is yes, you'll move forward with confidence instead of uncertainty.
Now let’s see an example of this:
Natalie is job searching and wants to know what salary she should target. Early in her search, she realizes the role she actually wants may come with a pay cut, so before she rules anything out, she needs to know her real number.
Here's where Natalie and Dan stand today:
Total expenses ($226,500) + savings ($96,000)= $322,500
Natalie currently makes $250,000 and Dan makes $180,000 for a combined household income of $430,000. For this example, we'll assume a flat 25% goes to taxes, or $107,500. Their $96,000 in total savings represents a savings rate of 22%.
Now Natalie wants to know: what's the lowest salary she can take and still make this work?
This is where we start pulling levers on various savings rates, expenses, or both, and stress-testing what each one costs long-term.
First, Dan and Natalie analyzed their annual budget and tell us something useful: $16,500 of their current spending isn't essential. It's the cushion, not the need. So now their real expense floor is $210,000, not $226,500. Next, we’re going to assume they can afford a lower savings rate of 18%.
Here’s the math: If 25% goes to taxes and 18% goes to savings, 57% is left for spending.
$210,000 ÷ 57% = $368,421; that's the new household income they need.
*In this example, we are going to assume Natalie and Dan have adequate cash reserves.
If Dan makes $180,000 and their total income need is $368,421, Natalie’s new target salary is $188,421. This is over a $60,000 reduction in compensation, or about 25% of her current salary!
The real question is whether this move still supports their other financial goals like retirement, college funding, and the life they're building today. Remember, at the start of this example we shared that Natalie and Dan started with a savings rate of 22% on $430,000. Now we’re assuming an 18% savings rate on $368,000, a total reduction of nearly $30,000/year in savings. Our job as planners is to see if they can afford this type of reduction in their long-term plans.
For some clients, a decade of aggressive saving means they can absorb this kind of cut without missing a beat. For others, a windfall like an inheritance or a large equity event has already changed the math.
Salary Is Only Part of the Equation
When comparing opportunities, it’s important to compare the entire compensation package. Ask yourself:
A job paying less may actually leave you in a similar or even better financial position after considering benefits and lifestyle changes.
A Lower-Income Year Can Create Planning Opportunities
If your income decreases because of a career transition or time away from work, it may also create unique tax planning opportunities.
Depending on your situation, it could be an ideal time to:
Not every lower-income year is a setback. Sometimes it's an opportunity to strengthen your long-term financial plan.
Remember: Your Career Isn't Permanent
One of the biggest fears people have is making the "wrong" decision. But careers aren't linear.
The role you accept today may provide new skills, stronger relationships, better work-life balance, or opportunities that lead to greater earning potential later. Your career is one of the biggest drivers of your financial life, but it doesn't have to be driven by salary alone.
Whether you're considering a lower-paying position, taking a career break, or pursuing a new opportunity, thoughtful planning can help you understand the financial impact before you make the leap. At the end of the day, financial planning isn't just about helping you build wealth. It's about giving you the confidence and flexibility to make decisions that support the life you want to live.
Sometimes, the best investment you can make isn't in the stock market. It's in creating the freedom to choose how you spend your time each and every day.
Ready to take the first step?
If you're considering a new opportunity, taking time away from work, or wondering whether you can afford a lower-paying role, you don't have to figure it out on your own. We'd love to help.
Schedule a complimentary consultation with us to discuss your goals and see how thoughtful financial planning can give you the confidence to make your next career move.
Book your complimentary consultation and take the first step toward making a career decision that's right for both your life and your finances.
Fyooz Financial Planning is a fee-only, fiduciary financial planner based in Minneapolis, MN and Portland, OR, dedicated to helping couples achieve their financial goals. Whether you're planning for retirement, managing investments, or looking for tax-efficient strategies, our experienced team provides personalized guidance.
Disclaimer: This article is for informational purposes only and is not a recommendation of Fyooz Financial Planning, Natalie Slagle CFP®, or Daniel Slagle CFP®. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. Therefore, it should not be assumed that future performance of any specific security, investment product or investment strategy referenced in the article, either directly or indirectly, will be profitable or equal to the corresponding indicated performance level(s). No portion of the article shall be construed as a solicitation to buy or sell any specific security or investment product or to engage in any particular investment or financial planning strategy. Any reference to a market index is included for illustrative purposes only, as it is not possible to directly invest in an index. Indices are unmanaged, hypothetical vehicles that serve as market indicators and do not account for the deduction of management fees or transaction costs generally associated with investable products, which otherwise have the effect of reducing the performance of an actual investment portfolio.
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