How much money should you make?
First and foremost, money isn’t everything. And, if it’s not your primary driver, that’s okay. You job search should be about finding an opportunity that’s a good fit and that aligns to your personal values and goals.
However, if you’re like me, you want to be paid fairly compared to your peers. And, you want to save for your future. There’s a difference between wanting to make a lot of money, and wanting to not have to worry about money every day. Don’t you agree?
So, let’s think about a decision that comes up very often during our job search. And, before I get too far – let me say this. I’m going to use some simple math that does not account for things like inflation. It’s not going to be as accurate as an estimate that you could make using Excel or another tool. But, I think this simple model will be helpful.
Okay, back to the common decision. We’re searching for a job that’s in a new field. We receive a job offer and are faced with the decision of whether or not to accept less money than we currently make.
Less money! Oh no! That’s typically not our goal when we start a job search. But, when we switch fields, it’s not uncommon to find ourselves with a lower paying job offer.
So, now what?
Well, first, let’s do some simple math. Here’s an example.
Let’s say that Jerry makes $70K today at Acme Company. Jerry is 30 years old. He plans to work until he’s 65.
Jerry landed a job offer at Baker Company that pays $60K. He plans to stay at the job for 5 years before looking for a better paying job. He wants to get some experience first. Jerry takes the job. In 5 years, Jerry applies for a new job and gets an offer at Carter Company that is a big raise — $10K more than what he is making at Baker Company. It’s for $70K.
So, for the 5 years that Jerry spent at Baker Company, he made $10K less per year than he made at Acme Company. In total, it was $50K less over the 5 years. Then, he went to Carter Company and began to make what he previously made at Acme Company.
Current Salary New Salary 5 Years
$70K –> $60K –> $70K
$50K less over 5 years
Now, let’s look at another example. Let’s say that Jerry makes $70K today at Acme Company. Jerry is 30 years old. He plans to work until he’s 65.
Jerry landed a job offer at Davidson Company that pays $80K. He plans to stay at the job for 5 years before looking for a better paying job. He wants to get some experience first. Jerry takes the job. In 5 years, Jerry applies for a new job and gets an offer at Edison Company that is a big raise $10K more than what is making at Davidson Company. It’s for $90K.
So, for the 5 years that Jerry spent at Davidson Company, he made $10K more per year than he made at Acme Company. In total, it was $50K more over the 5 years. Then, he went to Edison Company and began to make $20K more than he previously made at Acme Company.
Current Salary New Salary 5 Years
$70K –> $80K –> $90K
$50K more over 5 years
Now, let’s compare the two scenarios. In the first scenario, Jerry is making $70K at the end of 5 years. In the second scenario, Jerry is making $90K at the end of 5 years.
So, instead of a small investment, of time, Jerry has actually forfeited $20K per year beginning in year 5. Considering that future salaries are often based on past salaries, this decision could easily follow Jerry around for the lifetime of his career.
If his salary remained flat from age 35 to 65, the projected difference would be $20K per year, or $600K over the next 30 years. Wow, that’s a big difference for what seems like a small decision!
So, what should Jerry do? Should he take the first offer with Baker Company? Or, should he hold out for the job at Davidson Company?
This is where things get tough. The thing is, we don’t know anything more about Jerry’s situation here than the numbers. Here are some things we might want to keep in mind.
How much has Jerry saved for his retirement already? What’s his overall retirement savings goal and will he meet that goal with either job?
How old is Jerry? In this scenario, Jerry is 30. But, if he were younger or older, we might adjust our choices.
Is Jerry over the moon happy about the job that pays less? Is it everything he’s ever wanted, but has never had? Or, is he lukewarm about the entire situation? If Jerry plans to take a big pay cut, he should definitely like the job.
If Jerry is over the moon about the job, does it really require a pay cut? Very often, we assume that moving to a new industry requires us to start over completely from a salary perspective. Sometimes, that’s true. But, sometimes, it’s not. It’s important to fully understand Jerry’s worth in a new role before making this choice.
In summary, money isn’t everything. But, it is something. It’s an important factor to consider in our job choices. The decision we make today will have a long lasting impact on our futures.
Angela Copeland is Founder and Coach for Copeland Coaching, a great way to jump start your job search. Follow her on Twitter @CopelandCoach for tips on finding the perfect job for you.