Five Things You Can Learn As The Result Of A Pay Cut

Nobody likes to earn less money–ever. But the experience of taking a pay cut can prove a career asset in the long run.

Five Things You Can Learn As The Result Of A Pay Cut
[Photo: Flickr user bark]

Sometimes it’s an economic cycle that forces your hand. Other times it’s an opportunity where the career upsides outweigh the compensation package. Or maybe you’ve just had to move. No matter your reason, accepting a lower salary than the one you’ve earned previously isn’t any fun. But there are actually some upsides to making less, and they can change your perspective on your career and even yourself in ways you might not expect.


Over the years, I’ve had to take pay cuts, go without a paycheck altogether, and still manage my life accordingly. Though it’s really sucked each time that’s happened, those were periods when I’ve learned a few lessons that later proved hugely valuable.

1. You Get To Refocus On What Really Matters

When you take a pay cut, money is no longer the be-all-end-all of your work. You’ve got to budget more carefully, and that means worldly goods can’t be as high priority as they might have been before. You realize money isn’t the root of your happiness.

Instead, you can change your perspective and refocus on the other aspects of your life that don’t require money–like your health, family, and personal relationships. When I took my first pay cut, I really started to find out what was important in my life. It’s amazing how perspective changes.

2. It Helps You Reassess Your Market Value

Most of us are always trying to see how we can earn more money. Once we do, then it becomes how to make even more than that. But when you have to go the other way on the scale, money isn’t the driving force any longer. It finds its place as something necessary to live but not essential for thriving.

For me, taking a lower salary also helped me evaluate my skills and pin down what amount of money I’m truly worth. It caused me to focus on building up a more valuable skill set that people would be willing to pay more for. I was being paid $14.50 an hour at the time. Now, my hourly rate is in the $100s. Had I not taken a cut, I would have never realized what I could become professionally.

3. You Can Recalibrate Your Work-Life Balance

A lower salary may mean a job that no longer requires a commute or one that entails fewer responsibilities. It could even involve flextime so you don’t have to be at a physical job site as often. In return, you earn back the gift of time so you can rebalance your career and personal life.


Suddenly, you have time to socialize, stay in shape, and even return to hobbies (some of which might even earn you some side dough to top up that savings account). You may even find that you can do things that give back, like volunteering in the community, for another enriching experience.

4. You Learn To Do More With Less

When forced to do more with less, many people rise to the occasion. “Resource scarcity” has been linked with creativity, and it makes sense–when you have to stretch every dollar, you’re forced to come up with novel ways to do that. You’ll find new ways of actually using what you’ve got. That won’t just make you more efficient, it will make you more resourceful.

In fact, the last recession may even have popularized a “less is more” mind-set that may never have taken root otherwise–stimulating the sharing economy, inspiring the likes of Uber and Airbnb, as well as sparking wider interest in trading, recycled and homemade goods, and sustainability issues.

5. It Helps You Find Opportunities You’d Otherwise Overlook

Making less money can also incentivize you to take risks and seize opportunities you wouldn’t in different circumstances. You may strike out as an entrepreneur and see if you have what it takes. Or maybe you’ve always dreamed of running your own business but were afraid to do it because the money was always there with your traditional job. Once that salary starts to decrease, it may push you to finally take the leap. Nothing increases ambition like discovering you’ll need to make less.

Taking a pay cut taught me I could live on less than I’d thought–a lot less, in fact. This helped me save up to the point where I had over two years’ runway, even though I had less income overall to put away. I eventually used that runway to launch my first startup, which I ended up selling years later at a great profit. Despite successes since, I still live on a pretty similar budget to the one I got used to back then (even with a kid), which helps me keep looking for new opportunities and knocking on new doors. It’s also allowed me to bootstrap my invoicing startup to profitability.

If you’re considering taking a pay cut, the first step is to assess its impact on your overall budget–especially if your income helps support a family–and weigh your options in terms of what expenses you can reduce. But don’t lose sight of what you might gain. Sometimes it’s the experience of dealing with less that helps you do more.


John Rampton is an entrepreneur, investor, online marketing guru, and startup enthusiast. He is the founder of the online payments company Due. Follow John on Twitter at @johnrampton.

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