ETI’s advice on the times you should consider taking a pay cut

In a perfect world, your salary would move steadily upward over your years in the workforce. The reality is somewhat different. Most people experience dramatic increases in earnings early on in their careers, research by Payscale.com has found, but the typical man’s salary levels off around age 45. While salary trends vary somewhat depending on career, the general trend is clear: You’re probably not going to see big pay hikes after you hit middle age.

Given that your salary isn’t going to budge much as you get older, it seems logical to spend the first couple decades of your career focused on increasing your salary while there’s still time to do so. That onward-and-upward attitude certainly makes sense on paper, but real life tends to be a little more complicated.

At some point in your career, you may be faced with a touch choice: Stick with the safe and familiar path or take a risk – and a pay cut – because it feels like the right thing to do. Especially if you’re relatively young and have few responsibilities, settling for a lower salary may pay off big down the road, especially if it means a more fulfilling job or greater opportunities.

“Sometimes it’s good professionally to make less money,” Neal Frankle, a certified financial planner and author of Why Smart People Lose a Fortune, told Money. “Strategically, the younger you are, the more it could make sense to make less money.”

Here are five situations when taking a salary hit can actually be a wise career move.

When you want to switch careers

Once you decide that it’s finally time to pursue your dream of becoming a chef, graphic designer, or personal trainer, you may have to settle for earning a little less, since you’ll have to start again at the bottom of the career ladder.

“Changing careers means past experience will not be considered with equal value to someone who has actually done the job,” career coach Bruce Hurwitz told The Cheat Sheet earlier this year.

“If you do [change careers], you’re going to have to take a pay cut because you typically aren’t worth as much in your new career path as you were in your old career,” Brendan Courtney, senior vice president for recruiter The Mergis Group in Fort Lauderdale, told Monster.com.

When you need more balance in your life

Often, a generous salary comes at the expense of your work-life balance. If the long hours at the office have become unbearable, it may be time to look for a job that offers more free time, even if it translates to a smaller paycheck.

You wouldn’t be alone if you decide you want to see more of your friends and less of your coworkers. A 2013 study by Accenture found that employees rated a healthy work-life balance as the number one sign of career success, above money and professional recognition. Even some CEOs are turning their back on the corner office to focus on other priorities.

“I decided the only way to balance was by stepping back from my job,” wrote Max Schireson, the former CEO of MongoDB, an Internet database company, in a blog post explaining why he was stepping down from his leadership role. “I recognize that … I may be disqualifying myself from some future CEO role. Will that cost me tens of millions of dollars someday? Maybe. Life is about choices.”

When you’re ready to strike out on your own

If you’re ready to be your own boss, you also need to be ready to work for less. Entrepreneurs almost always take a pay cut during the start-up phase of their business. Some live off savings, essentially working for free. Others pay themselves a salary that’s just enough to get by. It can be rough going at first, especially if you’re used to the comforts of a six-figure income, but if your business succeeds, the lean years will be worth it.

“[E]ntrepreneurs have to take a leap of faith at some point. While it may seem daunting, the key is to make sure you’ve got a parachute,” Richard Branson wrote in an article for Entrepreneur. “You need to work out as many of the bugs in your plan as you can ahead of time – while keeping an eye on the clock. If you take too long, the circumstances might change, altering markets so that you could miss your opening.”

When you have no better options

You’ve been out of work for months and your savings are dwindling. A much-needed job offer finally arrives, but the salary is less than what you were making before. Should you settle for less or hold out for something better?

Taking the job may be the best move if money is tight, especially since the chances of securing an offer shrink the longer your unemployment lasts, according to research from the Brookings Institution. But if you do settle for a lower salary, it could mean a lifetime of reduced earnings, so it’s not a decision to be made lightly.

“It’s a very tricky problem,” Gary Burtless, a labor economist with the Brookings Institution, told MarketWatch. “It may pay you better to keep looking for a job than to take a job that is below your qualifications.”

But if the choice is between poverty and a less-than-perfect position, you may need to settle. “Obviously, if you are on the brink of losing your car, house, or apartment, or not being able to pay your bills, then the decision is really already made for you – take the survival job while still searching for one in your career field,” wrote career expert Randall S. Hansen in a post on The Career Doctor blog.

When you can’t imagine doing anything else

Not to get too touchy-feely, but sometimes, you just need to follow your heart. While quitting a good job to follow some half-baked whim isn’t so smart, there are cases where you just need to go with your gut and pursue a dream that will make you truly happy, even when that means taking a financial hit.

“I quit my job as a corporate executive, making $200,000 per year, to work as a Buddhist Minister for less than $35,000 per year,” Janet Taylor, the director of the Temple Buddhist Center, told CNBC. Taylor had been a practicing Buddhist for years, and eventually realized that helping others achieve peace was her true calling. “The Buddhist practices of meditation and mindfulness ended up making me a better consultant, but by then my heart was no longer in the work. I followed my passion into the ministry to be able to serve others every day,” she explained.