If you'd tell most people that accepting a salary that's less than what they'd hoped for would be beneficial, they would probably look at you in disbelief. Most of us work, in part, to get paid, and the bigger the paycheck, the better.
But there may be circumstances where the salary offer is not what you expected – it's lower. Before you nix the idea of accepting a lower-paying job, take these payoffs into account. While your bank account may not grow as quickly as you'd like it to, you can still be rewarded in other ways.
1. More Respected Job Title
There will hopefully come a time when your manager feels the time is right to promote you to a higher and more meaningful role within the company. But not every company has the budget to up your salary as well.
Accept the offer and gain more respect amongst your co-workers and clients. Show that you're in it to win it, and you have long-term aspirations within the company or in that particular field in general.
Salary.com notes, "It also allows you to negotiate a higher wage after a performance review, and to ask for more money when you start looking for a new job."
Update your LinkedIn profile and the new job title alone can open up new doors with exciting possibilities. So even though you didn't see an instant salary hike, with time, things will fall into place and quite likely into your bank account.
2. Better Benefits
A significant payment isn't always in the form of a direct salary. Benefits provided by an employer can be real money-savers that balance out a lower-than-desired monthly paycheck.
As per The Balance, "A company's benefits could easily outweigh the difference in weekly paychecks. Possibly the company has better health insurance, or offers on-site childcare for free." Salary adds, "Your salary might allow you to wind up breaking even—or even earning more than if you had to pay out-of-pocket for those items yourself."
Heck, they don't call them "benefits" for nothing!
3. Depends Where You Live
A paycheck in a remote town in Nebraska will go a heck of a lot further than it will in Manhattan. Location is a key component as to how much you should be willing to accept and still have a stable and satisfactory quality of life.
Perhaps a company will pay to relocate you to someplace where the cost of living is low. Not only will you gain new experiences and head out on new adventures, but you won't require as much money to have the things you desire. As Salary notes, "Making $80,000 in New York City but paying an exorbitant mortgage or rent could leave you poorer than if you took the same job somewhere else with much more affordable housing costs."
Additionally, if you already live in an area where the cost of living is lower than a major metropolis, don't compare average salaries across the country. As long as you can afford the way of life you're comfortable with, there's no need to squabble over a few extra bucks. Getting more for your money is a payoff in itself.
4. Work Remotely
When it comes to working from home part or all of the time, a reduction in salary will pay off in the forms of less stress and increased productivity. The lower salary will make up for itself in the now gone travel expenses, lack of need for an expensive work wardrobe, more time for sleep, and less interruption.
According to Salary, "Those who have a remote job can potentially save upwards of $11,000 annually on everything from commuting costs, office attire, and even lunches. So factor in those unseen but significant savings when you consider the salary on the table."
Working remotely can help one attain a more balanced way of being. As per The Balance, "Many people are willing to work for less payer if the trade-off is a better work-life balance, lower stress levels, a better schedule, or even a shorter (or no) commute."
Working from home is a dream come true for some and well worth a lower paycheck thanks to the many perks.
Don't give up your dream job, or at least a good one, based on salary alone. Keep these factors in mind when you're going through the hiring process and realize what makes "cents" for the time being.
When you take out a loan for a car, charge something to your credit card, or get a personal line of credit, there is going to be an interest rate that applies to your loan.
A lot of different factors go into what you will be charged, including your own personal credit score. But even those with flawless credit still see a minimum charge that they can't get around. That all goes back to the Federal Funds Rate.
One thing consumers rarely realize is that all of our banks are lending money to each other every night. Banks are legally required to maintain a certain percentage of their deposits in non-interest-bearing accounts at the Federal Reserve to ensure they have enough money to cover any withdrawals that may unexpectedly come up. However, deposits can fluctuate and it's very common for some banks to exceed the requirement on certain days while some fall short. In cases like this, banks actually lend each other money to ensure they meet the minimum balance. It's a bit hard to imagine these multibillion-dollar financial institutions needing to borrow money to tide them over for a bit, but it happens every single night at the Federal Reserve. It's also a nice deal for those with balances above the reserve balance requirement to earn a bit of money with cash that would normally just be sitting there.
The Federal Reserve
The exact interest rate the banks will charge each other is a matter of negotiation between them, but the Federal Open Market Committee (FOMC) (the arm of the Federal Reserve that sets monetary policy) meets eight times a year to set a target rate. They evaluate a multitude of economic indicators including unemployment, inflation, and consumer confidence to decide the best rate to keep the country in business. The weighted average of all interest rates across these interbank loans is the effective federal funds rate.
This rate has a huge impact on the economy overall as well as your personal finances. The federal funds rate is essentially the cheapest money available to a bank and that feeds into all of the other loans they make. Banks will add a slight upcharge to the rate set by the Fed to determine what is the lowest interest that they will announce for their most creditworthy customers, also known as the prime rate. If you have a variable interest rate loan (very common with credit cards and some student loans), it's likely that the interest rate you pay is a set percentage on top of that prime rate that your lender is paying. That's why in times of low interest rates (it was set at 0% during the Great Recession), a lot of borrowers should go for fixed interest rate loans that won't increase. However, if the federal funds rate was relatively high (it went up to 20% in the early 1980's), a variable interest rate loan may be a better decision as you would be charged less interest should the rate drop without the need to refinance.
The federal funds rate also has a major impact on your investment portfolio. The stock market reacts very strongly to any changes in interest rates from the Federal Reserve, as a lower rate makes it cheaper for companies to borrow and reinvest while a higher rate may restrict capital and slow short-term growth. If you have a significant portion of your investments in equities, a small change in the federal funds rate can have a large impact on your net worth.
Whether you're leaving a job involuntarily, departing for something new, or just want to prepare for the unknown, it is smart to understand all your options regarding your 401k.
Frugal gifting often gets a bad reputation. However, this shopping method does not make you cheap — it makes you practical. Frugal gifts often avoid waste and overspending and can be just as meaningful (if not more so) as any other present.
With the National Retail Federation predicting each consumer this holiday season to spend upwards of $1,000 on holiday gifts amidst an economic recession —this year might be the perfect time to reconsider your spending budget. We've formulated the ultimate list of frugal gift-giving ideas to get you started.