Balancing Work-life: How to Prepare to Live on a Lower Income

The last two years’ events have caused many to reassess their life priorities.

For many, this meant taking a hard look at their employment situation – whether they were happy in the role they had and if it allowed them to have enough of a life outside of work – leading to a movement known as ‘The Great Resignation’.

So, if you’re considering – or have already decided – to change jobs in favour of a better work-life balance, even though you’ll need to take a pay cut. As a result, here are six things you should do before taking the plunge.

Discuss the change with those around you.

Likely, your decision to take a pay cut to gain a better work-life balance will affect more people than just yourself.

So, discuss with your partner, family, or anyone else who may be affected by your earning less to ensure everyone is on the same page and comfortable with the decision – mainly if this means their life will change.

Prioritise meeting imminent monetary goals first.

It may be tempting to immediately make the jump once you’ve decided you’re going to change jobs, but you ought to think about the bigger financial picture first.

For example, do you have high-interest debt you need to pay off? If so, it’s probably better to deal with this first, as quickly growing debt isn’t something you’ll want to take with you into your new life on a lower income.

Moreover, consider whether you have long term financial goals in mind – such as buying a house or starting a family – that a pay cut would set back. Would it be better to intensely save for a year at your higher paying job to bring you closer to your goals before switching to a lower-income life?

Likewise, this might be the time to maximise your (non-taxable) contributions to a retirement account since a large amount contributed earlier can help offset the effect of a lower-income long-term.

Take stock of your outgoings and figure out where you can cut corners.

Right now, it’s likely that your lifestyle – and the amount you spend each month – reflects your means, which are soon to be depleted.

So, you should look at your outgoings each month to figure out where you can cut corners and the expenses you should avoid in your new lower-income life.

For many people, the most significant way to reduce their monthly expenses is related to food:

• Shopping at a cheaper supermarket.
• Eating out less.
• Ordering fewer takeaways.
• Packing more lunches and buying in bulk – these habits can save hundreds each month.

Otherwise, barely used subscriptions, excessive beauty and grooming treatments and products, cafe-bought coffee and even cable TV are all things that could chip from your monthly expenses.

Trial lower-income living while still in your current job.

The best way to check if you’re truly ready to live on a lower salary is to test it out: create a budget based on your new income – ideally, with savings and retirement contributions included – to see if you can manage to live your life as you want to, without dipping into the reserve offered by your current income.

Moreover, this gives you a chance to save a little extra while you still have your current job, providing more protection for yourself financially as you move to a life of lower means.

Downsize.

If you realise – after taking stock of your expenses and completing a trial month of living with your new income – that your cost of living is just too high to be supported by the salary offered by your new position, it might be worth downsizing.

For most people, their most significant living expense is the cost of renting or owning a house, and moving to a smaller place is an easy – and permanent – way to significantly reduce your monthly outgoings.

You’ll save on the lowered utility bills and council tax costs that come with living in a smaller place.

Consider building another source of income.

One of the reasons you may be reprioritising a work-life balance is to have more time to work on a passion project or pursue a side hustle you’ve been interested in. If you can monetise it, this can be a great way to offset the reduction of your primary income. 

Though it may sound counterproductive – since you’re quitting your current job to regain work-life balance – you often choose how much you work with side hustles. It’s usually something you enjoy, meaning it doesn’t quite fit into the traditional category of ‘work’.