Becoming Comfortable with a 45% Pay Cut
In the past year, I exited banking and my new role (after bonus + RSUs) is 55% what I would have made if I stayed. I knew this when I made the decision, and wanted a different lifestyle (less hours, out of NYC, less stress) so the decision made sense - and still does. Despite the job going well, exploring my hobbies more, dating more, being less stressed and working less, I am conflicted about losing so much potential earnings. All the extra money I would have made if I stayed in banking would have just been invested, and without a family or expensive hobbies, I never really benefited from it... So no decrease in QoL occurred because of the pay cut, but I still feel very uneasy and have a bad gut feeling. During banking, internally I took pride in (and had some extra confidence) working for such a cut throat, high velocity, and high paying industry, which likely explains part of it.
For those which left banking/PE for something like CF/CD/lower paying roles for lifestyle reasons, how did you get comfortable for the pay cut? Hoping that this bad gut feeling lessens with time.
Ah, the classic conundrum of trading dollars for sanity, eh? It's like choosing between a banana and a bunch of bananas, but the bigger bunch is up a really tall, thorny tree. Here's the scoop based on the most helpful WSO content:
Reflect on Priorities: It's like when you're swinging from tree to tree; you've got to know why you're reaching for the next branch. If you left banking for a lifestyle change, remind yourself of the reasons. Less stress, more personal time, and a healthier work-life balance are golden bananas that many folks in high finance would love to grab.
Adjustment Period: Just like a monkey needs time to find the best trees for food, you might need time to adjust to your new financial situation. It's normal to feel uneasy after a big change, but give it time. You might find that the peace of mind and extra time for hobbies and dating are worth more than the extra cash.
Value Non-Monetary Benefits: Remember, not all treasures shine. The value of your new lifestyle might not be immediately apparent because it's not reflected in your bank account. But over time, the benefits of improved mental health and personal relationships can outweigh the monetary difference.
Long-Term Perspective: Think about where you want to be in the future. Sometimes, taking a pay cut can lead to opportunities that align better with your long-term goals. Plus, a happier life outside of work can lead to better performance at work, which could lead to career advancements down the line.
Financial Planning: If the numbers are really eating at you, sit down with your banana stash and make a plan. Budgeting and investing wisely can help you feel more secure about your financial future, even with a lower income.
Community Support: Talk to others who've made a similar leap. They can be like your troop in the jungle, offering support and sharing their experiences on how they've navigated the change.
Remember, it's not just about the bananas you're collecting now; it's also about enjoying the jungle you're swinging through. Give it some time, and that gut feeling might just evolve into a sense of pride for having the courage to prioritize your well-being over your wallet.
Sources: Regrets After Switching From IB to PE?, 40% paycut, Anyone Regret Quitting their Investment Banking Job?, Why do IB directors change shops?, Is it worth leaving banking if I have it pretty good already
Just marry well, as long as your spouse is like you (mediocre job but saves well), you’ll be fine.
Remember, without a high paying job you can’t afford to marry a money pit, no matter how hot.
For me I think what helped is just remembering the stark contrast between WLB. Going form 60-80 hrs a week to 20-30 hrs at my first role outside of banking was a crazy contrast (for the better). I remember feeling just a huge weight being lifted off of my shoulders. I get it though, you do lose out on earning potential, but as you progress in your career your earnings will grow and IMO I think you'll feel it less. When I left I probably took at 30-40% paycut, but I made it up in a couple of years and now am pretty satisfied with my comp. Am I making $500k+? No, but for my lifestyle and work I'm happy where I'm at now and know that the $200-$300kish range for directors and up is totally fine with me.
Also, when I left banking I was still young (unmarried and no kids). Assuming you'd like a family someday, as you get further towards that goal you realize how much time / energy having a family takes. Sure you could be an absent husband / dad and still do banking and yes, kids / being married can sometimes suck, but for me I realized that time with them is precious and there's not really a price tag on that. I can't really imagine me having to work into the night everyday without spending time with my son before he sleeps.
Bump
Had a similar path to you -- did IB then PE and took a corp dev job in the middle of my second year as an ASO. Took a similarly sized pay cut as well.
Ultimately, I realized my career in PE was going to be short. I didn't want the live that life that my VPs had (nor Partners), despite the massive increase in comp. I could go into specifics if I wanted, but mainly, knowing their weekends were still blown up and they were struggling to make it home before the nanny had to leave every day didn't sound appealing to me. I was pretty stressed as an ASO anyways, without a family / kid and already had a relationship fall through due to the job, let alone the hard to keep up friendships.
My base comp now is more than enough to cover my expenses; I live in Chicago so the COL is decently better than NY or SF, so that helps as well. I also have more time to volunteer (coach middle school basketball in the winter / spring) and do weeknight things (dates, rec league sports, etc.) that really make me enjoy the week. I'm not saying I jump out of bed every Monday to get to work, but I do genuinely like my job and having things to do after work (even if just hitting the gym) breaks up the week and gives a variety of ways to find fulfillment.
Bigger picture, you can fill your extra time with things that bring you happiness rather than money. That might sound a bit too rosy, but at a certain point I was fine with my comp and was happy to make that tradeoff. You mentioned you didn't want the lifestyle in banking -- do you want to switch back? I get the second thoughts, but you can't look back at the comp you would have made if you stayed if you also don't think you could have lasted or wanted to last. I get why the conflict comes from, but it's a bit like having your cake and eating it too -- if you didn't like the job enough to stay then, would you like it *more* now? Probably not.
For a lot of people, the idea of huge comp is enough to stay in the job (and that is fine!), but if you already hit the point where it wasn't enough, do you think you'd hit the point when you get promoted (and likely have more out of work commitments to deal with)? The stress level only gets worse. For me, all those factors keep me from second guessing my decision (though every now and then that thought comes up -- it's only natural). I have explored side hustles or other more productive ways to spend my free time (GMAT prep, coaching as mentioned earlier), which in combination with natural progression at my firm prevents the second guessing.
Hope this helps.
Dude. You're by far one of the best posters on here. Love your mentality too. If you do pursue an MBA, I'm sure you'll have a great shot at HSW + M7.
Appreciate it man -- still figuring out if BSchool makes sense for me, but if so, ideally targeting that group!
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