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In basic economics, we all learned about the law of supply and demand.  We have seen how powerful this can be over the past several years in the real estate market as supply in many cities has grown, and demand has dwindled.  Consequently, you may be seeing some of the greatest real estate deals we have seen in decades around the country. The same may be true about the labor market. With unemployment still higher than normal and a limited number of better paying jobs, one of the questions we often hear is should I accept a job offer for a lower salary?

This can be an extremely challenging question to answer, and why you need to think about your household like a business when it comes to your finances.  Since most people tend to make very emotional choices around their personal finances, having a Private CFO® by your side could make all the difference in making the best choice to grow the wealth of your family.

The obvious piece of the puzzle is that without having consistent revenue, you will tap into savings or retirement money prematurely because there simply isn’t enough revenue to cover expenses.  You may have a severance for a period of time such as a year or may be collecting unemployment, but these revenue sources won’t continue to carry your expenses over the long haul.  That can only be replaced by consistent income from employment.

The first piece I would consider is to judge every opportunity not by salary, but by something called the Total Economic Package.  This formula will allow you to look at the total dollars that would come in from an offer vs. just the salary. Remember, that a total dollar offer should consider items such as how much of the cost of benefits does your employer pay, what kind of match may go into your retirement plan, and things like stock options or restricted stock unites. Since so many wage earners can only focus on how salary affects their household, it is very important compare future job offers on the total economic package.

The second piece to consider is your value in the market place as the length of time you are unemployed increases. I believe that while you may have tremendous skills and experience in your resume, being out of work for over a year can really hurt you if the goal is to hold out for a higher salary. Remember that you can always take a job for lower pay and set your expectations with your employer about what both of you need to bring to the table to increase your income.  You can also continue to look while you are currently employed.

The last piece of this is to set expectations for yourself, especially if you were a six figure salaried wage earners. As both large and small corporations tighten their belt, it is likely you will take a pay cut below where your wages used to be. Only you can determine what truly is a low ball offer, but with the law of supply and demand I would be a bigger fan of getting revenue on your books even if at a current discount from yesterday’s price.  If you were successful in growing your income in the past, times will be good again and you can do it in the future.

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Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc.

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oXYGen Financial, Inc. co-CEO Ted Jenkin  is one of the foremost knowledgeable professionals in giving financial advice to the X and Y Generation.

TED JENKIN IS SECURITIES LICENSED THROUGH INVESTACORP, INC. A REGISTERED BROKER/DEALER MEMBER FINRA, SIPC.  ADVISORY SERVICES OFFERED THROUGH INVESTACORP ADVISORY SERVICES, INC. A SEC REGISTERED INVESTMENT ADVISORY FIRM. Linked sites are strictly provided as a courtesy. Investacorp, Inc., and its affiliates, do not guarantee, approve nor endorse the information or products available at these sites nor do links indicate any association with or endorsement of the linked sites by Investacorp, Inc. and its affiliates.