The financial consequences of working less, what is the solution?

Working less can be an attractive idea, especially if you want to spend more time with your family, hobbies, or personal projects. But before you make this decision, it is important to fully understand the financial consequences. In this article, we discuss the impact of working less on your income, pension, allowances, and provide practical tips to be financially prepared.

What does working less mean for your salary?

Very obvious, but working less means a lower salary, which directly affects your monthly income. This may mean that you have to review your expenses and adjust to your new financial situation. In some cases, you will not lose much, for example, if you are in the highest tax bracket.

A thorough analysis of your budget will help you gain insight into your fixed costs and potential savings.

A few practical tips to start:

• Draw up a detailed budget: For example, by splitting fixed costs, variable expenses, and savings goals.
• Use automatic savings plans: Have an amount transferred monthly to your savings account. This prevents you from spending the money.
• Renegotiate fixed costs: Consider your energy supplier, insurance, or subscriptions. Even small savings count.

Example: "Anna works one day less per week and compensates for this by downsizing her subscriptions. She saves €100 per month, which partially offsets her lower salary."

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What is the influence on my pension?

A lower income also leads to less pension accrual from your employer (if they do it at all, of course). This is often regulated proportionally, so if you work less, they contribute less to your pension. This can have consequences for your long-term financial stability. It is important to understand how working less affects your pension and what measures you can take to make up for any shortfalls.

Practical Tips:

• Consider making extra contributions to your pension to compensate for the difference. This can be in the third pillar, for example with us, or through other schemes. 
• Discuss with a financial advisor what is useful and suits your life. This sometimes costs a little, but then you have a good picture. 

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And how do allowances influence this?

Although a lower income has disadvantages, there are also possible benefits. You may be eligible for higher allowances, such as healthcare and rent allowances, as these are based on your income. In many cases, this will not apply to people with a full-time job. But for students, for example, it can be beneficial. 

Practical Tips:

• Check allowances: Use online tools such as the allowance checker from the Tax Authorities (Belastingdienst) to see what you are entitled to.
• Apply for allowances on time: Do not miss out on benefits by missing deadlines.

Brief insight: "With a lower income, Mark receives €50 extra healthcare allowance per month. This partly covers the reduction in his holiday pay."

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Holiday Pay: What You Can Expect

Holiday pay is calculated based on your salary. If you work less, your holiday pay will also be lower. This means you may have less to spend during your holidays. To compensate for this, you need to save extra. 

Practical Tips:

• Plan your holidays well in advance and look for affordable options.
• Put aside a portion of your monthly income for holidays, so you can still enjoy them without financial stress.

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Cost Savings: Advantages of Working Less

A positive aspect of working less is that you can save on certain costs. Think of lower expenses for commuting and childcare. These savings can help to mitigate the impact of your lower salary.

Practical Tips:

• Make use of public transport to reduce travel costs.
• Consider alternatives for childcare, such as flexible working hours or working from home.

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Working less has both financial advantages and disadvantages. By preparing well and making smart financial choices, you can make the transition smooth and enjoy the extra free time. Draw up a detailed budget, look for ways to optimise your pension, and check your eligibility for allowances to minimise the impact on your financial situation.

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