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.
Quite obviously, 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 very 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 any potential savings.
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."
A lower income also leads to less pension accrual from your employer (if they do it at all, of course). This is often percentage-based. So, if you work less, they pay less towards 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 compensate for any shortfalls.
Although a lower income has disadvantages, there are also potential benefits. You may be eligible for higher allowances, such as healthcare and rent allowances, because 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.
Brief insight: "With a lower income, Mark receives an extra €50 healthcare allowance per month. This partly covers the reduction in his holiday allowance."
Holiday allowance is calculated based on your salary. If you work less, your holiday allowance will also be lower. This means you may have less to spend during your holidays. To compensate for this, you need to save extra.
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.
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. Create a detailed budget, look for ways to optimise your pension, and check your eligibility for allowances to minimise the impact on your financial situation.