Higher Pay Vs. Better Benefits: Which Should You Prioritize?Insights Goal Setting
When interviewing for a job, what are you more curious about, the salary or the benefits package?
While your mind may instantly favor the sticker price, benefits can be a job's make or break factor.
Whether you’re seeking a new job, moving up in the ranks with your current employer, or re-evaluating your benefit selections, this blog contains information that could benefit you. For example, with open enrollment starting soon (fall), now is the time to look at your benefits and make changes to your health coverage, savings opportunities, time off, and more.
We’re going to compare and contrast the differences between the financial and life benefits you can receive from both a higher salary and/or comprehensive benefits.
And spoiler alert, it’s probably more than you think.
- A high salary or a great benefits package aren’t mutually exclusive. Strive for the balance that aligns with your life and values!
- Your total compensation (salary + benefits) has a purpose and impact above and beyond what’s on the surface.
Financial Highlights of Securing Higher Pay
It’s likely no surprise that there are clear financial benefits to earning a higher paycheck. But, a larger salary shouldn’t mean extra cash to burn; let’s take a look at the core highlights of receiving higher pay.
Saving (and Spending) Power
While you might want to purchase a fancy electric car with your raise, there are more advantageous ways to put your money to work.
With more money coming in, you have the freedom to save for your future by maxing out your retirement savings, increasing brokerage account contributions, paying off debt, etc. All of these things put you in a stronger financial position.
After you’ve done those things, you may also be able to spend or save for areas that make your life a little better, like a vacation, designated date nights, meal services, kitchen renovation, etc.
Living within your means, staying away from debt that doesn’t serve you, and being purposeful about where your money goes are all ways to use your extra funds wisely. These things will serve you longer and much more than the sports car you’ve been eyeing but don’t really need!
Pad Your Emergency Fund
Life throws unexpected events at us all. Whether a broken-down vehicle, medical bill from surgery, or a contractor bill from the new roof you needed, these types of expenses are bound to happen.
A benefit of having extra cash at your disposal is your ability to navigate these unexpected expenses relatively unscathed.
For some, a large, unexpected expense can quickly put them into debt. In fact, 57% of Americans can’t afford an unexpected $500 expense.
Living with the fear of spending all your savings on one bill, putting the entire cost on a credit card, or turning to loved ones for help can be incredibly stressful. Having a cushion of expendable funds can save a great deal of strain on your wallet and mental health.
If you’re looking to increase your salary, know the market, understand your skills, and have a record of your wins. And don’t forget to negotiate! With salary transparency on the rise, job seekers have more power than ever.
Financial Highlights of Securing Comprehensive Benefits
When you think of a benefits package, health insurance, 401k, paid time off, etc., likely comes to mind. But, beyond the physical and wellness aspects, do those things actually offer any financial benefits?
If there’s one thing we know in the US, it’s that healthcare is expensive. Because of how our healthcare system is set up, having health insurance is essential for everything from ongoing preventative care, medications, exams, etc.
But, even health insurance on its own is expensive. Some plans have steep premiums with equally high deductibles. So, you could have a high monthly payment, and you still might end up with a large medical bill from a procedure.
Because of this, finding a job with a good healthcare package is vital.
If we look at health insurance from your employer's standpoint, they’re likely saving you a great deal of money. In 2021, the average annual premium for single coverage was $7,739 and $22,221 for a family.
While you still have some ongoing expenses, your employer covers most of the bill.
When looking for a health insurance plan, keep an eye out for options like Health Savings Account (HSA), Flexible Spending Account (FSA), Dependent care, etc. Depending on your needs, these perks can add value to your plan.
Retirement Savings Account
Besides insurance, a 401k is likely the next benefit on your list, and rightfully so.
Saving for retirement is critical, and the earlier you start, the better position you put yourself in to reach your goals. So, if your employer offers a retirement savings plan, that’s great!
What’s even better is if your employer also contributes to your retirement plan. Take advantage of what is essentially “free money” to boost your retirement savings, and challenge yourself to contribute the maximum amount each paycheck to get the most out of your employer’s match.
Ways Higher Pay Can Impact Your Life
A Forbes article puts the idea of wealth into a different context—rich is how your money functions and wealth is what you do with it.
Because, in reality, a number in your bank account can’t bring the joy that the impact of using your wealth for good can.
Paying it forward is arguably one of the best ways to use your money.
If charitable giving is important to you, look for an employer that matches donations and encourages days off for volunteering.
Giving back is good for your mental and physical health. A sense of purpose motivates you to achieve your goals, like living healthier, managing your stress better, etc.
Freedom From Worry
77% of Americans are anxious about their financial situation.
Carrying the weight of worry can cause insomnia, irritability, muscle tension, and inhibit your ability to concentrate, which can cause trouble in your everyday life, work, and relationships.
Now, we’re not saying that money buys happiness. But, if having some extra funds in your savings account gives you the peace of mind to get a good night's rest, you should embrace it.
Ways Comprehensive Benefits Can Impact Your Life
Your benefits can impact much more than your finances.
In addition to improving morale, benefits can positively impact your life and well-being.
Wellness & Paid Time Off
One of the best forms of self-care is taking personal time. It’s crucial for your mental and physical health to take time to rest.
- Mental Health Benefits: “Hustle culture” has glorified the idea of being busy. Through that lens, if you’re not busy, you’re not doing enough. And that’s simply not true.
- Physical Health Benefits: You likely spend much of your day stationary. Because of that, it’s important to take advantage of your employer's wellness program to take care of your physical health.
- Personal Relationship Benefits: By taking time off and caring for your mental and physical health, you’ll improve your relationships. Not only with your co-workers, but also with your family and friends!
It has become more popular for employers to provide things like tuition assistance, stock options, adoption assistance, monetary assistance for fertility treatments, and so much more.
These types of benefits are above and beyond the typical package. If you’ve been considering finishing your bachelor's degree, investing in company stock, or would like to start a family, take advantage of these unique benefits.
If you have questions or are unsure about your benefits package, reach out to your employer’s Human Resources Department.
How Do You Decide Which to Prioritize?
Compensation for your employment is so much more than your paycheck. So, how do you decide which to prioritize?
It’s a trick question because you don’t have to choose! Strive for a full compensation package that provides you with a good salary and a benefits package that improves your work and life.
Ask yourself these questions:
- What stage of life are you in?
- Are you starting a family and need better medical coverage?
- Are you underpaid and need to find a role that pays what you’re worth?
- Do you need more work/life balance?
Your answers can help determine where your salary or benefits may be lacking.
Purpose Driven Money
At AVID Planning, we focus on creating a Purpose Driven Money System that provides a holistic view of how your money can benefit your life and help you reach your financial and personal goals.
If you’re looking for guidance before open enrollment on what changes you should make to your benefits, or if you just got a raise that you’re unsure how to handle, we’re here to help!
If you’re ready to get started, please reach out to us today. We can’t wait to work with you.