The NBA point guard left the LA Clippers for the Houston Rockets
One of the NBA’s highest paid players is riding a rocket down the pay scale.
Point guard Chris Paul, a member of nine NBA All-Star teams, has left the Los Angeles Clippers to sign for the Houston Rockets. While the 32-year-old baller seems happy with the move– in a tweet, he announced that he felt “blessed and thankful for the ability to play this game”– his new salary is raising eyebrows. Per NBA regulations, the Clippers could have offered him a five-year contract worth a whooping $200 million; any other team would be capped at $50 million less.
Of course, $50 million probably feels like less of a deal if you’re Paul, whom Forbes estimates is making $30.9 million this year, marking him as the ninth best paid NBA star. His income tax bill is also likely to be reduced after moving from California, where the top tax bracket is 13.3%, to wallet-friendly Texas, where there is no state income tax. Still, even if you aren’t a highly compensated star athlete, there may be instances when getting your salary slashed is the right thing to do.
Unbelievable amount of emotions right now.. pic.twitter.com/1FB7ade7uC
— Chris Paul (@CP3) June 28, 2017
One example: When taking a lower salary for now leads to better financial prospects in the future. “It’s really important to think about short term pay versus long term pay,” says Katie Bennett, co-founder at Ama LA Vida, a coaching company, who recommends that her clients instead focus on the promotion trajectory and what they could be making in three to five years’ time. That’s especially true when you’re leaving a larger corporation for a startup or small business that may offer equity and stock options in lieu of a big fat salary. “You could be making a lot more in five years than at your current job,” she says.
Additionally, if you’ve spent a long time out of the work force, there’s nothing wrong with returning to the labor force with lower compensation than you’ve previously had. “It helps to get your foot into the door so that in the future, you can look for something that pays more,” says Bennett. She adds that being employed, even at a smaller salary, comes with other benefits such as a boost in self-esteem. That said, New York executive coach Roy Cohen still recommends not volunteering to take a haircut even if you’re willing to. “Let them raise the issue of a reduction,” he says, warning that offering prematurely could make your potential employer think of you as a pushover.
It’s also crucial to remember that financial compensation isn’t everything. Indeed, an oft-cited study from 2010 by Princeton economist Angus Deaton and psychologist Daniel Kahneman suggests that people don’t become much happier after they make a $75,000 annual salary. “The total is the sum of financial and emotional benefits,” says Bennett. “How do you feel when you wake up and get home each day from work? Are you surrounded by incredible people? Do you love the work you do? These are as important as what go into your bank account.”
Cohen, the author of “The Wall Street Professional’s Survival Guide” calls a salary reduction in return for quality of life still “a pay cut, but an informed pay cut trading compensation for other benefits.” He notes that this is something attorneys who go from working in Big Law firms to becoming in-house counsel at corporations often engage in. “There are a whole bunch of other benefits that may exist,” he says.
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