In my last article, I discussed the emotions of making a career change, specifically the guilt and pushback you may receive from others. In this article, I discuss what I consider to be the scarier part of a career change – how to prepare financially for the leap.
Understanding the cost of your needs and wants
I cannot state emphatically enough that the biggest component of financial freedom, successful life transitions, and getting through financial emergencies is knowing how much you spend and breaking it down into things you absolutely need and the things you want.
Food, shelter, clothing, transportation, communication tools, and medical care are basic necessities. Depending on location, health, and ability to split costs with others, the budget for these items can vary from a couple thousand to a few thousand dollars per month.
Much of what people spend are the “wants” – the basic needs can extend to going out to eat, living in “hip” areas, or having a nicer car then necessary. Add on top of that the easily identifiable wants – cable TV packages, the latest and greatest technology, designer clothes, second cars and homes, and much more.
In our mid 30’s at the top of the internet bubble in 2000, my husband and I were like much of America – spending like there was no tomorrow. As our income increased, so did our spending. Significant savings would have been needed to support our waste of money should we quit working.
When I decided to cut back in medicine in 2002, we evaluated our spending and cut everything we considered unnecessary. Cable TV – cancelled. Gym membership – cancelled. Eating out – no more than once every two weeks and at cheap restaurants. Expensive travel – forget it. When all was said and done, we cut spending by almost two-thirds our previous amount.
Starting a new business is tough. People tell you to not expect an income for a couple of years. It took me three years to break even and another two to match our reduced spending amount because I kept reinvesting in the business. Thankfully, our savings sustained us during that time. And guess what? Once the income increased, our spending didn’t go up – we didn’t miss much of what we cut out. Only recently have we loosened up and we are careful to make sure the spending is on things that provide treasured experiences, such as travel. Experiences have no ongoing carrying costs.
In a nutshell, by minimizing buying “stuff”, keeping normal carrying costs low, and saving any leftover money, it is much easier to break the chains of a career that is no longer satisfying.
Save, save, save
My 16 years in financial planning has significantly changed my opinion on why we should save money. We shouldn’t save for retirement – we should save for all the transitions in life that invariably occur. Life is precarious and we don’t know when we’ll need or want to make a change. Having savings takes away the angst of financial insecurity through the turbulence.
Savings can allow you to take sabbaticals, periodically cut to part time work, or totally change to a new career. These changes can keep you working happier and longer. It is healthier to work as long as possible in jobs that create satisfaction, financial peace, and keep your mind and your body active. I think often of the book, “The Five People You Meet In Heaven” by Mitch Albom. He deftly points out that all jobs are important, and you have to find the one that adds meaning to your life.
Keep a toe in the old profession
When considering a career change, if possible, make the change gradually. Take classes while still employed. Take time off to shadow others currently employed in the profession you are considering. Create a list of tasks you will need to complete to make a career switch. As long as you can maintain your sanity and health, work as long as you can in your old job while you complete your new career task list.
I explored opening my new firm in 2003 and opened the doors at the beginning of 2004. I continued part time in the urgent care area of the emergency department until 2005. Even though I didn’t have an income yet, we had enough savings to sustain us for a few years. The only reason I quit medicine for pay in 2005 was my disgust in learning I was being paid significantly less than my peers despite having higher productivity numbers.
Instead of giving up my license to practice medicine, and just in case my financial planning firm failed, I opted to volunteer in a clinic for the working homeless at my local shelter. Not only did this opportunity restore my love of medicine, it broadened my horizons immeasurably. Even though my firm is successful, I continue to volunteer in this capacity.
Think through the financials of your new career
Make sure you’ve thought through the financials of your new career. Will it provide the resources you need? Does your family support the plan? Although it is good to be optimistic about your career leap, don’t be too pie in the sky about your opportunities. Meeting with a financial planner for a second opinion on your plan may be a wise move.
Making a career change can be scary. If you can be assured of a roof over your head, food in your belly, and clothes on your back, you’ll probably be okay. Cut expenses, save, save, save, and keep your options open. With thoughtful planning, hard work, and a mind open to change, you can find the career you love.
[“Source-timesofindia”]
