WEALTH MATTERS: Change your career without...
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Jul 30, 2015  |  Vote 0    0

WEALTH MATTERS: Change your career without destroying your financial life

One of the keys: Consider your opportunity costs

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A recent Gallup poll found 60% of people were disengaged from their work. What a disaster. You shouldn't spend most of your days doing work that doesn't fulfill you, no matter how much money you make doing it.

But how do you go about changing careers to something more fulfilling without screwing up your family's finances? The key is coming up with a plan.

I went through this thought process myself not long ago, when I left a job as host for Market Sense to start Nest Wealth, Canada's first online investment advisor. I'd been an entrepreneur before, and I knew that no matter how much I enjoyed having a steady job, I wouldn't be satisfied unless I went back to company building.

And with our lifespans increasing -- the average Canadian man can expect to live to 80, and the average woman to 84 -- more of us will have the option to change careers. Here are my five financial steps to help find a new career.

Make sure you're running to something that works financially

Some people make the mistake of changing careers just because they hate the old one. But that's the kind of emotion that will lead you to make poor financial decisions. if you haven't thought through what you're shifting to, you can't be sure that it will sustain the lifestyle you want. You can find average wages for different jobs here, but that's just the beginning of your research. Be sure you know what the finances of any given job look like before you switch to it, in the present and the future. For instance, is there a limited upside to the path you're interested in? Will you quickly plateau at an earnings level? These are important questions to answer.

Career coach and Forbes columnist Kathy Caprino has some great advice on this.

You shouldn't run from a bad situation -- you need to run to a good one.

Research how much training and education will cost

Once you've figured out what you want (that's probably the hardest step, by the way), your next step is figuring out how to make the transition. The key question is do you need to return to school or get other kinds of training? And if you do, how much will it cost?

Figure out your opportunity costs

This is the part of the financial planning process where many people stumble. It might cost you $5,000 in tuition to return for a master's, but if you go full-time, it will also cost you the money you would have earned had you not gone back to school. That's the opportunity cost -- you're losing the opportunity to make a year's worth of pay. If you were making $70,000, the actual cost of a one-year master's program is $75,000. You need to save enough beforehand to cover the whole cost, or find some way to cut your lifestyle back. Here's Jon Chevreau on guerilla-style saving.

-- Pause!

If you're thinking that your switch is going to be easy, because you don't need to go back to school, stop for a minute to consider how long it will take you to be up and running in your new careers. Especially if you're starting a new business or becoming a freelancer, it may take two or three years before you're earning the amount that you estimated in Step 1 that you could.

Save or finance enough to cover those costs, and then some

Explore the options for coming up with the money? Can you save enough over a year or two to over the costs of switching careers? Do you have a piece of real estate that you can sell? Is it worthwhile to borrow money? Borrowing money to invest in your education may be worthwhile. Borrowing money to start an iffy new business is another question.

And finally, give yourself an out and set a time limit. Career coaches may tell you to persist until you make your dream come true, you also need to be able to face financial reality. If your new career isn't working out after the deadline you give yourself has passed, change plans again. If you follow these steps, you'll still be in good financial shape, and you can still find a plan B.

For one more step to your career change, check out the Nest Wealth blog.


  Randy Cass

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(1) Comment

By Ian | JULY 30, 2015 05:20 PM
I knew a cop, barely 100lb, who dealt with drug dealers and pimps. Then she became a family mental health facilitator. That's when I knew her, and she was really good at that. Now she's a yoga instructor, kind of blows my mind, but she is good at anything she does. She has a lot of passion for life. Some people are like that. I'm not, but I admire those people.
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