Am I Financially Ready to Change Careers?

0:00This episode is brought to you by PayPal. You know how a mom's bag has everything? Sunscreen? Snacks? A stapler? The new PayPal app is like that, but for your money. Shop, pay, manager account, and earn rewards all in one place. And with purchase protection on eligible items, biometric security, and pasquies, you're protected at every step. Download the new PayPal app to get started. See PayPal.com slash protection terms. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen, and helps reach people with the right skills, certifications, and more. Spend less time searching, and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsor job credit at and D.com slash podcast. That's indeed.com slash podcast, terms and conditions apply. Need a hiring hero? What is the job for Indeed Sponsored Jobs? Whenever fall comes back around, it always feels like a fresh start.

1:03This year, I've been layering in some styles from the new Lou Le Mans fall drop, because the weather is shifting, and I find I have to be ready for the entire day, and not just one part of it. Lou Le Mans fall line has some really versatile transitional pieces, so I can just wake up, throw on a matching set, add a jacket or a fleece, and head out, knowing that I'll feel comfortable enough to go wherever the day takes me. Check out the new fall arrivals in store and online now at LouLe Mans.com. You make good money, you've built a career, you may have good benefits, you have a title you worked hard for, and a life that looks pretty successful on paper, but you're tired, and maybe you keep thinking, I cannot do this for another 20 years. I don't even know if I can do this for another 5 years, and then almost immediately comes the next thought. But I can't leave, I make too much money, or I have student loans. What on earth would I do? My job has been my identity. So today, we're talking about what it actually takes to make a career change in your 40s,

2:05without blowing up your financial life. And why changing careers does not necessarily mean replacing your current salary, dollar for dollar. Welcome to She's Talking Money. I'm Shari, financial planner, founder of GWA Wealth, and after 20 years in personal finance, I've seen just how much the bad, generic, one size fits all money advice women are expected to follow can sometimes do more harm than good. This show is for women who are doing well on paper, but still have questions about what to do next with their money. We're going to talk about investing, taxes, retirement, spending, saving, and the decisions that don't always have one obvious right answer. I'm going to give you honest advice, explain things in a way that actually make sense, and challenge some of the financial rules you've probably heard your entire life, without shaming you for what you've done, what you haven't done, or what you're still figuring out. So if you make good money, but want to feel a whole lot clearer about what to do with it,

3:08you are in the right place. This is She's Talking Money. Okay, so let's first ask the question, why do you want to leave? Do you hate the career, or do you just hate the company? Do you want to work fewer hours? Do you want less stress, more flexibility? Do you want to take a sabbatical? Is this job or career not really what you thought it was going to be? Are you exhausted? Would you like a lower pressure role? Do you want to start a business? Do you want to completely change industries? Like what is the reason? What is the motivating factor here? And here's the big question. What do you want to do instead? We don't need your whole future just to be figured out. Like we don't need the answer to every single question, but I want out is not enough. We need more than that. So we have to get to the root of what exactly is going on.

4:13Because when you get to the root of what's going on, you then are more likely to not repeat the same issues in your next career, your next job, this next phase of life. When I sit down with clients that are having this like breakdown or breakthrough, whatever you want to call it, when they're like, I can't be in this job for the next 20 years. How much do I need to get out or can I afford to change jobs? And same thing with like, I want to retire. Can I afford to retire? Because we are put, you know, the headlines are put in front of us. This is how much money you need to retire or like last episode. This is how much money you need to have by 40 by 50. And so we just want like the dollar amounts. Like how much do I need to have in order to make this reality? It's a simple question, but it doesn't create a simple answer. Because what I need to know is, what does your life actually cost?

5:18To be you. To run your household, to have your family, whatever it is, what does it cost to be you? So how much are you spending right now? And how much of that spending is actually needs based spending and going forward, how much of your spending is going to be needs? Like what is going to happen in your life over the next few years that could potentially change how much your needs spending is? What are your fixed expenses? So what are some of the things you have that cannot change? How much do you actually need to live comfortably? When I'm working with my clients, I talk a lot about needs versus wants. So what is your needs based spending and what is your wants spending? And ideally your needs spending has some lifestyle enhancements built in. So the going out to dinner, maybe once a week or running through the drive through once a week, getting your hair done, maybe getting your nails done, whatever it is, there is the needs.

6:27That stuff is built in not every added expense, not every extravagance is built into the needs spending, but some of it is because when you enter a period of your life where you have to pair back a little bit, you can then just remove the once, remove the once. So then you know how much you actually need to live comfortably and the answer is those are my needs. It still has some quality of life stuff built in there, but I can live and be comfortable on my needs spending. I don't feel like I'm living off of ramen and going without everything. That's the big difference. And that's where a lot of people get tripped up because they think of their needs spending is just like basic necessities. And then they say, well, here are my basic necessities. This is what I need. And then it happens and they're like, this is no way to live the socks. And then they question all of their decisions and maybe go back into the career that they

7:33wanted to get out of because they didn't feel comfortable in this new life. So looking at your spending, what is a need, what is a one but slipping some of that stuff in there that some people, some talking heads may call once, but we're doing it for quality of life. So that coffee once a week, running through the drive through once a week, whatever it is getting your hair done every couple of months, slip some of that stuff in there too. So we have some quality of life. If you're earning 200,000 right now, you may assume you need another $200,000 a year job because you're not looking at what you spend, you're looking at just what you're earning. Maybe you don't, maybe you could have make $120,000 a year and be perfectly comfortable and fine. So that's understanding where your money is going and what does it cost to be you by doing that. That shows us what income you actually need to support the life you want. Now we do want to build into this income continuing to save. So we don't want to just say, well, X amount is my need spending. So that's all I need for income. No, we still want to have some spending too. But if we look at your needs income, that's going to point us in a really strong direction of how much do we need in this new job or as we make this transition.

8:59I have clients that quit their job did not have a plan and they're living off of their savings, but they're living off of their, they're using their needs expenses to live off of their savings. So their savings is lasting a whole lot longer than what they actually thought because they just so well, if I make $100,000 a year, I need 100,000 and my savings is 100,000 to that last me a year, maybe maybe not. But if you look at what my needs spending is actually 50,000 a year, now your savings of 100,000 actually last you two years, there's more to it because then we need to figure out like, do we want to have no cash, you know, after two years, no, we probably do want to have cash. So we need to go back to work a little bit sooner. But again, we need to have some math behind these decisions. The emotional decision is the first thing I can't live like this for the right for 20 more years. Great. Now let's assign some math to it. Here's a big one. Let's practice this new income before you make the move. So if you make 200,000, but you think your needs plus a little lifestyle is 120,000 a year, let's test it out.

10:15Let's start living on that needs based amount while you still have the higher salary and what are you doing. You are banking the difference. You are saving all of it. And what can that savings go towards. It can go towards if you're buying a business, it can go towards that transition period. Your future self is going to be very grateful. So now as you're going to work every day and you're like, oh my gosh, I'm miserable, but you're also telling us this is you're telling yourself, this is the means to the end. This is how I can make this transition. I'm performing a little experiment right now. I need to see how much money I need to live on. Before I make this transition, I need to learn whether this lower income is actually realistic. I need to see what my lifestyle is going to be like. So we need to figure out what life changes you would need to make. And it's a lot better to have this experiment while you're still making the 200,000 a year versus I quit my job. I'm making nothing. Now I need to make the lifestyle decisions.

11:21Any decision you make when you have no money coming in is automatically going to feel a little bit more stressful and a little bit more rushed. So building the plan while you still have the salary is huge. We cannot do this overnight. I met with a client yesterday and she was really the motivation for me to do this episode today because she's in a career that is draining. She's in therapy every week because of this career. It is draining her, but she has the student loans. She had like this was what I went to school for. This is my identity. There's so much more to it, right? I'm only 10 years out of school. How can I change careers already? I'm in my 40s. The sounds crazy. And she mentioned to me like two years. And I'm like, okay, well, we cannot do this overnight. We cannot make this change overnight. We need to plan. We need to have runway. So she makes $400,000 at least right now.

12:28This episode is brought to you by PayPal. You know how a mom's bag has everything? Sunscreen, snacks, a stapler, the new PayPal app is like that. But for your money, shop, pay, manage your account and earn rewards all in one place. And with purchase protection on eligible items, biometric security and pasquies, you're protected at every step. Download the new PayPal app to get started. See PayPal.com slash protection terms. Any job she goes into after this, even if she stays in the same industry, she is not going to make that same amount of money because with that salary comes added stress, added pressure, all of that stuff. So like she recognizes like, I'm not going to make this money in the future. So great. We need to save as much of it as we possibly can right now. We need to build up your cash. We need to build up your after tax investments build up your freedom fund because that is what is going to fund your next chapter. We need to reduce your fixed expenses.

13:33So right now you are living the life of someone that makes multiple hundreds of thousands of dollars a year. We need to pair that back. We can't say yes to everything. We can't say yes to every dinner, every night out, every vacation. We just can't right. We need to start changing our lifestyle now to save for future self. So then future self does have a quality of life. What's your health insurance going to look like that's going to be a big expense. We need to start setting up what your next career is going to look like we need to start networking. Maybe you start the side business now that then turns into the main business. So then yeah, you're working really hard daytime, then nighttime. You're also working really hard because you're setting up this new hustle for yourself. Do you need to take classes or earn certifications and then what's the cost associated with that. It's a good idea if if going starting your own business route is the next chapter. Let's test it out before you're relying on it solely for your income.

14:38And then that's where we look at again, it's the experiment of my current salary is funding this experiment is helping to fund the exit. And this is exactly why a freedom fund exists. The emergency fund is for when something goes wrong, right. It's put away with lock-in key when something bad happens. And we need cash on hand to pay for it. That's our emergency fund. A freedom fund gives you the option to choose something different. It gives you the ability to pivot in life. So then you don't feel stuck until you're 65 years old. You may need money for your living expenses during the transition transition costs money needed for the next opportunity classes schooling. Starting a business having enough money to live on is not the same as having enough money to fund the business. So your freedom fund may have to serve a couple different purposes. That's the purpose of it.

15:40That's why we are saving into the freedom fund. An emergency fund is not enough. So as we're looking at this transition, more questions to ask, are we taking six months off? So how long are you going to be without income? So are you are you quitting saying my cash is going to fund this period of time. And then I'll go into another job. Are you quitting then immediately job hunting? Are you taking a year to build your business? How long do you realistically expect to have a little or no income? If your cash has a couple different purposes to fund my lifestyle while I have little or no income to help me start my business, how long is it going to last for? Look at how much cash do I want to have when this journey is over? Right. Do I want to have no cash? Then you may be able to afford longer. What will your financial situation look like when those six months are over? If you're in a new job, is your new job enough to cover your expenses or are you still going to be using cash for this period of time?

16:52Here's another idea, a sabbatical. A sabbatical can can be for so many things. Is it for rest? Is it for recovery? Is it to explore your new career? Is it to build your business? Do you just need to take a step back from your job? Like do you need a break? Do you want to build your new business? Do you want to network? Do you want to figure out what's next? Can be whatever you want. Not knowing what you want to do next and being broke on top of it is a bad combination. Let's only have one of the two. If we're running out of cash, let's have a plan and let's have a strategy. Not knowing what you want to do is okay, but having the cash makes that a lot easier. So let's just create the plan. We don't want to be broke and not know what we want to do. So if we decide, okay, we're going to pivot, maybe we're going to change careers or maybe we're just going to stay in the same industry, but just change the job.

17:57We may have a salary shift, right? So if your lifestyle works comfortably at 120,000, you may not need 200,000. Did that $80,000 difference like cost you your sanity? Make you lose sleep at night, make you go to therapy every week. So a lower paying job may give you the flexibility you need, the less stress fewer hours, better quality of life and room to do something else. You just have to make sure your lifestyle has works with your new income. We cannot live the same lifestyle with our past income. Something else important is to compare total compensation. So salary is not the whole package. Maybe your new job has like killer health insurance. My client I was talking with yesterday has the $400,000 a year job has no 401k match where a lower paying job may have a 401k match. That may be worth it to catch up on the retirement savings. Get that free money. That's not tax to you.

19:05Bonuses, does your new job have bonus opportunities? Can you get stock or equity in the company is your PTO more generous disability insurance life insurance is that stuff cheaper does your new company with the potentially lower salary offer a Roth 401k. That could be very powerful for you. So 120,000 or making 80 grand less for example is not the same as 120,000 or making 80 grand less. Sometimes the dollars don't equal the dollars and we need to look at the entire package, not just the salary. I'll be honest though, you are not ready to change careers if you have no cash runway. If you don't know what you spend if your fixed expenses are really high, if you rely on credit cards, if you have debt, if you have no health insurance plan, if you have no idea what's going to come next, if you have no freedom fund, a K.A. that after tax savings, if you have no room in your budget to earn less like if you are in a position where you need to earn every single dollar that you're earning right now because that's what your budget is telling you.

20:22So you're not ready. We need to make a change. You're not ready if your plan assumes everything goes perfectly. Well, it's X happens and Y happens and Z happens and so on and so forth. Everything's going to work out just as good as just as it should. And that's probably not a good plan. We need to reevaluate it. But just because you're not ready now doesn't mean you're not ready. But never it just means not right now, not yet. So again, let's perform the experiment. How can we reduce our expenses? How can we live off of less? We need to get out of debt, right? When you don't have that debt payment that frees up a lot of money each month, that can then go to your lifestyle or to savings. So we need to get out of debt. We need to understand how much we're spending. We need to start saving in a freedom fund. So we need to hit these a milestones first. And again, let's perform this experiment. So we are we're going to work. We may not be thrilled with it. We may, you know, we've already accepted the fact that like I am not going to do this until I'm 65 years old. That's fine. But you may have to do it till 45 till 47. Let's conduct the experiment. Let's see as much as we can get out of debt. So then when the time is right, we are ready. We're not stressed and broke. So let's let's work through an example.

21:45Let's say you're 43 years old. You make $200,000 a year. You spend $9,000 a month. You want to take six months off. You think though you you could earn after those six months, about 120,000. You have 150,000 in cash and taxable investments on paper. Can we afford it? So first, let's look at how much is she actually spending spends 9,000 a month wants to take six months off the quick math $54,000. So of our 150,000 saved. We're going to use about 54,000 of it. So we'd have about 96,000 dollars and cash left over. So if she thinks she could earn about 120,000 pre-tax, then that means we're spending about $108,000 a year. So again, if the 120 is pre-tax, we're taking taxes out. We're spending 108. We probably will still be dipping into our cash to make up for the slight difference.

22:55So how comfortable are we when we are dipping into our cash? What is that number where it's like the sirens start going off of like my cash is starting to get low. Also, if we're spending 9,000 a month, that means we're spending $108,000 a year, that means we're not saving anything. So how comfortable are we with earning 120 grand, spending 108 of it, probably having to dip into our cash because 120 grand is pre-tax, not saving anything. I don't know. You know, we for a period of time, like as we go through this transition, it's completely reasonable to expect to not save. But do we want to always continue not saving? So then how can we adjust our lifestyles slightly so we then can save versus just spending the 9,000? So can we reduce the 9,000 in spending to at least break even like that's the first step to break even and then reduce it slightly more to then be able to save.

24:06We don't want to use every dollar we have and to fund the break even and leave yourself with no options afterwards using obviously the cash for our transition is fine. That's why we have the freedom fund, but we don't want to have to then depend on the freedom fund to just make up for, well, I'm spending more than I'm what I'm making because then you're at a loss every month, plus you're not saving on top of it. So the math isn't completely in our favor in this example. So then we either need to spend less or find a job that earns a little bit more to at least first get us to break even then ideally so we can save a little something each month. Career freedom doesn't mean having enough money to never work again. What it means is having the enough money flexibility and planning so that you don't feel stuck in your current job. So in your current job is not your only option. A career change does not have to be reckless. It does not have to be this big emotional decision that it's like I'm out of here like goodbye.

25:15I'm eating ramen. I don't know what I'm doing next. It can be plant and and and it can be strategic and it can be very calm. Like how awesome is it to be like I am changing my life. I am changing my job and I have a plan and I'm entering it with complete confidence. Isn't that so much better than just like piece out. I'm done. I can't take this anymore. So like if you're at the I can't take this anymore point acknowledge it sit in it but we need to first know what we need to do before making the move. We need to understand what our life costs. We need to know what you're going to do next or at least have a direction. You need to understand how long you may be without income. You need to have an understanding of how much to save have saved to fund this transition. You need to think through your benefits and your total compensation and have a plan for what happens after after the transition period.

26:15Your current job should not be your only option just because of pays well or because you took out student loans to be in this career or because you feel like this is your identity or or because you feel like changing jobs is irresponsible. The goal is not to build enough money that you will never have to work again. The goal is to build enough freedom that you don't have to stay somewhere you no longer want to be. If you want to talk this out more please use the link in the show notes schedule some time with me so we can work through this is why financial planning exists because it gives you the flexibility of being able to make a major life decision. So schedule a call with me and we can talk through this what makes sense for you and how financial planning can impact not just this part of your life but every impact every part of your life. Thank you so much for joining me. I'm Shari Rache and I can't wait to see you next week. When fall comes back around there's a sense of a reset and new pieces from Lululemon's fall job are an inspiration to push your goals and elevate your routines.

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