An excellent question, and probably one of the most important things to consider before making any “go/no go” career change decision (and preferably well before that!) While I agree to some extent with those who argue that you have to ”jump and grow wings on the way down”, I’m a planner by nature. So I also think it’s a good idea to do a little reconnaissance to make sure you don’t accidentally jump straight into a rock wall. Not only that, but you’ll almost certainly be a more valuable contributor in your target career of choice if you’re not constantly distracted by fears of running out of money and ending up on the street.
The good news is that quantifying your career transition is a lot more do-able — and probably much less an exact science — than many suspect. More important, it is what provides the basis for the developing the financial plan that will set you free. So do the math!
“OK, but how?” you may be wondering. I have just the tool for you, a Cash Flow Worksheet specifically designed for career changers. First published in Pam Skillings’ book Escape from Corporate America, you can get an Excel version of it for free on the Downloads page of this blog. In addition to all the standard features of tools that help you track living expenses, this worksheet has columns for before, during, and after the transition, and it includes hints on items that you should expect to fluctuate over the course of the transition. These include things like income, taxes, health and other insurance premiums, clothing and commuting costs, etc., plus some that only apply to certain kinds of transitions, e.g. tuition for any additional education needed, relocation costs, and business start-up costs, just to name a few. Once you’ve estimated the expenses for the various phases of the transition, you’ll need to figure out how long you’ll be in each phase, and multiply accordingly to come up with an overall cost.
As you might imagine, the answer to this question can vary dramatically from person to person, depending on how big the leap, and that’s why it’s so important to plan ahead. Over the next few posts, I’ll take a few different career change scenarios and do the math for each so you can get a better idea of how this works.