Money, money, money — can you afford to change your career?
The bread and honey. The quick buck. The green stuff (I may have made the last one up). While it doesn’t buy you happiness, money can buy you choice, freedom and time. Three things that are incredibly beneficial when career-changing as you may face periods when you’re not working, retraining or upskilling, or starting in a new industry on a lower salary and need to cover any disparity in income vs outgoings. But, not everyone has sufficient disposable income that allows for additional saving or voluntary unemployment.
So, today’s post is dedicated to being financially savvy with very little moolah and still achieving the same desired outcome. It just requires a bit of strategising.
Bills, Bills, Bills
Everyone has basic living needs, even Destiny’s Child. Although the requirements are the same, the cost of food, water and accommodation is different for everyone. It’s easy to assume that someone on a higher salary has more disposable income than you, but it’s often relative and they may also have higher outgoings and commitments. It is also city and country dependent.
For context, I am a born-and-bred Londoner and have remained here among spiralling rents and inflation. However, I recently read that housing costs are supposed to take up no more than 30% of your salary. For almost all of my working life, my rent / mortgage and bills (not including food) have swallowed 60 to over 100% of my income (yes that did equal debt). I did not realise the extent of this until I did the calculations; it’s crazy. And also probably part of the reason it took so long to career change.
From starting out in law in 2009, to when I qualified four years later, I was only earning £18,000 p.a. with accommodation costs of £900 a month. When my cold feet started post-qualification in 2013, I was earning £30,000; a then take-home of c. £1,900 and with basic living costs of £1,350 a month. In mid-2015, I was lucky that my salary briefly doubled to £67,000 as I took a job in a private firm for a year. Due to changes in interest rates however, my basic outgoings had risen to £1,800 and my student loan repayments also increased sizeably.
Knowing that I wanted to leave eventually, over the course of that year, I cut back on my ‘fun’ spending (long hours also meant little going out). I steadfastly saved £8,000 to pay off as many debts as I could and cover three month’s rent while I was working out what I wanted to do next. Three months before resigning, I also remortgaged to reduce my living costs down to £1,500.
Why am I telling you this? Because at no point have I been rolling in it and yet I still managed to change career. But it also means that no matter what I do, I must have £1,500 in my bank account at the end of every month. Does that cause me stress? Of course. Is it worth it? Yes — mostly.
Pennies, and My Thoughts
It may sound simple, but so few people actually know the exact amount they pay out each month and how that figure breaks down. It’s a weird super power to have — and one I’d probably trade for something better — but I can tell you to the pence, what each of my seven bank accounts hold (no, I am not in the Russian Mafia, it is just helpful for completing tax returns), how much each utility bill is and how much I have coming in gross and net, for the next three months. It pays to know. And if you don’t, start now by doing the following:
- Get well-acquainted with Microsoft Excel or Google Sheets — Write down everything you spend and then categorise each outgoing according to need, necessity and luxury. The reality will surprise you and for many, shock you. Although it often feels like a ‘necessity’, wine is unfortunately a luxury 😩.
- Once you have that base figure, it needs to be your guiding bastion — If and while you can, put money away every month until you have at worst, one month’s coverage, but aim for at least three-to-six months. It is for paying your rent/mortgage, required courses / training or to cover emergencies only. So, boiler break = yes; Bali break = no.
- Work out where you can save additional money — For example, after I quit, I couldn’t afford a travelcard so I bought a bike and began cycling everywhere. Pros: It was great for doing regular exercise. Cons: It was not-so-great for accident-prone people. It worked because the £150 up-front cost was made back in transport savings within three months and meant I had more money to spend on plasters. For you, that might mean cutting back on daily coffees, eating out or, *whispers it* Netflix.
- Make your money work harder for you —
a) Find the best savings accounts for your circumstances. This does not necessarily mean the highest interest rate; accessibility to your career change funds (without being penalised by fines) should be factored in.
b) Use cashback accounts and sites — Many banks nowadays offer interest when you use their debit and credit cards so you’re earning while you spend. Sites like Quidco and TopCashBack are also helpful when shopping online especially if you need to invest in things like a personal laptop.
c) Keep on top of your bills using sites like uSwitch or lookaftermybills and move providers regularly to minimise your outgoings. Loyalty doesn’t pay — friend referrals, switching and reward schemes do.
5. Get a credit card — I do not say this lightly and I am certainly not encouraging you to get into debt for shits and giggles. Having a credit card has been incredibly helpful to me during these last three years when bigger purchases needed to be made (i.e. My bike. And then the second bike to replace the first one that may or may not have been ‘stolen’ during a work night out). I also used it to pay for two Guardian writing masterclasses when I was out of work, but needed to learn how to pitch quickly. ‘Speculate to accumulate’ as they say.
Caveat: I would only recommend this option if you’re good with money, know how credit cards work (or are willing to find out) and can ‘afford’ to do so. Using a credit card properly can improve your credit rating, but using one badly can have disastrous effects on it, so be careful. This is what I do to ensure it works for me:
a) I look for the best introductory offers via a comparison website such as moneysupermarket or similar;
b) I have a schedule of payments to ensure any credit card balance is paid off within a set time;
c) I apply the ‘feast or famine’ principle and pay more of my balance off during months I earn more, so that I can reduce payments when I earn less and still remain on schedule to settle it;
d) Always pay on time and more than the minimum amount if unable to clear the full balance;
e) I move any outstanding balances to a new interest free card if needed, prior to the offer ending; and
f) Repeat once a day: IT IS NOT FREE MONEY.
Money Talks
The final thing I want to say about money is TALK ABOUT IT. People can be funny discussing money, some consider it crass, while others (me) do not. I’m grateful my parents taught me to be financially aware from a young age and it empowered me as a result. The old school attitude of ‘It’s rude to ask’ still pervades, but it’s damaging and perpetuates issues like the gender pay and pension gaps.
Part of the reason I have been so open about my earnings and outgoings in this newsletter is not only to be helpful to those feeling like they can’t afford to career change, but to also remove some of the shame that surrounds money. So get comfortable talking about what’s in your coffers, because it will lead to better financial decision-making that will impact and ideally support any jump. And you can’t put a price on that.
