Monday, 6 April 2009

Finances First - An introduction

So you're unhappy in your job. The thought of going through the same routine every day for the forseeable future fills you with dread. You long to do something useful, something fulfilling. Something that uses your talents. Something for yourself, rather than some faceless corporation who you feel don't truly value your input. Something that enables you to see your family more often. Something that makes you feel enthusiastic about life. What should you do then?

Many books and resources usually encourage you to think about what you're good at, what you enjoy doing, and spend some time brainstorming to come up with an answer. My experience was slightly different. For me, with a mortgage to pay - and some of you may even have other commitments, such as a family to support - there was something that I felt must be done first: before any brainstorming, before thinking about what you enjoy, and before thinking where your talents lie.

In my opinion, as soon as you even get the tiniest inkling that you want to change careers - even if you have no idea what you want to change to, or whether you will see the career change through - the first thing you must do is this: sort out your finances.

I am not saying this just because of the credit crunch, although it becomes vitally important during times of economic insecurity. It is because getting in the habit of managing your money now will relieve you from a major source of stress in the future. Many of us will be familiar with the notion of setting some money aside - we're usually advised to set aside 3 to 6 months' salary - as savings, in case of unexpected emergency expenditure (such as repairs that can't be put off) or in case of being made unemployed (so that you have a few months' worth of cash to live on if you are not able to find a new job soon after the previous one). Having a nice cushion of cash savings gives you peace of mind that you will be able to cope financially with any unexpected events that life throws your way.

When you are thinking of changing career, there are various other reasons why you need to build up your savings:
  • you may need to pay to re-train
  • you may need capital to start up your own business or franchise
  • you may need to invest in attire appropriate for the industry you are hoping to work in (for example, a smart, well-fitting suit for an interview for a banking career)
  • you may need to relocate
  • you may be out of work for a few months while you try to break into the new career field
  • you may experience a drop in your standard of living
  • the income from the new career may be lower than what you are used to
  • the income from the new career may be irregular.

Not all of these reasons will be appropriate to your situation, and there are probably other reasons that I have missed out (feel free to suggest more), but this is why it is important to start building up a cushion of cash savings before considering your new career path. The last thing you want to realise when embarking on your big journey is that your dream job involves significant training that you are not able to fund.

And of course, let's not forget the possibility that at this stage, where the thought of changing career is merely an inkling rather than a fully-considered idea, any extra cash savings you have are always useful to weather the economic storm!

Once you have a plan for managing your money and have started saving regularly the income from your job, then you are free to explore whether you want to change career, and if so, what you want to change to.

In a future post I shall detail tips on how to start saving money, budget, deal with debt and potential ways to increase the income you already have (legally of course). As most of my tips will be aimed at people in the UK, any US tips for American readers would be very much appreciated.

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  2. Thanks! Glad you liked it. I had a look on your blog - very useful tips! :-)