Finance Planning For A Stress Free Career Shift

You want to quit your job. You have been through the grind of life, and here you are. Wanting to quit your job. Career Shift in your mid thirties or forties can be a very tricky issue. You may be in the middle of paying your home loan EMIs, children’s education and managing a household. In this write-up, I will give you a broad idea of how you should plan your finances to not repent your decision to career jump later. It is not just you, many professionals run this thought in their mind at least once in their life.

Photo by Nik Shuliahin on Unsplash

Reasons for Career Change

Before we move on, let us first ascertain if your decision was correct. What is the reason you are quitting your current job? Bad boss, unsuitable career, incompetent benefits, bad work culture – these are a few of the common reasons people quit their jobs. There are other reasons too – you lost your job, bad health, personal loss. 

Whatever reason, here are a few things you may want to ponder. What do you plan to do after quitting? Are you prepared for the loss of the regular salary? Do you have plans in place for sustaining your expenses? 

Let us say you want to change your company. Ask yourself: “What am I running away from?” There are many responses to this question. If you are running away from a bad boss, what is the assurance you will not have a bad boss in the next job? As the saying goes, “A known devil is better than an unknown angel.” In such cases, it may help to talk to someone, say a friend. A problem shared is half solved. Chances are, you will feel better once you share your concerns with someone. Also, it is good to look around yourself. Everyone is fighting a battle every day of their life. You are not alone. It helps calm your nerves to know that you are not the only one facing challenges. You are in a better place in comparison to so many others around you. 

Or maybe you want to take up a new role within the company. Are you bored of doing what you are doing right now? First and foremost, does your company allow role swaps? If yes, are you qualified for the role you seek entry into? Even for an internal transfer, a minimum level of proficiency in the area you aspire to work in is necessary. In case you do not have that, it may be prudent for you to try to learn their function from a colleague who works on it. You may offer to help. Put in at least a few months of hustle in jobs related to the new role to prove your worth to be considered for the shift. Maybe that would mean an extra hour or two in addition to your regular work. Or perhaps a day on the weekend. Your chances of a shift increase substantially if you can produce proof of interest by chronicling your work this way. And again, we are all human. Once you have made the switch, if you feel your earlier role suited you better, ask around before shifting if you are permitted to come back later.

What if it is not the company, it is not the job, but the career you want to change? This is not new. It frequently happens today. Now. This requires a lot of planning. The later into the profession, the shift happens, the more planning it requires. Here are the things you should ask yourself again and again till you are confident about your decision. First, have you researched the career you want to pursue? If the answer is No, then please do. If the answer is yes, the next question is, “Is it going to fulfill your current lifestyle?” If not, you may need to see if there is something else that interests you. If yes, “Wow. That’s great!”. You now need to prepare to wait until it starts giving the desired returns.

A career is like depositing money in your account. Every year you fruitfully spend in your career, there will be additions to your deposit. And when you choose to dump your career for a new one altogether, you forfeit the benefit of your years spent in the job. It is like cleaning your account empty and investing all that money on a broke company. You should start from scratch. In most cases, the experience you accumulated will not be carried forward. If it does, you are lucky. All in all, you need extra planning. And here are a few tips to do it right.

Planning for a stress-free shift to a new career should be superseded by atleast two years of planning. By setting a target date for the change, you put an end in sight. That way, you can calm your restless mind. With a focus on the end date, start your preparation to quit. Discipline is the key here. You begin by implementing frugality in life. And then make monthly savings a habit.  

How much should I save?

Loads of copper coins spilt from a glass jar

You have two years before quitting your job. And it may be another two years or three before you earn a decent income from your new profession. Essentially, you must plan in such a way that your expenses are deposited in your account every month starting the following month after you quit the job. To do so, start by tracking your expenses. Expenses can be categorized into the following types: 

  1. Monthly Expense
    1. Household Expense – Rent, Groceries, Fuel
    2. EMIs on loans
  2. Yearly Expense
    1. Payment of Insurance ( Life, Health, Vehicle ) Premiums
    2. School / College Fees
    3. Diwali / Birthdays / Wedding Days / Dussehra etc
    4. Maybe a trip or two with family. After all, burnout is something you should plan against
  3. Unplanned Expense
    1. Health Complications
    2. Accidents
    3. Wedding of a close relative

Pie Chart

It would be a good idea to set aside an account for this purpose – to stash all your savings for the big day of your life. So, now, how much should you save? The simple answer is: “All the money that remains after the monthly expenses are met.” But if you were to ask, “What is the ideal amount I must be saving?” the answer is more complex.

We begin with a few assumptions:

  1. It will take two years from the day you quit your job to settle nicely into the next one
  2. It will take a further two years before you start earning at par your current salary
  3. Frugality is the order of the day for the next six years ( 2 years of preparation + 2 years to settle in new career + 2 years before you start earning your full potential)
  4. No new loans or significant purchases for the next six years

The whole idea is that you must get an amount that would manage your monthly expense into your account on the salary date ( which may be the 28 of the month, say). And this continues for 24 months after you quit your job. If you have saved more, then you may enjoy your paid hiatus for longer. Now, let us calculate the amount that you must save every month for the next two years.

You better use an excel sheet to do your calculation. Arrive at a figure for your average monthly expense. Let us call it ‘M.’ Make a list of your yearly expenses under different heads, as listed earlier in this article. Add all the annual costs and divide the same by 12. Call it ‘Y.’ Now, the last on our list was “Unplanned expenses.” Let us call it ‘U.’ For health-related expenses, it is advisable to hold substantial health insurance and keep it subscribed. In an Indian context, it is expected of you to gift generously when it comes to weddings of very close ones. So, you may put an amount of your choice under this head. So, as you see, there is no formula to calculate U.

Now, the formula for your monthly savings would be: 

Monthly Saving = M + Y/12 + 20% of M

Why the additional 20%? That gives you room to manage the increase in the cost of living and any other expense added on the way.

In addition to this, you need to 

  1. Keep your health insurance updated 
  2. Save a one-time lumpsum under Unplanned Expense

Ideally, you would stash the one-time lumpsum in a Fixed Deposit. 

And now the big question is, what if your savings are lesser than your expenses? Simple. You have to increase the planning period by a few more months and save enough.

How will you get the money every month-end after you quit?

It is straightforward. Start a Deposit every time you collect an amount equal to your Monthly Saving that we calculated earlier. Adding more into this saving does not hurt. Assuming you can save more than your monthly expense if you decide to quit your job after 24 months, the term of the Deposit must be 24 months. Suppose you intend to say “adiós” to your job in May 2024, you cease to get your monthly salary from Jun 2024. So, ideally, you would start your first Deposit that would mature in June 2024. And do the same till you have your funds planned for the next two or three years. The more, the better. You must invest more for months when you have your scheduled yearly expenses. Once you have this plan in place, you are good to quit your job. 

Make sure you choose the right career to shift

No matter how much you plan, if you have not chosen the right career to shift into, your plans shall fail. So, the step 0 in your career shift plan must be to seek expert advice to know if your decision is right. If that is what you want to do, head here.

Be informed that this plan may not serve if you are quitting to start a new business. That is a world apart from changing jobs and careers. So, that will be for another article. Another day!

Hope you enjoyed the article. And all the very best with your career plans!

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