Breaking Out of a Rut Without Going Broke: Financial Tips for Career Transitioning

I've recently come to realize I've lost something I've had my whole life. Something that some, if not all, people never have. Direction. I didn't really appreciate it until it was no longer there, like most important things in life. For me, it is science. Science has been an inevitable, magnetic pull as far back as I can remember. I never even hesitated when people asked "What do you want to be?" or "What will you major in?". Biology of course. There are other things you can study and do? Who knew.

Biology in action.

Therefore, my whole life thus far has been laser-beam-focused on science. And I've certainly achieved my objective. From four different lab internships throughout undergrad, to a published masters thesis, to a PhD candidate position on a top medical campus, I'd say in terms of 'doing science' I have succeeded so far. 

Problem is, one day I realized that magnet was getting weaker. And I fought it, I tried to re-focus, to think about it differently. But it faded away like a sunset, leaving the darkness of confusion in its wake. That thing which defined me, drove me, inspired me, now there is no pull. There is no sense of purpose, no goal to strive for. Now what? 

I'm very fortunate that my parents taught me how to manage money from a young age. I started my first savings account at 13 with my meager allowance. I had many a lemonade stand and bake sale, and had a sort-of job by 15. My dad made me a deal to pay for half of my first car, and by the time I had my license in hand, I'd paid cash for a cute little green Saturn. Throughout college and my masters degree, I worked two jobs to cover rent, food, gas, and books. My test scores had rewarded me with a full tuition scholarship. Because of this life-long money awareness, I made it out of six years of school with less than 1/3 the average debt. 

I will be forever grateful to my parents for those lessons in frugality and saving.

Those lessons are ones I continue to apply every day in my life. My savings account is by no means impressive, but it would be enough at this point to allow me to be unemployed for about 5 months without changing my lifestyle one bit. If I cut back dramatically I could probably stretch that to 8 or 9 months. That is such a peace of mind when looking at a possible huge life change, like a major career transition. 

As if the thought of not having a job weren't stressful enough, I just think how much worse it would be if I literally needed that paycheck to pay my necessary bills. And I know a lot of people are currently in, will soon be, or have been in that exact situation, and my heart goes out to you. If you are, or think you may be in a career transition situation, I have a few pieces of advice you should consider now to make it easier when that day comes.

1. Pay yourself first.

This is the most important rule of money. You pay your landlord rent, you pay the dealer for your car, you pay the grocery store for your food, you pay Uncle Sam his taxes. Why would you not pay yourself? After all, you are the one doing the hard work at whatever your job is to bring that paycheck home. Statistics from December 2013 reveal that 40% of Americans are not saving for retirement, while 25% have no savings at all. That is a very scary thing. And when you pay all the required bills, there is not much left over for silly things like, say, food and gas. I understand. But that's why it's imperative you save 10% first. 

Use automatic transfers to make it easier. On the first of the month, just take 10% of your paycheck, whether that is $10 or $1000, and transfer it into a savings account. It may be slow, but over time it will build. And you will find that you can still make it to the end of the month. Maybe you will have to cut out a trip to the store, or a movie night. But think how much better you will sleep at night when there is a cushion of cash you can call your own.

2. Scale back on non-necessities.

If you know for a fact that a period of transition is coming up, scaling back on your lifestyle can make a huge difference between being comfortable and feeling squeezed. If you know you will be transitioning to a different field, might be unemployed for a few months, or will have to take a lower paid position, try to estimate how your income will change and start living off that lower amount now. Save the difference. 

Maybe cut back on eating out, going to happy hours, or buy fewer groceries, and stop smoking now. Find ways to minimize the cost of things you like to do. Go to a matinee on Saturday instead of a Friday night if you like theaters. Have a potluck game night with friends rather than going clubbing. $30 in booze goes a lot farther at home than in a club.

3. Make a budget and stick to it.

The first step here is to figure out how much you are currently spending. For one month, track every cent that leaves your accounts. You can do this by hand, or try using an online tracking tool like You Need a Budget or Mint.com. The next step is to figure out how much you want to or should be spending in these categories. Things like rent/mortgage, car or loan payments, and utilities are rather concrete. Focus on categories you have control over, such as entertainment, hobbies, gas, and groceries. Find more great tips in How to Make & Stick to a Budget.

4. Learn to cook, and cook at home the majority of the time.

Eating out can cost $5-$15 for lunch and $10-$20 or more per person for dinner. If you have lunch with co-workers every day, and dinner at a restaurant 2-4 times per week, that is a significant expense. It will save you hundreds per year if you cook your own meals at home. Obviously I am a huge proponent of learning to cook! 

In the archives here you should find plenty of simple, cheap meals as inspiration, and the internet has seriously infinite ideas. Even just picking up a loaf of bread, peanut butter, and jelly will give you two week's worth of lunches for less than you probably spend in one day eating out. If you don't think you have time to cook, check out my 10 Minute Chili Mac, Fancy Ramen Soup, or Easy Steak Stir-fry. For even more tips on getting your grocery bill as low as it can go, check out How to Save Money on Your Grocery Bill.

5. Find frugal entertainment & frugal friends.

 

If your social circle is based on events where you are pressured into spending money, then you need to start branching out. Big trips, buying toys like boats and golf clubs, and going out drinking can cost you big bucks. Try new hobbies that don't require money, like taking up jogging or walking, join a book club, hike, start a garden, or find a local sport club. You could entertain yourself with a visit to the park, your local museums, or volunteering. Help Habitat for Humanity, your local church or soup kitchen, or go to Volunteer Match to find something that fits your interests in your area. You can get involved in your community, help people, and meet new friends along the way.


More ideas on cheap/free hobbies:
23 Fulfilling Hobbies You Can Start Right Now from Thought Catalog
The Only Thing You'll Need to Spend is Time from The Simple Dollar
100 Cheap Hobbies - Spend Time Not Money from Free in 10 Years 
The 35 Best Ways to Spend Your Free Time (Frugally) from WiseBread  

Job transitioning articles:
When Your Dream Job Disappoints, How to Find Plan B from The Wall Street Journal
Don't Burn Bridges: 10 Ways to Maximize a Job Transition from Monster Working
Transitioning From One Job to Another from Business Insider
Advice for People who Want to Quit Their Jobs from Thought Catalog


This post began with the intent of giving tips for making a career transition easier, but these tips are applicable to any stage of life. If you start incorporating these ideas into your daily life, you will notice your bank balances going up, maybe your debts going down, and your worries starting to ease. You may even find a whole new world of things you didn't know existed, and make new life-long friends.

Though a career transition is scary, being prepared can help make it easier. The more you have saved, and the fewer your bills and expenses, the more comfortable you will feel financially. Then you can focus on perfecting that resume, building your network, and polishing your interview skills instead. I have no idea where I will go from here, but I know that having some money in the bank and minimal expenses makes it a lot less scary to not know.



Have you ever transitioned between careers? What advice do you have?

How to make & stick to a budget

How to make a budget

Part of any healthy financial plan, a budget is a critical tool to help you find out and control where your money is coming from and more importantly where it is going. Many people cringe as soon as they hear the word "budget" because they think that means never having fun ever again, which is simply untrue. The beauty of a budget is that YOU are in charge of it. You call all the shots, from what categories there are to the amounts allocated to each. And they can be amended as your life situation changes to allow for schooling, a raise, a job loss, a move, a marriage, a baby, a divorce, etc. 

So how does one go about creating a budget? 

Your first step should be sitting down with a pen and piece of paper, or a Word or Excel document, and writing down every single thing on which you spend money on a daily, weekly, monthly, or yearly basis. Include housing (rent/mortgage/taxes), transportation (bus pass/gas/parking), food (groceries/dining out/coffee shops), and entertainment (movies/books/games/hobbies/vacations), as well as any other special categories you might need (children's activities/debt repayment/investments). 

Your next step is to either: a. keep track for a month to see what level of spending is in each category, b. use an online tracker such as Mint.com to track spending, or c. estimate the amount spent each month. This is your total spending. Now estimate or calculate your income each month. This can include paychecks, investment dividends, interest on savings, gifts from relatives, inheritance, side jobs, etc. This is your total income.

Your goal: Make the difference between your income and your spending as large & positive as possible

This is the "spending gap", as covered in several great articles (Minding The Gap & The Gap Matters More Than Anything) by Trent from The Simple Dollar. You can increase your gap by either spending less or earning more, or ideally doing both. The larger your gap, the more room you have to pay down debt, invest, and sock away savings, and the less stressed you will be. 

Let's look at an example:

In the scenario on the left, the person in question makes about $54,000 a year (take-home of $4,500 a month) plus some extra from interest (assuming there are investments). The smart thing to do would be to re-invest that interest each month, thus adding to the principal amount invested and increasing the amount of interest. 

Anywho, that adds up to $4,750 coming in each month. This person also appears to have a rather nice home and car, as well as a lively social life, causing spending to total $2,450 per month. Even at this spending level, this person's "gap" is a healthy $2,300 per month. They could use this to pay off debt like cards or loans, save for retirement, pad an emergency fund, or take a nice vacation.

On the other hand, the person on the right makes about $26,400 per year, and has no income other than their paycheck, which is $2,200 per month. While they have a lower housing payment, they have the same social and entertainment level as the person with a higher income, leading to a tiny "gap" of only $50 per month. 

The best way to approach this, with the intention of increasing the gap, is to consciously choose a number smaller than the current spending level. If you then hold yourself to those smaller numbers, you will naturally see your spending gap widen in your favor. 

If, for example, the person on the right were to move to a smaller housing situation or obtain a roommate, drive a smaller or older car, save money on groceries and eating out, decrease shopping and eliminate unnecessary spending like going out to the movies, the gap can widen to as much as $1,150 per month! That can become a nice savings account to eventually full-out buy a nicer car, a house of their own, make a job transition, or whatever dreams are yet to be fulfilled.

How to stick to a budget

Once you decide on the amount you want to spend per month on a certain category, now all you have to do is hold yourself to it. Easy right? Not so much when you're new to budgeting. Or really at any point in your life. You see, we all have a tendency to get used to whatever lifestyle we currently lead. Our "wants" will always greatly outnumber our "needs", and that leads to lifestyle inflation. That means when your income increases, you can fulfill more wants, so you expect a nicer lifestyle. Investopedia explains how this keeps us in the "rat race", working just to pay the bills. 

This more expensive lifestyle then becomes the new normal. Inexpensive or free activities aren't as appealing because it seems "beneath" you since you have such a nice way of living. Unfortunately things happen which may decrease your income, but will not decrease your expectations. It is also more difficult to save and get ahead financially. The Simple Dollar also has a great article about Avoiding Lifestyle Inflation.

There are several ways you can avoid the temptation of lifestyle inflation. 

1. If you get a raise, pretend like you didn't by putting that money straight into a savings or retirement account. If you don't know it's there, you can't spend it.
2. Do NOT take on unnecessary debt. Just because you make more doesn't justify a huge loan for the newest car out there or a bigger house or more credit cards or whatever.
3. Forget about the Joneses. What other people have doesn't matter, there will always be people with more money and things than you. Focus on your life, your relationships, and the things that bring you joy.
4. Continue finding free and inexpensive activities that fulfill you. Teach, tutor, volunteer, read, or go for walks. Enjoy the simple things in life.

For more ideas see YahooFinance, GetRichSlowly, or FabandFru. 

The single best tip I can give you on sticking to a budget is to automate as much as possible. If 10% of your paycheck goes straight to a savings account minutes after it is deposited, you don't have a chance to spend it at the mall. If you have accounts set up for grocery spending or entertainment and put only the amount you want to spend, then you can only spend as much as is in the account. This takes a lot of the work out of budgeting, and makes you accountable. Just be sure to keep an eye on amounts and balances every month.

How to save money

Another problem people have with budgeting is not being able to "find" any extra money to cover the bills, savings, investments, as well as social fun. A lot of people view being frugal as the same thing as being cheap or miserly. This is not necessarily the case. You can still have a vibrant social life and enjoy leisure activities without spending large amounts of money every month. And many easy tips that save you money over the long haul don't even make a noticeable impact on your daily life. 

You don't have to go to the extremes of making your own laundry soap, living with a 55 degree home in the winter and 85 in the summer, or eating wild flowers to supplement your diet if you don't want to. There are boatloads of frugal money-saving tips, and of course each one will not work for every person. You need to evaluate each tip according to your needs and lifestyle, try a few out, and keep only the ones that work for you. 

My favorite way to save money is on food of course. I combine many different techniques to keep my grocery bill as low as possible. For starters, I very rarely eat out. Nearly every breakfast, lunch, dinner, and snack is made by me in my home. This saves me a TON of money yearly. Say I got lunch at work each day, for an average of $8 per day. $8 x 5 days per week x 48 weeks per year = $1,920! Nearly $2,000. That's 2 1/2 months of rent for me, or 7 1/2 months of car payment, or 10 months groceries. By making my own meals, I save that amount and put it towards savings, retirement, and other goals. 

I shop what's on sale at the store, I stock on up frequently used items if there's a good deal, I buy in bulk when I can, I pay attention to "per unit" prices, etc. I also take the bus to work in warmer months (I'm a student and we get a free bus pass, saving me $36/month), I insulated my apartment windows so the heating bill is lower, I buy clothes at Goodwill and consignment stores, and so on. 

For more great tips on daily money saving strategies:

America Saves - 54 Ways to Save Money
Daily Finance - 5 Tips for Frugal Living That Won't Leave You Feeling Miserable
How Stuff Works - 5 No-Brainer Money-Saving Tips Everyone Forgets
Learnvest - 9 Frugal-Living Tips from the Great Depression
Little House Living - Frugal Tips
Living Frugal Tips website and Savings category
The Simple Dollar - Little Steps: 100 Great Tips for Saving Money for Those Just Getting Started
US News - 8 Painless Ways to Save Money
zenhabits - The Cheapskate Guide: 50 Tips for Frugal Living

What's your favorite frugal tip?