The following is an excerpt from the book When Life Strikes: Weathering Financial Storms
by Cal Brown, CFP, MST. The excerpt is a digitally scanned reproduction of text from print. Although this excerpt has been proofread, occasional errors may appear due to the scanning process. Please refer to the finished book for accuracy. Copyright © 2011 Cal Brown, CFP, MST, author of When Life Strikes: Weathering Financial Storms (Brown Book Publishing Group).
This is a continuation from part 1.
The Six-Step Career Makeover
You now realize that lifelong employment at your present company is tenuous at best, delusional at worst. You also recognize that there are better opportunities waiting for you. The following are six steps designed to create lasting and fulfilling career change:
1. Envision your dream job, and then act on it.
2. Consider self-employment.
3. Consider a career in sales.
4. Obtain essential education and training.
5. Develop networking skills.
6. Create a cash reserve and get out of debt.
Envision Your Dream Job, and Then Act on It
What Color is Your Parachute? will guide you through a process of determining your ideal career. Once you've completed this step, you'll need to conduct "informational interviews" with people who may be able to assist you in making your goal a reality. An informational interview is very different from a job interview. It's more akin to networking because you're asking people in related fields to assist and give you ideas and feedback. You'll be pleasantly surprised by how the simple question, "Can you help me figure out my future?" will be greeted with helpful assistance.
Consider Self-Employment
If you're looking for job security and financial success, I encourage you to consider starting your own business. While working independently may seem like a risky proposition, I'm convinced that the highest degree of job security is available to those who own their own companies. Why? Because business owners have much more control than their employees. After all, their customers are the only ones who can fire them.
You may have heard discouraging statistics that claim that 90 percent of small businesses fail. There is research, however, that counters this high-failure-rate figure. A Small Business Administration study, for example, found that 70 percent of small businesses survive for two years and roughly half for five years. Furthermore, the National Federation of Independent Business conducted a study in conjunction with Wells Fargo Bank and found a similar five-year survival rate. The NFIB estimated that over the lifetime of a business, 39 percent were profitable, 30 percent broke even, and the rest either lost money or fell into the category of "undetermined."
If you're going to start your own business, be very analytical and develop a written plan. Carefully calculate your anticipated expenses -- and then double them. Determine your projected revenue -- and then cut it in half. This is because things rarely go as expected with a new business; costs are usually higher than anticipated and revenue is often less than expected.
Consider a Career in Sales
My father once told me that if you're a good salesperson, you'll always have a job. He wasn't even in sales -- he was a corporate attorney -- but my dad came to this conclusion after decades of observing others in the working world. Commission-based sales is a career that may seem very risky. I'll be the first to acknowledge that success in sales is tough because you're compensated only for the amount of deals you close, so a dip in performance will directly affect your earnings. However, the law of supply and demand will work in your favor if you have the natural gifts or the desire to learn how to become an effective salesperson, and you're willing to work very hard.
Neither self-employment nor sales is easy. If you've got the "right stuff," however, you can find these careers immensely rewarding, both emotionally and financially. In my case, I went from being an employee in a large corporation to taking a sales position in financial services. Then I became self-employed. The transitions from one role to another were extremely difficult. I experienced a long, steep learning curve to gain and master sales and self-employment skills. The hard work paid off, however. As Confucius said, "Do something you love and you'll never work a day in your life. "While that's a bit misleading -- self-employment is very hard work -- the truth is that the investment of time and money can be immensely rewarding if you're engaged in a business that you truly enjoy.
Obtain Essential Education and Training
In the late seventies, factories throughout the northeast and upper midwest regions of the United States were closing their doors. The result was massive unemployment. These economically depressed regions eventually were referred to as the Rust Belt. Sadly many of the Rust Belt factories never reopened. The situation was so tragic and widespread that singer Billy Joel recorded a song titled "Allentown" that captured the hardships that millions of former industrial workers endured. The unemployed individuals ended up following two broad paths:
- One group went on welfare and continued living off the tax revenues of productive American workers.
- The other group enrolled in educational and training programs that prepared them for different careers.
The demise of industries that comprised the Rust Belt points to the harsh reality that everyone in this country must acknowledge: with jaw-dropping speed, new technologies make obsolete what was once the latest and greatest. One just needs to look at the evolution of the Dow Jones Industrial Average for proof The Dow, a widely quoted stock market index, contains thirty companies. Charles Dow established it in 1896 with twelve companies. More than one hundred years later, there is only one company from the original list still in the Dow¬ -- General Electric. All the others went bankrupt, were broken up by the government, or were merged into other companies. Consider how word processors put typewriter manufacturers out of business, Napster and iTunes forever altered the recording industry, and the automobile destroyed buggy whip makers. On the other hand, constant change also creates new opportunities for those who are open to what the future holds.
I remember a television program that interviewed those who had formerly worked in steel mills and other factories in the Rust Belt. These folks had gone back to school or received training in entirely new careers. Through hard work and adjusting to change, they found jobs in software and other high-tech industries. Not only were they making more money than they had in their former jobs, but also their working conditions were vastly improved. Gone were the dirty and dangerous factories and mines where they had clocked in every day. The television documentary pointed out that these workers didn't get their new jobs by sitting at home, watching TV, and waiting for someone to come knocking on their doors. Instead, they recognized the challenge and the potential opportunity that would only be possible through education and training.
Just as some kind of educational degree is necessary for most adults to get their first so-called grown-up job, additional education will most likely be necessary if you're making a career switch. When you take care of this while you're still at your current job, you've got the cash flow to cover retraining expenses. Once you've completed the necessary coursework, training, or both, you're ready to move into a new field right away. This points to the importance of being proactive. There is no downside to being more educated. Yes, it may cost money -- in some cases lots of it. I got a master's degree in taxation at the age of fifty-four, and it was expensive. Obtaining any degree is an investment in your future earning power, which means that the payoff can be huge. Will it guarantee you a high-paying job that you'll love? No. It substantially improves the odds, though. You'll be a much stronger candidate for whatever job you seek because you'll rise to the top of the hiring list. Remember, when you're competing for a job, coming in second usually means that you won't get hired.
Develop Networking Skills
You've probably heard the saying, "It's not what you know, it's who you know." Actually, I think it's both. It is what you know (education and credentials)and who you know (personal and professional connections). Meeting and getting to know as many people as you can are essential steps to advancing your career. Those who aren't particularly sociable often shudder at the thought of schmoozing and reaching out, but networking can fit nearly any personality type. If you're an introvert, it helps if you join an organization where you'll meet like-minded individuals. That way you'll increase the chances of creating an immediate connection.
In addition, consider joining community, civic, and faith¬-based organizations that align with your interests. Your networking community can potentially help you in ways that you can't even imagine. Don't just join and attend meetings; get involved in committees and volunteer to take on leadership positions. This points to one important characteristic of a successful networker: always give first. When your priority is to contribute your time and talents for the good of the organization itself, the rewards will come naturally.
Create a Cash Reserve and Get Out of Debt
In 234 BC, the Roman statesman Cato the Elder said, "Cessation of work is not accompanied by cessation of expenses." In addition to the psychological and educational preparation required for career change, there are two critical financial planning measures to take care of as well.
First, you must create a cash reserve, which is also called an emergency fund. Career switch or not, every working person should have one. The emergency fund should cover a minimum of three months of your living expenses. In order to determine a cash reserve amount, you need to figure out your monthly living expenses. Your emergency fund should be invested in something safe and liquid. In other words, it should be in a place where you can access the cash quickly and without penalty or delay. I recommend that my clients place theirs in bank savings accounts or money market funds. No, they won't earn a high interest rate, but that's not the objective. In the event that my clients experience job loss, they can withdraw money right away to pay living expenses. A six-month emergency fund would give you even more leeway to find a new position -- all the better if you can do this.
Second, get out of debt. Dave Ramsey's excellent book Total Money Makeover provides readers a great strategy for eliminating debt and building an emergency fund. You may think that slashing debt should come before saving for a rainy day. Instead, Ramsey suggests that you first put $1,000 into an emergency fund. Only then should you begin paying off your debts, except your mortgage. I agree with his approach because it ensures that you have something in reserve ($1,000 minimum) while implementing a debt reduction plan right away.
To do away with debt, you first list all of your liabilities¬ -- with the exceptions of your home mortgage and home equity line of credit. Then you place your debts in order from smallest to largest. Examples include car and personal loans and outstanding credit card balances. Next to each item, determine the minimum payment and the interest rate. The following is an example:
- MasterCard -- Owed: $1,000; Min. Payment: $25.00; Months to pay: 61; Interest: 18%
- Visa -- Owed: $2,000; Min. Payment: $50.00; Months to pay: 78; Interest: 24%
- Car Loan -- Owed: $15,000; Min. Payment: $375.00; Months to pay: 44; Interest: 5%
- Total -- Owed: $18,000; Min. Payment: $450.00
Notice that the total monthly debt amount is $450. At this point, you start each month by tackling the smallest debt first, while making the minimum payment on all the other debts. Using the example I provided, you'd start with the MasterCard. Let's say that you decided to increase your total debt payment to $600 instead of your current $450, which is $150 more per month. Add that $150 to the $25 monthly MasterCard payment. In other words, you're now paying $175 per month toward the credit card balance. Following this formula, this item would be free and clear in just seven months. Once the MasterCard is paid off, take the $175 per month you were paying for it and apply it to the $50 Visa payment, so the total monthly Visa payment will now be $225. At this monthly amount, within nine months you'd payoff the Visa. Once the Visa balance is zero, apply that $225 to the car loan, which will mean that your monthly car payment is now $600 per month. The good news is, instead of waiting four years, the car will be paid off in twenty-three months. Ramsey refers to this as the "debt snowball" because you pay more and more against each successive liability. As a result, your debts get paid off remarkably quickly. In most cases, it's an eighteen-month to two-year process.
Once all debts are gone, then you take that snowball amount and start building up your emergency fund. Read Total Money Makeover for more details. Ramsey not only provides solid advice but also adds real-world stories that illustrate the power of his money management system. The best part is that Ramsey's tools are straightforward and free of financial jargon. The bottom line is to do whatever it takes to plug the hole that's hemorrhaging your savings. If you need to get a second job delivering pizzas to generate extra cash, so be it.
How to Avoid Career Change Panic
Remember this formula: debt + joblessness = pressure. The opposite is true as well. If your overhead (monthly expenses and liabilities) is low and your cash position (assets including an emergency fund) is high, you'll be in much better shape to weather a job search that may take months. If you're laid off, you may be fortunate enough to receive a severance package that will help you stay afloat despite a prolonged period of unemployment. Do not be complacent during that severance pay period. Attack the new job hunt with vigor instead so you don't have to tap into your emergency fund or amass more debt than you may already have.
Planning ahead for a job loss will help you avoid financial ruin, maintain dignity, and remain solvent during a period of career transition. As a result, you'll be equipped to dive into your job search with confidence and peace of mind.
In the next chapter, I'll address what to do when unemployment is your current reality.
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