5 Ways to Financially Prepare to Go After Your Dream Job
In her search for her dream job, McDaniels left the financial cushion of a full-time job at the Fortune 100 company that had hired her after she graduated from college. She was giving up an $85,000 annual salary -- a lot more than young, aspiring actresses can hope to earn when starting their acting careers. The pay cut was worth it, she says, because it ultimately led to her dream job.
While not everyone who searches for their dream job has to leave a high-paying, steady job, leaving a job and its benefits -- like medical insurance, paid vacations, a company car and a retirement plan -- is a sacrifice worth considering when moving to Plan B.
Whether you're quitting to become an entrepreneur or want to leave a dead-end job so you can work part-time elsewhere and spend more time with your family, quitting a steady job is a risk. In the search for the job of your dreams, you need to ask yourself if it's worth the financial risk and if you'll be making more or at least the same amount of money as your previous job. And if you're happy at a new job that pays less, can you make the lifestyle changes needed to pay for that happiness? Here are five financial aspects of a dream job search to consider before sending out your résumé:
1. Set Aside Some Savings
McDaniels put some money into savings before leaving her job in marketing and finance at General Mills (GIS) in Minnesota so she could cover her expenses if she didn't immediately find work. She had worked at the company for four years and was also a Minnesota Vikings cheerleader, and knew she was ready to leave.
She started modeling in New York and later moved to Hollywood after getting the lead role in an independent film. "I've never had to have a waitressing job or anything like that," McDaniels says.
Barry Maher, an author and motivational speaker in Corona, California, says that long before he quit his job earning five figures a month in the corporate world, he was setting aside "FU money" so he could walk away from it if he ever needed to. He quit after an argument with his boss.
"At age 50, I had a very successful career which was keeping me from the life I wanted," Maher says. "What's worse, I was on the verge of deciding that I was just too old to pursue my dream." After he quit, it took him about a year and a half to get back to and surpass what he'd been earning before.
2. Know the Price of Your Happiness
If you're going into a field that pays less than your current job or has seasonal ups and downs, plan for it and know that you're leaving so that you'll be happier in a more fulfilling job.
McDaniels, for example, had a comfortable, steady and enjoyable job at General Mills, but it wasn't a job she saw herself in for a lifetime. "If I stayed at General Mills, I'd probably be making more money but I wouldn't be as happy," she says.
While she's now making more than she did at her corporate job, McDaniels says her work comes and goes in waves, and she sometimes misses the steadiness of her old job. "Every day of my life, I'm never comfortable," she says.
3. Cut Expenses
At least initially, dream job searchers say they earn less money than they did in their previous job, and that cutting expenses is part of their everyday life for at least awhile.
For Kimberly Ferguson, of Burlington, New Jersey, getting to her dream job of providing training and development and coaching services required accepting a $15,000 to $20,000 a year income decline from her previous jobs in publications and education. She's closing the gap with the help of her family.
"As a mother and wife, I didn't want my decision to leave a secure job to adversely impact my family," Ferguson says. "I didn't want my two children to have to stop their extracurricular activities. Initially, I tightened the belt regarding my own interests. I went out to eat less, didn't travel much last year."
In 2013 at age 29, Kate Holmes of Las Vegas left her six-figure position at a firm that worked with rich individuals and qualified retirement plans. Eventually, she become a certified financial planner and started Belmore Financial so she could work for herself. Holmes is earning a lot less money, she says, but it has been worth cutting her expenses substantially, she says. She put all of her belongings in storage and is working from the road.
"My income is nowhere near the prior six figures, and I'm not striving for it to be," Holmes says. "I've realized how little I honestly need and how much more important experiences are. I've built a business that allows me to live life now, rather than working like crazy, buying crap I don't need and waiting to enjoy life decades from now."
4. Don't Forget Retirement and Other Costs
Depending on the path you take, you may not have a company retirement plan in your dream job. "I would love to have the 401(k) back," McDaniels says.
If you work for yourself, you can still contribute to a SEP IRA, for example, to save money for retirement. Without setting money aside, you'll be further behind your peers in planning for retirement.
Kary Oberbrunner of Columbus, Ohio, left his job as a pastor -- along with its retirement plan and other perks -- to write a book about how to move from a day job to a dream job and to become a coach and speaker. He stared a SEP account and had to deal with a host of other issue common to self-employed workers, such as paying quarterly taxes and getting health care for his family.
5. Be Prepared to Take Any Job
Even if you have a cushion set aside as you start on your path toward your dream job, it can quickly get spent, leaving you needing to take on any low-paying job you can swing so you can pay the bills. Dan Nainan, who left his job as an engineer at Intel (INTC) to pursue his dream job as a comedian, says it took him two years to make his first $5 at a comedy show. He got by working as a barker for a business in Times Square, earning $1 for each person he persuaded to go inside.
He's now making more than double what his salary was at Intel. "More importantly, there's a tremendous amount of satisfaction with what I do," Nainan says. "I'm essentially a paid tourist, and I don't have to work too hard, and I love what I'm doing."
That, in a nutshell, should be the definition of success in finding a dream job.