Cash & Coupling: Advice For When You Or Your S.O. Changes Careers And Takes A Pay Cut
We know you love your man for more than how much he reminds you of Don Draper when he puts on his suit and tie every day, just like we know that you aren’t with him for his paycheck. That said, a voluntary career change involving a serious pay cut isn’t necessarily easy to cope with. If your significant other has come to you wanting to talk about a career change, hopefully it’s something you can believe in, like supporting his lifelong desire to be a teacher, not joining his little brother’s garage band. But even if your heart’s behind him and your relationship’s rock solid, it doesn’t mean that your finances will be, too. Cathi Doebler, author of Ditch the Joneses, Discover your Family, offered this advice for deciding whether a major career change is right for your family.
Identify all the impacts to your budget. Your partner probably thought long and hard about this before ever coming to talk to you, so ask plenty of questions. Doebler recommends: “Questions you should ask about this change include, ‘What are the benefits for our family with this career change? What are the challenges? How will this impact our family benefits, such as health care, life insurance, and 401K options? Will the reduction in income be long-term? For example, will he start out at a lower salary, but build up again to a higher salary over time? Will the reduction in income be permanent? How will this impact our tax bracket? Will the reduction in income reduce your taxes significantly?” While at first the idea of slashing your income may sound painful, it’s possible your man has thought it all out and has a plan that will soften the blow.
Get a clear picture of your current budget. Hopefully, you and your partner both have a pretty solid idea where your money goes, but even so, you need to go over your current financial lifestyle with a fine-toothed comb. Doebler says that looking at this budget is critical in determining whether you’re financially healthy enough to absorb the blow of a voluntary pay cut. “Some ways to do this include tracking your spending on everything from the electricity bill to coffee at Starbucks for at least three months, and looking back at your credit card statements and checkbook for the last year.” Doebler says that this close look will allow you to see what your lifestyle really costs. Even if you’re very careful with your budget, realizing that you blow half of your disposable income on eating out may be a realization you need to have before that disposable income vanishes.
Distinguish between your needs and wants. With your budget detailed on paper, it should be easy to identify what you’re spending on needs for your family and what you’re spending on things just because you want to. It’s OK — we all spend money on wants. The key here is just to identify whether you’re willing to give those up. And make sure you’re honest about what category you’re putting your expenditures in; while you may argue that red wine is obviously a need, it belongs in the want column. “Needs are critical to your family’s survival. Wants are not critical to your family’s survival,” Doebler clarifies.
Identify what you’ll need to sacrifice. Once you’ve identified what you’re spending on needs and wants, you can start adjusting your budget to see what sacrifices it would take to make the new budget fit. This may require small tweaks, or, depending on the amount of the reduction, major changes. “Minor changes can include changing your habits while grocery shopping, such as purchasing store brand items rather than more expensive brands, shopping the perimeter of the store for the more important items (fruit, vegetables, dairy, meat) and skipping the non-critical items (chips, soda, candy) or reducing expenses like your cable or phone plans. We saved $4000 over nine years by reducing our cable to a basic plan!” says Doebler. “Major changes can include taking less expensive vacations, or spending vacations at home doing small daytrips to simpler and less expensive sites, or getting rid of any extra vehicles. If your family can live with only one vehicle, you’ll also save money on the additional vehicle costs, including insurance.”
And Frisky readers, we know that all of you don’t live in a big city with an extensive mass transit system. (See? We do read your comments!) But you can still sell a car that has a hefty monthly payment for a less flashy one you can pay off or pay off sooner, or you can arrange your family’s schedule so that you can make do with just the one car, like Doebler suggested.
Don’t forget to anticipate future needs. You may be able to slash and burn your budget brutally enough that it will work, but make sure you’re taking into consideration big expenses looming in your pipeline. “Consider any additional spending you’ll have in the next few years to include in your budget. For example, will you have to put a new roof on your home in the next three years?” asks Doebler. With a lower income, you’ll have a smaller safety net ready to absorb the blows of expenses you didn’t plan for, so you and your partner need to talk about how you’ll approach these situations – both those you can expect and those that may catch you off guard.
Decide whether the change is worth it for your family. While this may be about your partner following his heart, the bottom line is that this is a decision that will affect your whole family and if you’re committed to a life together, it’s a decision you need to make together. After looking carefully over all aspects of your finances, you need to honestly decide whether this change is something you both can live with. “Brainstorm together about the benefits of this change for you, your spouse, and your family as a whole. Talk about the challenges you’ll face, and your fears about those challenges. It will be important for you to listen to each other as you talk these through, remembering that a relationship is about we, not me,” Doebler advises.
The Money section and all articles within it are sponsored by Free Credit Score; however, the articles are all independently produced by The Frisky and the opinions and views expressed by the writers and experts are their own.