Make It a Habit of Saving Money
You’ve been working at your current company for a few years now and haven’t really been advancing. You are thinking of moving to another company for a new job since it offers more opportunity for promotions. Perhaps you’re thinking of moving into a sales position where you work on commission. You’re confident that if you make the switch in a few months you’ll be making more than your current salary. Maybe you just decided that being an employee isn’t for you. You want to go ahead and turn your side income stream into your main income stream.
What do you do?
You have to decide for yourself what’s best. I do know, however, that have a cash reserve can be empowering and help you make the transition. There are times when the best long term decision requires a bit of pain in the short term. For example, Some sales jobs pay by commission so you may have a little bit of negative cash flow until you get your footing.
Money Management Skills You Need Before Making the Switch
Before you make the switch, there are a few financial priorities that you need to take care of until your finances have stabilized. You should have a cash reserve ready to help out if the pay is a bit irregular or lower than your current income for the time being.
That means you may have to make the following changes to your finances:
- Essential Bills: Pay your rent/mortgage and all the essential bills as normal.
- Debt Payments: If you can pay off some or all of your debt, then go for it. You don’t want to be behind on your credit card payments while starting off on a new job; it’s just too stressful.
- Investing: I would put enough into get your match and save the rest. You can always pick up your contributions after you’ve made the jump.
- Extras: Cut back or eliminate on the extra expenses you have until you reach your cash reserve goal.
How do you calculate your cash reserve goal? I would research how long it typically takes to reach your income goal and then add on 25-300% to that in case you hit a bump in the road. If estimate that you’d need 3 months to build your contacts and contracts for your new sales job, then save enough to pay for gap for 4 months of expenses.
If you pick up on the job sooner than expected then you can use that money to pay down more debt, transfer it to an emergency fund, or contribute it into your IRA.
Psychology of Money
Having freedom fund can be the best thing for you as it gives you a bit of a safety net while you build your career.
Are you thinking about making the jump? Curious to see what affects your money making (or losing) decisions? Check other posts in the Money & Psychology series:
- Choosing Friends to Build Your Net Worth
- Decisions, Decisions – Making a Big Purchase
- Is Saving Really About Motivation?
- Ways We Spend Money Without Evening Knowing It (and How to Fix It)
- Barriers That Prevent us From Saving Money
- Dealing with the Stress of Financial Issues
How are you working through this economic mess? What tips can you share?
Photo Credit: alancleaver_2000