'Honey, Can We Afford a Career Change?'

This article is part of a series of stories offering help with “Hot Topics”: tricky family conversations that have real financial impact.

Our financial priorities are changing.

Research suggests that a majority of Americans now consider a healthy work-life balance a better measure of success than a fat paycheck -- and burgeoning benefits like flexible work arrangements are making it easier than ever to strike that balance.

As working families gain more freedom over their career trajectories, some are taking a step back to assess whether they’ve chosen the right path to begin with. Yet for workers making a mid-career transition, the financial stakes are higher than for young professionals -- you might have to take a pay cut as you start at a lower rung in a new profession, or recalibrate your skills through additional education. Such a change, then, calls for careful planning -- and, if you're married, a frank discussion with your spouse.

“I’m a big believer in second careers, of reinventing yourself, but it has to be in line with the rest of your goals,” says Allan Roth, a Colorado Springs, Colo.-based financial planner. “Follow your dreams, but do it in a smart way.”

PAIN POINT

Making a change can be challenging, particularly later in your career. The share of people who changed careers was 2.2% in 2012 for workers aged 45 to 65, according to the American Institute for Economic Research (AIER) -- much lower than the 5% seen in the general population.

PREP WORK

Understand how making a change could affect your family's finances. Start with an expense sheet that documents your spending. You can use an app like Mint.com, a spreadsheet, or a yellow legal pad, but it will probably help to have a year's worth of credit card and bank statements at hand. Make sure you account for irregular expenses like home and car maintenance.

Now look at money coming in, and subtract the salary of the partner who wants to pursue a new opportunity. You'll need to have a frank discussion about whether you could live off one income, even in the short term. Go back to the expense sheet to discuss what you could cut, if needed.

Finally, look at job postings in your desired field to get a sense of what you might make once you've made the switch. That will help you understand whether your family is looking at a long-term drop in income or a short-term gap.

OPENING LINE
“I've been unhappy at work for a while, and I think I'm going to need to make a shift. Can we sit down and figure out how I could make a change work?”

This isn’t the kind of conversation one partner can spring on the other in the middle of a bad week. Both members should have ample time to decide if the change is an investment they’re OK with, according to Roth. “You have to buy into this together,” he says.

TALKING POINTS
“This could be a tough period for us, at least in the short term. Are we both comfortable with the change?”

While a new role could well help your family in the long term, whether financially or emotionally, there will almost certainly be short-term hurdles. Brainstorm all the issues that could spring up. Is it less money? More hours? Variable workloads? “This is almost certainly going to bring new headaches,” Roth says. “If you’re thinking, ‘my gosh, this is going to be perfect,’ you’re probably making a mistake.”

Both spouses must be solidly comfortable with the change, says Cristina Guglielmetti, a Brooklyn-based financial planner. If the transition involves the temporary loss of one income, the health of the other job can’t be in question -- and that partner must be OK with taking on the weight of being the sole breadwinner. If these are up for debate, it’s time to talk compromises, Guglielmetti says. Can the spouse who wants a change scale back at their current job instead, maybe working part time or on a consulting basis? Can he or she moonlight in the profession they aim to transition into, or take night classes to prepare for the new role, and shorten the time it takes to find a new job?

–––
“What kind of time frame are we talking about?”

A common mistake couples make during the planning stage is failing to set realistic goals, Roth says. To get a sense of how long the shift could take, arrange informational interviews with contacts in the field. Then sit down with your spouse to set a timeline and figure how much of a hit you'll take -- this is where you'll use those expense and income sheets. “Taking the conversation from this nebulous thing to a conversation that’s based on facts and figures gives couples a clearer sense of what [a career transition] means,” Guglielmetti says. “They go from wading into the void to making an informed decision.”

Experts suggest that you plan for at least a year before you even start the shift. Start building your network through LinkedIn, Beyond.com, and other career-based websites. Look at job postings to see whether you'll need extra training or a new degree. If you'll need to go back to school, that could extend your timeline and may require you to set aside money for tuition.

Finally, because the AIER study found that almost one in five people failed to make a late career change stick, agree on a fallback plan. Decide with your spouse exactly what circumstances would make you throw in the towel -- and commit to those parameters. “Make a list of at least three things that can go wrong, and how each of those scenarios would impact the family,” Roth says.

–––
“Will a career change really make me happy?"

For some people, the cure for burnout isn't so much a career change as a career hiatus. If this sounds like you, discuss plans now that will help you transition back to work as seamlessly as possible once you've had a break.

You can look for ways to volunteer in your industry during your hiatus, or take a class that keeps you up-to-date on technological advances in your field, says Sallie Krawcheck, the former Merrill Lynch CEO and co-founder of the digital investment startup Ellevest. For women, this is especially important: One in five women reported a pay cut of 20% or more after taking a career break, according to research from Krawcheck's women's network, Ellevate.

“Once you’ve left the working world, it can be hard to get back on that horse,” she says. “If you want to keep your skills sharp and your connections intact, you can’t step fully out. You have to strategize about how to stay fresh.”

NEXT STEPS

If the transition is going to require a multi-year career break, Guglielmetti suggests that you and your spouse take it for a test run: Both of you keep working for a full year before launching the shift, but live on just one salary. By the end of that year, you’ll know if you can hack it for real, and you’ll have a nice chunk of change stashed away to help you bridge the gap.

ONE FAMILY'S SOLUTION

Guglielmetti recently took a couple contemplating a career transition through a baseline-spending scenario. There was a drop in income, but there were also some financial positives. The salary loss shifted the couple’s tax burden, and other small expenses like commuting costs went down as well. In the end, the pair decided to take the plunge.