I was at a Wattpad conference in December when someone in the audience asked one of the authors on stage:
“How do you manage your finances?”
It was quite funny seeing the collective groan resonate across the entire panel (and audience for that matter). It sounds like a boring question, but it is a really important one for anyone in business for themselves. It’s also an important question for anyone thinking of changing careers. Changing career is exciting and wonderful, but it can also be daunting and stressful if you don’t prepare yourself fully…especially when it comes to money.
How to manage your money during a change
A drop in income is more noticeable when you go into business for yourself, but it can also happen if you’re completely changing career. You won’t have the required experience to earn the big bucks straight away. So what do you do? Don’t do what I did when I first started; panic!
I learned the hard way that you can’t just bury your head in the sand. Money concerns won’t just ‘go away’. I had reminders from HMRC (the UK tax authority) that were incomprehensible and in most cases, ridiculous. Leave it to a government to make something that should be relatively simple (i.e. pay tax on what you earn), unnecessarily complicated. So what do you do when you’re making a big transition?
After making many mistakes I put together a plan that helps me manage my finances on a monthly and yearly basis. It stops me from hyperventilating and ensures that I know roughly what my income and expenses will be.
How to manage your finances during a career change
Look at your bank statements
Pull out the last 3 months of your bank statements and go through them with a fine toothcomb. Circle everything that is essential. By essential, I mean things like food, transport, energy bills. Cigarettes and alcohol do not count, sorry! Now add up what the rest of your money is being spent on. How much are you spending on non-essential items? Are there any items you think you can do without for a while?
Draw up an example budget for the next month
Try living one month without some of the non-essentials. You don’t have to cut everything out. Leisure time is arguably more important than working time, but do you really need to spend £100+ a month on booze, cigarettes and nights out?
Save some cash
If you know your income is going to be less or unstable for a while, start putting aside money you might spend on booze, cigarettes and going out.
Don’t run away from your bills
If you’re self-employed or are just worrying about how you are going to pay a bill, ignoring it won’t help. You might have to pay more if you do. Contact the relevant company or organisation and have a chat with them. It’s hard to believe, but a lot of people are sympathetic and willing to help if you give them the opportunity. Even the tax office can be helpful…when you can get them on the phone that is.
It’s okay to ask for help
A good accountant can save you money. They can help you pick through the financial debris of your life, and sort it out. The money you spend on them is nothing compared to the hundreds or thousands you may end up spending trying to sort it all out yourself. You can find individual accountants online who deal with sole traders or small organisations. They don’t charge as much as a big flashy firm would, and they can be better. You can start finding an accountant that’s right for you here. Prices can start from £600 all the way up £1500, but if the accountant can save you more money and time, it’s worth it.
Changing career is a challenge, and managing your finances sounds about as fun as taking a bath in sulphuric acid. Yet it doesn’t have to be that difficult.
- Look at your bank accounts
- See what you can do without
- Save some money before if you can
- Get some professional advice
- Don’t panic
Coming in March
Are you unhappy in your career? Looking to change but scared about the uncertainty?
This book will help you pluck up the courage to leave the career you’re in and go for the career you want. Includes case studies and exercises designed to get you moving from where you are now, to where you want to be next year.
Available for FREE on Amazon, Kobo, Smashwords, Nook, iBooks and more in March 2016.