By Valarie Hogan • January 31, 2013•Careers
Last month, I introduced the topic at hand: transitioning from a private firm to public interest work. This month’s motto is, to borrow a dated catch phrase: SHOW ME THE MONEY [video]. After all, what your current job may lack in personal satisfaction, your new job will lack in money (full frontal honesty: I don’t even look at my pay stubs because they make me sad).
First and foremost, you have to be realistic about what you can afford to do. This means that you have to think about the city you live in, the life you lead, and – perhaps most importantly – the things you’re willing to live without. There are some jobs, in some cities, that you just won’t be able to do – $40k in NYC is not $40k in Milwaukee [Cost of Living Calculator]. While I will get into more specifics about budgets and budgeting next month, there are some basic things you can figure out before you leave your six-figure job that will give you a better idea of how different things will really be.
A. Student Loan Repayment Programs
For better or worse, student loans are pretty much a part of everyone’s life. For those extremely fortunate people whose parents picked up the tab – go have some celebratory drinks while we, the indebted, commiserate for a minute.
I was very fortunate that my law school has a very generous loan repayment program. There is no way I could have taken this job without it, but it still only allows for a very basic standard of living. Most schools offer some kind of assistance, but sometimes there are a lot of hoops to jump through and only a very small number of jobs qualify, so you shouldn’t count on having something like that available until you’ve read all the small print. There are also, however, some outside programs for people who work for the government or non-profit organizations. You can find out more about these programs with this very helpful guidance from the Department of Justice.
If you don’t qualify for any of these programs, it may make sense to just start focusing on aggressive debt repayment for the remainder of your private career. Of course, the golden handcuffs are real and you will have to work hard to resist the temptation of continually increasing your standard of living, even when your salary continues to increase (you can even try living on the salary that you think you might make in the future to see how easy/difficult it is).
B. Rainy Days and Mondays (or how not to be sad if something unexpected happens)
This is probably the least exciting part of this post, but there are two things you need to do before you ever consider taking a huge pay cut: (1) pay off your credit cards and (2) create an emergency fund. The first should be obvious, but let me just say this – I never worried about racking up credit card bills before because even payments totaling amounts that I’m embarrassed to admit now were no problem. I paid my cards in full every month. But, now, sometimes even $100 is a lot to ask and, for the first few months at my new job, I had to break some very bad online shopping habits. The sooner you can learn to live on cash, the better.
As for emergency funds or whatever you want to call them – put it somewhere you don’t have regular access to. You can pick an arbitrary amount, like $10,000 or, figure out how much it would take for you to be without a paycheck for 3, 6, or 9 months and start putting that money away. My firm allowed associates to direct deposit in up to three accounts, so I set up a separate account for my emergency fund and sent a set amount to that account every month. Happily, almost six months in, I can say that ALL of the money that I put in is still there.
Like I said, we’ll get into more specifics about budgeting later, but I bring up the dreaded ‘B’ word here because it’s important to realize that you have to change how you think about and spend money. You can ask 100 people how to live on a budget and they will all give you a different answer. You’re the only one who knows your financial situation, but you may not be the only person who suffers if you fail to properly manage your finances - your parents don’t want to be responsible, your friends aren’t always going to spot you, and, really, you’re old enough to know better. You don’t have to take anyone else’s advice, including (perhaps especially) mine, but you do need to understand the magnitude of the decision you’re about to make (regardless of the size of the actual pay cut). It’s very nice to not have to worry about money (I remember those days fondly), but worrying about it before you make the leap (and being adequately prepared) is much better than worrying about it after.