But even if you are 100% sure you have a “can’t fail” idea for a business, actually carrying the whole thing out is scary.  As any retiree will tell you, saying goodbye to the vaunted “steady paycheck” is a big step, and probably especially so in this still uncertain economy. 

Does that mean you shouldn’t do it?  Heck, no.  As the events of the past decade have played out, “employment stability” appears to have evolved into a rather quaint notion, evoking feelings of nostalgia even for many with so-called full-time permanent jobs.  So it could well be that the bigger risk lurks in staying at your current job. 

Risks, risks everywhere.  So what do you do?  Start by reading this:

In the article A top 10 list for all the risk-takers among us, Boston.com’s Scott Kirsner offers up some excellent ideas for mitigating the risks of taking the leap from employed to self-employed.  Check it out before you stop by your boss’ office to say “buh-bye”…

In this case, the couple wanted to start a family but felt they had to pay down their debt before they changed gears.  Smart!

In 2003, I left my Silicon Valley career behind to open a bookstore in Sacramento.  My goal was to create a passive income business so that I could become a novelist!  

Before I quit my job, I spent a year building my business plan. At the same time, I was tucking away as much money as I could and cutting my expenses. I knew that I wouldn’t earn a Silicon Valley income right away, so it was important to have a year’s worth of living expenses in the bank.

Right around that time, my husband was offered a job transfer up to Sacramento, about 100 miles from where I lived in the Bay Area. I saw that as an opportunity to cut our expenses dramatically since the home prices and cost of living in Sacramento were at least 2/3 less than what we were spending in the bay area. So I sold my house and moved up north—and I’d do it all over again as it was a smart way to prepare for the big transition.

I also opened up a line of credit. I didn’t need it, but wanted to have access to it just in case. One thing the books don’t tell you is that when you quit your job and start a business, you have to reestablish credit. Without verifiable income from a paycheck, it can be much harder to get access to money. I highly recommend getting it before you need it!

So I had my financial and business plan firmly in place.  But the Universe had a different plan for me. Here’s a quick run-down on what’s happened since:

1. Opening a retail store in a lousy location (no street visibility) provided an excellent training ground for small business marketing.

2. I quickly discovered that I am a lousy novelist–not nearly enough imagination.

3. Thanks to internet marketing strategies, I got the bookstore website to the top of Google almost instantaneously. I went on to launch BusinessInfoGuide.com, which has since benefited from SEO practices and a slow and steady evolution.

4. It didn’t take long to realize that I hated just about everything involved in owning a retail store–except the marketing (and the endless supply of books!)

5. I caught the nonfiction bug and decided to write books that I wanted to read. My first title was released in 2005, followed by books in 2006, 2008 and 2009. (I missed one year when I had a baby!)

6. Selling the bookstore was one of the best decisions I ever made. My only regret was not doing it sooner–I was ready to let it go.

7. Launching Authority Publishing was the logical culmination of everything I’ve done so far. It’s created an opportunity for me to leverage my publishing experience (bookstore owner, self-published first book, three traditional book contracts, countless information products…) and blend it with my internet marketing experience. It has also forced me to build a team and treat my business as an asset (so I can take a vacation once in a while!) The results have been spectacular and I know that I am exactly where I am supposed to be.

The other thing I know for sure about my journey over the last six years is that I wouldn’t be doing what I am now if I weren’t willing to take some risks. Taking risks involves letting some things go–which is not always easy.

In this economy, I see a lot of people struggling with this concept, essentially beating a dead horse. But it’s important no matter where the economy is headed. If what you’re doing isn’t working or if it’s bringing you down in any way, perhaps it’s time to consider other options–regardless of how much time or money or emotion you have invested in your dead horse.  Often when you’re willing to let go, all kinds of magical things can happen.

This is exactly the kind of financial planning I recommend prospective career changers do before making a transition. Doing an analysis like this is even more important if your transition is likely to result in a lower annual income for life, as for the woman profiled in the article and the client I discussed in this recent post (4th bullet).

That’s because:

1. it can determine the viability of the proposed change with much less risk than a “jump and grow wings on the way down” strategy;
2. it can pinpoint any gaps (e.g. here, the need to earn $12,000 a year and increase portfolio diversification) and opportunities (here, a Roth IRA conversion) ahead of time.

Having this information and acting on it — making the most of her money through this time of change — could well mean the difference between a career change that sticks and an unwelcome return to the salt mines.

But I do have an important health care-related message for you and your financial plan:  If you’ve been putting off going to the doctor for something, go do it now before your coverage gets any sparser and it ends up costing you more.  When I talk about coverage getting sparser, I’m not talking in the global sense, but on a “per individual”/”per family”, near term basis.  And I bring this up here and now because both year-end and, unfortunately, career change can be a trigger for this.  

True, even people keeping the exact same job pretty much expect to see fewer benefits at higher cost each year when open enrollment season rolls around.  But the risk of reduced coverage is greater still when changing careers.  The obvious situation is a move from an industry that has comprehensive benefits to one  that doesn’t.   Maybe your spouse’s insurance can make up the difference; maybe not.

Or consider involuntary career changers.  Those workers who’ve been laid off often face a choice between paying astronomical premiums to stay on COBRA or dropping down to a much less comprehensive plan.   Yes, the COBRA subsidy included in the American Recovery and Reinvestment Act of 2009 has been a big help, but this job market is brutal and many are remaining jobless long enough to see that benefit expire.

Even 8+ years post-career change, I myself keep running up against this as a self-employed.  Every November when my renewal package comes, I steel myself for an eye-popping increase to what is already a sky-high premium.  Sometimes I swallow hard and accept the new rate; other times, I opt to “self-insure” for more things, i.e. downgrade to a lousier policy. 

This year, I already know I’m in for a bigger-than-usual wallop.  Why’s that??  I’ve reached a birthday that qualifies me for a new “rate class”, as they say in insurance jargon.  i.e. I’m older enough that stats say I’ll be costing the insurance company more so they have to increase my premiums by even more than the inflation-beating annual percentage to which I’ve grown accustomed.    Argh. 

Health insurance for the self-employed, or anyone who’s not in a very secure long term job (read: almost everyone), is not for the faint of heart, that’s for sure.   I’m sorry to say I don’t have a good answer for any of this, one of the most vexing challenges facing career changers.  But it seems clear that each of these “little” gaps in the current system add up to a solution that really doesn’t match the way the world of work is evolving.  In my wildest dreams, I hope that we — the collective “we”, that is – can do something to close that distance sooner rather than later.  In the meantime, at the very least, be sure to make the absolute most of the benefits you have now before you reach some milestone and they become a treasured memory of the good old days.  Stay well!

Last post, I promised to follow up with one more story on managing the costs of returning to school for graduate study.  In that post, I described some strategies I used to minimize the costs of getting my MBA. One of the points I made was that, although time = money, sometimes the equation shifts, so that time actually equals more than money. And that was certainly true for me when I decided in 2001 to go back to school yet again, this time to pursue CERTIFIED FINANCIAL PLANNER™ certification, which would allow me to make the major career shift I had in mind.

In deciding NOT to work full-time while getting certified, several factors came into play.  First, I was pretty burned out after 4 years of working in the dot-com maelstrom.  Plus, this was a scant 4 years post-MBA, so the struggle of trying to study part-time while working full-time (translation: no life) was still fresh in my mind.  And now that I’d finally found the answer to the question “What do I want to be when I grow up?”, I just wanted to get on with it, frankly, as opposed to dragging it over several years.

A few other factors that enabled this decision:

• While not cheap, the costs of CFP® certification are relatively reasonable compared to other professional programs.
• While I could have kept the actual dollars invested lower by learning the materials via self-study,  I decided it was worth the extra money to pay someone for formal classroom instruction.  As a trained engineer who might tend towards overengineering when left unchecked, I know myself well enough to realize that externally imposed deadlines would be valuable far beyond the outlay of cash required.
• There was another absolutely critical piece that made this work…  At the time (and maybe even now), only colleges 45+ minutes drive from my home even offered this curriculum, and most did so in the traditional “one class per week for a full semester” mode.   Northeastern University, however, was unique in offering what I called crash courses, where the instruction of an entire semester was delivered in 2 full days over 2 full weekends at their more easily accessible suburban campuses.  Although this format was probably targeted at full-time employees who could only attend on weekends, it was also the perfect way for me to fast track my certification, while also avoiding the commuting costs and wasted time (= money!) of driving into Boston every week for probably 2 or 3 years.
• I did some consulting work, using skills from my previous life, but in the new industry.   Not only did this help defray the costs of living and tuition, but it was a major coup in another, perhaps even more important way.  That is because it required me to discuss fee-only financial planning practice models with a variety of experienced members of the National Association of Personal Financial Advisors (NAPFA), to whom I otherwise wouldn’t have had access.   Talk about fast tracking an education!  This work was absolutely integral to helping me understand what my desired career change would take, and how I would want to run my own practice when the time came.  (A big shout-out to Warren Mackensen and the rest of NAPFA for this tremendous opportunity!)

As I look back over this post, I realize it is not so much a tale of controlling costs, as it is of matching the time/money equation to the wanna-be student’s needs and resources.  Something tells me that might be worth a lot more when the final tally is made.

But even going back to school only twice can add up to a whole lot of tuition and book money.  So I thought I’d share how I kept my education costs to a minimum.

The first time I went back was about 8 years after undergrad.  At that point, the only career direction I knew for certain was that I didn’t want to be the engineer my undergrad degree qualified me to be, and I’d already made the shift to engineering manager at a small company in Marlborough, MA.  (Any Viewlogic alum out there??)  I was curious to learn more about management but not sure I’d like it enough to take on the financial risks (i.e. no cash in, lots of cash out) that going back to get an MBA full-time would entail. 

Fortunately, my company offered tuition reimbursement, and Clark University offered classes at a satellite campus only 15 minutes away.  So I went part-time, and found I kept wanting to go back for more.  It was an absolutely ideal arrangement… for the first few years, until I realized that by the time I finished the degree, I would be eligible for Social Security.

In the equation “time = money”, sometimes there comes a point when time equals more than money, and I had reached it.  So I applied to finish full-time, Clark generously offered some scholarship money, and I was out of there — degree in hand — about a year later and not that much poorer.  Honestly, I don’t even remember what the whole thing cost, but I can tell you it wasn’t even 1/10th of what I might have paid if I’d gone full-time and footed the entire bill.  Best of all, I didn’t end up with any student loans that would be sure to dog me long after I’d forgotten how to use the Black-Scholes model.  (Don’t ask.)

The moral(s) of the story:

• If you’re not sure what you want to do when you grow up, find a way to test drive your interests before committing to an expensive education program.
• Look around to see who else might have a stake in you learning.  In my case, my company benefited for several years as I was attending Clark and applying my newfound knowledge (“So that’s what they mean by profit!”) back at the office. 
• Don’t assume schools won’t help an older student.  If you have the characteristics they’re looking for, you might be just get a nice $urprise.

Now, if you’re any good at math, you’ve probably already figured out that this all happened more than a decade ago.  Since then, college costs have gotten exponentially higher as purse strings at companies and colleges have gotten tighter.   But I know from talking to friends, family, clients, and our “go to” college planning expert Todd Weaver that opportunities to get smarter for less still exist.  With costs as forbidding as they are today, it’s likely to be worth your while to do a little digging to find them. 

(Next up:  Student prophecy II, The Sequel — Back to school again, this time to learn what a financial planner needs to know.)

Have you ever heard the phrase, “you can plan all you want, then life happens?” That’s exactly what happened to my family in the past year as I made the transition away from “W-2” payroll to self employment.
I am entering my second full year (fifth if you count my part-time “ramp up”) of my career as an independent college counselor. While my wife and I planned to use one of Sherrill’s phrases, “Break Away without going broke,” the reality is that even the best laid plans can come undone in the blink of a recession!

Approximately five years ago I made the conscious decision to plan my escape from Corporate America in order to return to a prior career which I loved: college and financial guidance. I truly enjoyed working with students and their families when I was part of a financial aid office at a private university twelve years ago. Like many other career changers, I felt the “pull” to get back to a more meaningful (to me) career after the events of September 2001 and after spending more than enough time behind a computer, on the phone all day long.

With family and the new career located in New England, my wife and I made the move from Philadelphia to Boston with one child in tow and another on the way. We had planned on saving money for another 18 months after relocating to Boston. That timetable was going to allow us to make our way through the expected start-up phase of little to no income. Then to our delight, we soon discovered that our household was going to increase 50%, with twins! While this event might have delayed others, we continued to press for meeting our self-imposed deadline so that I could make the career switch on target.

While my wife and I both lived frugally we knew that when the eventual separation from my “day job” came along, we might not enjoy our current income stream for a year or two. To plan for the career change we fully funded:

• 401k’s
• Roth IRA’s
• Coverdale accounts for our first 2 children
• Set up a home equity line of credit for emergencies
• Funded our cash reserves to cover nine months of living expenses

I began my new career on schedule and fortunately, was able to be a stay-at-home dad for a few months before the launch. Little did we know that a month before my wife was to end her maternity leave and return to her part-time remote work situation, her job would be relocated back to headquarters. In order to keep the position, she was informed she would have to move. Well, that didn’t fit the plan at all!  Talk about a BUMP in the road!

I’m blessed to have a supportive wife and family that are helping with the career transition that is now beginning to show some fruit from the labor of the past year. Some of the many ways that my family of six is coping with the career change include:

• My amazing wife and her ability to care for the four children and allow me to put the time and effort into my work. (She’ll be starting the job search for herself soon so that’ll be another interesting twist to deal with…)
• Keeping a vigilant eye on the cost cutting and savings on the home front
• Continuing to talk about my career with anyone I meet – because you never know who they may know! What “location, location, location” does for real estate, “network, network, network” does for the career change!
• Working with a great team of colleagues who have been wonderful mentors, advocates, and friends throughout this process

What’s kept me going most of all, however, have been the happy clients who continues to validate that I made the right choice in moving to a career where I know I am making people’s lives less stressful and making a meaningful difference for them.