HerMoney Podcast Bonus Mailbag #25: Career Change And Salary Loss

Kathryn Tuggle: (01:32)
Hello Jean. Nice to see you.

Jean Chatzky: (01:34)
It is nice to see you too. Albeit virtually. So what do we have first?

Kathryn Tuggle: (01:40)
Our first note comes to us from an anonymous listener. She writes, the pandemic has me questioning what’s important in life. And I want to transition into teaching, early childhood education, which is something I’ve dipped in and out of for 10 years. I currently have a great job in talent acquisition at a tech company, but it doesn’t fulfill me. I’m 34 and I’m maxing out my 401k. I have $180,000 saved so far. I only have a mortgage for debt and my husband and I are saving around 30% of our paychecks with $100,000 currently put aside for emergencies, vacation and a new car fund. My husband is supportive of the change and I would probably need a year to do school or teacher training, as I only need a teacher certification in my state. My question is, when should I make the leap? We have a one-year-old child. So I’d like to be a teacher once he’s in school. But with this change comes a big salary drop. So how can I best prepare for that? Prior to tech, I worked in higher education in NYC for 10 years and really struggled on a meager salary while trying to pay off my student loans. And being a non-citizen, I had additional work visa expenses and a constant fear of being deported if I lost my job. I think I have trauma from living paycheck to paycheck for so long and I fear going back to that, even though now I have a very supportive husband and I’m in the best financial position of my life. Key pointers on what I should do to be in the best position for the transition would be incredibly helpful. Thank you.

Jean Chatzky: (03:05)
And thank you for such a great question. When I saw your letter, which says, and I want to just tell our other listeners that you said you want to transition into teaching slash early childhood education. I very quickly Googled the average salaries in teaching versus early childhood education and they are quite different. And the benefits are quite different as well. So early childhood education has incredibly low average salaries, which is a total shame. And I hope that we do something to change that because it’s a very, very valuable profession and a valuable skill. But the salaries for teachers, particularly public school teachers, are double on average and the benefits can be quite good when you look at both healthcare, when you look at retirement, there’s often a pension. And so I would encourage you, particularly because you’re so salary focused, to look at getting a teaching job in a public school where you’re likely to be able to tap into those benefits rather than a job in early childhood education. I think that knowing how wary you are of a low salary, this is just something that will make yourself feel better. And then I’d do some planning in order to decide when to make this transition. You’re doing great as far as the amount of money that you’ve got in your 401k so far. But I’d like to know what your goals are and what your husband’s goals are, how much you need to live on every single year, how much you both need to earn in order to make those things happen. And then for you to structure a plan that gets you there. I am all for career fulfillment. I think you should be looking into perhaps whether, over the next few years, you could take a course per semester to get the certification that you need, rather than quitting your job and taking a year off, where you wouldn’t be earning, in order to maximize the amount of salary that you can put away for the future as you make this transition. But I think, in order for you to feel not nervous about this, you need a real roadmap. And right now you don’t exactly have one. And that roadmap, those numbers are going to make you very clear on the timing. So talk to your local college about what you need in order to get that certification. Sit down with your husband and/or a financial advisor if you have one, or if you’re looking for one, to run the numbers on how much it will take to support your lifestyle. Talk about your other goals, in terms of your finances and what you want and when you want it and I think the road will become really, really clear. But I encourage you to do this. I mean, I’m somebody who thinks that I will someday teach. I don’t know when it’s going to be, but it’s one of those professions that has always appealed to me as well. And keep us posted.

Kathryn Tuggle: (06:27)
Yeah, absolutely. Let us know how it goes. It’s exciting.

Jean Chatzky: (06:30)
It is. It’s really, really, it’s really exciting. And the certification thing too. I mean, I actually think I’d like to teach at a college or a community college at some point, when I have the bandwidth in my life. I don’t know what kind of certification I need for that. But looking into that, I think it will help her answer a lot of her questions.

Kathryn Tuggle: (06:48)
Yeah, for sure. Our next question also comes to us from an anonymous listener. She writes, I love your podcast because, up until I found you, I couldn’t talk to anyone, due to a lot of shame and judgment from my friends and other family members. Thank you for all you do. You two feel like friends that I can talk to and it means the world to me. You give me hope.

Jean Chatzky: (07:08)
Oh, that’s so nice. Thank you.

Kathryn Tuggle: (07:12)
I’m 55 and I made a lot of mistakes when I was younger. I didn’t save nearly enough money and about the time I was getting on my feet in my early forties, my job was a casualty of the 2008 recession. I was out of full-time work for three years aside from temporary jobs that sustained me. I was forced to live off my 401k at the time and had to live off credit cards, which I was vehemently opposed to. Then the icing on the cake was I needed to have surgery. It was the perfect storm of events. Long story short, I moved in with my mom to pay down debt and save money. I’m now her primary caregiver. I’ve taken on a debt consolidation loan. I’m saving money. And I have a car loan that I hope to pay off before the payoff date in 2021. I have one rewards credit card that I try to pay off every month. My plan is that once the debt consolidation loan is paid in 2023, hopefully sooner, I’ll put those funds directly in my 401k provided I’m still with this job. Right now, I’m trying to finish my degree. I work full-time but I’m grossly underpaid. I know I need to have a higher salary, but I really don’t want to start over. I’ve been at my job for five years. I have two questions for you. First, what do you think about finding a new job during the pandemic versus waiting until I have my degree and all this is over. Second, once my car is paid off, should I put that $400 a month in my 401k or my emergency savings? I only have $2,500 in emergency savings at this time. My annual salary is $51,000 and my debt consolidation loan is $1,300 a month. Thank you.

Jean Chatzky: (08:38)
Well, I’m so glad that you’re on the right path. I’m really, I mean, I think everything is looking really positive for you in the future and that’s because you did the work. So you should feel really, really good about that. I would absolutely 100% encourage you to look for another job. I know, and Kathryn can attest, we’ve had a couple of people leave HerMoney during the pandemic because they’ve gotten other jobs. And, you know, it wasn’t something that I was worried about. I actually thought they were pretty happy, but that’s neither here nor there. But it’s just to show you that, yes, you can get hired during a pandemic. People are getting hired every single day. And even if you don’t end up changing jobs until you get your degree, doing the looking will give you a much better sense of your worth on the open market. And if you get an offer, you can take that offer back to your current employer and you can use that to negotiate for more money. So, by all means, listen to our LinkedIn episode if you haven’t listened to it yet. Beef up your LinkedIn profile. Beef up your resume. And put some feelers out there. And start talking to people. And start looking. And you may very well be surprised. Once your car is paid off, I would probably split the difference. I don’t think that $2,500 is enough of an emergency savings fund. So I would probably put $200 more a month in your 401k and $200 into your emergency savings fund. And once the emergency savings is up to like $5,000, then I just put the whole thing in your 401k. And once the debt consolidation loan is paid off, then you’re just going to be able to go gangbusters on retirement. So that is really good in and of itself. Last thing on that debt consolidation loan, I don’t know how long ago you took it out, but interest rates have dropped significantly. So, while I don’t want to see you increase the term on your loan, if you’re paying interest at higher than average rates, you may be able to refi that debt consolidation loan to a point where you can pay it off even quicker and cheaper, and I’m all for that.

Kathryn Tuggle: (11:10)
Absolutely great advice, Jean.

Jean Chatzky: (11:12)
Thank you.

Kathryn Tuggle: (11:13)
Our next question comes to us from Kaitlin. She writes, hi Jean. I’m a new listener and a 2020 college grad who is lucky enough to have excess income to work with at the end of the month. My current salary is $72,500 a year. I recently purchased a certified pre-owned car with $20,600 remaining on the loan, earning 1.99% interest that has a five-year lending term. I also already paid off a chunk of my student loans, but I still have $2,750 in subsidized loans that I’ll begin paying in January, 2021. Also I’m currently contributing 4% to a pretax retirement plan and 3% to a Roth retirement plan through work. My work will match 50 cents for every dollar I contribute up to 4%, as well as a 2% automatic contribution. I have $8,000 in a high-yield savings account for an emergency fund and some vacation savings. The emergency fund should support me for about four months. I typically have about $1,800 at the end of the month that I split between my car payment, my emergency fund and vacation savings. I’m wondering if there’s something else I should be doing since I’m not used to allocating this much extra money. Should I up my retirement contribution, aggressively pay off my car loan, or start using my money in some other way? My current goals are to have money to travel every year once COVID is over, and potentially move away from renting and buy a condo or a small home. I’m single with no plans to have kids soon and just need some advice for someone so new to the personal finance game. Thanks so much.

Jean Chatzky: (12:40)
Okay, Kaitlin. I wish I had been as smart as you when I was your age. You’re just incredible. I can’t believe that you’re a 2020 college grad and you’ve got this solid of a handle on things. So this is just fantastic. I would make a couple of little tweaks to what you’re doing, but nothing substantial. So when I add up the amount that’s going into retirement, you’ve got 4% that you’re contributing, another 2% that is matched by your employer, 3% into the Roth and an additional 2% automatic contribution, also from your employer. So you add all of that up. It gets you to 11%. I’d like to see you at 15% of your income into retirement. I think that is a level that will allow you to sustain your lifestyle, whatever it happens to be, when you get to retirement. So I might bump up the contribution to retirement a little bit. The other thing that I’m thinking about is that car loan. On the face of it, I wouldn’t pay it off early because the interest rate on that car loan is really, really inexpensive. But I want you to think about how long you’re going to want to have that car. I’d rather see you pay it off before you want to get rid of it. Now, clearly you’re a smart cookie. You bought certified pre-owned. That means you’re probably under warranty for the next three years. Are you going to keep it longer than that? Are you going to keep it until it’s paid off? These days, you can easily put a hundred thousand miles on just about any car. So I hope that the answer to your question is yes. But if it’s not, I’d rather see you pay it off before you get rid of it and go through the process of buying something else. Cause I don’t want to see you underwater in a car at any other time. The other thing I might do is just start a small down payment fund for a house. I don’t know when your condo goals are likely to come to fruition. But the more that you have for a down payment, the less you have to finance. And so even if you’re just putting $100 or $200 a month into a down payment fund, I don’t see the harm in that. If it’s more than five years from now, you could even invest that money. If it’s less than five years from now, I’d probably keep it in the back. But you’re doing great. Just keep on going and good luck to you. It sounds fantastic. And we’re so proud of you and happy to have you as part of our community.

Kathryn Tuggle: (15:23)
Absolutely. Yeah. Congrats on a great starting salary and making good decisions from day one.

Jean Chatzky: (15:28)
Making good choices, right?

Kathryn Tuggle: (15:31)
Yeah.

Jean Chatzky: (15:32)
I always think of Juno. Was that a movie that you were a fan of?

Kathryn Tuggle: (15:36)
Yeah. Yeah. I’ve I’ve seen it. I like it.

Jean Chatzky: (15:39)
Yeah. I like it. But at one point she says, make the choices. And Kaitlin is clearly making good choices.

Kathryn Tuggle: (15:46)
Totally.

Jean Chatzky: (15:46)
Before we go onto the next question Kathryn, let me remind everyone HerMoney is proudly sponsored by Fidelity Investments. Some of life’s important moments are planned for way in advance, while others we do not see coming. But as always, Fidelity is here to help you navigate both the joyous and the unexpected events with confidence. Their resources, guides, and tools can help guide you through important financial decisions when you need it most. Visit Fidelity.com/HerMoney to learn more. We have more?

Kathryn Tuggle: (16:19)
We have two more.

Jean Chatzky: (16:20)
Excellent.

Kathryn Tuggle: (16:21)
Our next note comes to us from Juanetta. She writes, I had to apply for early retirement due to a layoff from my employer. My position was terminated. Since I had only been with my previous employer for a few years, I did not have a lot regarding retirement. I’m currently receiving half of my earnings from my previous employer. Prior to the layoff, my husband and I were relying primarily on my income. As a self-employed individual, times were very tight for us. At this time we were caregivers for my elderly mother-in-law. What do the more mature individuals do when there is little in the bank and very little retirement. Through faith, love and support, we are managing. Unfortunately, this is not what I had in mind toward retiring. I’m having a difficult time trying to break into a second career or pursue my dream of writing. I don’t know where to begin. Thank you and stay safe.

Jean Chatzky: (17:07)
Thanks so much Juanetta. And I’m sorry that all of this is happening in your life. It is a really, really tough time out there for a lot of people. Your question makes me think about this conversation that I have. I have it with my mother. Kathryn, I don’t know if you have this conversation with anybody in your life, but the conversation is, all right, you lose your job tomorrow. What do you do? You’re not able to do what you’re doing right now. So what do you do? And my mom and I, and this is pre-COVID, we sort of always come back to, well, I would work in a bookstore. I would like to work in a bookstore. I think that I would enjoy that. I think that I would be good at that. I think I would be able to help people pick books. I think that it’s a place that I would actually like to go every day. And by the way, by doing it, I could earn some money. And I think that’s what you have to think about right now. Thinking about a second career is maybe a hard thing to do. I don’t have a lot of information about what you did in your prior job. It sounds like your husband was self-employed and maybe he still is self-employed. But I think finding a job that you enjoy, where you like the people, that brings in some extra income, is where I would set my sights. And you can simultaneously, of course, still put out feelers in your chosen field and look for another career job. But while you’re doing it, you’re bringing in some money. And there are a lot of jobs where you can work from home these days, where you can do it by phone, where you can do it on zoom, where you can do it virtually. You’re not necessarily going to get the same amount of comradery that you would get with people in person. But eventually we will go back to a place where we can actually see people and you’ll feel you’ll feel better about it then. But for me, for a long time, actually, it was, I would work in a bakery. And then I realized that if I worked in a bakery, I would very quickly put on 10 pounds and that would make me unhappy. So it shifted to the bookstore. But I’ve stuck with that for many, many years. And I hope that you can find something that brings you some happiness at the same time that it brings you some money.

Kathryn Tuggle: (19:23)
I love that advice. And I think doing something out of the box or something that is a departure from what she has been doing, that’s not necessarily a career track job, I think could offer that reset that she needs just mentally and emotionally to help her think about her next move.

Jean Chatzky: (19:41)
Yeah. Yeah, absolutely. It’s like a pause, right? It’s a career pause.

Kathryn Tuggle: (19:47)
Yeah, totally.

Jean Chatzky: (19:48)
Love that.

Kathryn Tuggle: (19:49)
Our last question comes to us from Maggie. She writes, thank you both for your podcast. I listen to every week and always feel like I’m getting better at thinking and talking about my money. I currently own and operate a small martial arts studio with my husband. I graduated from college in 2009 and jobs were not what we’d call readily available. We had an opportunity to buy an existing studio in 2010, which was my husband’s dream job. We figured we were young, and if it didn’t work out we could always go find real jobs. Now, here we are10 years later. I’ve been kind of itching to do something else for a while. We have two kids who are now school age. We’ve gotten over a lot of the owning a business learning curve, and I think my husband can run the business by himself and hire someone to take over the things I do in the business. We’ve been thinking about this for a while, but it’s definitely been accelerated by the coronavirus, because we’ve had to close and put together an online offering in a very short time. For the past two years, we’ve each taken a $36,000 salary from the business. So a family income of 72,000. The business also pays for our cell phones and some travel. But based on what’s been happening, I think we’ll have to cut that significantly to keep the business afloat this year. We live in Florida and have a low cost of living so we’ve been able to live comfortably on our salary. We have an $83,000 mortgage, $6,400 in personal debt, a thousand dollars on a credit card and $5,400 on a 0% interest card that should be paid off by the end of the year. I feel like we’re pretty behind on retirement savings. I’m 33 and he’s 44 and we have $40,000 saved. I feel like if I could increase my income doing something else, then we could catch up and create more stability in our lives. My degree was in math and I’ve done bookkeeping, social media, customer service, managed inventory, and so many other things as a business owner. But I feel a little lost in looking for a job. I think I’d be a great hire for someone. I just don’t know what I should look for. I think an entry-level anything would replace what I’m currently paying myself, but that’s not exactly what I want. I was hoping you could offer some advice in what kind of job I could look for. Are there resources for putting your, I owned a business that hasn’t gone bankrupt skills, onto a resume? Who do I ask to be a professional reference? Should I go back to school to get a credential to do something else? I’m hesitant to do this, because I finally paid off my student loans a year ago and I don’t want to go back into debt to maybe get a job in a new field. Thank you for all you do for this community.

Jean Chatzky: (22:13)
So Maggie, I have a bunch of thoughts that are all in my head at the same time, and I don’t want to forget any of them. But I think that this is a time of great opportunity for you and I feel really, really hopeful about your future. So in no particular order, I agree with you on not going back to school, cause you don’t know what you want to go back to school for. And for that reason, spending money going back to school makes absolutely no sense. I would take that off the table. And if down the road you find you need some sort of certification, you find you need some sort of other qualifications that you can get by taking a course or two, I’d look at that. If you find down the road that you do need some degree, well then you can think about it, but you’ll do it with a plan in mind. You’ll do it. Knowing that you have a real reason to go back to school. The second thing I would say is, I would just get online and start Googling. I love that your degree was in math because it opens you up to jobs in the STEM fields. It opens you up to the jobs that people are desperate to hire women to do. And so I’d take these words that you’ve got here, managed inventory. I mean, gosh, somebody would probably pay you a lot to manage inventory. I’d Google careers and math. I’d see what in your area, but also not in your area cause we’re all able to work remotely these days. And just see what’s out there. See what you can find. In writing a resume, what you want is a functional resume rather than a chronological resume, because you’ve spent so many years in this one business, you actually want a resume that looks at your particular skills and your particular accomplishments under the experience section. And if you Google functional resumes, you’re going to come up with a whole bunch of examples. And please, you are not entry level. There’s nothing wrong with being entry-level, but if you’ve run this business for 10 years and you’ve basically been the co-CEO of this business, you’re not entry-level. And I don’t want you to think that when you see job listings, that call for three years experience or five years experience that you don’t have it. Cause you’ve got 10 years experience. So please don’t sell yourself short in this way. That’s something that women do all the time. We don’t like to apply for jobs when we think, oh, it says two years experience and I only have a year and a half. And P.S. the guy down the hall who’s got three to six months worth of experience is not thinking twice about applying for that job. So you just go ahead and you apply. As far as your retirement savings, if you can find a job with a company that has benefits that’s going to allow you to contribute to a retirement plan at work, I think that would be wonderful. But either way, when you get this next job, then you and your husband should definitely prioritize trying to amp it up a little bit. And my last thought is, before your husband hires somebody to do the things that you’ve been doing at the business, see what he can do himself. You are clearly in a position where you’ve had to go back to the drawing board for this martial arts studio. I don’t know when your income is going to pick up again, but see if he can bootstrap it for a little while rather than taking on another employee right away, until you get on your financial feet. And I hope that that makes sense, but I think your future looks great.

Kathryn Tuggle: (26:09)
I completely agree. Yeah. Her experience at the studio has been amazing. I think she’s learned more than she even thinks she has.

Jean Chatzky: (26:16)
Absolutely. And I hope that once she puts it into a resume, then she will see that it looks so much better than she thought.

Kathryn Tuggle: (26:25)
Absolutely. Yeah. People love that. People love to know that you have the capacity to start your own thing and maintain your own schedule and be your own motivator and your own boss. Those are all amazing qualities.

Jean Chatzky: (26:37)
Yeah. A hundred percent. Nobody’s told you what to do for the last 10 years and you’ve managed to get it done. So by the way, you’ve done payroll and you’ve, you know, I mean, there’s so many things that you’ve done. So, be really boastful about every single one of them.

Kathryn Tuggle: (26:52)
Yes.

Jean Chatzky: (26:53)
Or at least, if you can’t be boastful, don’t be afraid to just be proud and put them out there.

Kathryn Tuggle: (26:58)
A hundred percent. Toot your own horn.

Jean Chatzky: (27:00)
Exactly. Exactly. Thank you, Maggie. And thanks to everybody for such great questions. Kathryn, thank you.

Kathryn Tuggle: (27:06)
Thank you Jean for all the amazing advice as always.

Jean Chatzky: (27:08)
Oh for sure. And thank you all for joining both of us today on HerMoney. Thanks for writing to us at mailbag@hermoney.com. Please keep your letters coming. We will continue to put out these bonus shows to ensure we get all your questions answered. If you like what you hear, I hope you’ll subscribe to our show at Apple Podcasts. Leave us a review because we love hearing what you think. We want to thank our sponsor Fidelity. We record this podcast out of CDM Sound Studios. Our music is provided by Video Helper and our show comes to you through Megaphone. Thank you so much for joining us and we’ll talk soon.