Money Guy Show
Episode: HUGE Pay Cut for a New Career - Is it Worth It?
Hosts: Brian Preston and Bo Hanson
Release Date: March 5, 2025
Introduction
In this compelling episode of the Money Guy Show, hosts Brian Preston and Bo Hanson delve into a significant career dilemma: taking a substantial pay cut to pursue a new, more fulfilling career path. The episode not only addresses the financial implications of such a decision but also explores the emotional and lifestyle factors that come into play.
Listener Dilemma: Zach J.'s Big Decision [00:29]
The episode kicks off with a listener question from Zach J. He presents a scenario where he is considering a 40% pay cut to transition out of his current career field, which he no longer finds satisfying. At 34 years old with three dependents, Zach has a net worth of $1,000,000, with $700,000 in liquid assets. Despite his impressive financial standing, Zach is concerned about maintaining a tight budget and ensuring financial stability for his family.
Rivi introduces Zach's question:
“Should I take a drastic pay cut of about 40% to move out of my career field that I'm no longer interested in? Our family has a net worth of $1,000,000 and a liquid net worth of 700k. It would make a tight budget, though. I'm 34 with 3 dependents. What do you think about this moving to something maybe he's more passionate about? Would enjoy. But big pay cut in the messy middle. What should he be thinking about, man?” [01:21]
Analyzing the Financial and Emotional Factors [01:53 - 03:34]
Bo Hanson acknowledges the difficulty of Zach’s situation, especially with dependents to consider:
"First of all, 34 with three dependents. That's hard. Oh, that's hard." [01:53]
Brian Preston commends Zach's financial acumen:
"Did you see that net worth, $1,000,000? 700,000 of it's pretty liquid. That's awesome." [02:05]
Bo emphasizes the importance of evaluating both economic and lifestyle reasons for the career change:
"Is the reason you're making this decision because... Or is it because you recognize... what it's going to position me to do is take four, five, six, seven steps forward over the long term." [02:40]
Brian introduces the concept of 3D Planning, encouraging Zach to envision three scenarios:
- Dream Scenario: Everything works out perfectly, leading to increased happiness and fulfillment.
- Down-to-Earth Scenario: Short-term sacrifices lead to long-term benefits.
- Do-Over Scenario: The new career doesn't meet expectations, prompting second thoughts.
Comprehensive Financial Planning [03:34 - 08:43]
Brian Preston elaborates on creating a detailed financial plan, emphasizing the need to forecast income and potential growth over the next five years:
"I would expect Zach to lay against or create his own five year trajectory of what his current income is and what it potentially could be in five to seven years and see where the intersection point was." [05:44]
Bo Hanson adds the necessity of aligning financial decisions with personal happiness:
"I think you have to measure both the art, the art and emotional piece of it, as well as the math and the science piece of it before you can decide if it's worth it or not." [03:34]
Key Takeaways:
- Economic Impact: Assess whether the pay cut can be sustained in the short term and whether it positions you for future financial gains.
- Lifestyle Improvement: Consider whether the new job offers a better quality of life, such as more family time or less stress.
- Long-Term Planning: Use financial projections to determine if the new career path will lead to significant growth and satisfaction over time.
Building a Financial Bridge [08:43 - 10:22]
Brian Preston emphasizes the importance of having a financial bridge to support the transition:
"Do the extra the next step is how long of a bridge is going to let you recover before you start hitting success." [08:55]
Bo Hanson underscores the necessity of family consensus in financial decisions:
"You also have to make sure that, you know, this isn't just a you decision. This is a family decision." [09:39]
Key Points:
- Bridge Financing: Ensure you have enough savings to cover the transition period until the new career becomes financially viable.
- Family Agreement: All household members should agree on the financial sacrifices and understand the long-term benefits.
Additional Listener Questions and Discussions
The episode also addresses several other listener questions, providing valuable insights into various financial scenarios:
1. Factoring in Pensions for Retirement [10:35 - 14:23]
Listener: Revy N.
“How should I factor in my pension to my retirement percentage?” [10:35]
Discussion Points:
- Pensions as Promises: Pensions should be considered as part of cash flow in retirement planning rather than static assets.
- Pension Benefit Guarantee Corporation: Ensure pensions are protected and understand their reliability.
- Supplementary Savings: Continue saving through options like Roth IRAs and HSAs to enhance financial security.
2. Balancing Saving for a House and Roth IRA [14:58 - 21:12]
Listener: JW116
“I’m balancing saving for a house and taking advantage of the Roth IRA. How should I prioritize?” [14:58]
Discussion Points:
- First-Time Home Purchase: It’s acceptable to put down less than 20% if managed well.
- Budgeting: Keep housing costs within 25% of gross income and avoid lifestyle creep.
- Discipline in Buying: Stick to financial plans to prevent overspending on home purchases.
3. Saving for a Child’s Future [36:03 - 51:28]
Listener: Marcus P.
“Where should I be saving and investing for my adopted child's future?” [36:03]
Discussion Points:
- Financial Stability: Prioritize overall household financial health before specific savings for the child.
- Savings Vehicles: Consider UTMA accounts and 529 plans for education savings.
- Family Consensus: Ensure the financial strategy aligns with family goals and stability.
4. Managing Emergency Funds During Unemployment [51:30 - 57:46]
Listener: Adam C.
“How low can my emergency account get before I have to make tough decisions like selling my house?” [51:31]
Discussion Points:
- Emergency Buffer: Maintain a sufficient buffer to avoid desperate financial decisions.
- Immediate Actions: Make tough, but smaller, financial cuts early to preserve long-term assets.
- Timeline for Decisions: Create a structured plan for when to implement larger changes based on financial recovery.
Insightful Banter and Real-Life Examples [25:04 - 38:34]
Throughout the episode, Brian and Bo engage in light-hearted conversations and share personal anecdotes, such as the story behind their custom koozies. These segments add a relatable and entertaining dimension to the financial discussions, illustrating the hosts' approachable and down-to-earth style.
Notable Quote:
"Our team did such a good job with this koozie that it cost more than a dollar. And I was kind of like, we couldn't have. But that's good because the first ones." - Brian Preston [29:40]
Conclusion and Final Thoughts [57:46 - 57:46]
As the episode wraps up, Brian and Bo reiterate the importance of balancing financial strategies with personal well-being. They encourage listeners to utilize the resources available on moneyguy.com for further financial planning and to maintain financial confidence.
Brian Preston:
"We have this whole abundance philosophy, but we also know that there's so much more to wealth and money beyond just the dollars and the bills. And that's why we've tried to balance that and give you guys all the tools so that you can be good with money, both from the financial standpoint and the math and numbers, but also so you live your best financial life." [57:46]
Key Takeaways:
- Comprehensive Evaluation: Assess both financial and emotional aspects before making significant career changes.
- Strategic Planning: Use financial projections and emergency funds to support major life decisions.
- Family Involvement: Ensure that all family members understand and agree with financial decisions.
- Continuous Learning: Utilize available resources and stay disciplined in financial planning to achieve long-term goals.
For more insights and financial strategies, visit moneyguy.com and subscribe to the Money Guy Show for future episodes.