How To Test Your Plan Before You Make Your Career Change Leap

Analogy junkie that I am, I’ve drawn comparisons between financial planning and bike racing, gardening, cross-country skiing, surviving in the wild, organizing, high school, and personal training.  So it’s surprising that I’ve never drawn on my pre-career change experiences as a software product manager when writing about personal finance — especially since I see parallels between the two often.  No matter, that streak ends now, and here’s why: the concept of “Beta testing”.

Those from the world of software development know that Beta test is the last phase before a product is officially released, and its purpose is to test drive the product under conditions that mimic as much as possible the way it will be used in real life by real customers.  The kinds of testing that come prior to Beta — unit test, Alpha test, etc. — are typically done internally by the company, and they are critical to getting the software to the point where it is even usable by real customers.

BUT it turns out that, no matter how bulletproof the software development team thinks they’ve made the product, there are always important issues uncovered once a Beta version of it gets into customer hands.  When these problems are found in Beta testing, they can be fixed BEFORE the official release when expectations and stakes are not as high as they would be in production use.  Yes, as all software users know, pretty much every piece of software gets out the door with at least some minor bugs remaining, but those that are thoroughly Beta tested are less likely to result in wildly customer-unfriendly behavior such as data loss, repeated crashing, and blue screens of death.

And this is an important lesson for career changers, retirees, and others whose plans include a change in employment compensation: try before you buy.  Or to put it another way, Beta test your post-transition financial plan as much as possible BEFORE you say goodbye to your regular paycheck.  For career changers and software development teams alike, it is easy to get caught up in the excitement of the new, the feeling of having already done so much and come so far, and the desire to just “get’er done”.

When it comes to career change, including retirement, this often shows up as an overly optimistic view of how much it is possible to reduce living expenses, in order to pull off the desired change.   I read a study a while back that suggested most of us can reduce expenses by 10% without a significant hit to lifestyle, but it’s a really good idea to verify that’s true, not to mention sufficient, for you while you still have all your options open.  Here’s how:

  1. Download my free Cash Flow Worksheet with before, during, and after columns, as well as hints on categories where career changers are likely to see fluctuations.  First, determine your current income and expenses, which will help you with the next step: making estimates for the “during” and “after” columns.
  2. If your post-transition budget doesn’t balance (i.e. more cash flows out than in, and the assets intended to fund this change can’t make up the difference), dig into more detail and identify additional areas where you think you can reduce spending, being as realistic as possible.
  3. Now Beta test your plan.  In other words, try now, while you’re still gainfully employed, to spend at the post-transition level to see what “bugs” might be lurking.   While you won’t be able to test every change, e.g. lower commuting costs, you should be able to learn a lot just tracking the categories you can simulate, e.g. spend less eating out.
  4. Fix bugs, and retest until the plan is ready for “production use”.

Even if the 1.0 version of your spending plan is perfectly achievable, it sometimes takes a while to make a downward shift in spending.  This Beta test strategy not only gives you that time, it has the added bonus of further padding your nest egg, er, goat pen, should a little extra cash come in handy.  And doesn’t it always?

About the author

Sherrill St. Germain, CFP®

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