This post is the third in my series on lessons I’ve learnt since quitting my job. My first post was on 4 health and wellbeing lessons I’ve learnt and the second was on 4 work lessons I’ve learnt since quitting my job.
2 career change lessons I’ve learnt since quitting my job
1. Income is hard to ignore
There’s one obvious point of comparison between different careers – the income that you can expect to receive. When making decisions about career change, income is guaranteed to be one of the main factors considered – often it will be the number one factor.
Why income can become the focus
Income is tangible. Changes in our future income affect our mental projection of our future lives – the higher an income we can expect, the wealthier our future selves become.
Other factors that we take into account when considering a career change may be far less tangible. Our wellbeing, our excitement, our hope for the future – these are all things that we might expect to increase with a new career but may find difficult to quantify. It’s harder to imagine your future self with more excitement each day than it is to imagine your future self with more money.
This can create a situation that feels at odds with our desire to be happy. Whether or not you consider income to be a key factor in determining your happiness, it’s likely to loom large when considering a career change. Although your main goal in changing career may be to be happy, it can feel like your decision-making process doesn’t fully reflect this goal.
This was certainly my situation when I was considering a career change. Although I felt certain that income wasn’t the only significant factor in determining my happiness, I struggled to draw my focus away from income when comparing my options.
As it became clear that this focus on income wasn’t going to disappear, I decided that I needed to better understand how it would bias my career change decision. Then, perhaps, I could figure out a way to make an informed decision.
2. Losses loom larger than gains
When making decisions, our brains are often under the influence of cognitive biases. A cognitive bias is a flaw in our rational thinking – something which causes us to be irrational. Often our brains use heuristics (shortcuts) that save mental energy but cause us to make irrational decisions.
One example of a cognitive bias is stereotyping – expecting an individual to have specific characteristics based on a broad view of a group to which we think they belong. It’s easier for our brains to jump to a stereotypical conclusion than it is to consider all the individual factors, weigh them up and come to a conclusion that way.
A key cognitive bias that applies to expected changes in income is loss aversion.
Loss aversion is simply the feeling that a loss of some amount is more painful than an equivalent gain is pleasurable. It can be illustrated well with an example:
- You are offered the following gamble on the flip of a coin:
- tails you lose £1000
- heads you win £1200
- Would you take this gamble?
If you were an economic robot considering only the economic gain or loss, you would certainly take the gamble. In fact, you would take any gamble where the amount you win on heads is greater than the amount that you lose on tails. As long as you expect to see a profit in the long term, you take the gamble.
Whether or not you would take the gamble above, it’s likely that economic gain and loss weren’t your only considerations – we aren’t all economic robots.
Other factors could include how much regret you expect to feel if you lose or how significant the loss or gain would be to you. They may not have even been consciously considered – you may simply have imagined how you would feel if you won and how you would feel if you lost. If the pain of losing is more significant than the pleasure of winning, the gamble isn’t going to be appealing.
The career change scorecard
Loss aversion isn’t, of course, limited to gambles on the flip of a coin. Any decision where a loss or gain is possible can be affected by loss aversion. This includes decisions on career change.
When weighing up our current career and a potential new career, we create a mental scorecard. The new career will have certain positive aspects versus our current career – these add to the new career’s ‘score’. Similarly, any negative aspects of the new career are subtracted from the score.
The positive points are gains, the negative points are losses. Loss aversion causes the negatives to carry more weight than the positives.
This is best illustrated by another example:
- Consider how much extra holiday is worth to you – if you were offered 10 extra days of holiday per year, how much of a salary increase would you need to be offered in order to be indifferent between the two options? You can receive either the salary increase or the extra holiday based on the flip of a coin – what salary increase would make you equally happy either way?
- Now consider your current situation. You are told that your salary is to be cut by the amount that you decided above, but that you are going to gain 10 extra days of holiday per year. This is mandatory – you have no choice
- Are you happy with this situation?
Although you’d previously decided that you were indifferent between the salary and the extra holiday, it’s unlikely that you’re still indifferent given the specifics of the situation.
Previously you were comparing two gains – either way you were winning – whilst now you are comparing a gain with a loss. Loss aversion causes the loss to carry more weight than the gain – losing the salary feels worse than gaining the extra holiday.
A career change decision is similar. The negatives of our new career weigh more heavily in our minds (on our mental scorecard) than the positives. Losses in income are likely to weigh especially heavily – they certainly did in my mind.
Although I understood loss aversion and the affect it was likely to have on my decision, I wasn’t confident that I could mitigate its effect. I needed a plan.
Making an informed decision
Income doesn’t just affect our projection of our future wealth – it affects our ability to live in the present moment. Whether or not we consider income to be a key factor in determining our happiness, we may require a certain level of income in order to do the things that make us happy.
A change to a career with far more free time to do the things you love needs to come with sufficient income to afford to do them.
My aim wasn’t to disregard income when making my career change decision – it was to give it the correct weighting in my decision.
Here’s how I went about it:
- I looked back through past bank statements to assess the monthly income that I required for my current lifestyle. This included any recurring expenses for accommodation, food, bills – anything that was necessary for continuing to live the way I was living
- I then went through these recurring expenses and decided whether they were necessary for my required lifestyle. If required, could I cut out some of the expenses and still be happy? What was the minimum monthly income that I would be content with?
- Next I went through my future desires. If I wanted to travel, how much would it cost? If I wanted to save for a future purchase, how much would I need to save each month? I estimated the additional monthly income that I would require for these items
- Finally I considered back-up plans. If things didn’t go to plan, could I return to a career that provided sufficient income for my current lifestyle and for my future desires. If necessary, could I return to where I was now?
Running through these steps helped me to mitigate the affect of loss aversion by focusing on how much income I actually needed to do the things that made me happy and mitigate my fear of regret by convincing myself that I could return to my current situation if required.
Whilst the idea of change was still scary, I felt able to weigh the factors more fairly in my mind. Income was less dominant in my decision process as I had quantified the effect that it would have on my happiness. Other less tangible factors, such as freedom and control over my time, got the attention that they deserved. I no longer feared some vague worse-case scenario as I had a back-up plan in place.
Changing careers still felt like a leap of faith, but this planning exercise helped me feel like I had safety net to catch me.
I’ve got a few more lessons to share – look out for posts in the near future.
In the mean time, I’m still learning (and I’ll never stop!). I don’t claim to be an expert on anything that I’ve written about in this post – I want to learn more! Please share your own insights and lessons in the comments below.