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Life Kit: Taking a financial leap

SCOTT DETROW, HOST:

Have you ever felt completely burnt out at work and thought, what if I just quit? Or maybe your work situation isn't bad, but you're ready for something new. You want to try another kind of job or start your own business. Maybe you want to leave a marriage or move to another state. One way or another, you're looking for a reset. And in these moments, it can help to crunch the numbers to see what your finances look like, what might be possible for you and when. Life Kit host Marielle Segarra is going to walk you through how to do that.

MARIELLE SEGARRA, BYLINE: We're going to use a financial framework from a book called "The Great Money Reset." It's written by Jill Schlesinger, a business analyst at CBS News. And there are five steps.

JILL SCHLESINGER: If I could have put this to music, I would have, but I'm not that talented. I call it the fabulous five.

SEGARRA: No. 1 is to add up your resources. That's your paycheck, any savings you have, anything you own.

SCHLESINGER: When I say what you own, a lot of people will say to me, well, I don't own anything. And I say, but don't you have a 401(k)? Oh, yeah, I have that. So it really is a real calculation of kind of what you have and also what you might be giving up.

SEGARRA: And by the way, you might also have a 401(k) match from your employer, and maybe you have subsidized health insurance. Those benefits are things you might be giving up if you make the change you're considering. And that's all good information. Step two is to add up your debt - the mortgage, the credit card bills, that line of credit you took out to build another bathroom, your car loan, your student loan.

SCHLESINGER: And, you know, don't throw in the towel in that moment, OK? That's all I want to say. Like, I think that some people say, oh, I can't do it. I have all this debt. OK. We may be able to still do something.

SEGARRA: Step three is housing. If you own a home, ask yourself some questions.

SCHLESINGER: If I were to sell this house right now, how would I feel? Would I feel like I could have more freedom to consider something else in the future?

SEGARRA: Also, how much money could I make by selling? Would it be better in the long run to rent the house out instead? And if you're currently renting a house or apartment from somebody else, the questions are different. It's more like, how much is this costing you compared to what it might cost to buy?

SCHLESINGER: You might have a better deal than you think.

SEGARRA: Next up, step four, is expenses. How much money do you spend every month?

SCHLESINGER: This is not about living like a monk. This is just accounting for what your needs are and then what you actually are spending your money on.

SEGARRA: Step five is to consider the obligations you have to others. Will you be taking care of your parents as they age, or have you promised your kids that you'll pay their college tuition? Once you've gone through these five steps, it's time to do some analysis. If you, for instance, quit your job, what do you think will happen in each of these five categories in the best-, middle- and worst-case scenario? And then ask yourself, can I live with those scenarios? Sometimes, the answer will be, yeah, let's do it. And sometimes, it'll be no.

SCHLESINGER: And that's OK, by the way. It really is. I mean, isn't it OK to come through a process and say, you know what? I don't want to do that. That's too much for me.

SEGARRA: You might come to a compromise with yourself instead, like, I'm going to stay at this job a little longer and save up money while I bring down my expenses.

SCHLESINGER: You don't know if this money reset is within your grasp unless you actually stop the, like, fantasyland and do the math. You just don't know.

SEGARRA: And that's the whole point of this framework. It's meant to show you what's possible so you can make your own decision.

For NPR News, I'm Marielle Segarra.

DETROW: Life Kit has more personal financial advice, and these are tips for how to do your taxes, make your budget and more. You can find all of that information from Life Kit. Go to npr.org/lifekit. Transcript provided by NPR, Copyright NPR.

Marielle Segarra
Marielle Segarra is a reporter and the host of NPR's Life Kit, the award-winning podcast and radio show that shares trustworthy, nonjudgmental tips that help listeners navigate their lives.