Liz Weston: Chasing a dream? Fix your finances first

Mark Howard of Basalt, Colorado, earned a hefty six-figure income during his 25-year career in financial services. His dream, though, was to teach high school — a job that paid about $40,000 a year.

When he floated the idea past his wife and business partner, Danielle Howard, her reaction was surprise and unease. He was 54, she was 44. They had two kids in college, a big house and a lifestyle based on their $250,000-plus income.

But her experience in the life planning branch of financial advice taught her to ask searching questions of clients and follow up on their answers.

"One of the questions is, 'What would you regret not having done if you were on your deathbed?'" says Danielle Howard, a certified financial planner. "And his answer was, 'I would regret not having taught school.'"

After a lot of "soul-searching and number crunching," she says, they sold their house and downsized to a smaller one. They gave up expensive vacations for shorter trips closer to home. Mark Howard, now 66, happily taught English for 10 years and recently retired from teaching this past spring.

"It was a wonderful time. I loved it," he says.

ROLL THE DICE — BUT REDUCE THE RISKS

Improving your life sometimes means taking big risks, whether it's starting a business, going back to school, changing careers or quitting a job you hate. Whether that risk pays off depends a lot on how you handle your money.

"Two things, in particular, make a huge difference: having small ongoing expenses and having a large cash rainy-day fund," says Jon Luskin, a certified financial planner in San Diego.

Reducing expenses and paying off debt helps build a cash hoard ahead of your big leap and increases the odds you'll be able to cover the bills afterward, Luskin says.

Typically financial planners recommend dual earners have an emergency fund equal to at least three months of expenses. Single earners should have a six-month stash. People making a transition that involves a pay cut, or no pay at all for a while, should save even more, Luskin says.

"Figure out how long you anticipate your pay cut — one year? Two years? — and save accordingly," he says.

The planning required to project future income and expenses should help people discover whether their leap makes sense. Those considering a return to college, for example, should determine the new job they want, how much the job pays, how plentiful those jobs are and the total cost of the education. That will give them a far more realistic picture of their prospects than just assuming education will always pay off, says Breanna Reish, a certified financial planner in Riverside, California.

BEFORE YOU QUIT, USE YOUR BENEFITS

People also need to look farther down the road to see how the change may affect their ability to save for retirement and other goals. Earning, or saving, less may require working longer, for example.

Financial planners advise clients to take full advantage of any benefits they currently have before making their leap. Getting dental work or new glasses now makes sense if you'll be making do with bare-bones health care coverage during your transition, for example.

You also may want to stay put in your current job awhile longer if you're about to vest in a retirement or stock option plan or qualify for some other financial benefit. Samuel Boyd, a certified financial planner in Washington, D.C., had one client who was planning to leave her job at a nonprofit to start her own business. Boyd discovered that the client was eligible to have the balance of her student loans erased through the Public Service Loan Forgiveness Program if she stuck with the job for a few more months.

"She'll be one of the first Americans to take advantage of this program that she had no clue about," Boyd says.

Leon C. LaBrecque, a CFP and CPA in Troy, Michigan, asks his clients to tell him the pros and cons of not making the leap as well as the risks and benefits of going through with their plans. Those are the same questions LaBrecque asked himself before starting his own wealth management firm in 1989. LaBrecque says he had "a nice six-figure job in corporate education" but wanted more freedom.

"I measured the benefits of doing versus the risks and weighed those against the benefits of not doing and the risks," LaBrecque says. "I decided (hockey legend) Wayne Gretzky was right. You miss 100% of the shots you don't take."

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This column was provided to The Associated Press by the personal finance website NerdWallet .

Liz Weston is a certified financial planner and columnist at NerdWallet, a personal finance website, and author of "Your Credit Score." Email: lweston@nerdwallet.com . Twitter: @lizweston.