When to Step Back —
and When Not To!
Questionable "Investments"
of Time and Money Might Not Pay Off

It's a popular saying, and is often true: Sometimes one step backward can lead to two steps forward. But when it comes to career and financial decisions, that kind of thinking can lead to trouble — especially for those in debt. The reason is that the backward step comes first and is certain, while forward steps often don't pan out, leaving us in worse shape than before. Simply put, it's usually a bad idea to try to climb out of a hole by first digging deeper. Consider these examples and the larger lessons they demonstrate:

Moving for more money, cheaper housing

Relocating for a higher paying job or a cheaper house sounds sensible enough. The calculation works like this: Take one step back by moving to an unfamiliar place and getting hit with moving expenses. Then take two steps forward in the form of a better financial situation. The problem is that people often expect the step backward to be smaller and the step forward to be larger than they are. The step backward may include moving expenses which are typically $3,000. Homeowners will have to pay a real estate commissions in selling their house, which could be $12,000 on a $200,000 home. Also, switching jobs may shut you out of a 401(k) plan for a period as most employers require a year of service before eligibility. The lost matched contributions could mean another $1,000. Also, if your spouse works, he or she will likely spend some weeks finding a new job. All in all, the step backward could be roughly $20,000. Consider how hard it is to get ahead at all financially, let alone overcome another $20,000 hit. The two steps forward, meanwhile, are still uncertain. You may get there and not like the new city or the new job. This is especially risky if moving away from the support of friends and family. Or you could like the job, only to watch the company hit a down cycle, a few months later, making raises and advancement difficult for the next few years. When considering all that you can't control, it's easy to see the sense in simply refusing to take on more debt. Getting back to "even" after increasing a debt burden by $20,000 could take years — years that could've been spent building wealth. So, weigh such decisions carefully. How long will it take to get back to even? What can go wrong? Is there a way to improve a current situation without making any drastic, costly changes?

Leaving your job to gain new skills

It can be tempting: You see or hear an advertisement for a training program that will teach you a new skill or vocation and perhaps give you a new degree or certificate that, in turn, will lead to a higher-paying job. It only takes a year or two, and if you can't afford it, they will help you finance it.

Debt Matters certainly isn't against education — in fact, it's essential to thriving in today's economy. But we do encourage you to carefully weigh the costs and benefits of leaving your job (or even cutting back to part time) and spending money (or, worse, borrowing it) in exchange for promised future benefits. Keep in mind, the true cost of the program you are considering includes not just tuition, but also your lost income and opportunity while you are studying. And if you do borrow money to pay for your education, you'll have to pay it back with interest. Given all of that, the true cost could easily approach $100,000. Now ask yourself how long it would take you to earn that much more compared with if you had been working at your current job the whole time. Education can pay off, but usually only if you're willing to use your training for many years, and of course only if you really end up earning the higher salary you expected.

Keep moving forward

Don't get us wrong, living where you want and chasing your goals is worthwhile. We're not suggesting not chasing your dreams and that we shouldn't make sacrifices for them. But there's a fine line between sacrifice and behaving recklessly with money. People who are in debt are among the most vulnerable in society. So, taking on additional debt is all the more dangerous and should be done only along with careful planning and foresight. Certainly, there are times when short-term sacrifices can lead to worthwhile long-term gains. But generally, the way to move forward is to, well, keep moving forward.