Are you considering a new career that better aligns with your talents, interests and values? Devoting your time to doing something you love will have an immeasurable impact on your quality of life. But while reinventing yourself through a career change can be exciting, fear of the unknown can also be unsettling, particularly when there are financial implications.
A career change doesn’t always happen as quickly as you’d like, and the journey may take some unexpected turns. It’s possible that you won’t be able to replicate your current salary when you begin your new career. Therefore, our career coaches advise careful planning in order to position yourself to better navigate this transition.
The following strategies can help you prepare your finances for a career transition:
Hold yourself accountable — Do you know where your money goes each month? Seemingly small expenses (think daily coffee runs, ATM fees, Uber rides … ) can collectively add up to money that you could save for a financial cushion during a career change.
Take an honest, close look at your monthly expenses, making a column for “needs” and “wants.” You might be surprised by the amount of money you spend on goods and services that fall into the discretionary category. While you keep a tighter rein on your budget during a career transition, make a habit of asking yourself how badly you need (or want) each item you consider purchasing. Can it wait until your finances become more predictable?
Do your research — As you prepare for a career change, explore the financial implications. What type of pay range can you expect in your new job? Can you afford to maintain your lifestyle with a lower salary? Will you need to spend money on additional training or certification?
While you can find the answers to many of these questions online, two of the best ways to conduct career research are connecting with people in your target industry who can offer insights you may not be able to find elsewhere, and meeting with a career coach who can help you determine if your target career is the best fit for you.
Develop a side hustle — Picking up freelance or consultant work can be a great way to supplement your income during a career change. Some people enjoy doing something new and different, like working at a boutique on weekends, not only for variety, but also to see where new paths may lead.
Stay away from your retirement account — Resist the temptation to liquidate your retirement account to finance your career transition. Not only will you have a large tax burden, but you will also hurt your overall retirement goals. With this goal in mind, keep working at your current job for as long as you can to build a sizable emergency fund (financial experts suggest six to twelve months of living expenses), so you don’t have to think about turning to your retirement account for your livelihood.
Being financially prepared can help ease the transition as you make your next professional move. And while career change doesn’t happen overnight, requiring patience and persistence, the benefits can be profound — and they’re worth the wait.