Career Change and Pocket Change: Financial Advice for Career Shifters

The new year always gets people talking and thinking about changes they would like to make. For some, that means finally getting serious about leaving a career for which they are no longer passionate. For others, it may mean devoting time to an entrepreneurial endeavor, business start-up, or even a capital intensive passion project. If you count yourself among either of these groups, I’ve got some advice to make that transition a lot easier on your finances. Depending on how dire your situation is, and how desperate you are to change, these steps can feel lengthy. But ideally, no career change should happen without thoroughly weighing all the pros and cons. You should carefully consider the financial ramifications of what is usually a monumental life decision.

Plan It

To start this process, do a copious amount of research into your new career field. And then do even more research. This should be an honest examination of what it would take to move into this field, including the potential salary and the potential costs:

Do you need extra education, training, or certifications?
Does your new role have any large upfront expenses (Offices, equipment leases, mortgage financing, zoning, etc)?
Will you lose benefits, or have to pay more for them?
Do you need to hire and train staff?
Will you need additional insurance to protect your family?
Do you need to move?

And the list goes on. After final calculations, you may find that your career shift leaves you with a financial shortfall. Either way, make a plan to begin putting money away now to build a supplemental nest egg. Try to save at least twelve months of expenses for your family to withstand a slow start and allow for bumps in the road. But don’t let perfect be the enemy of good: even saving $1,000 a month can leave you with a bit of a cushion to help counterbalance a possible reduction in income. Start-up expenses and marketing will need to be accounted for too. Try to bucket enough funds for these expenses, or you may need to consider a partner or other less desirable forms of funding (retirement drawdowns, etc.). You can control your freedom with proper funding. Don’t delay, start saving now!

Live It

Once you have a realistic idea of what you can expect to earn with your new career, live that budget for at least 3-6 months. Sure, some easy items that most people can start with include:

Eating out less
Skipping the fancy coffee shop
Fewer trips or taking staycations instead
Canceling services you don’t utilize or don’t really need e.g. streaming services, music memberships, gym memberships, cable television, magazines, etc.

But, let’s face it- the big purchases are where you can do the real saving. Think about your future before you purchase expensive depreciating assets like cars, boats, and electronics, etc. Forgo a luxury car for a reasonable one, and with the substantial savings, you can enjoy that Mocha Frappuccino while you sock away cash for your new career too! One career shifter, Carissa U. from Madisonville, followed this advice when she left a high-stress sales job that was making her burnt-out and miserable. “When the time came to make the jump to my new career, I was paid about 30% less, but I was ready. Some people thought I was making a foolish choice, but I never looked back.”

Take the Big Steps

If your situation is a little more complicated than Carissa’s, you may find that you need to look at your more significant assets to accommodate your goals. That usually means a house or a car. Refinancing these items, or even downsizing to more affordable options, may be a great way for you to prepare for making a financial leap.

But Transition Slowly

Though you may dream of a dramatic, Office Space exit scene from your current career, there’s no need to shut the door immediately or even completely. Financially, it can make more sense to use a slow transition to prepare for your new career. You can start by taking courses, networking, joining a professional association, or even job shadowing. Ask about rearranging or reducing your hours so that you can slowly develop time every week to check out your new field. Inquire about staying on as a consultant. This safety net can make it much more palatable to take a risk, and you may be surprised that working in a reduced capacity can reenergize your passion for your current job.

Ask a Professional

Whether you’re projecting salaries, examining benefits, considering tax credits, or crunching the budget, a financial advisor is an invaluable part of the career change process in providing an educated second opinion. If you are planning a career change in 2020 or just looking to improve your finances, partnering with a fee-only advisor is a great way to start the process.