The desire to meet financial goals, aligning a job with one’s passions and values, and career sustainability are among the biggest drivers for people who are considering switching to a new job or forging a new career path. One of the biggest obstacles that keeps people from making a career change, though, is the prospect of struggling financially in the process.
Changing your career might mean entering a lower-paying field, starting over at the bottom with a lower salary, or losing benefits that you’ve come to rely on. This can be especially concerning during uncertain economic times when it’s hard to anticipate the future, but 58% of surveyed workers say they would be willing to take a pay cut to change careers.
Having a comfortable financial cushion to fall back on when changing careers is ideal if you can manage it. But the reality is that most of us can’t cover our expenses while we exclusively pursue our dream job. Steadying your financial course so you can afford a career change is absolutely essential if you’re in the market for a new job.
How to Create Your Career Change Budget
Before you commit to an all-out career transition, it’s important to lay the groundwork to make sure you can truly afford a career change. These 10 tips can help you pave the way to the (new) career of your dreams, without jeopardizing your finances!
1. Track Your Monthly Expenses
Building up your financial reserves is only part of the equation. It’s also important to think more strategically about what you need to do budget-wise to prepare for a career move. If you haven’t already, begin by creating a monthly budget to help you understand your current spending—with columns for needs, wants, savings, and debts.
Take an honest look at your discretionary spending and see where you can pare it down to make room for a potentially lower income.
2. Pay Down Debt
Any debt reduction you can achieve is well worth the effort and can serve as an investment toward financing your future career. First, make a list of your financial liabilities.
Then, draw up a plan of attack that will free you up to focus your energies and finances on finding your next job, instead of worrying about your next credit card payment.
3. Build an Emergency Fund
If you’re already employed, giving up that security and changing careers can be a risky venture. Before you jump ship, make sure you have an emergency fund with, at the very least, 3-6 months of your bare minimum monthly expenses.
These funds can be a lifeline in any emergency once you move to your new career—like in the case of a sudden job loss or medical costs that go above and beyond what your new income can handle. The more you can save in advance for true emergencies, the less stressful your job transition will be.
4. Stick to a Career Change Budget
Once you have a handle on your household budget, it’s a good time to start living on your “new” salary. You likely won’t know exactly what your new career will pay you until you have the offer letter in hand, but using resources like the U.S. Bureau of Labor Statistics (BLS) and PayScale (and searching by occupation), can give you a ballpark figure for what you might earn.
And don’t forget to anticipate new expenses! Depending on your role (remote vs. in-office), you may have to budget for commuting and childcare expenses, along with a new wardrobe or specialized equipment. Once you have your anticipated budget in place, pretend it’s your new normal and see how well you can get by.
5. Plan With the End in Mind
It can be tempting to cash out your retirement savings to fund a career change, but do whatever you can to keep your retirement fund intact. Not only would withdrawing funds negatively impact your retirement goals, but you’ll face hefty taxes and withdrawal penalties for taking the money out early. Instead, make plans for every possible retirement fund scenario in a new job.
If you’ll be transitioning to a career with a lower income or think your new job won’t offer matching contributions, consider contributing more now in your current job to make up for lower contributions in the future.
6. Know Your Worth
Before you change careers, do your research and agree on the lowest salary you’re willing to accept. Know what your worth is, even if you’re moving into an entirely different career field. And keep in mind that your professional experience, college education, internships, and transferable skills bring a lot of value to a new role.
It’s also important to take the time to reflect on possible outcomes before you are discussing salary with your new employer. If the money isn’t right, will you make the move? Or is this a “dream job” scenario where money isn’t the driving force? How much of a pay cut are you willing to take? Knowing what you’ll accept (and if you can afford a career change) before switching gives you time to put an action plan in place.
7. Prioritize Your Health
Depending on what type of career change you’re making (like employee to freelance or full-time to part-time), you may not have access to employer-provided healthcare in your new job. Or, you may have access but with a waiting period before you’re eligible to apply for benefits. If you currently have health insurance, COBRA can help bridge the gap once you are at your new job—but at a significant cost that can eat into your career change budget.
To ensure your health and bank account don’t pay the price, take care of any annual check-ups or planned procedures before leaving your current coverage. In the same vein, find out if you need to use up your current flexible spending account (FSA) funds before you leave. Need help spending? FSAstore.com has more than 4,000 items you can buy using your tax-free FSA dollars.
8. Transition Gradually
If at all possible, it’s smart to slowly transition to a new career while still bringing in a steady salary at your current position. If you’re planning a move into a new industry, consider taking classes or pursuing certifications in your free time. An adult internship or part-time job during non-working hours in your new field can give you valuable experience without sacrificing your financial well-being.
If you’re planning on launching a new business, slowly building it up while still working full-time enables you to really see if it has the potential to support you as a full-time career down the road.
9. Find a Side Hustle
A great way to bolster your financial cushion is to find part-time work to help build up your banking account while also working full-time. Ideally, you could find a freelance side job or a part-time work-from-home job in your current or intended field that helps you develop your skills and lets you earn some extra cash for your career change fund.
If that’s not in the cards, any extra work (think: seasonal gig or temporary side hustle) can help you afford the career change you want.
10. Align Your Allies
If possible, make sure that colleagues, friends, and family members are on board with your aspirations. A support network that can hold you accountable for your goals is one of the most valuable assets you can have when you’re changing careers.
Let everyone know you need to commit to a career change budget and that you may not be as free-spending as you’ve been in the past. And, start building a professional network that can help you achieve all your career goals, no matter what they may be.
Start Your Career Change With FlexJobs
If you’re ready to change careers but don’t have the luxury of deep pockets, taking the time to figure out how to afford a career change and set up a career change budget before making the leap will do wonders to set you up for success on every front.
Ready to start searching for your new job? FlexJobs members have access to career coaching services, along with remote and flexible jobs in over 50 career categories. Not a member yet? Join today and learn how FlexJobs can help you find your new dream career!
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