Thinking of a career change? You’re not alone! According to new research conducted by Microsoft and LinkedIn in the first quarter of 2024, nearly half (46%) of professionals were contemplating quitting their jobs, surpassing figures even during the great resignation of 2021. The desire to follow your passion is universal, but the financial implications are deeply personal. The key question many face in their relationship is: Can we afford my career change? Let’s break down the steps to answer this question together.
Assessing your current financial situation
To increase the chance of success with any journey you embark upon, it’s crucial first to understand your current financial position. Just like entering details into a GPS–how can you arrive at your destination if you’re not sure of your starting point?
- Schedule your Money Date: This is a crucial first step in determining your financial position with your partner. On a money date, you can determine your post-tax monthly income and much more.
- Calculate Your Net Worth: List all assets (savings, investments, property) and liabilities (loans, credit card debt). Understanding your net worth provides a clear picture of your financial health.
- Track Your Monthly Expenses: Use apps like Mint or YNAB to track spending. Categorize expenses into needs, wants, and savings. This helps identify areas where you can cut back if needed.
Knowing your financial position is the first step in making a well-informed decision about a career change and not jumping too early.
Creating a financial plan for your career change
With a clear picture of your finances, it’s time to create a career change plan. This section outlines the key steps to prepare for your career transition financially.
- Estimate the Costs: Consider fees that will be incurred to upskill or acquire new skills, the cost of any required certification costs, and the opportunity cost of potential income loss during the transition period. For example, if you want to become a lawyer, you may want to consider factoring in LSAT prep and tuition costs.
- Create a Budget: Review and adjust your current budget to factor in additional expenses. This might involve reducing discretionary spending, like dining out, or finding ways to increase your income temporarily with side hustles or freelance gigs.
- Explore Funding Options: Look into scholarships, grants, and loans that can help cover educational expenses or that can fund your start-up.
While the time may never seem perfect to take a leap of faith, clarity on your finances can mitigate the risks and stress associated with career changes.
Maximizing savings and reducing debt
Managing debt and maximizing savings are essential steps to ensure financial security during your career change. Given your current liabilities (i.e., debt), be realistic about your current financial situation and whether it’s a good time to make such a move.
- Debt Repayment Strategies: Prioritize high-interest debt. Consider the snowball or avalanche method to tackle debts effectively. Find more on these debt-tackling strategies here.
- Automate Savings: Set up automatic transfers to your savings account or investment accounts. This ensures you consistently save a portion of your income and have a sufficient emergency savings fund to weather this change.
- Cut Unnecessary Expenses: Review your spending habits and cut back on non-essential expenses. For example, this might involve dining out less, canceling unused streaming subscriptions, or finding cheaper alternatives for necessary expenses, such as grocery items.
If you have staggering, untamed debt, you may not be able to manage a new job, which is why reducing debt and boosting savings are key steps to provide the financial flexibility needed for a smooth career transition.
Discussing your plan with your partner
A career change doesn’t just affect you—it impacts your partner and family as well. For everyone’s benefit, avoid making any impulsive decisions without first communicating with your partner.
- Share Your Vision: Explain why you want to change careers and what you hope to achieve. Sharing your passion can help your partner understand your perspective and why this matters to you. For example, if you’ve always dreamt of being a lawyer, you may want to express this to your partner so they can get on board with your plan.
- Discuss Financial Implications: Go over the financial plan together, highlighting how expenses and income might change. Be honest about both best- and worst-case scenarios. Transparency is key to ensuring you’re both on the same page.
- Plan Together: Involve your partner in the planning process. This includes the impact on your budget, potential sacrifices you and the family must make, and setting new or amended financial goals together.
You can’t do this alone. Clear communication will best lead to mutual support, both of which are vital for navigating the financial challenges a career change can bring as a couple.
Finding supplemental income sources (i.e., the “side hustle”)
Ever heard of a “side hustle”? Well, now’s the time to implement one. To ease the financial burden, consider ways to earn extra income during your transition.
- Freelancing and Consulting: Use your current skills to freelance or consult in your field. Websites like Upwork and Fiverr offer many opportunities to earn extra income. For example, some people who are great at organization take up “side hustles” as virtual assistants for a little extra cash on the side.
- Part-Time Jobs: Look for part-time work that fits your schedule. This could be in retail, hospitality, or even remote customer service. Just be sure it doesn’t become a full-time distraction, taking you away from giving your full effort to your new career.
- Monetize Hobbies: Turn hobbies into income sources. For instance, sell crafts on Etsy, offer tutoring services, or start a blog or YouTube channel.
Supplementing your income in the interim with a side hustle can reduce stress during your career transition by filling in the temporary income gap.
Find resources to support the career change
You can and should make use of any free, available resources to support your career change journey. Here are some examples of free or low-cost resources you can try:
- Online Courses and Certifications: Platforms like Coursera, Udemy, and LinkedIn Learning offer affordable courses to gain new skills and can be a great way to upskill without the price tag.
- Tap into your Network: Reach out to your current network and connect for coffee dates. Share your new career intentions and explore opportunities within your current circle.
- Explore New Opportunities: Expand your circle and connect with professionals in your desired field through networking events, LinkedIn, and industry groups.
Leveraging low-cost or free resources can make the career change process feel more manageable and less overwhelming.
Frequently Asked Questions (FAQs) on making a career change
Let’s go more in-depth on some commonly asked questions about financing a career change.
Q: How do I know if a career change is the right move?
A: Assess your current job satisfaction, identify your passions, and consider if the new career aligns with your long-term goals. Also, consider this current chapter of your life and whether the time is right for you all.
Q: What if I don’t have enough savings?
A: Consider delaying the career change until you’ve built a sufficient savings buffer. Alternatively, explore part-time education options that allow you to work while studying.
Q: How can I balance work, study, and family life?
A: Time management is key. Prioritize tasks, set a schedule, and involve your family in the planning process to ensure everyone is on board.
Bottom line on financing your career change
Changing careers can be an exciting yet challenging journey. However, you can make the transition smoother by understanding your financial situation, creating a solid plan, and involving your partner in the process (this is key!). Utilize free or low-cost resources and consider supplemental income (side hustles) to ease the financial burden. Remember, with careful planning and mutual support, you can pursue your dreams without compromising financial stability.
Laura Tynan is the founder of The Witch of Wall Street, a personal finance and investing community, where women are shown how to manage, multiply and manifest money, using simple strategies. Laura holds a BSc Hons in Finance, is a Chartered Accountant, and is certified in EFT Tapping, Breathwork, and RRT. She has been recognized by the Financial Times as a Top 20 Future Female Leader and by Yahoo! Finance as a Global Champion of Women in Business. She is a multi-award-winning speaker who has spoken at, and been featured in, Forbes. Laura hosts The Witch of Wall Street podcast and is the author of the personal finance and investing book for women, by the same name, which is available now on Amazon.
0 Comments