Are you changing careers midlife? It's an idea that many people have, but fewer people find the nerve to actually follow through. How can you be the type that makes a successful career transition? Follow these few financial planning steps before you take the plunge.
Save a Nest Egg. One of the biggest challenges for most people when thinking about a career change is how to manage financially. If you expect to take a lower salary, return to school, search for new positions, or start your own business, you need a financial nest egg in advance. To accomplish this, boost your savings rate now, putting it aside into an account specifically for the career transition. No one can specify exactly how much you should put away, though, as it depends on your current expenses.
Prepay Expenses. If you think your income will drop when you switch careers, build a financial bumper by prepaying all the expenses you can for the future. Prepaying bills allows you to control what expenses you'll have over the next few months or a year so that you can breathe easily. Prepay expenses like your property taxes and house insurance, mortgage payments, vehicle and life insurance, tuition, and car payments. If you can't prepay items, consider setting aside money in a separate account to pay these bills for the next few months.
Minimize Bills. The other way to manage your transitional budget is to reduce expenses as much as possible before you begin. Changing careers is difficult enough without making drastic cuts and adjustments once you get started. Before you start school, a new position, or a new business, cut your budget down. Taking this step early on gives you a few months to tweak your budget before you face the real thing. Many people like to use an envelope system—either real or virtual—to control expenses and reduce spending.
Think Part-Time. Rather than jumping into your new career, consider a part-time transition over the course of several months, a year, or more. That part-time transition could include going to school part-time while maintaining your old job, or it could be pursuing your new career only part-time to start with. Keeping one foot in the old industry or field allows you to make a less stressful adjustment.
Are you thinking of changing careers in the near future? Talk to a financial planner like those at Family Financial Partners today to start making a plan that will carry you through this time and into a brighter, happier future.