Making a career change can be one of the most exciting decisions of your life. Whether you’re feeling stuck, bored, or simply seeking something more fulfilling, the idea of pursuing the job of your dreams is appealing. But before diving in headfirst, it’s important to ensure that your finances are in order.
A well-thought-out career change doesn’t just mean understanding what your next job will be; it also means preparing for the financial shift that will inevitably come with it. In this post, we’ll guide you through how to make that transition without jeopardizing your financial stability. We’ll also explore how two couples, Emma and John, who live sensibly, and Sarah and Mike, who often confuse wants with needs, navigate this challenging decision.
Why Are You Unhappy with Your Current Job?
Before deciding to make a career change, it’s crucial to understand why you’re unhappy in your current position. This helps ensure that you’re making the change for the right reasons.
- Emma and John:
They sat down and discussed why John wanted to leave his job. He explained how the office had moved, doubling his commute time, and he found it increasingly difficult to balance work with family life. They recognized that the stress from the long commute and lack of work-life balance was a valid reason for considering a change.
- Sarah and Mike:
Sarah felt unsatisfied in her job but couldn’t quite put her finger on why. After some thought, she realized that her dissatisfaction stemmed from not getting a promotion she had hoped for, but she hadn’t explored ways to improve her chances or ask for feedback from her boss. In reality, her frustration could have been addressed without changing jobs.
Lesson: Be clear about what’s bothering you in your current role. You may find that some problems are fixable without the need for drastic changes. If the issue is long-term, like John’s commute, it might be time to explore new options.
Will You Need Additional Training?
A career change often requires learning new skills or obtaining additional qualifications. But this takes time and money, so it’s essential to factor these costs into your planning.
- Emma and John:
John realized that switching careers would require additional education. He researched the cost of enrolling in a part-time program while continuing to work. Together, they adjusted their budget, cutting back on non-essential spending and increasing their savings to cover the education costs.
- Sarah and Mike:
Mike jumped at the idea of switching careers to pursue a long-time passion for photography. He enrolled in a pricey course without first researching whether the investment would be worth it. Without a clear plan or financial cushion, they found themselves struggling to meet day-to-day expenses.
Lesson: Before committing to a career change, figure out what kind of training or education is required and whether it fits within your financial means. Research low-cost options, such as online courses, to avoid derailing your financial stability.
Do You Have Enough Savings?
Making a career change can mean taking time off or earning less money during the transition. If you’re not financially prepared, this can put a lot of stress on you and your family.
Time between pay cheques
Will there be any gap between your last pay from your previous job and your first pay from your new one? If so, have you budgeted enough to cover your living expenses during that time?
- Emma and John:
Over the years, they made a habit of saving a portion of their income each month. When John decided to change careers, they had enough savings to comfortably live for six months without income. They carefully calculated how long John might be out of work and how much they would need to cover living expenses during that period.
- Sarah and Mike:
Without a strong savings habit, Sarah and Mike struggled when Mike left his job without securing another position. They had no emergency fund, and when unexpected expenses came up, they had to rely on credit cards, pushing them further into debt.
Lesson: If you’re thinking of switching careers, make sure you have enough savings to cover the period where you might not be earning a regular income. A good rule of thumb is to have at least 3-6 months’ worth of living expenses saved.
Read more about emergency funds and other budgeting considerations in my article A Complete Guide to Creating Your Personal Budget.
Research Salaries in Your New Field
One of the biggest financial impacts of a career change is a potential shift in salary. You might end up earning less in your new job, at least initially. That’s why it’s essential to research salaries in the field you’re moving into.
- Emma and John:
John used online resources to research salary ranges for the new role he was considering. They checked out Monster.ca as well as other similar sites. He also spoke with someone who worked in the field to get a better idea of what to expect. They carefully evaluated whether they could live comfortably on the starting salary and how his earnings might grow over time.
- Sarah and Mike:
Sarah didn’t take the time to research how much she could realistically earn in her desired role. After quitting her job, she was shocked to discover that entry-level positions in her new field paid significantly less than she expected. This lack of research put her and Mike in a tough financial spot.
Lesson: Always do thorough research on the salary you can expect in your new career. This will help you determine whether the career change is financially feasible.
Health Insurance Considerations
For many, health insurance is tied to their job. A career switch can have a major impact on your health coverage, especially if you’re supporting a family.
- Emma and John:
They took the time to investigate health insurance options before John made the change. They found an affordable plan that fit their budget, ensuring that their family wouldn’t lose coverage during the transition.
- Sarah and Mike:
Sarah didn’t consider the impact her job switch would have on their health insurance. When she left her job, they lost their family coverage and ended up paying high out-of-pocket costs for a new plan. This oversight added unnecessary financial stress to their already strained budget.
Lesson: Don’t overlook health insurance. Research your options carefully and make sure you have a plan in place before leaving your current job.
Start Saving Big Now
If you’re thinking about a career change, it’s smart to start saving as much as possible before you make the leap. Unexpected costs can arise, and having extra savings will help cushion the financial impact.
- Emma and John:
Even before John officially decided to change careers, they started putting extra money into their emergency fund. By cutting back on dining out and reducing their entertainment expenses, they were able to build up a significant cushion. This gave them peace of mind when John finally made the switch.
- Sarah and Mike:
Despite talking about saving more for months, they never actually got around to it. When Sarah decided to leave her job, they had very little saved, which left them scrambling to cover basic living expenses.
Lesson: It’s never too early to start saving. By padding your emergency fund now, you’ll be better prepared for any unexpected costs that come with a career change.
Avoid Confusing Wants with Needs
One of the key elements of sensible living is understanding the difference between wants and needs. This can be especially important when preparing for a career change, as financial uncertainty can make it tempting to cut corners on important necessities.
- Emma and John:
They carefully evaluated their spending to ensure they were meeting their needs without indulging too much in wants. By focusing on essentials, they were able to build up their savings and prepare for the financial challenges ahead.
- Sarah and Mike:
In contrast, Sarah and Mike often confused wants with needs. When Mike left his job, they continued spending on non-essential items, like upgrading their phones and going on vacations, even though they couldn’t afford it. This put them further behind financially and made the transition much harder.
Lesson: Prioritize your needs over your wants. When preparing for a career change, it’s important to focus on what’s essential to maintain your financial stability.
Having trouble separating wants from needs? We have a great explanation in this article.
Sensible Living for a Smooth Career Transition
Switching careers can be a life-changing decision, but it’s essential to approach it with financial preparedness and a sensible mindset. By understanding why you’re unhappy in your current role, researching your new career, building up your savings, and distinguishing between wants and needs, you can make the transition smoothly.
Emma and John’s story shows us how planning and sensible living can lead to financial security, even during major life changes. On the other hand, Sarah and Mike remind us of the challenges that arise when we fail to prepare and make impulsive decisions.
By following the practical tips in this guide, you’ll be well on your way to making a successful career change without sacrificing your financial well-being. Sensible living isn’t about depriving yourself—it’s about making thoughtful decisions that set you up for long-term success.
Disclaimer for ManageYourMoney.ca
The information provided on ManageYourMoney.ca is intended for educational and informational purposes only. It should not be taken as financial advice. The opinions shared are those of the authors and are meant to encourage sensible financial habits and decision-making. We recommend that you do your own research or consult a certified financial advisor before making any financial or investment decisions. All investments come with risks, and there is no guarantee of success. Past performance is not a reliable indicator of future results. Always consider your personal financial situation and risk tolerance before pursuing any investment opportunities.
As always, I am not a qualified financial advisor. I just relate financial management to my own experience which may not resemble yours at all. Advice is frequently worth exactly what you paid for it. Most of mine came from expensive experiences.
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