Top Five Finance Tips for Career Changers

Sunday, July 15, 2012

Top Five Finance Tips for Career Changers

You've probably heard that people change career seven times during their lives, but this is not necessarily true. While today's workers do change jobs more often than our parents and grandparents did, most people don't change career. According to one Wall Street Journal article, career switches early in life – in the twenties – are fairly common, but this is often because people are working at jobs rather than career. Mid-life career changes, on the other hand, are less common.

While career changes in mid-life aren't necessarily common, they can certainly be done, and they can be undertaken for good reason. Whether you're unhappy with the pay of your current career or want to pursue something that you truly love, you can change your path in life by changing your career. But before you do, make sure you take these five finance tips.

1. Assess your current financial situation

The first step when considering a career change is figuring out where you are financially at this very moment. How much do you make per year? Do you have a potential for bonuses with your current job? How much is your current benefits package worth, and what would it cost to replace it independently for a time?

These are all questions that you need to answer as you're planning a career change. Having a full assessment of your current financial situation can help you figure out where your new career will take you financially and how your life will change when you change career.

2. Find out what you can expect from your new career

The next step is to figure out how your new career's payment will differ from that of your current career. Do some serious research – the Bureau of Labour Statistics website is a reliable place to start – about salary ranges in your new career. If you're changing to a dramatically different field, remember that you're likely to start near the bottom of the pack, which can mean lower wages to begin with. Of course, your past work experience will count for something, particularly if you can figure out how to tie past experiences with your new career.

If you can, find out what jobs like the one you're after are worth in your area or in areas to which you would be interested in moving. If your spouse has a job where you are and it will be tough for you to move cross-country for your new career, it's particularly important that you know what to expect from a new job right where you are.

3. Live on a tight budget

If you're married to a spouse who works, the ideal way to go about a career change is to live on the income of the other working spouse. So if you're a husband trying to launch into a new career field, see if you can trim the family's finances back enough to live off your wife's income. Even if this means cutting out all luxuries for a while, it will buy you some breathing room as you get into your new career – especially if you're launching a business or going to school full-time in order to get started.

Even if you aren't married to someone who also works, you should work on cutting as much out of your budget as possible. The fewer expenses you have to cover each month, the less you'll have to worry about pulling in the cash while you're changing career.

4. Build up an emergency fund

Even if you can live on one spouse's income or a fraction of your own during the career change process, having an emergency fund is essential to changing career. It's a little like having a safety net under a trapeze. You'll be prepared to make much bolder leaps if you know there's a safety net underneath you, and sometimes a bold leap is exactly what you need when it's time to change your career.

If you absolutely must change your career immediately and don't have time to save for emergencies, then check out credit cards that you can keep on standby for emergencies. If you'll need to travel frequently during the career change process, you can find some good deals on travel rewards credit cards. They can be a great option.

5. Look at your retirement options carefully

As you're changing career, don't forget to think about your current retirement investments. If you've got a retirement account through your current employer, you need to look carefully at your options before moving your money. While many Americans simply cash out their retirement funds, this is one of the worst possible options, since it drains whatever nest egg you have built up and can come with heavy taxes and penalties.

A better option is normally to roll over your retirement savings into a new employer-sponsored plan. The best way to go about this is to talk to a qualified financial advisor, who will be able to let you know if your retirement savings is eligible for this option and how to go about getting it done.

Switching to a new career may not be as common as we think, but it's still not an impossible task. When you're ready to change career, these five financial tips will keep you on the right track as far as your finances go.

About the Author:

Ashyia Hill is a blogger at CreditDonkey.  Visit her at CreditDonkey .

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