Navigating Life Transitions: Financial Tips for Career Changes

Posted: July 22, 2024

At the peak of the "great resignation" in 2022, 3% of American workers-roughly 4.5 million people-were quitting their jobs each month. This trend in the job market has continued, with a recent survey showing that more than half of workers in the U.S. are considering switching jobs within the year.

Changing jobs or starting a new career often means starting at the bottom with a lower salary or adjusting to a different benefits package. Whether you've chosen to change careers or are dealing with a job loss that you didn't anticipate, making a plan can help ease the transition. We've rounded up our top financial tips for career changes to help you navigate your big life transition.

1. Track expenses
   Keep track of everything you spend, from monthly bills to dining out. This will help you understand your current spending, what your fixed expenses are and where you can afford to cut back.
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3. Pay down debt
   Most people have some type of debt, whether it's a mortgage, student loans or a credit card balance. The more you can pay down, the better-especially debt with high interest rates, like credit cards.
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5. Save for a rainy day
   Giving up a secure job for something new can be risky, especially if you're taking a pay cut. Before you take the leap, create an emergency fund that covers your minimum expenses for 3-6 months so that you have something to fall back on.
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7. Create a new budget
   New careers often require new budgets. If you expect your new job to come with a lower salary, try to scale back on some of your luxuries to help ease the transition. Once you receive your first paycheck, you will have a better idea of your net income, which will inform your new budget.
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9. Don't touch your retirement funds
   It might be tempting to dip into your 401(k) to help tide you over, but do your best to avoid it. Withdrawing funds early often comes with hefty taxes and penalties, not to mention the fact that you'll have less money when you do retire. Keep contributing to your retirement fund-you'll be glad you did!
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11. Do the math
    Be honest with yourself: Are you willing to take a pay cut? What's the lowest salary you can reasonably accept and still live comfortably? Are your skills, education and professional experience worth more than that? Or is this your dream job, where taking a huge pay cut doesn't matter if it means you'll be achieving a lifelong goal? As the old saying goes, "Know your worth-and then add tax."
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13. Stay healthy
    Every employer is different when it comes to health benefits. Packages differ and plan rates fluctuate; what can you afford with your new salary? Is there a waiting period between starting the new job and your benefits kicking in? Will you need to apply for COBRA coverage to tide you over? Take care of any medical needs like checkups and procedures while you have adequate coverage, and find out if you need to empty your flexible spending account (FSA) before changing jobs.
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15. Ease into things
    Not everyone has the luxury of easing into a new career; some people are struggling with layoffs and downsizing. If you can, transition into your new career while in your current position. Take classes, pursue certifications or take on a part-time job in your new planned field. Give yourself time to plan and prepare before you make the change.
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17. Take on a side hustle
    Hustle culture is here to stay. Taking on a side gig is a great way to save a little extra money, whether it's for a vacation or your job-change slush fund. Look for freelance or part-time jobs you can do from home-even better if they're related to the new career you would like to pursue.
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19. Find your village
    They say it takes a village, and it's the truth. A supportive network of family, friends and professional connections can keep you accountable, help you achieve your goals and support you when you need a kind word. Changing careers or switching jobs can be a challenge, but it's also exciting-a chance to try something new and pursue your interests.

Need help budgeting and planning for a career change? We're here to help.