At certain times in a person’s life, finances really take a front seat even more than usual. A career change is one of those times. Below, our expert, Guirlene walks us through everything to consider about our finances while making a career transition.
The question…
I’m at a point where I want to switch careers. A big thing holding me back is my finances. I don’t want to switch and then realize that I put myself into a tight spot financially. What do I need to consider about my finances if I do move to another career?
Fred C., Kelowna, BC
The answer…
A career change can be a stressful and exciting time for all of us. Some people no longer enjoy their jobs and feel as though they are trapped. These feelings entice us to make a pivot towards something that is more aligned with our interests. While you may immediately want to go onto LinkedIn, Indeed, or other job-hunting sites, we advise that you consider the factors below to help mitigate some risks and pitfalls that come with career transitions.
Why are you looking to do a career change?
Asking yourself the simple question of “Why?” is important. This may seem simple or redundant because you may strongly dislike the career path you are currently on for a variety of reasons. You probably already know that there is a career out there that is better suited for you. You may already have an idea of what career you want to move into. However, do not skip or underestimate this step. It’s a simple step that can bring to light important things that can influence your decision.
A simple method to assess your reasons for a career switch is writing down a pros and cons list.
Doing a pros/cons list helps ensure you are not simply being emotional and making an impulse career change based on a few bad highlights. These lists can also help identify where your interests reside. Figuring out what you value and what fulfils you the most makes it easier to filter through the thousands of jobs to find the right career path for you.
Assess your financial situation
Many worry about swapping into other careers because of the loss of income during that transition period. To help mitigate those worries, it is essential that you determine all your fixed and variable expenses. In addition to your expenses, there are also debt repayments. For instance, you’ll want to account for car payments, insurance, and loans. A big concern for many is how to pay their debt without income. Thus, it may seem like switching careers is not ideal. However, a great and simple tool is a budget sheet. This is incredibly helpful in tracking your expenses, sources of income, and savings. Consolidated Credit Canada has a great resource that further explains how to create a budget sheet!
There are no shortcuts when looking for a new career. It will likely take somewhere between 6-18 months to make a full and successful career transition. That’s why, once you have determined which expenses are recurring, you should prepare for at least six months’ worth of expenses. This is what we call an emergency fund. This emergency fund will give you a cushion to fall back on during your search.
While most of your emergency will be composed of the money you save yourself, consider also utilizing your current company’s resources or government benefits. These are great resources that can lessen the stress as you look for a new career. There are many financial resources available, such as employment insurance. Don’t be shy. They are there to be used. Make use of them. All it takes is a little bit of legwork. Well worth it for help that can greatly improve your financial situation.
Compare careers in detail
As you scroll through job postings, you most likely found a few positions that interest you. However, don’t fall into the common trap of making a higher salary your only consideration. That will lead you to pass on jobs that may bring you a lot more joy and fulfilment.
Firstly, we want to acknowledge that we are not saying that salary is not an important factor in determining your career choice. It’s an important consideration. However, you should consider other equally important factors such as:
- Company culture
- Work-life balance
- Company benefits
- PTO (paid time off)
- Unemployment resources
Many companies offer varying benefits that go beyond the job posting. Looking at online employee reviews like Glassdoor or Indeed can give you a better idea about what to expect while working with that company.
Many workers feel trapped in a job when their only source of motivation is money. The famous saying “money can’t buy love” or “money can’t buy happiness” is very true. Material things will never make up for the unhappiness in a career.
Financial anxieties
Mental health is still a commonly overlooked issue in present society. This is also the case when it comes to personal finances. Many of us experience anxiety when we look at our bank accounts and think about our long-term financial situation. The loss of income during career transitions can cause these emotional discomforts to amplify. Some symptoms of financial anxiety include:
- Fear of spending
- Anxiety when thinking about money
- Lack of confidence for the future
- Lack of sleep
- Depression
These symptoms are often overlooked and not properly addressed. However, mental health is very important in maintaining level-headed thinking needed when working towards a new career. Some of these financial anxieties can be addressed by utilizing a budget sheet and creating an emergency fund. It’s equally important that you reach out for help if you need it. For instance, a financial advisor or financial planner. You will also want to consider your creditors as a place to look for help. Often, they will be willing to figure out a new plan to pay off your debt that works with your new situation. The key is to go to them before you are in trouble financially. The important thing is to not lose sight of these anxieties, address them immediately, and recognize that help is always available.
These professionals can also help with another crucial step, learning how to create healthy practices. Making use of healthy practices will ensure you make better career decisions and avoid impulsively taking a new job that only temporarily relieves these anxieties.
Conclusion
A career change can be very stressful but exciting. It can feel intimidating to look for another long-term career when anxieties or lack of income hold you back. To ensure your career change goes as smoothly as possible:
- Determine why you want to switch careers
- Assess your financial situation
- Compare (in detail) careers
- Address your financial anxieties early on
Doing these things will keep you on track to find a new long-term, successful career and avoid transitioning to another uncomfortable career.
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