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The pandemic has caused many people to rethink their current career situation. A recent Harris Poll survey found that 59% of workers earning between $50,000 and $75,000 say they've considered a career change this year. Whether you've experienced an unexpected job loss or are simply looking for more fulfilling work, a career change can cause a big financial disruption, especially if it requires pursuing a new degree or certification.
Thinking of switching up your career? Let's explore some of the basic ins and outs—including the potential difficulties that aren't necessarily obvious if you're in the early planning stages.
Reasons You Might be Considering a Career Change
People make career moves for all kinds of reasons. A recent survey from FlexJobs found that the most popular one was to secure a job that provides a better work-life balance. Higher pay was the second most popular reason, followed by a desire for more meaningful work.
No matter your justification, there are some logistical details to consider, including the potential monetary cost of a career change. The money factor is something that will be unique to your financial situation and career-change strategy, but it's important to at least mull the following questions before making any big decisions:
- What is your gross monthly income? Is this number higher or lower than your expected earnings in your new position? If it's the latter, will you have to make any lifestyle changes to continue living comfortably?
- Do you have enough cash savings to keep you afloat while you're looking for a new job? If not, it might be best to stay at your current job until you've secured your next gig. Alternatively, you can explore part-time work to supplement your income in the meantime.
- Will your career change require any new expenses? This can include everything from new work clothes to the cost of going back to school. (More on this shortly.)
Get a Feel for the Industry
Treat the above questions as jumping-off points for more detailed planning. If you're at the starting line of a career change, the first order of business is to clarify your salary expectations. Sites like Salary.com and Glassdoor can provide a glimpse into the average pay in your desired field, but what you see there is no guarantee. If you're seeking an entry-level position, for instance, you probably won't be earning as much as someone who's been in the trenches for a while.
You can also give your research a hands-on touch by reaching out to folks who are already working in the industry. Ask around your network to see if you can get any informational interviews on the books. This can be as simple as a quick coffee date or phone call to ask them about their experience. What has their career trajectory looked like? And is there anything they wish they would have known when they were just starting out? Industry-specific networking events can be another great resource for newbies to learn about the field and make meaningful connections.
Consider Educational Expenses
Depending on the field you'd be moving into, your career change might require you to up your education. This may involve getting certifications, attending a trade or vocational school or earning a college degree. Research your options to ballpark how much this will realistically cost. If you can't finance it on your own, would you be comfortable taking on student loans? It might be worth it if you expect your degree to unlock well-paying career opportunities. Securing a need-based grant could be another way to lessen the financial burden.
If you have sticker shock, you can opt for a gradual career change where you take one or two classes per semester after clocking out from your 9-to-5. Your current employer may even cover some of your educational expenses. When taking your education slow, stay up to speed on degree completion requirements as they can change.
How to Handle the Logistics of a Career Change
Once you're clear on your new career direction (and how much it will cost to get you there), it's time to iron out some other important details.
According to the Kaiser Family Foundation, approximately 157 million Americans rely on employer-sponsored health plans. Before accepting a job with a new employer, find out if there's a waiting period before your health benefits kick in. If so, you may be eligible for COBRA to get you over the gap. COBRA allows employees to temporarily stay on their health insurance plan after leaving their employer—although you'll typically pay much more in premiums. Another alternative is to find temporary coverage on your state's health insurance Marketplace.
Your family might be reliant on before- or after-school care for school-aged children, or daycare for little ones. Is it likely that you'll be earning enough in your new career to cover these costs? In some instances, a new job may take up more of your time and trigger childcare bills you didn't have before. This may be the case if you're transitioning from remote or freelance work to an on-site position.
Your Emergency Fund
Changing careers can be an uncertain journey. Topping off your emergency fund before making the leap can provide financial peace of mind along the way. Most experts suggest having three to six months' worth of expenses on hand, but it may be best to have more if you're entering into a competitive job market where it may take a while to land a gig.
Revisiting your budget before making a career change can help you stretch your dollar. Look for expenses you can cut or temporarily do without until you're settled in your new career. Exploring a side gig can be another way to up your income during this time.
The Bottom Line
Making a career change is a big decision that will likely have a direct impact on your finances. Planning ahead and doing some research can help you avoid surprises that could derail your plans. One way to shore up your financial life is ensuring that your credit is as strong as it can be. Experian makes it easy to check your credit report and credit score for free, right from your computer, tablet or phone.