Switching Careers without Going Broke
Switching careers, either within in the same field or into a new one, will probably mean a smaller paycheck as you gain experience, work your way back up the professional ranks, and/or take on an unpaid internship. Making this kind of big life change a success takes careful planning, determination, and not a small amount of bravery.
Set yourself up financially for a career change with these steps:
Calculate your lowest income threshold and how long you can maintain it.
This first step is a mix of in-depth research and a little bit of math (mostly addition and subtraction, don’t panic). Gather as much information as you can about the new career:
realistic and current salaries for entry level positions, opportunities and timelines for advancement, any additional education or certifications you’ll need, if your commute or living costs will change, and if there will be any up-front work-related costs, etc. Use this information to estimate what you can expect to make in your new job over the next few years.
Next, track all of your current spending for at least a month—preferably longer. See where you can, and likely will need to, make spending changes to get your budget to match the expected income you’ve already researched.
Look for the big picture: what life will look like when you first take a pay cut, as well as in the distant future. Keep your desired lifestyle in mind when contemplating which expenses to cut. Short-term sacrifices are usually easier—and likely necessary—to make, but keep in mind not to cut things like your retirement fund and life insurance.
Build up your savings.
Create a separate savings account earmarked for your career move. Using your research and calculations from above, create a savings goal. Consider how long it might take you to find a job, or how much of a shortfall you’ll have in your budget between expenses and income and how long you’ll need to cover this gap with savings. If you can trim your current monthly spending back, consider trying to live off of one paycheck per month and saving the other. This will also train you for the possibly slimmer budget ahead as you start your new career.
This savings account should be separate and in addition to your emergency savings fund of three to six months of living expenses. Emergencies can still happen while you’re making less in a new career, and unless you want to be forced to use credit cards or go back to your old job, you’ll need this rainy-day fund to continue pursuing your dream career.
Spend money like you mean it.
It may not be obvious to you right away how to find money to put into this new savings account. Use your new awareness of your spending habits to show you where to save money. When you’re about to spend money on a non-essential (not rent, utility bills, insurance, cell phone bill, medical, food, etc.), ask yourself “Would I rather spend money now on this expense, or would I rather use it to reach my saving goal to begin pursuing my dream job sooner?”
Share your goals.
Sharing your career and new budget goals with supportive friends can be a real game changer. It can be the difference between feeling alone and isolated, and having a support network. Remember, changing spending and saving habits is just as much about emotions, human nature, and accountability as it is about making the numbers work. This is also another way to find other people who’ve made similar changes in life and being able to learn from their experiences.