Career transitions are a common experience for most people. At some point in our professional lives, we may feel the need to switch careers for various reasons. Reasons including poor job satisfaction, better pay, a desire for growth, or to pursue a new passion. When planning a career switch, there are many considerations to bear in mind – one of them being money. Managing your finances as you transition from one career to another can be quite overwhelming and challenging, but it is doable with the right strategies in place.
If you are contemplating a career switch, there are a few things you should take into consideration to help you manage your money during the transition period. We have put together a comprehensive guide to help you navigate the process.
1. Create a budget
Creating a budget is always essential, and it becomes even more crucial when you are changing careers. As part of your planning process, you should evaluate your financial situation and create a budget that reflects your current income and expenses. This will help identify where you can cut costs and where you may need to adjust your spending to accommodate any income changes. Having a budget will also help you avoid overspending and create a financial plan that works for your situation.
2. Build an emergency fund
Saving for a rainy day is an essential financial strategy to keep in mind, especially during a career transition. Building an emergency fund will provide you with a safety net in case of unexpected expenses. Ensure that you have enough savings to cover at least six months of expenses before making any significant career moves. This will help to protect your finances and ensure that you have enough money to cover your bills during times of financial uncertainty.
3. Evaluate your debt
Debt can be a significant burden during career transitions, and it is essential to evaluate how much you owe. If possible, try to pay off any high-interest debt or consolidate multiple debts into one payment. This will reduce the amount of money you must pay each month, giving you more room in your budget for other expenses.
4. Explore alternative income streams
During career transitions, your income may be affected as you switch jobs. To mitigate the impact of a reduction in income, you may want to explore alternative income streams to supplement your existing earnings. This may include starting a side hustle, seeking various freelance opportunities, or renting out a room on Airbnb to generate additional income.
5. Work with a professional
Working with a professional can provide you with the expertise and guidance you need to navigate the complexities of planning your finances during a career transition. A financial planner can help you develop a holistic financial strategy tailored to your specific needs, provide guidance on how to manage your money during a transition, and offer support throughout the process.
Making a career change can be exciting but also daunting, especially when it comes to managing your finances. However, with the right strategies, it is possible to manage your money and achieve your career goals. Creating a budget, building an emergency fund, evaluating your debt, exploring alternative income streams, and working with a financial planner are all essential steps to financial planning during the transition. As a boutique financial planning company, we are equipped to help you make the right financial decisions as you pursue your professional goals.
If you would like to improve your current investment strategies or are looking to start your investment journey, click here to organise a complimentary 20-minute phone call with an EPG Wealth adviser.