Many people dream of a new career earning more money doing the things they love. In fact, labor surveys suggest that four out of five people are unhappy in their careers and want to make a change. We Americans are optimistic with a tendency to accept that the “grass is always greener” on the other side of the fence. Yet few people actually pursue a career change voluntarily. Why? Because age, high income, and debt lock many into their current jobs or fields, making it that much harder to change.
If you desire to make a clean break from your current career and start anew – be it for more pay, personal satisfaction, or a better balance between your personal and work life – prepare yourself for a more difficult transition than seeking a similar job with a new employer. It’s unlikely that you will replicate your current salary or benefits in the beginning of a new career, while it is likely that you’ll need to invest in training or education to be hired. You may even be forced to relocate.
But these and other obstacles needn’t hold you back from your goals. However, they do require preparation in order to surmount.
Preparing for a Career Change
According to Thomas J. Denham, managing partner and career counselor of Careers in Transitions, only about 40% of Americans ever plan their careers – in fact, they spend more time planning their vacations. Whether or not you presently intend to change jobs or contemplate a career change, it is prudent to be prepared for the unexpected.
While continuing in your present job and career, you should do the following:
- Live Within Your Means. The value of a financial plan and a personal budget cannot be overstated. Restraining your impulses to buy things you need, rather than things you want, is difficult, but essential if you are to ever achieve the mental freedom that accompanies financial security. When budgeting, differentiate between your obligatory and discretionary spending – reducing the latter is likely necessary in any emergency including a future career change.
- Assess Your Abilities and Deficits. Objectively evaluate your occupational strengths and weaknesses – the things you do well, as well as the tasks you perform acceptably or poorly. Develop and implement a plan to improve those skills and abilities that are barely adequate or non-existent, including more training and education. Understand your likes and dislikes, how important each is to your current job, and how important both are likely to be to your new job.
- Be Aware of Factors That Affect Your Job, Company, and Industry. Advances in technology and a worldwide marketplace expands opportunities as well as competition. Jobs and careers across the country are being replaced with smart machines capable of doing intricate, physically demanding work without error for low cost. Skills once unique to America are being copied and performed in locations with abundant, cheap labor as a result of companies’ relentless drive for greater efficiency and lower costs. Few catastrophic changes occur overnight, so remain vigilant for signs that your job will be affected.
- Maintain and Improve Your Skills. While no person or position is indispensable in the modern world, it is far better to ride the wave than be caught in the undertow. Take advantage of company training and course offerings that will make you a better, more productive employee. Accept responsibility and take initiative. Push your way forward rather than waiting to be pulled by management or colleagues.
Financial Steps to Take When Making a Career Change
If you find yourself pursuing a new career field, whether of your own volition or with a shove from your previous employer, it is important that you build bridges, not burn them. In all likelihood, your references will come from your former bosses and peers – it makes no sense to poison the well from which you’ll later drink. Furthermore, your current and past employer may be willing to assist you with financial transition or training.
1. Negotiate a Severance Agreement
Many employers are willing to make severance payments to released employees, including a payment based upon months of service, unused vacation or sick days, continuance for a period of medical, dental, and life insurance, and/or assistance in searching for new work. In states where a notice of termination is required, there may be payments in lieu of notice. Companies undergoing reorganization or liquidation often pay employees bonuses for staying until the action is completed. Even in cases where an employee terminates employment voluntarily, part-time work may be available which can supplement income during training for a new job. According to a recent court ruling, some payments may not even be subject to FICA payroll taxation.
2. Cut Your Living Expenses
In all probability, your income will drop significantly during a transition to a new career. Your first task is to reduce or eliminate discretionary expenses and evaluate such fixed expenses as life insurance for their value and necessity. A single person with no children needs minimal life insurance coverage and only term coverage. Younger people are less likely to become ill, and can afford health insurance with high deductibles. Furthermore, with no regular income, disability insurance is likely unavailable (and so premiums will cease). Also, stop credit card charges and notify the companies of your financial situation, negotiating minimal payments with no additional interest charges. Staying within your budget is extremely important during your transition period.
3. Get Liquid
Cash is king when you have no income, so take measures to reduce risks and preserve it. Defer funding retirement accounts until you are sure you have adequate funds or the income necessary to make a minimum of 6 months, preferably 12 months, of your revised budget expenses. Transfer investments outside of your retirement accounts (IRAs and 401ks) to money-market funds or savings accounts. This way you can avoid the risk of liquidating investments during a down market if you need the funds. If you own your home, investigate refinancing it to cut monthly payments and free up equity which can go into savings.
4. Pursue Financial Assistance
If you are pursuing a new career due to a termination or layoff, apply for unemployment insurance and benefits, and seek financial assistance with training through federal and state sources. Provisions of the American Recovery and Reinvestment Act of 2009 were enacted especially to help those displaced by the latest recession. Also, apply for grants, scholarships, and student loans from schools and organizations which provide the education and job training you need. There are literally hundreds of benefits available for the unemployed from public and private organizations. But to receive them, you must take an active role in finding and applying for them. Don’t hesitate to seek and ask for help from these organizations as well.
Making a career change can be a daunting task for the most confident and prepared individual. There are no certainties that the decision you make will prove successful, and no promises that you will live happily ever after. But millions of Americans change jobs and careers every year, starting new companies and striking out in new directions successfully with no regrets.
You too can have your dream job if you investigate the alternatives, select the position most likely to meet your goals, develop a plan, and work persistently to reach your goal. Why wait until tomorrow?
Are you planning a career change?