An important aspect of changing careers is how to prepare your finances so the transition is as smooth as possible. Taking the leap from one company to another, or from employee to entrepreneur, can be scary.
Instead of using money as an excuse not to change career tracks, put some key financial safety nets in place now. They can give you courage to move your career forward — or soften the blow if things don’t work out.
Use these five tips to take control of your finances ahead of your next career pivot.
[See: 10 Foolproof Ways to Reach Your Money Goals.]
Do plenty of research. No career move is a sure thing. Even doing your same job for a different company means working with different people and perhaps operating within a radically different corporate culture.
To reduce your risk, do your homework. Talk to people who are running the business you want to start or doing the job you’d like to have. Take them for coffee or ask for a short video call to pick their brains for information and advice.
If your resume is thin, consider taking a pro bono or low-paid consulting project in your chosen field. The work can help you build your experience, skills and future income for your next career opportunity.
Speak with team members you’d work closely with at a potential new job, even if they aren’t required to give you a green light to be hired. Hearing their praise or gripes about the business, company or bosses can be invaluable.
There’s no perfect business or career plan, but doing research about your chosen field, such as salary range, culture, the cost of living in a new city, industry forecasts, competition and potential start-up pitfalls, can help you know if making a career pivot is right for you.
Beef up your emergency savings. Finding your next job or first business clients can take longer than you think. Make sure you build and keep an emergency fund equal to at least three to six months’ worth of your essential living expenses.
Your savings could be a lifesaver if your transition costs more than you expect. The bigger your cash cushion, the easier and less stressful the process will be.
To build your fund, start small. Even setting aside $100 a month in savings is better than nothing. If you’re currently employed, have a portion of each paycheck directly deposited into a separate savings account. And always add extra cash, bonuses, tax refunds or profit from side jobs to your emergency savings.
[See: 12 Best Part-Time Jobs to Pay the Bills.]
Budget for now and the future. If you struggle to build an emergency fund or don’t know how you’re spending money, it’s a good time to create a budget. Before leaving steady income or accepting a new job offer, be sure to understand your monthly expenses. Review monthly bills and see where you can cut back.
Mint is a simple digital tool that can help you create a budget and track spending automatically. It’s free to use on your Mac, PC or mobile device. For an all-in-one money-management program loaded with functions such as bill pay, budgeting and cloud backup, check out Quicken for PC or Mac.
Also, consider what your future income and expenses could be after your career move. If you’ll have relocation expenses, different commuting costs, higher health care premiums or a higher cost of living, factor them against your predicted new income. When it comes to budgeting, hope for the best but plan for the worst, just in case your career transition goes poorly.
Create multiple income streams. Nothing can give you more financial peace of mind than having more than one source of income. It can also be the secret to finding more money for your emergency savings as you approach a career change.
So, spread your risk by creating and sustaining multiple streams of income, such as freelance work, a seasonal job, a side gig or even a part-time job. It won’t leave you much extra free time, but could be a solid short-term strategy to get ahead financially.
[See: The Best Side Business Ideas for Busy People.]
Don’t be afraid to negotiate. No matter whether your income will be an annual salary or a monthly consulting rate, don’t be afraid to ask for more. Consider what your product or service is worth to your employer or customer, instead of just the minimum you’re willing to accept.
If you get pushback, you can always take less. But if you don’t negotiate your pay, you’ll never know your upper limit, and you could be losing out. Additionally, consider other benefits you could negotiate. Perhaps more vacation time, stock options, a flexible office schedule or quick payment terms are just as important to you as income.
While you can’t plan every aspect of a major career change, you need a general idea of how you’ll support yourself during a jump. If you follow these five tips, you’ll have some good advice to guide you, plus cash in the bank and extra income to fall back on while you bridge the gap to your next fulfilling career.
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Changing Careers? Follow These 5 Financial Tips for a Successful Transition originally appeared on usnews.com
