Making a career change — after years of building your resume in a specific industry or role — can have its challenges. One frequent concern on the minds of many: Am I financially ready to leave my company or field for a new adventure?
Here are four questions that could help you decide if you're financially prepared to take the next big leap.
Do You Have Enough Savings?
If you've decided to transition into a field in which you don't have much experience, you'll likely be making less in the beginning. Are you prepared for a lower income — at least until you build enough experience in the new field? It might help to make sure you have a good financial cushion in place. Eight to 12 months of living expenses is a standard recommendation, according to CNBC. That way, there's less of a chance you'll be forced to take a job you don't like because you're low on funds.
Consider how long the transition between careers might take. It could also make sense to postpone changing fields if you have a high amount of debt. Minimize your expenses by reviewing your budget and getting rid of nonessentials, such as eating out and shopping sprees.
You'll likely be making more after a few years of working in the new field. But until then, save up enough to help with any possible shortfalls. An emergency fund could also help provide you with the flexibility you need during this time.
Are You Moving Into a Lower-Paying Field?
Perhaps you're transitioning into a field that tends to pay less, even though it brings you greater satisfaction. In this case, ask yourself if you're prepared to change your lifestyle — especially if you've been accustomed to higher earnings. Determining how much of a change in salary is worth the change in careers can also be a helpful exercise. Are you willing (and able) to take a pay cut?
A lower income could also have a long-term impact, potentially decreasing your retirement savings and Social Security benefits. One way to possibly counter this is to ramp up your retirement savings while you're still at your current job. You might consider maxing out your contributions and — once you've transitioned to your new role — contributing as much as you can without cutting back too much on living expenses. You could also open up a personal retirement savings account, such as a traditional or Roth individual retirement account (IRA).
Will You Need More Education?
If your planned career change requires you to get new certifications, take professional exams, obtain a professional license, attend graduate school or pursue other training, it could be smart to account for this in your budget. Consider reviewing your educational expenses to see how they fit into your future budget. Will you be able to afford them — or could it be a better idea to stick with your old job a bit longer?
When Is the Right Time?
You could always think about transitioning slowly into your new career. Some people try to move into part-time positions at their current employer, giving them a chance to try out a new career without starting completely over. Doing this could also help give you the needed time to reflect and adjust to any changes.
A career change can be a scary but exciting time in your life, as it can bring the hope of a better future with greater possibilities. Perhaps the most important thing to consider is whether you'll feel happier and more satisfied with your new career — that could have a positive effect on both you and your family, who gets to see you come home every day with a smile on your face.