How To Keep Your Finances From Getting Destroyed While You’re Changing Careers
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How To Keep Your Finances From Getting Destroyed While You’re Changing Careers

Taking that leap into a new career almost always comes with some financial uncertainty. Here’s how you can minimize it—and minimize your stress, while you’re at it.

Money. Sometimes the scary prospect of managing our finances can stop us from even considering career change. Will I earn less in my new career? If I take time off to figure out what’s next, will I need to eat Top Ramen for months?

There’s obviously going to be a financial gap between leaving your old job and launching your new source of regular income. Knowing this, it’s wise to plan ahead and scope out ways to fill that gap.

Run the numbers

In other words, do a budget. Your goal here is to know how much money is required each month to cover your basic needs. Begin this often enlightening (and occasionally terrifying) exercise by reviewing the last month of transactions in your bank account and on your credit card.

If you’re an Excel whiz, make your own spreadsheet to categorize your outgoing expenses. If, like many ordinary mortals, you’re not spreadsheet-savvy, use one of ASIC’s free budgeting tools or choose from these well reviewed alternatives.

Try seeing the art and science of budgeting as a creative way to show your smarts. Done well, budgeting can be surprisingly satisfying. It can also free you from financial anxiety long after you’ve secured your next reliable income.

Here’s a dead straightforward bit of inspiration on the value of budgeting and calculated risk taking from career changer and photographer Milton Gan.

Review your savings

Would your savings cover your costs if you wanted to take a course, take time off between jobs, or work at a lower rate to get some experience under your belt?

If a career break is on your mind, measure the number of months your savings will sustain you while you plan and prepare for your next move.

If you decide your funds fall short of the required amount, estimate how long you’ll have to stay put in order to save enough before making a comfortable leap. Having a clear figure and time frame in mind can keep you focused and optimistic about your impending escape plan.

Separate needs and wants

A brutally honest budget will show you where you can cut back on non-essential spending. Look for ways to simplify your spending. Can you defer the gratification that goes with buying new stuff while you make momentous and meaningful career change? Can you sell old stuff you no longer need?

Switching to a “less stuff” driven lifestyle can be a liberating change in itself. The relationship between money and happiness is debatable and ongoing. Beyond a threshold, more money does not necessarily mean more happiness.

Once you’ve covered the basics, take one small financial step towards career change. Set up a payday direct debit to a separate “career change” savings account. The amount isn’t so important; it’s your intention that counts. Committing your small change to support your grand one can boost your career change morale as well as your finances.

Hedge your bets

Think about what you can do without ditching your day job. This works especially well if you have a highly marketable skill and the energy to work long hours for a sustained period. Consider starting a side project—sell something you love to make at your local markets. Freelance one evening a week at whatever you do during the day.

Alternatively, negotiate to go part-time in your current role as you try out a new area or start a business. That way, you have steady money in the bank, all the while testing the waters on your next move.

Finally, a word on managing your inner money monsters

Like all life-changing shifts, career change is likely to unleash your inner demons. Some of the loudest voices amongst this heady horde of doomsayers belong to the money monsters. They’re the ones shouting about impending financial rack and ruin. They’ll be keen to convince you that you’ll never earn a decent crust again if you leave your current gig. But the best way to quiet them is with a combination of the carefully calculated financial risk taking.

This piece originally appeared on Collective Hub by Jo Green.