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If you’re thinking of making a major career change, chances are you’re considering the impact on your finances. This was certainly the case for me when I decided to work for myself back in 2003.
I’m not a financial risk taker. But this didn’t stop me from making the calculated decision to take the plunge and start my own business, at a certain point in my life.
The reality is that a career change may result in a financial hit in the short term, although this is not inevitable. And there is evidence that people are more successful when they do a job that plays to their strengths. So if you’re not in the right role or field of work, making a change may increase your long-term earning potential. Or you may think a lower income is a price worth paying to work in a sector that feels more worthwhile, or a role that offers you more freedom.
I believe there are two key questions you need to ask yourself. The first one is focused on the short term, the second on the longer term.
This is really about clarifying the minimum income you need to pay for essentials. If your career change involves re-training, or starting again at a lower level in a new field or industry, then you may need to accept a temporary drop in income. If you are not as clear as you could be on your current financial situation, take time to audit all your monthly and annual expenditure.
This process is likely to uncover areas where you could cut your costs. For example are you paying too much for household expenses? And if you stopped commuting, how would this affect your outgoings?
For help with assessing and reviewing your budgets, it’s worth looking at the Moneysavingexpert.com website. A good starting point is the Do a Money Makeover page which includes links to a downloadable budget planner and lots of advice on reducing your expenditure. https://www.moneysavingexpert.com/family/money-help#personal
This is a question as it’s about your future ambitions and lifestyle.
I’m a believer in the maxim “do what you love and the money will follow”, as long as you temper this with a pinch of realism. If you love your job you are more likely to be good at it, and to progress up the career ladder, and the same goes for running a business. But if a certain level of income is important to you, then this will affect your career choices. Starting your own business or company can offer a high degree of freedom, and the potential to generate wealth, if you can come up with a commercially viable idea and are prepared to do the work and take the risk. But the reality is the majority of small enterprises bring in a more modest income. Many people are happy if they can establish a sustainable lifestyle business.
We all have different attitudes to risk. Speaking personally, I stayed in employment longer that I might have done because I wanted to achieve a certain level of financial stability before working for myself. This was the right decision for me, especially as I was single at time so had no-one to fall back on. But others might have chosen to take the leap sooner.
When you start on the process of thinking about your longer-term financial goals and security, it’s worth getting some advice from a qualified independent financial adviser. A good adviser will listen to what is important to you and make recommendations accordingly. The moneysavingexpert website outlines things to consider before seeking advice.
And if you would like some help with thinking through a career change decision, consider working with a career coach. Taking some time to reflect on your choices can help you work out what is right for you. It can allow you a confidential space to “try out” your ideas for different career choices in a neutral, non-judgemental environment.
Contemplating career change or job search can feel daunting. Download this free toolkit full of resources and tips to help you feel more confident about your next steps.