Over two-thirds (62 percent) of the UK workforce want to change their careers, according to the latest research from Jobrapido. Besides fearing they would be too old for such a major switch, many of them worry about the financial implications of starting anew in a new career, and possibly from the ground up. Apart from acquiring technical qualifications and dealing with the emotional changes that come with making a career change, you also need to prepare your finances. This becomes even more important when the change is done later in life, and with a family in tow. Many parents are seeking ways to cut spending already, so the added uncertainty and cost of retraining for a new career can seem out of reach financially. Taking the time to implement just a few simple measures can minimise the impact of a career change on your family finances and your family life.
Create Buffer Incomes
While you are in the process of contemplating a change of career or doing research on how to get started, consider establishing a secondary income stream if you can. Some career changes require that you head back to school to be retrained, and this can affect your income levels. Also, starting in a new career may require you starting in a lower placed position with less salary. A secondary income stream helps to buffer the difference, and means your family finances do not feel the change in income as much. Whether it is through a stock portfolio, a side hustle or starting a freelancing service, the extra income comes in quite handy when you are just starting anew.
Build Up A Cost Of Living Account
One of the best things you can do financially before switching careers is to build up a cost of living savings account. This gives you financial peace of mind for a set amount of time while you and your family get adjusted to the new norm. Keep in mind that the cost of living account is completely different from an emergency fund (although emergency funds are recommended as well). In your buffer savings account, aim for at least a six month equivalent of your current bills. However, based on your research into your new career, this amount can be adjusted accordingly. When deciding on a target total, take into account standard bills such as rent/mortgage, transport or car payments, and basic utilities, including gas, electric and food.
Attack High-Cost Debt In The Lead-Up
Switching careers takes some time to plan your move and acquire the necessary training (if any). Take advantage of this period to maximise your payments on any outstanding high-cost debt you may have, including credit cards. Debt with higher interest rates and balances cost more of your income, since a higher percentage is going towards paying the interest rates. This helps to reduce the burden of debt repayments in your transition period when your income may be reduced or expenses may increase due to training costs. Also, it can boost your credit record and helps to lower your credit utilisation. An improved credit record can come in quite useful for the initial settling in period for your new career, when you may need to supplement your reduced income with credit, or the attached cashback and loyalty reward schemes become useful. Therefore, the use of such consumer credit facilities helps control your money and is a key part of financial planning.
Find Out What Support Is Available
Finally, seek information on the support available while making the switch. When it comes to your training, many community centres and outreach programmes offer free training, while online platforms such as Opentutition, Coursera or even Youtube offer free or low-cost content to help you gain new skills. It is also worthwhile checking out any internship programmes and the attached stipends available, so you know what your financial situation will look like. Lastly, check with your local council on any available assistance they may provide and the application process. Benefits such as housing or universal credit typically have a six week decision period, should you need to apply.
For anyone, making a career change can seem daunting and intimidating, particularly financially. This has never been truer for a person later in life, with the added responsibility of having a family. However, with good financial planning and a proactive attitude, you can minimise the impact on your family finances, and still pursue your professional dream.