No matter your age or experience level, making a major career transition can be both exciting and terrifying. There are a lot of factors to consider here, and one of the most important has to be your financial health. In order to really identify goals for this new career and be truly prepared for what’s in store, you’ll need to focus on becoming more financially aware. To that end, here are some financial tips to consider before embarking on your new professional venture.
Create a budget
When exploring the idea of a second career, creating a budget becomes essential. Without knowing exactly how much you have to work with, you’re likely to end up overspending. Around 55% of middle-class women said in a 2017 study that they didn’t have the financial knowledge to properly manage their expenses. Budgeting properly will allow you to gain confidence and map out your expenses in a realistic way. Ideally, you should start with a six-month financial cushion just for your living expenses, with more for emergencies and transitional needs.
Pay off debts
If at all possible, you should make an effort to pay off any outstanding debts before you make this transition. This includes car loans, college debts, and credit card debts (particularly those with higher interest rates). While this can take some time, you’ll improve your overall financial health and can concentrate more fully on your new career without those additional economic pressures hanging over your head. Plus, you’ll be more likely to be able to secure financial assistance, should you need it, if you take care of these debts first.
Improve your credit score
In your second career, you may need to take out a business loan, rent office space, or apply to work at other established companies. In all of these situations, your credit score could come into play. Your lender, landlord, or potential employer may use this number to assess whether you’re a good candidate. Obtain your credit score for free to check for mistakes and, as a rule, always pay your bills on time. Just one late payment can wreak havoc on your score. You should also refrain from opening or closing any accounts or making balance transfers leading up to your professional change.
Spend money on the right things
There may be some expenses that you enjoy but that you can live without. Even if these costs seem relatively small, giving them up can make a big impact on your financial health. Cutting down on takeout, canceling a subscription, or spending the night in can help you focus on what’s really important without taking your overall life satisfaction. You may also be able to downsize your home or move to a less-expensive area. On the flip side, you should spend money where it counts: in your career. If you need to sharpen your skills, obtain a certification, or pursue a degree to really succeed on this new path, consider this to be a real investment. You can take a single class at a time or even ask your employer about tuition reimbursement.
Don’t dip into your savings
You might think that your savings account is meant for times like these, but you should refrain from relying on this too much. The same goes for your retirement fund or your home equity. If you make the mistake of using these accounts to fund your new business venture, you may find you have nothing left for retirement. For the sake of your financial health, don’t depend on these to launch your second career.
Starting over takes a lot of courage and confidence, but it’s something you shouldn’t go into blindly. By taking control of your finances now, you’ll be in much better shape with whatever happens in the future. To find out more about how financial coaching can help you begin your next chapter, contact us today.