No matter your job or industry, you’ve likely thought “What if I changed careers?” There are bad days, bad weeks, or interests we all have in things that are outside of our current realm… and it can be very appealing!
However, there’s one thing that often holds us back from changing our careers: finances. Leaving a reliable job with a steady income to search for another, places us in a vulnerable state. But, with some financial planning, you can make a career change.
Figure out if you’re ready to take that leap by using our Career Change Calculator below.
Calculate Your Current Financial Needs
For the best results, use your average spending for at least the past 3 months. For example, you might state, “Over the past 3 months, I spent $9,000.” That means your average spending is about $3,000 per month, so put $3,000 in the total spending line.
If you need more guidance figuring out your average spending, breaking it down by category can be helpful. Sorting expenses by category can also help you understand where you may be able to cut back if needed. In general, discretionary expenses and lifestyle wishes are the easiest to change in a short period of time.
Essential Needs
(e.g. rent or mortgage payments, groceries, utilities, insurance):
Discretionary Expenses
(e.g. dining out, entertainment, streaming service memberships):
Lifestyle Wishes
(e.g. vacations, gifts):
TOTAL SPENDING: _______________________
Build in a Buffer
Finding a new career often takes more time than you expect. It’s important to give yourself some time off in between careers to decompress and get in the right mindset. You’ll avoid stressing over money and can focus on your career search by building in a buffer for your finances. With a buffer, you’ll be mentally and financially prepared when you start to search for your new career.
If you are single and have no dependents, multiply TOTAL SPENDING by 3.
If you are married or have a significant other, multiply TOTAL SPENDING by 6.
NEW TOTAL SPENDING: _______________________
Calculate Your Current Savings and Liquid Assets
Next, you’ll calculate your total liquid assets. Liquid assets are those that can be converted to cash in less than one year, like checking, savings, and money market products.
Checking Accounts: _______________________
Savings Accounts:_______________________
Money Market (CDs, short term savings bonds, etc.): _______________________
TOTAL LIQUID ASSETS: _______________________
Are You Financially Ready for a Career Change?
Now, let’s figure out if you’re financially ready to change careers. Here’s a final calculation:
TOTAL LIQUID ASSETS
– NEW TOTAL SPENDING
___________________
RESULT
Subtract the NEW TOTAL SPENDING AMOUNT in section two from your TOTAL LIQUID ASSETS in section three. If your result is positive, you may be ready to make a career change! That means you likely have enough reserved cash on hand to start a new career.
If your result is negative, it’s probably not the best time to change careers. You might need to work on budgeting, or find assets to convert to cash. However, you now have a financial goal to work towards that will support a new career.
Plan for Change with Guiding Wealth
Changing careers is a big step. Though our free Career Change Calculator can give you an idea if your finances are ready for that change, there are many other factors to consider, like loss of employee benefits, what to do with your old 401(k), and understanding what new benefits will be available at your new employer. Guiding Wealth can help you with all of that — and more. Learn more about working with Guiding Wealth’s Certified Financial Planner™ professionals today.