Tips To Manage Your Money During A Career Transition

By | March 19, 2021

A career change can be an exciting phase full of possibilities, but if you don’t plan for your finances during this phase, you’re putting yourself in financial jeopardy.

Tips To Manage Your Money During A Career Transition

Being stuck in a job that is doing nothing for your personal or professional growth year after year can be nothing short of torture. After a certain point, the work may become so ritualistic that everything runs on auto-pilot mode without you having to spare so much as a thought. In this scenario, changing careers can present a promising opportunity for a new start. Changing careers holds a different meaning for different people. For some, it’s an opportunity to pursue a long-sidelined passion and for others, it is an opportunity to grow further in their careers.

While changing careers can be an exciting time, it can also mean a disruption in your finances. If you’re giving up your job to pursue something that you’ve long wanted to, it might mean moving into a job that is lower-paying than your existing one or incurring considerable expenditure in relocating.

In this post, we’re going to tell you how to make easy transitions in your career without jeopardising your finances.

  1. Set The Right Expectations About Your New Paycheck:

A change in career is likely to be accompanied by a change in pay. For instance, if the role is lesser-paying than your existing one, you may have to readjust your lifestyle to suit your affordability. However, you can and should still prepare to negotiate with the potential employer. Do your homework to find out what is the industry standard and use that to predict what your offer might look like and know what a reasonable salary is to request.

At this point, check in with yourself if you will be able to afford this transition or not. If you’re the sole earning member in the family, will a lower salary have an impact on your family? These are vital things to take into consideration when you’re mulling a change in your career.

Additional Reading: Thinking About Switching Jobs? Keep These Things In Mind

  1. Start Living On Your New Salary Now:

If your new job involves a significant pay cut, you may have to re-adjust your budget accordingly. To ensure a hiccup-free transition to your new salary, start taking small measures right from Day 1. In addition to how much money you have coming in, some costs may change with your new job. In your previous job, you may have availed the office pick-up and drop-off service, whereas, in the new one, you may have to commute by public transportation. Your new job may even require you to move to a different location with a higher cost of living.

Take the case of Anu Nair who moved to Kochi from the Gulf two years ago. Anu is divorced and a single mother of two who gave up her banking job to start her own clothing line. The move set her back by at least a few lakhs but she took small measures to counter this. She sold off her car and a portion of her land to shore up initial capital for her business. Despite her initial salary setback, Anu was able to build her business, match her income in the first year, and surpass it a few years later.

  1. Make A Part-Time Job Out Of Your Career Change:

If you’re joining a new industry, find out what trainings and certifications may help you get a leg up in your job application process. See if you can squeeze in these training after work or on weekends. This will facilitate a smoother transition and you don’t have to lose out on income in order to get the benefits to become a more desirable candidate. If you’re looking to break into a new industry, sign up for part-time gigs or internship opportunities that you can do on the side before you commit to seeking full-time employment.

If you’re launching your own business, work on your venture part-time after hours until you feel confident of making the leap to full-time. Leaving your stable job cold turkey may not be a good idea until you see its potential to become a full-time venture.

Additional Reading: Is Changing Jobs Frequently Financially Wise?

  1. Be Prepared To Miss A Cheque Or Two:

Between leaving your previous job and moving into the new one, there is likely to be a gap of at least a few weeks or months or maybe even more if your new venture doesn’t take off. You will need to plan ahead of time for these phases of uncertainty and limited cash inflow. Suppose you’ve secured a new job, served notice period at your old job and arranged a week off in between leaving and starting at the new job. When you start at the new job, there’s likely going to be a bit of a delay before your first paycheck arrives. You will need to have ample cushion in your savings to be able to cover your bills during this time.

If you’re quitting your job without a new one lined up, ensure that you have at least three to six months’ worth of your income saved that will help you tide over these times of financial uncertainty. Taking out a Personal Loan to keep your finances on track during this time might also be a good idea.

Additional Reading: Automatic PF Transfer On Job Change

  1. Get Your Own Health Insurance:

When you decide to make a career transition, along with potentially giving up a steady paycheck, you could also be forfeiting other employer-provided benefits like Health Insurance. This is why you should get your own Health Insurance regardless of whether your employer provides one or not. In the absence of a Health Insurance, a sudden medical emergency can set you back by at least a few lakhs. Having adequate health cover for you and your family can help you take care of such emergencies without any hiccup.

  1. Strengthen Your Network:

A career transition can bring about a tumultuous change in your life. Before making the move, it’s a good idea to check in with yourself if it’s a good move. Reach out to your family, partner or friends to make sure you have their emotional support to get through this change. Moreover, start building your own community within your desired industry. Participate in networking events and conferences to meet contacts and learn more about opportunities. Reach out to industry leaders and ask for their advice and guidance.

A career change may seem risky at first but if it’s a well-thought-out-of move, the return may well be worth it. In a cash emergency? Taking out a Personal Loan might help.

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