How to Finance Your Career Reinvention

How to Finance Your Career Reinvention

Printer-Friendly Version

by Randi S. Bussin, CCMC, CPBS, MBA

[Editor's Note: Readers may also wish to consult Randi Bussin's other article on career reinvention: In a Down Economy, Maybe Career Reinvention is in the Cards.]

You want to reinvent, and emotionally you are ready to do so, but you just don't know if you can afford to do so. The affordability of reinventing yourself is a very important concern, but one that you can overcome with the proper planning. To succeed at a career reinvention, you will need to consider the costs of preparing for a reinvention, the possible hidden costs of this reinvention, and how to work with the possibility of a reduced salary in your new field.

The most important factor in a career reinvention, after realizing where your passions will take you, is to realistically prepare your financial outlook. Start by determining how much you could potentially earn in the first few years of your transition. Conduct some research on such websites as Salary.com, SalaryExpert, and PayScale. Talk to professionals in your desired field, and get specific information on how much you can expect to earn, both in the short term and in the long term

Don't forget, salary isn't the only factor that can affect your overall financial picture. Benefits such as employer-paid life and disability insurance, flexible-spending accounts (which allow you to pay for medical and dependent-care expenses with pre-tax dollars), and employee stock-purchase plans can make a big difference in your total compensation.

Next, look at the costs of working with a career coach, and add those costs to those you will need to spend for training and professional development. Ask those in your target field and check in with professional organizations to see how much others in transition have spent for training and certificate programs. Add in the costs to join a few new professional associations, as well as attending a professional conference. These groups and venues are great for networking and building relationships, so don't neglect them.

Another hidden cost can be the expense of adding technology to make your transition. Determine what your needs will be, and remember, if you are starting a business, you can reduce the impact of your purchases if they qualify as business expenses. Review any related income-tax laws or check with a good CPA.

Medical insurance also is a very important factor. You should calculate the costs of continuing that coverage with COBRA until you have landed your new job with benefits. Check also with private insurers as sometimes they are less expensive than COBRA. If you think your coverage might be less in the new field, also consider moving up some of your elective visits and procedures while you are still employed.

Once you have reviewed the cost of making this transition, work on a backup plan. Collaborate with your career coach and/or your mentors to come up with a backup plan you can execute in the event that your transition will take longer than expected.

During this transition process, it will be important for you to continually monitor your expenses and compare them with your original financial plan. Accurately determine what you are spending to help keep you in line with your target goals. At the same time, look at your long-term goals, and how this transition will affect your plans for savings, personal expenses, and retirement.

Once you have created your budget, and started to monitor your expenses, you will then be ready to make adjustments. You might find some places where you could tighten your belt, or others where you need to allocate more of your money. This scrutiny is important because the sooner you can start living with your new budget, the easier it will be to adjust to your new salary level in your new career.

I would suggest reading Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence by Joe Dominguez, which offers many tips on saving money and spending consciously. Also, at The Career Change Financial Planner (Click on Downloads) you can get a free Cash Flow Worksheet to help you itemize reinvention expenses before, during, and after your transition. The worksheet includes hints on the expenses most likely to shift as you go through your career change.

One of the factors that greatly reduces tension for career changers is building an emergency fund that is greater than the normally suggested three to six months of living expenses. Building this larger cash cushion with additional money can certainly help if your reinvention undergoes a few unexpected changes.

You can start supplying this cash cushion with extra money right away by taking on any overtime or extra work that is offered at your current job. Or, you can pick up an extra job on weekends or evenings, and put this income directly into your career reinvention emergency fund. Look into paying off any existing debt, especially anything with a high interest rate. Securing a line of credit while you are employed will help by making sure additional emergency funds will be available.

During and after your transition, you could end up in a lower tax bracket and be eligible for tax breaks previously not available to you (e.g., Roth IRA eligibility or deduction on tuition paid). So, be on the lookout for these additional benefits.

Final Thoughts
Once you have your finances in order, you will be able to pursue your new dream career with ease of mind and a financial plan that will support you and help you find your way to a brighter future.

Questions about some of the terminology used in this article? Get more information (definitions and links) on key college, career, and job-search terms by going to our Job-Seeker's Glossary of Job-Hunting Terms.

This article is part of Job Action Day 2010.

Randi Bussin, CCMC, CPBS, MBA, is a Career Reinvention Strategist and holds the Reach Certified Personal Brand and Online Identity designations. The founder of Aspire!, she partners with successful individuals, helping them find more meaningful work while reigniting the passion that has dimmed professionally. She guides them to a renewed sense of direction, an actionable career reinvention, and a personal branding plan. Reinvention can be a new career, a role more aligned to values, an entrepreneurial pursuit based upon a passion, or a retirement game plan. Randi has changed careers twice, working in high tech, higher education, and is a serial entrepreneur. Learn more. She has an MBA from INSEAD and an MA from Tufts University.

Maximize your career and job-search knowledge and skills! Take advantage of The Quintessential Careers Content Index, which enables site visitors to locate articles, tutorials, quizzes, and worksheets in 35 career, college, job-search topic areas.

Find a New Job

What:
Where:
jobs by

Job-Hunting Tools:

Career Tools:

Career Categories: