Financial Planning for a Career Change
Changing careers often means a change in salary. Sometimes that change is an increase, other times the change may mean a pay cut. Often, changing careers means relocating as well. How can you be financially ready to take on these changes? What should you consider when making a career change to keep yourself on top of your finances?
Obviously, an increase in pay without an increase in expenses would be ideal. However, that is often not the case. There are many factors to consider: relocation, commute, dress code, benefit plans.
Relocation - If your new position requires you to move, you’ll need to consider the cost of living in contrast to your increase in income. $70,000 in one area may be the equivalent of $50,000 in another.
Bankrate.com offers an easy to use cost of living calculator that allows you to not only compare salaries from one area to another, but it breaks down the cost of housing, food, and lifestyle costs. This site allows you to compare down to everyday items such as a gallon of milk or a loaf of bread It is important to know about the cost of living in the area of your relocation so that you negotiate an appropriate living salary.
Commute – There are many factors that play into calculating the cost of your commute. Will you need to take public transportation? Do you have a long drive?
Adding costs including wear and tear on your vehicle should be considered when factoring in just how much of a pay raise or cut you are taking in your new role. Consider the value of your time in factoring the cost of your commute as well. Make sure that your new position is not going to cut into your ability to have a life outside of work.
Dress Code – This factor can be especially important when going from a relaxed office environment to one that requires business casual or business formal attire. Buying an entirely new wardrobe can get quite expensive. Consider buying pieces that can be mixed and matched or shopping at higher end thrift stores to build up your wardrobe.
Benefit Plans – Compensation for a job is far more than just a salary. Consider the benefit plan that you are being offered. Compare its worth to that of the one you currently have. If you are taking a cut in benefits, be sure that the salary is compensatory to make up for your loss. Ask about 401K matching, insurance, and paid time off. Consider all of these items in your financial planning before you make a move.
Changing careers is an exciting adventure. Consider all aspects of your offer before deciding what is right for you. Being financially prepared and aware of the potential changes will smooth your transition.