Almost every person has thought about a major career change. When it comes to considering a career switch, the question of financial stability is what often prevents us from taking that final leap. Can you afford to make this change? Would you need an emergency cash immediately bad credit direct lender if you face unforeseen costs? How will your life change if you accept a new career? How will your income perspective alter?
Tips on How to Prevent Financial Struggles If You Decide To Change Jobs
In this article, we are going to share with you some tips on how to assess the risk tolerance of your household, test out your estimated income, and avoid financial struggles during a career switch.
State of Work in America
High job turnover and low unemployment state that workers are searching for and finding new working arrangements. It’s especially essential to understand what workers see from their positions today. Financial problems during uncertain times make them flip the career switch. If a company or a small business wants to succeed and develop, retaining and attracting high-performing workers should be a priority.
Twenty-one percent of American employees took a new job in the past 12 months, mentions the recent State of Work in America survey, which polled over 5,000 workers. Of respondents who stated they had done a career switch, 40% are already searching for a new position again.
Besides, the war for talents continues. Around 48 million consumers quit their positions voluntarily in 2021. While the economic situation has emerged from the pandemic hibernation, the demand for labor has recovered quicker than the supply of employees. Hence, this situation has helped craft favorable working conditions for employees.
How to Prevent Financial Issues During Career Switch
Every situation may be different; we all look forward to changing our lives for the best. Whether you find your current position boring or want to have a paycheck boost to avoid money problems, here are some tips to consider that can help prevent financial mistakes and have a smooth career move.
Create an Emergency Fund
This is one of the most important factors to consider whether you are going to make an IT career switch or go into any other industry. Can you protect yourself from emergencies? Financial issues and monetary problems may unsettle consumers who don’t have a solid emergency fund. You never know what might happen in your new career.
Adding to your existing account or building your emergency fund will definitely help you eliminate the stress of starting a new job. Many financial coaches and advisors recommend consumers set aside money for at least three to six months of living expenses. While there is no golden rule and each situation is different, building a safety net is crucial if you decide to switch career. The bigger your financial cushion is the better for your stability.
How can you establish your emergency fund? You should earmark your paycheck tax return or annual bonus. While you try your new income, take the cash each month that is left from your monthly expenses and add it to the emergency fund. You may even decide to live a more frugal life for a certain period to maximize your savings.
Figure Out Your Old and New Payroll Schedules
Another factor to consider is your old and new pay policies as they may differ among recruiters. Some consumers used to get paid bi-weekly, weekly, or monthly. Some recruiters even pay in advance, while other employers may pay only after the work has been done.
It can be confusing at the beginning if this paycheck policy is different at your new place of work. It takes some time to adapt, and you certainly need a safety net to cover the living expenses during the period until you get your new payroll.
Know When Your Bills Are Due
Even if you are in the process of changing jobs, you will still face the same monthly bills. Nobody will pay the utility bills, mortgage, or rent for you. Those who are great at keeping track of their finances and budgeting already know what their average monthly costs are.
While some creditors or landlords don’t accept early payment, you may look for options to pay the bills on time or ahead of time. It will protect you from emergencies and missed payments that can lead to further penalties.
Try Living on Your New Paycheck
What if your new position will pay less? Even if you still decide to switch career and find a more interesting offer, you should test your estimated income and try living on it at least for several months. Find out the exact sum you are going to earn and use this amount for a couple of months.
A great idea is to live on less money than you are about to get. If you do so, you will be able to have a realistic picture of whether it will be enough for you to live a convenient life. Adjust your budget, take into account your bills and debit card logs for the past six months to see the real situation of how much you need to earn to have enough for living expenses.
Assess Your Household’s Risk Tolerance
What do you think about the risk of switching career? Tolerance for risk can be different among people. If you’ve built a sufficient emergency fund to protect you from unpredicted costs, you may face fewer risks.
Having enough cash set aside will offer you a higher level of job security. If you assess how comfortable you are with this risk, you will find more options to choose from. There are plenty of self-assessment tests on the web to help you quantify the level of your risk tolerance.
The Bottom Line
To sum up, the decision to switch career is a tough one. You should take into account some factors to define whether it’s a good solution for you to change your current job. Follow our tips to budget for this uncertain period in-between, take some time to assess your risk tolerance, and establish an emergency fund to avoid financial struggles.