Senate Cents: A Financial Wellness Blog

Making a career change is an exciting yet challenging time that requires not only emotional readiness but also solid financial planning. Whether you’re pursuing a new passion, seeking better work-life balance, or transitioning to a completely different industry, having a financial game plan is essential to ensuring a smooth transition. Below, we’ll explore key financial steps to take before embarking on your next career move, along with additional action steps and resources to support you through this process.

1. Assess Your Current Financial Situation

Before making any big changes, take a thorough look at your current financial health. This includes evaluating your:

• Income and Expenses: Track your monthly income and outgoing expenses to see how much wiggle room you have in your budget.

• Savings: Make sure you have enough savings to cover at least three to six months of living expenses, especially if you anticipate a gap between jobs.

• Debt: Review your debt payments (credit cards, loans, etc.) and assess how a potential income reduction may affect your ability to manage these payments.

Understanding your financial standing will give you a clearer picture of what changes need to be made before you take the leap.

2. Build or Strengthen Your Emergency Fund

A career transition can come with unexpected financial challenges, such as taking longer than anticipated to find a new job or requiring additional education or certifications. That’s where a robust emergency fund comes in. If you don’t already have one, now is the time to build or strengthen it.

Your emergency fund should cover essential expenses like:

• Rent or mortgage payments

• Utilities and groceries

• Insurance premiums

• Loan or debt repayments

Having a well-stocked emergency fund offers peace of mind and financial flexibility while you navigate the transition period.

3. Plan for Potential Income Gaps

One of the most significant financial risks during a career change is the possibility of experiencing a gap between paychecks. Even if you plan to start your new job immediately after leaving your current one, there may still be delays in your first paycheck or unexpected onboarding costs.

To mitigate the financial strain of income gaps, consider:

• Saving extra in the months leading up to your career change.

• Cutting back on non-essential spending to boost your savings.

• Taking on temporary or freelance work to bridge the income gap.

Preparing for potential income fluctuations ensures that you won’t need to dip into long-term savings or rely on credit cards during the transition.

4. Budget for Additional Costs

Career transitions often come with additional expenses that can catch you off guard if you’re not prepared. These costs might include:

• Professional development: Certification courses, workshops, or training for new skills.

• Relocation: If your new job requires you to move to a different city or state, relocation costs can add up quickly.

• Job search expenses: Think about costs like new work attire, transportation for interviews, or professional networking events.

Be sure to incorporate these potential expenses into your budget, so they don’t disrupt your financial stability.

5. Research Health Insurance Options

If your career change involves leaving a job that provides health insurance, don’t forget to plan for healthcare coverage during the transition. You don’t want to be caught without health insurance in case of an emergency. Explore options like:

• COBRA: If eligible, you can temporarily continue your employer-sponsored health coverage under the COBRA program.

• Marketplace plans: Check out the health insurance marketplace to find temporary coverage until your new job’s benefits kick in.

• Spousal coverage: If your partner has employer-provided insurance, consider getting added to their plan.

Health insurance is a critical part of your financial well-being, so plan accordingly to avoid costly gaps in coverage.

6. Evaluate Retirement Contributions

During a career transition, it’s easy to forget about your retirement savings. However, it’s crucial to ensure that your long-term financial goals remain on track. Consider the following:

• Rolling over your 401(k): If you’re leaving a job where you’ve contributed to a 401(k), research your options for rolling it over into an IRA or your new employer’s retirement plan.

• For federal employees, this includes reviewing your Thrift Savings Plan (TSP) and considering whether to leave it as is, roll it into an IRA, or transfer it to your new employer’s plan.

• Keep contributing: If possible, continue making contributions to your retirement savings during your transition, even if they’re smaller than usual.

Maintaining focus on your retirement goals will help you avoid losing valuable time for growing your nest egg.

7. Talk to a Financial Advisor

A career change can involve many complex financial decisions, and it can be helpful to get expert advice. USSFCU members can consult with Michael Schimmel, our dedicated financial advisor through Fellows Financial Group. Michael can help you navigate the financial aspects of a career change, whether it’s budgeting for the transition, managing retirement savings, or planning for long-term financial stability.

Visit ussfcu.org/fas to schedule a consultation with Michael today.

Related Resources:

• CareerOneStop: A resource sponsored by the U.S. Department of Labor that offers job search tools, training programs, and career guidance for transitioning workers.

Visit CareerOneStop to explore resources for job seekers, including resume writing tips and career exploration tools.

• USAJOBS is the go-to platform for federal employees applying for new roles. They also offer resources for navigating job transitions.

Visit the USAJOBS website to explore federal job openings and career transition tools.

Conclusion

A career change is an exciting opportunity for personal and professional growth, but it’s important to be financially prepared for the transition. By assessing your current financial situation, building an emergency fund, planning for income gaps, and managing additional costs, you can ensure that your career move is a smooth and financially sound decision. Remember, preparing today sets the foundation for future success in your new career.

This article is being shared for informational purposes only. We do not endorse any third-party websites, software, or services mentioned in the content.