I want a career change but I am concerned what impact it will have on my personal finances. What can I do about it?
You have worked hard to get to where you are in your career but for whatever reason you have hit and cul-de-sac and require a change of direction. One of the questions running through your mind may be that you are uncertain what the financial implication will be for you if you switch careers now.
Do your longer term lifestyle aspirations have to be amended if your career change results in a drop in income whether it is for a short period of time or for the longer term?
Our career decisions can often hinge on the financial ramifications that a change will bring. While we may be happier in an alternative role we can often continue with what we are doing due to the fear of losing the financial support we have in place. However, with an appropriate financial plan it is possible to live the life we wish to whilst also meeting our financial goals. This article addresses some of the areas you should consider.
You should treat this change as a time to review the current state of your personal finances. Ask yourself the following questions:
• Are you in debt? Clearing as much debt as possible before your career change will reduce your monthly outgoings during any lean periods. Perhaps you need to borrow money to fund your change; shop around to ensure you are getting the best terms available and make sure you are clear what the repayment terms are.
• Do you have sufficient savings to support a period of low or no income while you re-train? If you don’t do you have time to prioritise funding a savings pot before your career switch? This would be preferable to borrowing money to fund your transition.
• Do you have a pension in place? If so will you be able to afford to continue to make the existing level of contributions? Now would also be a good time to address how it is invested to ensure you are getting the optimum returns, particularly if contributions are going to be reduced. You may also be paying too much in charges so switching providers may ensure your returns are maximised.
If you do have to suspend contributions set yourself a reminder to re-start them in the future. Failing to do so is likely to lead to your pension funding being stalled longer than is advisable.
• Do you have ISAsfunds? These could be called upon if necessary to provide income support and if not, as with the pension fund, they should be reviewed to ensure you are getting the best return for the risk you are willing to take whilst paying less in charges.
• What life assurance will be necessary? If you are out of work due to sickness or accident will your new career provide you with financial support? If you are moving to another employed position certain benefits such as pension contributions, income protection and life cover may be provided but if you have decided to become self-employed you will have to fund these benefits yourself.
If you are moving to an employed position will the benefits you are offered match those that you are giving up? If not, will there be gaps in your life cover that need to be addressed? If you were ever out of work or even die, would your family be financially secure?
There are a number of financial implications to be addressed when considering your career change but with a bit of careful management this impact can be significantly reduced, if not negated entirely, allowing you to pursue a career that is more meaningful to you.
Andrew Neligan is an award winning Chartered Financial Planner who helps individuals achieve their long term lifestyle goals. If you would like to know how he can help ensure your financial position can support your career decisions contact him via email@example.com or 01483 274 566. Or, for more information visit www.icl-ifa.co.uk