Consider these four tips to help make the financial impact of the transition easier.
1. Do Your Homework
Before you quit your current job, make sure that you clearly understand the steps involved in a career move, including the financial and personal consequences.
- How long will it take you to transition from one career to the next?
- What are the job prospects in your new field?
- How will changing careers affect your income and expenses in the short and long term?
- Will you need additional education or training?
- Will your new career require more or fewer hours?
- Will you need to move to a different city or state?
- Is your spouse/partner on board?
You should also prepare a realistic budget and timeline for achieving your career goals. If you haven’t already done so, build an emergency cash reserve that you can rely on, if necessary, during your career transition. It’s also a good time to reduce outstanding debt by paying off credit cards and loans.
Assuming it’s possible to do so, keep working in your current job while you’re taking steps to prepare for your new career. Having a stable source of income and benefits can make the planning process much less stressful.
2. Protect Your Retirement Savings
Many people tend to look at their retirement savings as an easy source of funds when confronted with new expenses or a temporary need for cash. But raiding your retirement savings, whether for the sake of convenience, to raise capital for a business you’re starting, or to satisfy a short-term cash crunch, may substantially limit your options in the future. Although you may think you’ll be able to make up the difference in your retirement account later—especially if your new career offers a higher salary—that may be easier said than done. In addition, you may owe income taxes and penalties for accessing your retirement funds early.
3. Consult Others for Advice
When planning a career move, consider talking to people who will understand some of the hurdles you’ll face when changing professions or shifting to a new industry or job. This may include a career counselor, a small-business representative, a graduate school professor, or an individual who currently holds a job in your desired field. A financial professional can also help you work through the economics of a career move and recommend steps to protect your finances.
4. Consider Going Back to School
You might be thinking about pursuing additional education in order to prepare for your new career. But before applying to graduate school, ask yourself whether your investment will be worthwhile. Will you be more marketable after earning your degree? Will you need to take out substantial loans?
In your search for tuition money, look first to your current employer. Some employers might cover the full cost of tuition, while others may cap reimbursement at a dollar amount. Generally, you’ll be able to exclude up to $5,250 of qualifying educational assistance benefits from your taxes.
In addition, it’s likely that you’ll have to satisfy other requirements set by your employer to be eligible for reimbursement benefits. These may include, and are not limited to:
- Discussing course of study with a manager or supervisor prior to enrolling (and receiving approval)
- Pursuing a degree or training that is job related
- Maintaining a minimum grade-point average
- Working a certain length of time for the company before taking advantage of the benefit
- Meeting eligibility requirements for regular benefits
Check with your human resources department to learn more about tuition reimbursement qualifications. Be sure to find out whether you can continue to work at your company while you attend school part-time.
Students attending graduate school on at least a half-time basis are eligible for Uncle Sam’s three major student loans: the Stafford Loan, Perkins Loan, and graduate PLUS Loan. Also, at tax time, you might qualify for certain tax benefits, such as the Lifetime Learning credit. For more information, see IRS Publication 970, Tax Benefits for Education.
If you have questions, contact the experts at Henssler Financial:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
Disclosures: The following information is reprinted with permission from Forefield, a division of Broadridge Financial Solutions, Inc. This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
