Before making a career change, ask yourself these four questions to gauge your financial readiness.
Many factors can compel you to find a new career — stress, a poor work environment, or an unhealthy work-life balance. But before you make the move, consider all of the implications of changing careers, including the financial impact, says Alissa DeWitt, CEO, founder, and executive coach of Executive Impact.
“Invest time in researching and gathering credible information by which to make decisions,” she says. “Then apply what you’ve learned from your research to develop a solid transition plan before making the leap.”
For starters, DeWitt suggests reviewing four questions with the help of colleagues, industry leaders, and your financial advisor.
1. Is this new career in a growing or declining industry?
With a changing world and job market, determine if the industry you’re entering has long-term growth potential and whether your new career will help meet your financial and personal needs. Some industries that are currently seeing growth potential include: motion capture software developers, telehealth services, real estate and e-commerce.
2. Is there a need for additional education, training, or certification?
Before pursuing any type of education or training, make sure you’ll be employable after receiving an additional degree or certification, DeWitt says. You don’t want to invest hundreds of hours and thousands of dollars in schooling or training only to find out that you need some other qualification or skill for the job.
If you do receive education or training, gauge whether you’ll receive a return on your investment. For example, will your new career free up future time or award better pay?
3. What will be the impact on your 401(k), health accounts, stock options, and other financial plans?
Understand how a transition will impact all of your current financial resources. Take into account whether you’ll forfeit health savings accounts, stock options, bonuses, or other financial assets as a result of changing careers.
4. What is your risk tolerance?
“Any career change elicits some level of risk, especially if it involves transitioning from a corporate position into an entrepreneurial venture,” DeWitt says. To assess your risk tolerance, consider the level of stability through income or benefit programs, the duration of the transition period, and your amount of self-confidence to navigate the transition. These factors will help you understand how you’ll tolerate the mental, emotional, and financial risks that come with changing careers.
Talk with your financial advisor to help you address these changes before you move into a new career. And check out five instances that might spur a career change.
