7 Financial Planning Strategies for Your Own ‘Great Resignation’

Making a career change can affect your financial planning strategies. It is essential to plan and prepare for how this change could affect you and your finances.

In addition to considering your new career potential and any education or training you may need, you should carefully consider your budget, savings, health insurance, and retirement goals before committing to such a significant life change.

If you are one of the many people considering a career change during this wave of the Great Renunciation, a CFP® professional can help you plan for the change and smoothly transition to the next phase of your life.

1. Be honest about why you want to change careers

Take an honest look at why you want to make such a magnificent change in your life before you take the plunge. ask yourself:

  • Do you have a passion for another industry or type of career?
  • Are you dissatisfied with your current work environment? Is it too stressful? Toxic company culture? Intolerable boss or management?
  • Are you looking for a better paid profession?
  • Do you want a better lifestyle, like a shorter commute or more time for you and your family?

Figuring out the “why” before you make a significant career change can help you identify the right industry, types of employers, and roles in your job search.

2. Look for ways to pivot

Depending on the type of change you are looking for, you can take advantage of a new opportunity for a test drive by turning. Before you dive in, brainstorm options to boost your career:

  • Can you change your current situation without changing jobs?
  • Does changing careers involve starting a small business or becoming self-employed?

You can make a low-risk transition by going part-time with your current career to work your new job simultaneously, taking evening or weekend classes, and seeking advice from people who have made similar career changes. This way, you’ll have time to explore whether you like your new career while having the safety net of staying in your current job.

3. Examine your budget

When cash is constant, you can confuse your “wants” with your “needs.” However, it’s critical to focus on needs and cut back on wants when changing careers.

if you haven’t looked at your budget In a little while, take a financial inventory: Calculate your net worth and identify cash you can access quickly. Consider essential expenses, like your mortgage or rent payment, versus things you can cancel or stop doing to save money.

Determine which subscriptions and other recurring costs you can cancel or downgrade. For example, if your credit card charges an annual fee, ask to switch to a card with no fee. Reduce your food bills by learning to cook or prepare meals at home. Take advantage of online classifieds to sell unnecessary items that take up space or buy things you need at a discount.

As you cut costs, set aside the money you save in a savings account. Creating a financial safety net gives you options. Plus, it’s easier to make decisions based on what you want out of life, not what makes money to pay this month’s bills.

4. Make a health insurance plan

According to an analysis of the Census Bureau’s American Community Survey conducted by the Kaiser Family FoundationNearly half of all Americans get health insurance coverage from your employer.

If you fall into that category, build a health insurance plan to fill the gap until your new employer’s coverage begins. You may have the option to continue your coverage through COBRA, obtain coverage under your partner’s plan, or find a policy on the health insurance marketplace at health.gov.

5. Leave your retirement accounts alone

While raiding your 401(k) to fund a new business or career is tempting, it can hurt you. Early withdrawals incur a 10% early distribution penalty if you are under age 59½. You will also pay income tax on the money you take out.

But more importantly, withdrawing your retirement accounts hinders your ability to fund your retirement. When you take out your 401(k) prematurely, you lose the compound interest and stock growth you would have earned.

6. Get new credentials

Many people who change careers choose to go back to school to get certifications or another degree. New training and credentials can increase your job options and give you an edge when applying for new roles. But first, consider whether you:

  • Do you need money to finance those expenses?
  • Do you have enough savings? How long can your savings cover until they run out?
  • Can you live on your partner’s income while you train for a new career?
  • Is it possible to apply for scholarships or special programs for experienced workers?

Education is not always necessary to change careers. You can find a way to avoid spending, network with other professionals, and land a job you love.

7. Prepare to rejoin the labor market

If you took some time off to retrain for your new career, Consider your job prospects once you complete your education.

You may need to take an entry level job to get started. When changing careers, some fields may allow you to switch to a level similar to what you had in your previous job, but others may not. For example, doctors, nurse practitioners, and other health care providers may require you to start as an intern first.

Saving money up front for a job change can help supplement a lower starting salary. But in the long run, your new career may have greater growth potential.

Think about possible scenarios, sources of income and expenses when planning a career change. Changing careers can lead to financial insecurity if you don’t plan properly. A CFP® professional can help you prepare for and plan for a career change. In addition to these seven strategies, you may discover additional ideas to consider based on your circumstances.

CEO, blue ocean global wealth

Marguerita M. Cheng is Executive Director of Blue Ocean Global Wealth. She is a CFP® Professional, a Certified Retirement Planning Counselor℠, a Certified Retirement Income Professional, and a Certified Divorce Financial Analyst. She helps educate the public, legislators, and the media about the benefits of competent and ethical financial planning.

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