Starting a new career? Here are 5 things you need to know to prepare your finances to make the jump

The average person will now change careers five to seven times during their working life according to career change statistics. With an ever increasing number of career choices, 30% of the workforce will now change careers or jobs every 12 months. The reality is, a “career for life” is essentially unheard of in the modern workforce. This shift reflects a dynamic economic landscape where technological advancements, evolving market demands, and changing personal interests play pivotal roles. As a result, continuous learning and adaptability have become crucial skills for professional success. Furthermore, the rise of the gig economy and remote work options has also played a significant role in how individuals approach their career trajectories, offering more flexibility and opportunities for change.

The financial implications of frequently changing careers can be significant, often imposing considerable stress on individuals. Transitioning to a new career path may involve periods of unemployment, reduced income, or the necessity of investing in additional education and training. These factors can strain personal finances, leading to uncertainty and the need for careful budgeting and financial planning. Moreover, the loss of seniority and benefits accumulated in a previous career can impact long-term financial stability, including retirement savings. For many, the decision to change careers is weighed against these potential financial challenges, making the process not just a matter of professional growth, but also of careful financial consideration and planning.

Building on the financial challenges of career changes, it’s noteworthy that most people are often unaware of what their net pay will be at a new job after accounting for benefits, deductions, and taxes. This lack of clarity can add to the uncertainty and stress of transitioning to a new career. As individuals prepare for a new chapter in their professional lives, the ambiguity surrounding their future financial situation can be particularly unsettling. Not only do they have to navigate the complexities of a new job and potentially new industry, but they also face the daunting task of understanding and adjusting to the new financial realities that accompany this change.

Finance coach Jeannie Dougherty believes in controlling what you can during this transition period of your life.

Here are 5 financial tips to keep in mind when starting a new job:

1. Pay yourself first

2. Prioritize the bills that affect your credit and home life

3. Cut unnecessary subscriptions and expenses

4. Save one to three months salary

5. Wait at least six months before making large purchases

When embarking on a new career path, financial planning becomes more crucial than ever. Here are five essential financial tips to consider when starting a new job:

The principle of ‘paying yourself first’ should be a cornerstone of your financial strategy. This means allocating a portion of your income to savings as soon as you receive your paycheck, before addressing any other expenses. This approach ensures that you are consistently building your savings, providing a cushion for unforeseen expenses or periods of transition. It encourages a savings mindset, which can be particularly valuable when adjusting to a new income level or navigating the uncertainties of a new career.

Another critical aspect to consider is prioritizing bills that directly impact your credit score and home life. This includes obligations such as mortgage or rent payments, utility bills, and loan repayments. Timely payment of these bills is essential to maintain a healthy credit score and ensure stability in your living situation. A good credit score not only reflects your financial reliability but also plays a crucial role in future financial endeavors, like obtaining loans or renting properties.

It’s important to evaluate your regular expenses and cut down on unnecessary subscriptions and expenditures. This might involve auditing monthly subscriptions, such as streaming services or gym memberships, and eliminating those that are not essential or regularly used. Reducing these expenses can free up a significant amount of money, which can then be redirected towards savings or paying off debts.

It’s also prudent to save an amount equivalent to one to three months of your salary. This emergency fund acts as a financial safety net, providing a buffer against unexpected situations such as medical emergencies or sudden job changes. Having this reserve can greatly reduce financial stress, knowing that you have a fallback in times of need.

Lastly, it’s advisable to wait at least six months before making any large purchases after starting a new job. This waiting period allows you to fully understand your financial standing in your new role, including your net income and any additional expenses that may arise. It also provides time to adjust to any new financial responsibilities associated with the job. Rushing into significant expenditures can lead to financial strain, especially if you have not yet stabilized your income and expenses in the context of your new employment.