Thinking about a Career Change? 7 Keys Areas to Review
Part of the Life Stages Series
As a woman, you will evolve through many life stages. Some stages will require you to completely change your financial plan, while others will only require small adjustments to your strategy. There are many reasons why you may be seeking a career change. Perhaps it is because you need a more flexible schedule, or potential for more growth. Regardless of the reason, the reality is many people change careers, often times more than once. With proper planning, you can transition into a fulfilling new career without sacrificing your financial security.
Work with a Professional Coach or Career Counselor
Working with a professional coach or career counselor can ensure you are pursuing a career that is in alignment with your individual needs, goals and overall life vision. Professional coaches and career counselors can help you explore your abilities and interests, clarify your life and career goals, help you decide whether you should find a new career, and teach you job-hunting skills.
Review your Financial Plan
The best way to plan for the financial impact of starting a new career is to plan early. Don’t quit your present job until you’ve determined how you will survive financially during your career transition. In particular, review how changing your career will affect your income and expenses, impact your cash cushion, and reduce or increase any debt you have. Determine if you can afford to be out of work if you cannot find a job or decide to go back to school.
Go Back to School
Sometimes you may have to go back to school to gain the education you need to pursue your new career. If you go back to school, figure out how you will pay for your education. You may be eligible for grants and financial aid. In addition, if your income is within certain limits, you may be eligible for a Lifetime Learning tax credit each tax year that is equal to 20 percent of your qualified education-related expenses up to $10,000. You may also be able to deduct interest paid on qualified higher education loans. Also, you can use websites like eCampus.com to buy used textbooks or rent your college textbooks instead of buying them. Buying used textbooks can save you tons of money, but even though eCampus.com has the largest selection of cheap textbooks, not all students want to buy their textbooks. Their Textbook Rental and Return Program is a cheaper alternative to buying new or used textbooks. You don’t own the textbook; you are simply borrowing it from eCampus.com for a low fee and returning it with free shipping. eCampus.com is also a great place to sell textbooks through their textbook buyback program.
Re-evaluating your Insurance Coverage
Consider how starting a new career can affect your insurance coverage. For instance, you will likely lose your employer-sponsored health insurance coverage when you resign from your present job. Although you may be able to continue coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) for 18 months, it can be expensive to do so. If you have a disability insurance policy, consider the impact that changing your career may have. Your ability to get disability coverage and the premium you pay depend, in part, on your occupation. So, if you switch careers, your disability insurance coverage may be affected.
Negotiate Your New Salary
Women tend to be averse to negotiating salaries. Don’t sell yourself short. Authors of Women Don’t Ask: Negotiation and the Gender Divide, Linda Babcock and Sara Laschever state, “Men ask for what they want twice as often as women do and initiate negotiation four times more.” Women still earn $.77 for every $1 earned by a man and are out of the workforce on average 11 years taking care of children and dependents.1 You cannot afford to be missing out on extra dollars earned. Make sure you ask what you are worth by negotiating your new salary. Enroll in New Employee Benefits
Once you start your new position, make sure to evaluate all the benefits your employer offers. Take advantage of group health insurance, health savings accounts, group disability and life insurance and other fringe benefits offered.
Continue to Save for the Future
Changing careers may affect your retirement nest egg in several ways. First, if you leave your current job before you have completed a certain number of years of service with the company, you may not be vested in the company’s pension plan. If you are not vested, you will own none of, or only a portion of, the employer’s contributions to the plan. Second, if you leave the company and don’t properly roll over your retirement funds into an IRA or another corporate plan in a timely manner, then you may have to pay a 10 percent nondeductible penalty tax and 20 percent in federal income tax withholding. The funds that are not rolled over will also be included in your income for tax purposes. Also, sometimes employers use nonqualified deferred compensation plans as golden handcuffs to make sure that key employees stay with the company for a specified period of time. If you are a highly compensated or key employee and participate in such a plan, you may lose certain benefits if you leave the company prematurely under the terms of the plan. Since your monetary loss may be significant, consider this before changing careers. Finally, continue to save for retirement. Once you change careers make sure to enroll in your new retirement plan right away. Strive to save 10-20% of your income toward retirement.
US Census Bureau, Women’s History Month- Facts for the Features, March 2011. Published January 26, 2011