The true cost of making a career change

The true cost of making a career change
SEEK content teamupdated on 20 April, 2024

Changing careers brings both many opportunities as well as a few challenges along the way as you look to establish yourself in a new job in a new industry. So before you take the leap, it’s wise to look into the financial impact of a career change.

But before you take the leap, it’s wise to look into the financial impact of a career change. 

We asked Jane Jackson, career coach, and Leah Lambart, career coach and director of Relaunch Me, for their advice.

How long will it take? 

Depending on your situation, making a career change can take time. It typically takes someone in a mid-management role three-to-four months to make a transition, Jackson says. That covers the time it takes to explore what’s out there, promote yourself, apply for roles and go for interviews. But with a lot of job seekers having the same idea of reinventing themselves or looking for something better, that timeframe could now be drawn out, she says.

Whatever your situation, thinking about the financial impact before you make a change is wise, Jackson says. “If you’re thinking about leaving your current role because you’re unhappy and it’s not tenable to be in it, then you need to have a buffer in the bank so you can draw upon it monthly.”

Here’s what to know and how to start planning.

How much should I save?

Exactly how much money you should put aside for a career change will depend on factors like whether you have a mortgage, your family situation and your lifestyle expectations. But Jackson advises to have at least six months of expenses saved for the move.

Lambart recommends a thorough financial review before you make the leap.

“Review your financial situation starting with your day-to-day expenses as well as your long-term financial goals, such as planning for your retirement,” she says. “If you are not already using a budget, start tracking your income, expenses and savings using something like the Sorted budgeting tool.”

You might also want to think about ways you can live more frugally while you’re adapting to your new career, says Lambart.

“Most of us can reduce costs in some areas,” she says.

Consider your future earning potential

While having a healthy savings safety net is important, Lambart also says it’s worth thinking about superannuation and whether your new role will come with a pay cut. This is especially true if you’re transitioning from an industry that you’re quite experienced in to one where you’re less senior.

“Career changers do need to be mindful that their superannuation could be affected if they are out of the workforce studying for a period of time, or if they need to take a step back financially to facilitate the career change,” she says.

“Having said that, there are often ways to change career without a change to income, but this will greatly depend on the ability to transition to a new career without further study and instead relying on networks and transferable skills.”

When it comes to skills, remember, you’re not starting from scratch – identifying your transferable skills can help you see what you’ve already got to work with.

What to do before you quit

Like anything challenging, making a change to a new job or career is best broken down into steps.

1. Look into your prospects: “When you’re going for any advertised role, you’ve got to think of the statistics and the chances of your success,” Jackson says.

2. Questions to ask yourself might include: What’s going on with that industry right now? How many companies might need this kind of job? And how many candidates might there be for that role?

This isn’t about being negative or limiting yourself; it’s about being realistic and getting a more accurate idea of how long or challenging the process might be.

Some of these questions might feel hard to answer, but try using them to guide your research. One way to do this is to explore industries and roles to see how many job opportunities are available, the projected job growth and the average salary.

3. Be clear on the salary you want: It’s important to explore and compare salaries for roles. Researching salaries for roles you’re interested in can help you determine if a move is feasible, and it can also help you to set a benchmark for yourself when you get to the stage of interviewing for roles.

4. Prepare your savings: Cost of living pressures are making it harder for many people to save now, but anything you can set aside may ease the transition if you’re changing jobs – or keep you afloat while you’re looking for work. The larger your safety net, the more time you have to job hunt. Ensure your money is readily available to withdraw in something like an online savings account, versus a long-term investment like stocks, superannuation and property.

If you’ve already left a role, Jackson advises her clients to withdraw from their safety account on a weekly basis – “either the same amount or a little bit less than what you’d normally spend,” she says.

“This way you know it’ll last you that entire time. If you get a job within a month then fantastic, the rest can go to savings, but you won’t have to panic until you get to the fourth month. Then you might need to look at getting a job instead of the dream job.”

5. Talk to people in the industry: Not only will this help you understand which areas have the best growth prospects, it also minimises the chances of you not enjoying your new role after making the transition. “It pays to thoroughly research your dream career,” Lambart says.

Look at how you can build your network online, and see if you can connect with people for coffee, a virtual catch-up, or an informational interview. Let people know you’re looking to change careers and that you’d appreciate their insight into the industry. Ask about what roles are like, the pressures or challenges, the best places to work, and if there’s anyone else they’d recommend you speak to.

6. Have a plan: Creating a career change plan can help you remain focused, feel less stressed, and give yourself enough time and resources to make the change.

"You may be desperate to make the career change now but it is usually wise to make it slowly,” says Lambart. “It is very difficult to transition from full-time work to being a full-time student, for instance.”

You may be able to study part-time while staying in your current job, or reduce your hours to gain work experience in your chosen field.

A career change might seem like an overwhelming idea at first, but the current job market could provide just the right environment for you to make the leap. By researching, speaking to others, considering your finances, and forming a longer-term plan, you can start taking steps in a new direction.

Independent research conducted by Nature of behalf of SEEK, interviewing 4000 Kiwis annually. Published April 2024.

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