Changing your career can be exciting, but it’s important to be financially prepared. This guide will help you assess your current situation, plan a realistic budget, and manage your expenses during a midlife career change.
The founders of Womoneysta, Neha Singh and Rachana Patel, have provided their invaluable inputs to bring you this article.
Assessing Your financial standing
- Track your expenses: Break them down into mandatory (rent, utilities) and choice (dining out, entertainment) categories. This will show you where your money goes and where you can potentially cut back.
- Gather your assets: List your cash savings, investments (liquid and locked-in), and any outstanding loans. Knowing your net worth will give you a clearer picture of your financial health.
- Plan for the future: Identify upcoming personal goals like buying a house or college savings. Consider inflation for long-term goals and calculate potential monthly investments needed to reach them.
Preparing for your transition
- Build an emergency fund: Aim for 6-8 times your monthly expenses as a safety net. Keep this in easily accessible investments.
- Secure your well-being: Ensure adequate health insurance coverage (not just employer-provided). Consider life insurance if you have dependents or loans. Term life insurance is a good option.
Budgeting for your midlife career change
- Categorize expenses: Revisit your mandatory and choice expenses. You may need to adjust them during the transition.
- Factor in annual expenses: Include annual expenses like insurance premiums and holiday spending in your budget.
- Account for upskilling: Add the costs of any courses or certifications you need for the new career path.
- Create a transition fund: Aim to save enough to cover 6 months of fixed expenses, 20-30% of variable expenses, and all one-time costs. Consider working with a financial planner for detailed budgeting.
Adding to this, Neha says, “As an example take the case of Shanti who spends Rs. 50,000 as fixed and Rs. 35,000 on her discretionary/variable expenses every month. She also has estimated an annual spend of Rs. 2L on travel, gifting and insurance premiums. To calculate the transition fund amount that she would require, use the following method:
6 months x Fixed Spend +20% x Discretionary/Variable Spend x 6 months + Annual Spend = Transition Fund Amount
6 x 50,000 + 20% x 35000 x 6 + 2, 00,000 = Rs. 5,42,000.
Such detailing is easily possible by working with certified financial planners or SEBI-accredited advisors.”
Managing expenses during your midlife career change
- Utilize free resources: Explore free learning options like books, online courses, and volunteer work to gain knowledge in your new field before investing in expensive programs.
- Seek relevant experience: Look for freelance projects or part-time roles in your desired field to gain experience and potentially earn income.
- Government resources: Many governments offer free online learning platforms like Swayam. Take advantage of these resources to upskill for your new career.
By following these steps, you can gain a clear understanding of your finances and plan a smooth financial transition into your new career path.
