{"id":483,"date":"2012-03-26T17:38:34","date_gmt":"2012-03-26T17:38:34","guid":{"rendered":"https:\/\/kerryhannon.com\/?p=483"},"modified":"2012-04-29T21:19:20","modified_gmt":"2012-04-29T21:19:20","slug":"your-financial-fitness-makeover-2","status":"publish","type":"post","link":"https:\/\/kerryhannon.com\/?p=483","title":{"rendered":"YOUR FINANCIAL FITNESS MAKEOVER"},"content":{"rendered":"
\n

Four ways to get ready for a midlife career switch<\/h1>\n
By Kerry Hannon | \u00a0 September 20, 2010 \u00a0 |\u00a0Read Published Article at SecondAct<\/a><\/div>\n<\/div>\n
\n

When Cliff Stevenson chucked his 20-year career as a mortgage banker to teach social studies to high-schoolers, his salary took a freefall. To ease the hit, he and his wife sold their century-old Victorian home outside Pittsburgh and moved to a smaller townhouse. Now they don’t have a mortgage.<\/p>\n

“We downsized and simplified our lives,” Stevenson says. “We wanted to change our lifestyle and get reinvigorated.”<\/p>\n

For many people, a\u00a0midcareer restart<\/span><\/span><\/a>\u00a0comes with a financial price tag, particularly if you don’t have the cushion of a partner’s income or a severance package. There’s a good chance that you will take a pay cut when you move into a new field, and the lean job market might make it even worse. Job growth in 2010 has been concentrated in mid-wage and lower-wage industries, such as retail positions and nursing in residential care facilities, according to a recent analysis by the\u00a0National Employment Law Project<\/span><\/span><\/a>. By contrast, higher-wage industries, such as technical services and finance, showed weak growth. And if you’re moving from a for-profit to a nonprofit, lower wages are practically a given.<\/p>\n

To make your move affordable, review every detail of your financial life. Here are four key areas to consider:<\/p>\n

1. Chart a budget.<\/strong>\u00a0If you’re going to be living on less, you probably need to trim expenses. Get a clear sense of your income, debts and savings. It’s smart to set aside a six-month cushion of living expenses for transition costs and emergencies. Plan a detailed budget now to avoid dipping into your\u00a0retirement savings<\/span><\/span><\/a>–and paying penalties–later.<\/p>\n

2. Downsize.<\/strong>\u00a0Depending on the real estate market where you live, it might make sense to move to a smaller home, as Stevenson did, or relocate to a cheaper area. “We loved our house, but it was a hundred-year-old house with an acre of land,” Stevenson says. “Every weekend there were four or five chores to be done. I like to do that stuff myself, but it was too much. Moving to the two-bedroom condo freed up a lot of time and money.”<\/p>\n

Another option: Refinance your mortgage. With average rates hovering around 4.5 percent for a 30-year fixed loan and 3.9 percent for a 15-year fixed loan, why wait? If you can lock in a fixed rate or cut your mortgage interest by at least 1 percent, you likely will break even on refinancing costs within two years. Figure out how much you can save over time with an online refinancing calculator. Check\u00a0HSH.com<\/span><\/span><\/a>\u00a0or\u00a0Bankrate.com<\/span><\/span><\/a>\u00a0for the latest rates and then shop around.<\/p>\n

3. Get out of debt.<\/strong>\u00a0Debt is a dream-killer. For credit card debt, trim it to below 30 percent of your available credit limit. If possible, pay off high-interest credit cards, college loans and auto loans. This can take time, but starting a new venture with a clean balance sheet will make a difference.<\/p>\n

4. Raise your credit score.<\/strong>\u00a0Why should you care about your credit score–that pesky three- digit number, which generally ranges from 300 to 850? If you need to borrow funds to start your own business, lenders use it to determine whether they should lend you money and what your interest rate will be. Landlords may use it when deciding whether to rent to you. And if you are moving to a new company, some employers review it when deciding whether to hire you.<\/p>\n

“Three years ago, a creditworthy borrower was someone with a 680 to 700 score. Now that score needs to be 760 and up,” says Greg McBride, senior financial analyst at Bankrate.com. Today, 60 percent of all Americans have a score below 750, according to Minneapolis-based Fair Isaac Corp., which runs the FICO scoring system most lenders rely on.<\/p>\n

Here are the best strategies to raise your score:<\/p>\n

\u2022 Review your credit report.<\/strong>\u00a0One of the biggest factors lowering your score could be a mistake on your credit report, including outdated data, paid-off loans listed as due, and money owed by relatives or strangers with names similar to yours. Visit annualcreditreport.com to request a free credit report from the three major consumer credit reporting agencies–Experian, Equifax and TransUnion.<\/p>\n

\u2022 Stabilize your credit.<\/strong>\u00a0If you know you’re going to make a career change in three to six months, don’t open new accounts, transfer balances or close accounts, says John Ulzheimer, president of consumer education for Credit.com. “Closing accounts is particularly hard on your score because lowering your available credit pushes your current ratio of debt higher,” he says.<\/p>\n

\u2022 Get a handle on your bills.<\/strong>\u00a0Never miss a payment or due date. It could ding your score by 110 points. “Paying on time is the ultimate rule,” says Maxine Sweet, vice president of public education for Experian. “All it takes is one late payment to crush your score.”<\/p>\n

SecondAct contributor\u00a0Kerry Hannon<\/span><\/span><\/a>\u00a0is a contributing editor for<\/em>\u00a0U.S. News & World Report\u00a0and the author of\u00a0<\/em>What’s Next? Follow Your Passion and Find Your Dream Job<\/span><\/span><\/a>.<\/p>\n<\/div>\n

\"Share<\/a>