{"id":729,"date":"2012-04-20T17:24:27","date_gmt":"2012-04-20T17:24:27","guid":{"rendered":"https:\/\/kerryhannon.com\/?p=729"},"modified":"2014-12-15T19:04:56","modified_gmt":"2014-12-15T23:04:56","slug":"the-big-career-shift-your-financial-checklist","status":"publish","type":"post","link":"https:\/\/kerryhannon.com\/?p=729","title":{"rendered":"THE BIG CAREER SHIFT: YOUR FINANCIAL CHECKLIST"},"content":{"rendered":"

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If ditching a regular job for meaningful work is part of your \u201cretirement\u201d plan, then it\u2019s time to start taking the financial steps necessary to make that a reality.<\/p>\n

Money is the biggest stumbling block when it comes to changing careers later in life. That\u2019s because starting over in a new field, particularly a philanthropic one, or going the self-employment route usually comes with a price tag, at least initially. If you can start the planning process a few years ahead of time by saving, adding new skills and downsizing, you\u2019ll have a leg-up.<\/p>\n

I plan to. But I want to be able to pick and choose the work I do based on what\u2019s important to me, and what I love to do, not solely the paycheck. And I definitely don\u2019t want to take on a load of debt or raid my retirement funds to make that happen. And that takes some financial footwork.<\/p>\n

I have spent the last several years interviewing successful mid-and-late career changers. I\u2019ve followed their paths-not all have been smooth, but with a financial strategy in place before they hit the re-start button, they were prepared to wade through those tough times. Some decidedly unromantic dollars and cents decision-making is what gave them the chance to pursue a dream job. It gave them the safety net to choose<\/p>\n

what they wanted to do next and bought them the time to ramp up the necessary skills.<\/p>\n

These second-acters taught me some core lessons on how to do it right.\u00a0Here\u2019s a financial roadmap that works.<\/p>\n

Sock away savings<\/strong>.<\/em>\u00a0Refrain from scooping funds from retirement accounts or sinking your mitts into home equity. The standard advice is to have an emergency fund of at least six months to a year of living expenses saved before you make the jump, but the more the merrier.<\/p>\n

The reasoning here: You may need to carry your own health insurance costs for a time, pay for retraining and education. Your income may be lower than it was in your old job for a variety of reasons. If you\u2019re starting your own business, you not only have launch costs, but it may take a few years before it turns a profit. Simply put, a savings cushion opens up options and lets you be patient when it comes to finding the right job for you for this stage of your life.<\/p>\n

Chart a budget.<\/em>\u00a0<\/strong>The inevitable upfront costs of a career shift\u00a0usually means you need to do some belt-tightening. I\u2019m not a huge fan of budgets that make your life uncomfortable, but when you have a bead on what your cost of living really is\u2013your debts, savings, monthly cash flow and all the fluff, you can see where the easy, and, perhaps not so easy cuts can come from. What can you do without, at least temporarily?<\/p>\n

There are some obvious cuts that you hear all the time\u2013dry cleaning, vacations, dinners out. One wayWell Read\u00a0<\/a>bookstore owner\u00a0Bill Skees<\/a>, 58, cut back his spending when he decided to switch from IT to open his own business in Hawthorne, NJ \u2013 he quit his one-pack a day smoking habit. That\u2019s good for many reasons, of course. Are you willing to do that? (Continued on next page).<\/p>\n<\/div>\n

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Get out of debt.<\/em>\u00a0<\/strong>If possible, pay off outstanding high-interest credit card debts, college loans, and auto loans. This can take some time, but starting a new venture with as clean a balance sheet as you can will make your life less stressful, particularly in the lean early days of your new venture.<\/p>\n

Learn before you quit.<\/em><\/strong>\u00a0Keep your current job while you add the education you need for your new pursuit. Many employers offer tax-free tuition assistance programs\u2014up to $5,250, not counted as taxable income\u2014and the contribution doesn\u2019t have to be tagged to\u00a0<\/strong>a full-degree program. You may have to repay the funds, though, if you don\u2019t stay with the company for a certain number of years afterward.<\/p>\n

Check-out lower tuition options.\u00a0<\/em><\/strong>There are a host of certificate programs in specialized fields of study that you can cobble together one course at a time. A growing number of\u00a0community colleges<\/a>\u00a0have 50-plus offerings aimed at adult students looking to retool their careers. Community college classes, too, are generally a fraction of the cost of a full-blown university degree and may be all you need to prime the pump.<\/p>\n


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Seek financial aid<\/strong>.<\/em>\u00a0You may qualify for a low-interest\u00a0Stafford loan<\/a>,\u00a0currently a fixed rate of 6.8 percent. Many private lenders also offer loans, though rates will be higher.<\/p>\n

Research scholarships and grants<\/strong>.<\/em>\u00a0These, too, are available for older students, and are offered by associations, colleges, religious groups, and foundations. The AARP Foundation, for instance, has a Women\u2019s Scholarship\u00a0Program<\/a>\u00a0for 50+ low-income women. Go to sites such as\u00a0FinAid.org\u00a0<\/a>to find what\u2019s available.<\/p>\n

Take advantage of educational tax breaks<\/strong>.<\/em>Depending on your income, you might qualify for the lifetime learning credit, worth up to $2,000 each year. There\u2019s no limit to the number of years you can claim the credit. If you make too much, the income ceiling is higher for claiming a deduction associated with tuition and fees, up to $4,000.<\/p>\n

There\u2019s also a maximum student loan interest deduction of $2,500. For details, see\u00a0IRS.gov<\/a>.\u00a0<\/strong>If you think you might go back to school in a few years, consider opening a 529 plan.<\/p>\n

Downsize your housing costs.\u00a0<\/em><\/strong>Think about moving to a smaller home, townhouse or condo. Depending on your real estate market, refinancing your mortgage can lighten your debt load. Move to a cheaper cost of living area where there are job opportunities for workers your age. Figure out how much you can save over time with an online refinancing calculator. Check\u00a0HSH.com<\/a>orBankrate.com<\/a>\u00a0for the latest rates and then shop around.\u00a0You might even be able to write off moving expenses.<\/p>\n

Set-up a self-employed retirement plan.<\/strong><\/em>\u00a0If you\u2019re starting a business, moving to a nonprofit or a small firm without an employee retirement plan, you should keep setting aside money as long as possible in tax-friendly accounts. Your three main options: a SEP-IRA, Solo 401(k), and a SIMPLE IRA.\u00a0Read mycolumn<\/a>\u00a0\u201cBest\u00a0<\/a>Retirement<\/a>\u00a0Plans for the Self-Employed\u201d for more details.<\/p>\n

Shop for health insurance<\/strong><\/em>. This one\u2019s a bear if your next employer (maybe you) doesn\u2019t offer a health insurance plan. Check out professional or alumni associations you belong to for group policies.\u00a0You can compare a variety of insurance options in your area at\u00a0healthcare.gov.<\/a>\u00a0Individual policies can be expensive, particularly if you\u2019re 55 or older.<\/p>\n

Other online sources to compare health insurance plans that are available in your area include:eHealthInsurance.co<\/a>,\u00a0einsurance.com<\/a>, and\u00a0GoHealthinsurance.com<\/a>. The National Association of\u00a0Health<\/a>\u00a0Underwriters website(www.nahu.org<\/a>), can direct you to a local health insurance agent if you prefer to have someone else do your homework.\u00a0Don\u2019t drop your current employer\u2019s insurance (you can continue it for a time under a law known as COBRA) until you have a new policy in hand. For more on health insurance plans, read this\u00a0column<\/a>.<\/p>\n

Check for mistakes on your credit report<\/strong><\/em>. Everyone it seems wants to know how creditworthy you are these days from prospective employers to lenders, landlords and insurers. It apparently says something about your character, so shipshape pays. Visit\u00a0www.annualcreditreport.com t<\/a>o request a free credit report from the three major consumer credit reporting agencies\u2013Experian, Equifax and TransUnion.\u00a0Clean up anything that\u2019s wrong or looks questionable. This can take a little time.<\/p>\n

Boost your credit score.\u00a0<\/strong><\/em>To raise your score a few months before you start interviewing for a new job, renting office space or applying for a small business loan, lay low. Don\u2019t sign up for any new accounts, transfer balances or close accounts. Closing accounts sounds like a good idea, I know, but it lowers your available credit and pushes your current ratio of debt higher. Your score changes constantly, but the oft repeated advice is \u2013 one thing that will help a shining score is\u00a0always<\/em>\u00a0paying your bills on time. Makes sense to me. For more help, go to\u00a0Credit.com<\/a>.<\/p>\n

Squeeze the most from job hunting tax breaks.<\/strong><\/em>\u00a0Keep track of all your job hunting expenses. Uncle Sam lets you write off many job-hunting costs such as r\u00e9sum\u00e9 \u00a0preparation, travel for interviews, outplacement fees, moving expenses, and professional association dues. If you\u2019re heading off to the world of self-employment, ask your accountant about setting up a sole-proprietorship business reported on tax returns on Schedule C that allows additional deductible expenses. For more, read\u00a0How Write off Your Job Hunt<\/a>.<\/p>\n

Final tip:<\/strong>\u00a0A financial plan is a work in progress. Design a blueprint for your big career shift including what it might cost to get it rolling, then do one thing daily to work your plan\u2013run the numbers on a mortgage refinancing calculator, order your credit report, or put the cashback from your rewards credit card into your Second Verse savings account straightaway. Step it up.<\/p>\n<\/div>\n

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