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How to finance a career change

If you’re faced with things like a nightmare boss, a redundancy, or a job you just don’t enjoy, the idea of changing careers has probably popped into your head more than once.

On the other hand, you might be tempted to shift gears because you love your work so much you want to start your own business or you want to open yourself up to more opportunities. You may just be hoping a career change will give you a better chance of earning a higher salary, or leave you more fulfilled.

Whatever your situation, sometimes, the decision to make a career change feels as easy and natural (and necessary) as washing your hands. The difficult part is actually working out whether you can afford to go ahead with it.

First things first: break it down

There are a few key factors you’ll need to consider when asking yourself whether you can afford to change careers:

  • What are your monthly living expenses?
  • Are you supporting yourself or a family?
  • How much of your current lifestyle can you go without?
  • Could you live off your savings for a while?
  • Will you need to return to study?
  • What will your financial situation be like in your new career? (e.g. will you need to start on an entry-level wage?)

Life is unpredictable at the best of times, so once you throw a career change into the mix it’s important to be prepared for anything.

Marc Olynyk, a senior lecturer in financial planning at Deakin, says you can take much of the financial uncertainty out of a career change by drawing up a good old-fashioned budget.

Budgeting basics

Olynyk says one of the best places to start your budget is by figuring out what you’re currently spending, where you could make some savings and the minimum amount of income you (or you and your family) will need to live on.

‘You will need to determine exactly what your current spending patterns are, and consider needs versus wants, order of priorities and the lifestyle that you are ultimately prepared to accept,’ he says.

Your lifestyle is a particularly important factor to consider.

‘If you’re young and mobile with few financial responsibilities, it may be relatively easy to move between careers whilst still supporting yourself financially,’ Olynyk says.

‘However, as we get older and take on greater responsibilities, we get used to a certain lifestyle and become more set in our ways. Changing careers then becomes a much bigger impost and therefore requires a more carefully thought-out plan.’

The Household Expenditure Measure (HEM) that is used by banks states that, on average in Australia, the monthly living expenses for a family of four is $5,378.

If you only have yourself to think about, the average monthly living cost is $2,835.

‘Expenditure should be categorised into essential costs such as the mortgage and utilities that are fixed, and optional expenses where there may be the opportunity to cut back. These are items such as holidays, eating out, Foxtel, gym membership and private school fees,’ Olynyk advises.

'You will need to determine exactly what your current spending patterns are, and consider needs versus wants, order of priorities and the lifestyle that you are ultimately prepared to accept.'

Marc Olynyk,
Faculty of Business and Law, Deakin University

The sooner you can draw up a budget and start changing your lifestyle, the greater chance you’ll have of remaining comfortable.

‘Where a career change is able to be planned well in advance, there’s an opportunity to maximise savings and investments, accumulate leave and find other work and adjust to a more frugal lifestyle,’ he says.

What if you need to go back to study?

How you fund a return to the classroom – and cope with a drop in pay if you decide to quit work or go part-time – will depend on your situation, including whether you have family to support (or who might be able to help support you), Olynyk says.

Some options to consider:

Can you use existing savings or investments?

If you’re already employed, could you work part-time while studying – or would it make more sense to work full-time and study part-time over a longer period? Do you have any annual or long service leave up your sleeve? Another option could involve finding some temporary or contract work.

Like many students, you could benefit from a government loan that enables you to defer your tuition fees, Olynyk says. ‘This will be in the form of a HECS-HELP loan if enrolled in a Commonwealth Supported place (such as for an undergraduate degree) or a FEE-HELP loan for domestic fee paying courses (such as for postgraduate studies).’

A FEE-HELP loan can really take the financial weight off postgraduate study, which Olynyk says can typically cost anywhere between $25,000 to $60,000, depending on the discipline and the level of the qualification.

For 2019, you can borrow up to $104,440 through FEE-HELP to fund your further study.

If crunching the numbers is giving you a migraine…

Olynyk says if you have a more complex financial situation, or can’t get your head around the budgeting aspects of a career change, it’s worth meeting with a financial planner.

A good financial planner can play a critical role in helping you to identify realistic goals, and provide advice on strategies to allow you to reach them.

‘The advice and plans put in place in conjunction with a financial planner may be invaluable in ensuring that your financial situation during this significant change in circumstance is properly planned and managed, allowing you to better concentrate on your studies and ensuring a successful transition in careers,’ Olynyk says.

If you’re thinking of starting a small business, it’s also important to plan ahead and seek professional advice first because so many businesses fail in the first few years.

The road ahead

It’s a rare person who would argue that changing careers is going to be particularly easy, or cheap.

But life’s too short to be unhappy or unfulfilled. So if you decide a career change is the right path for you, start saving and planning as soon as you can to give yourself the greatest chance of success.

Need some ideas to finance your return to study? Here are 10 clever ways to make money while studying.

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Marc Olynyk
Marc Olynyk

Senior Lecturer in Financial Planning, Faculty of Business and Law, Deakin University

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