3 money moves to make before a career change
By Georgie Miller
One of the measures of a healthy economy is workers' confidence in their ability to leave a job and find other employment. The U.S. Department of Labor's Bureau of Labor Statistics (BLS) tracks this number, also referred to as "voluntary separation" or the "quits rate." The higher the quits rate, the more people believe that they will be able to find another (possibly better) job quickly.
While the BLS crunches the numbers, they don't analyze them. However, analyses of the most recent Job Openings and Labor Turnover Summary (JOLTS) in the Wall Street Journal and elsewhere suggest that the labor market is strengthening. Along with that strengthening may come increased confidence that now is the time to make a career move.
If you're considering transitioning to new employment, here are a few strategies to consider before leaving your current position.
1. Pay off debt
Whether it's consumer debt such as credit cards, or other forms of debt such as medical debt or student loans, having a monthly payment hanging over your head may hinder your ability to leave your current job without something else lined up. Having debt also means that money may have to be the primary consideration in your job search. On the other hand, being debt-free means that other factors, such as corporate culture or work-life balance, can rise to the fore.
So if you're considering transitioning to new employment, becoming a freelancer or starting your own business, you'll want to pay off as much debt as possible prior to pulling the trigger. You may not be able to pay off everything. However, transferring your credit card debt to a lower interest card (or perhaps even a zero percent balance transfer offer) to maximize your monthly payments may aid you in escaping your debt and put you in a better position financially, regardless of your employment situation.
2. Build an emergency fund
It's a wise move to anticipate a lag between your last paycheck at your old job and your first paycheck at your new job. Filling that gap is literally what emergency funds are for! Or perhaps your job search is being prompted by a layoff, move or other stressful life event. The more you are able to squirrel away when times are good, the longer you can feel financially secure when the rest of your life is uncertain.
Three to six months' expenses is the recommended amount for a healthy emergency fund, usually parked in an online savings account. The amount you choose to save may vary according to factors like the industry you work in, the area of the country where you live, your significant other's employment situation, your health or other factors. A zero-sum budget is one way to maximize your savings potential while getting one month ahead in your bills and expenses -- both smart moves if there's a career change on the horizon.
3. Take care of your credit
Some employers base their hiring decisions in part on the applicant's credit report. While your credit report doesn't include your credit score, it may include debts, any bankruptcies on your record, your work history and other information. While paying off debts will obviously improve your credit report, there are other factors to consider that make pulling your credit report a wise decision.
Maybe you have accounts you've forgotten about. Maybe there's inaccurate information on your report that needs to be removed. Wouldn't you rather find out (and take corrective action) before you get to the final stage in the hiring process only to have the offer rescinded? And if you're leaving to become an entrepreneur, having your credit report in order may help you qualify for a better loan or business credit card to help get your new business off the ground. Everyone's entitled to one free credit report a year from each of the three bureaus (Experian, TransUnion, and Equifax) at AnnualCreditReport.com, the only government-authorized site to get free reports.
When opportunity meets preparation
These and other methods of building your financial flexibility may increase the odds that when the right opportunity comes along, you're in a position to take advantage of it. Even if you're not actively job seeking, it's important to be prepared in the event that a career change is thrust upon you!
Photo: Dave & Les Jacobs/Thinkstock
