Changing careers is now more popular than ever before. In fact, a recent survey showed that 15% of UK workers are planning to change careers in the next 12 months 1.
It’s a life event that’s been rising through the generations, with the figure now at 26% for those aged 18-34. For many, salary drives the decision, with other common reasons including work-life balance and career prospects. And for some, illness or injury can force a career change.
Still, it’s a big decision that can have a sizeable impact on both your finances and your lifestyle. There’s a lot to think about before you make the change.
Planning for a salary change
Salaries vary wildly from industry to industry, with finance workers earning on average £994 a week, while those in the service industry earn on average £367 a week 2.
You could be looking for a big jump in pay, but if you're switching for lifestyle reasons, you could also be preparing to take a drop in salary. Either way, if you have little experience in your chosen industry you might need to take a salary cut in the short term – even if you'll be better off in the long run.
Household budgeting can help you manage initially, and our retirement spending calculator will help you decide what salary you can afford to live on.
Investing in retraining
To address a lack of experience in a new area, you might want to take a course or get a qualification to help you get ahead. There are lots of skills that you can train yourself in for free online, or you could go for an industry-recognised certification. This is a more expensive option, but if you can make this money back through increased salary it could be well worth it.
Work-life balance is the main reason for changing career for 35% of people 1. Some industries offer more opportunities than others for flexible working and working from home, but many people consider becoming self-employed or going freelance to be the best way to get control of your schedule.
Though it's a positive life change for many, there are even more financial implications to consider. You’ll need to handle your own accounting (or pay for professional assistance), complete self assessment tax returns and consider if you need a personal pension. Make sure you take all these things into account when planning your finances.
To protect your income as a freelancer in case you get sick or injured, you should also consider Income Protection Insurance in place of your employer's sick leave.
Losing accumulated benefits
If you’re going to be leaving a company you’ve been with for a long time, or are moving to a more junior position, your benefits package could change quite a bit – such as length of maternity leave, holiday allowance, or a higher rate of sick pay in the event of long-term absence.
It’s likely that this won’t be the biggest factor in your decision, you should consider the financial impact and how much money you'll lose if you were to take maternity leave or sick leave. Make sure you have enough in savings to manage.
Income Protection Insurance might help here too, especially if you're moving to a company with less generous sick leave benefits.
If changing careers is right for you, it’s an exciting and positive choice. As long as you have a strong financial plan, it can be the start of a great new chapter.