If you’re considering a career transition, you're not alone: About one in five workers planned to change jobs in 2017, according to a CareerBuilder survey. But the modern job search can take time, and as we all know, time is money.
What does it mean to be financially prepared to go after your dream job? Here are the bases you should cover:
Shore up your emergency savings
You’re entering an uncertain time, and if uncertainty calls for anything, it’s a financial cushion. Experts recommend at least six months of living expenses in an accessible account—that is, not in a retirement account or the stock market. “Living expenses” means anything you must pay monthly, including your rent or mortgage, utilities, insurance, loan payments and groceries. It’s likely going to take some time to accumulate—24% of Americans have no emergency savings at all, according to a recent Bankrate survey, and another 20% have less than three months socked away. So, start saving now.
Understand your living expenses and how to live on less
You might have to live a little leaner while you’re launching this next stage of your career. Now’s a good time to examine your cash flow patterns and get a feel for where you’re spending your money—and where you can cut back. The less money you’re spending, the more flexibility you have to wait for the right opportunity, versus diving into the first offer you get because you need to pay the bills. Think about what you can do without on a temporary basis. Then create a bare-bones budget to cover the basics during your search.
Be prepared to cover your own benefits
If you’re getting health insurance from your employer, find out what happens when you leave. If you have a spouse who can add you to their insurance plan, that’s your best option. Otherwise, you may be able to keep your work coverage under COBRA—but you’ll have to pay the full price yourself, plus a little extra for expenses. If that’s not financially feasible, you’ll have to look for individual health insurance, and you have about two months after losing your coverage to sign up for a health insurance marketplace plan. (Don’t forget, you must have health insurance or pay a fee to the federal government.)
You might also have life insurance or disability insurance with your current employer—if that's the case, what happens to that coverage when you quit? If you can take it with you, great. Otherwise, consider buying your own policies. You also might be able to cash out unused vacation days, which you can sock directly into your emergency fund.
Tap other income streams
Since a serious job search can take a while, it might be prudent to do some work on the side to help you make ends meet. That’s easier than ever in this gig economy, where you can pick up projects on sites like Upwork, Toptal, Guru or even FlexJobs. You could drive for Uber or Lyft, or rent a room in your home on Airbnb. The more you can supplement your savings, the more time you can take to find exactly the right fit in your job progression.
Learn where you’re headed
Just because this next step is your dream scenario doesn’t automatically mean it’s a dream paycheck. Your next position might not pay as much as your current one, or the pay structure might be different—if you’re starting your own business, say, or the income is seasonal. Do your research so you know what to expect, and if you think your income will take a hit, make sure you can live on your new salary. You may have to make long-term changes—buy a cheaper car, live in a less expensive location—if your lifestyle isn’t sustainable on less.
The financial considerations and potential challenges that come with a new job search aren't insurmountable—and having a plan in place for these five key areas can help you start and finish your dream job search on the right foot.