09.25.2024 By Amelia Simons

How to Financially Prepare for Going Back to School, a Career Change, or Early Retirement

At America Saves, we’re all about helping you prepare for major life milestones, and a career shift is no exception. Here’s how you can financially prepare for these major transitions to set yourself up for success.

 

Life is full of changes, and one of the biggest transitions can be shifting your career path. Whether you're going back to school, changing careers, or retiring early, these moves can be both exciting and overwhelming. But one thing is for sure: financial preparation is key to ensuring that you’re ready to embrace this new chapter with confidence.

At America Saves, we’re all about helping you prepare for major life milestones, and a career shift is no exception. Here’s how you can financially prepare for these major transitions to set yourself up for success.

1. Create a Financial Game Plan

No matter what your career shift looks like, having a clear financial strategy is essential. Start by assessing your current financial situation: What are your current expenses, income, and savings? Then, outline a realistic timeline for your career shift, whether it's going back to school for two years, transitioning into a new job, or preparing for an early retirement in five.

Having a specific timeline will allow you to make adjustments to your spending and saving habits to fit your new goals. Once you have a clear vision, you’ll want to create a detailed budget that includes everything from tuition costs, living expenses during a career transition, or extra savings needed to support an early retirement.

Tip: Use our free spending and savings plan tool to help you break down your financial goals and create a realistic roadmap to reach them.

2. Build an Emergency Fund

Career shifts often come with uncertainties. You might experience periods of reduced income, higher education costs, or unexpected expenses. An emergency fund can act as your financial safety net during this time.

If you're preparing for early retirement, your emergency fund can provide peace of mind in case the unexpected happens. Even if you're planning on living off your retirement savings, having a separate emergency fund ensures you won’t have to dip into your long-term savings when life's surprises come your way.

Tip: Set up a automatic savings to build your emergency fund little by little. Even small contributions add up over time!

3. Evaluate Health Insurance and Other Benefits

One area that’s often overlooked in career transitions is healthcare and other employee benefits. If you're leaving your job to go back to school, switching careers, or retiring early, take time to research what your health insurance options will be.

In addition to health insurance, make sure to review other benefits such as retirement accounts, life insurance, and disability coverage. Knowing what benefits you’ll have—or need to find alternatives for—will give you a clearer financial picture.

4. Reduce Debt

Debt can be a major hurdle when preparing for a career shift. If possible, aim to reduce or eliminate high-interest debt, such as credit card balances, before making any significant changes to your career. This will give you more financial flexibility and lower your monthly expenses during times of reduced or uncertain income.

If going back to school is part of your plan, you may need to take out student loans. Be sure to explore all your options, including federal student loans, scholarships, and grants, to minimize the amount of debt you take on.

5. Maximize Your Retirement Savings

If you’re changing careers or retiring early, your retirement savings will likely play a big role in your financial future. Take advantage of any employer-sponsored retirement plans, such as a 401(k), and be sure to contribute enough to get any employer match before you transition out of a current job.

If you're retiring early, you’ll need to plan how to draw from your retirement accounts without penalties.

6. Seek Professional Guidance

Finally, consider speaking with a professional to help you navigate your career shift. Whether it’s determining how to pay for school without taking on too much debt, how to save for an early retirement, or how to best invest your savings during a career change, a financial advisor can provide personalized advice based on your unique situation.

Your Career Shift, Your Financial Future

A career shift can be a life-changing decision, and preparing financially is the best way to ensure a smooth transition. By creating a plan, building your savings, and addressing potential financial challenges ahead of time, you can confidently navigate this new chapter in your life.

At America Saves, we’re here to support you every step of the way. Join the millions of Savers who have taken the America Saves Pledge to make saving a priority, and let’s prepare for your future together.

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