The best way to adjust to a career change is to be prepared for it. Career changes will happen, some by your choice and others out of your control. Americans spend 4.2 years on average in a job, according to the latest statistics. Some changes are for the better, but almost all cause some stress, for you, your spouse and family. If you need to cope with the sudden loss of a job because of a layoff or find that a job feels untenable, you’ll find the financial plan you created in advance to be invaluable. Here are a few ideas to help you prepare for career changes:

1. Communicate plans and concerns with spouse and family. Your spouse needs to know if you are considering a switch, or are concerned about job insecurity. Your spouse’s career may need to shift in concert with yours, or you might need to decide together if relocation is warranted. Together, you’ll be able to stay focused on important financial goals and support each other’s careers.   

2. Have a financial plan for a job loss. Throughout your career, it is important to have a cash emergency reserve of 6-12 months of after-tax expenses.  Especially as you get older and have a family, the emergency fund needs to be large enough to cover emergency home repairs and even your children’s tuition. You cannot plan on having access to personal credit, home equity lines of credit, or low cost access to your retirement savings during a period of unemployment. In your savings calculation include an adjusted cost for medical insurance at the COBRA rate, job search expenses, job search travel costs, additional dry cleaning, postal and Internet costs, and maybe even short-term relocation costs. Do not assume that you will get more than the minimum guaranteed severance package.  

3. Know the cost and value of a career change. If you decide to quit, you need to understand the financial cost and risks, and know what’s required to make the change:

• Understand and compare compensation plans fairly. It is not unusual for a new firm to pay you more than your current firm, but, there may be no annual increase in pay for several years. Delineate between the percentage of compensation that is guaranteed and the percentage that is based on achieving profitability or other goals.

• Calculate if there will be any additional deduction or increase in take home pay due to a higher cost of living, higher fringe benefit and medical benefit costs, additional mileage and parking costs, potential relocation costs, or changes in local tax liability.  Having this information at hand will help you prepare questions to ask a CERTIFIED FINANCIAL PLANNER™ professional. He or she can help you assess the value of a compensation plan.

•Account for vesting of retirement plans or pensions. When you leave an existing job, you may forsake money in your retirement plans or pensions, due to vesting schedules. Try not to leave before achieving 100% vesting in benefits or before the next vesting threshold.  A surrendered benefit is real lost money. Look at guaranteed severance packages at both firms, including the value that years served adds to the package.

Consider that by changing firms, you start over and need to learn about new processes, policies, and customers.  Also, there can be a great difference in culture, such as assumptions regarding your work schedule and flexibility for community service or your family.

4. Maintain a professional reputation. Seek internal development and mentorship within the firm, participate in professional organizations, and seek ongoing professional education/certifications. Maintain professional contacts that can help you find a new job. Remember that you all are colleagues in the industry, not warriors on a battlefield.  

5. Remember the value of loyalty to your employer. Be loyal to your firm until the day you leave, even if you are considering changing jobs or you are worried about losing one. Do not sabotage your former team, take unfair advantage or slander the previous firm. Your personal and professional reputation, references, and recommendations are critical to finding future employment. The bridge that you burn today may be the bridge that you need to achieve your long-term career and financial goals.

Seek financial guidance to prepare for the career changes that are bound to come your way: Consider working with a CFP® professional.