How women can prepare financially for a career change

Many women dream of a career change but feel unsure about how to make it work. Here are four practical tips for preparing financially for a smooth transition

According to the most recent UK career change statistics published by StandOut CV (June 2024), few people have a job – or even a vocation – for life any more.

In fact, the average British worker changes jobs every five years and 1 in 10 UK workers have swapped careers in the past 10 years, with 31 being the most common age to do so.

There could be many reasons why women might consider switching up their professional lives. For example, the cost of living crisis may drive you to pursue a higher salary, or you might want a new challenge.

Equally, a change in your circumstances might drive your decision to change careers. Research published by national education provider, Open Study College has revealed that a third of women switched careers after having children.

If you’re considering moving on to pastures new, read on to discover four practical tips for preparing financially for a career change.

1. Budget for a salary change

When you move career, there’s a good chance that you’ll need to take a lower-level role than you’re currently used to – at least initially. Unfortunately, this typically means accepting a drop in your salary too.

Of course, this isn’t always the case. If you’re moving into a field or a role that has significant overlap with your current career, or you have established strong connections through years of networking, you may be able to transition without compromising your income.

However, if you do need to adjust your salary expectations downwards to accommodate your career ambitions, a key part of preparing financially for this change is to review and revise your budget.

By creating a detailed list of your expected income and your outgoings, you may be able to identify areas where you could cut back on non-essential spending.

It’s important to factor in any changes in benefits you might lose or gain. For example, you could lose subsidised daycare for your children from your current employer but gain different forms of financial support from the government due to a lower salary.

Remember, this need only be a temporary or transitional budget. Once you build the skills, qualifications, and experience you need to climb back up to your current level of responsibility, you might be eligible for a higher salary. 

2. Build an emergency fund

As a rule of thumb, it’s a good idea to save between three- and six-months’ worth of your essential expenses in an emergency fund.

This could provide an invaluable financial buffer if you have a gap between periods of employment or if your career change means that your income falls in the short term.

Having this safety net in place might also give you the confidence you need to take the leap from your current career to the one you want to pursue – an intimidating prospect for many women.

The exact amount you need to save will depend on your financial commitments and how much you’re willing to adapt your current lifestyle to achieve your professional ambitions. For example, if you’re a woman who has young dependants living at home, you may need to build a more substantial emergency fund than a woman who is living alone.

Additionally, external factors that change over time, such as rising inflation and the cost of living crisis, may affect how much you need to build in an emergency fund to feel financially secure.

If you’re planning to use your back-up savings to subsidise a lower income when you change careers, you might also want to consider how long it could realistically take you to return to your current level of income.

The more money you have in your emergency fund, the more freedom you’re likely to have in terms of choosing how you progress in your new career. For example, you may choose to take some time out to complete relevant training courses or undertake voluntary work.

3. Invest for income

If you already invest, growing your wealth over the long term might be your primary objective. However, it may be worth considering the possibility of using some of your investments to generate an additional income stream during your career change.

Alongside your other savings and earnings, investing for income could allow you to manage a potential fall in salary as you transition to a new career.

One option could be to add bonds and gilts to your portfolio. These typically carry a lower risk than other types of investment, such as stocks. In fact, gilts are backed by the Treasury and the risk of the government defaulting is very low.

What’s more, gilts and bonds are exempt from Capital Gains Tax, and you can usually withdraw up to 5% of your original investment each tax year without any immediate Income Tax liability.

However, the fixed income you receive may not keep up with inflation. Additionally, if you decide to withdraw your money before the end of the fixed term of your bond or gilt, you could face a penalty fee.

So, while bonds and gilts could potentially provide a steady income, you might find it beneficial to speak to a financial planner. They can talk you through the different options for generating an income from your investments and help you decide which is the most useful for you during your career change and beyond.

For example, you might choose to invest in dividend-paying shares instead of, or as well as, adding bonds and gilts to your portfolio.

4. Speak to a financial planner

Planning financially for a career change can be complicated and there is no one-size-fits-all approach as every woman’s situation and aspirations are unique.

As a female financial planner who specialises in supporting women, I can provide support and guidance that is tailored to your specific needs and goals.

Perhaps you’re unsure about how to adjust your budget or how much you need to put by as an emergency fund while you retrain? I can use cashflow modelling to provide a clear picture of your income needs based on different financial scenarios, such as a reduced salary or higher outgoings due to retraining costs.

If you feel anxious about investing, I can help you build a confident investing mindset that sets you on the path towards achieving your financial goals.

To find out more about how I can help you prepare financially for your career change, please get in touch by emailing lottie@truefinancialdesign.co.uk or calling 07824 554288.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

The Financial Conduct Authority does not regulate cashflow planning.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.