How to manage your fear of money when changing careers

Fear of financial instability paralyzes many people who want to pivot in their careers. When you’re considering a career pivot, it’s natural to worry about income loss, increased expenses and the potential inability to maintain your current lifestyle.

For entrepreneurs and small business owners, financial fears can be particularly intense. The stakes are higher, and the burden of financial responsibility can feel overwhelming. Understanding the root causes of these fears is the first step toward overcoming them. Recognizing that these anxieties are expected and manageable can help you develop a more balanced perspective.

Another significant factor contributing to financial fear is the fear of failure. Many worry their new venture won’t succeed, leading to financial ruin. Statista reported that 46% of entrepreneurs in the United States are deterred from starting a business due to fear of failure. Even though 49% of Americans say they have the knowledge, skills, and experience to start a business, and 54% see good opportunities, the thought of failing at something new scares individuals who want to change.

Overcoming The Fear

Budgeting For Success

Creating a detailed budget is crucial when planning a career pivot. A well-thought-out budget helps you understand your financial situation, identify potential shortfalls, and allocate resources more effectively. Start by listing your current income and expenses, then project how these might change during and after your career transition.

• Assess Current Finances: Take an inventory of your current income, fixed and variable expenses and any existing savings or investments. Understanding your starting point will provide a baseline for your budget.
• Estimate Career Transition Costs: Calculate the potential costs associated with making the career pivot, such as educational courses, certification fees or equipment needed for the new venture.
• Set Financial Goals: Establish short-term and long-term financial goals to guide your budgeting process. These could include saving an emergency fund, reaching a certain income level or achieving a particular business milestone.
• Create a Transition Plan: Outline a financial plan that covers the duration of your career transition. This should include reduced or variable income projections and strategies for maintaining financial stability during this period.
  

Risk Management

Managing risk is an essential part of overcoming financial fears. Begin by conducting a thorough risk assessment of your career pivot. Identify potential risks, such as income fluctuations, increased costs, or market changes and develop mitigation strategies.

One effective strategy is to diversify your income streams. This could involve starting a side business, taking on freelance work or investing in passive income opportunities.

Saving Money During Your Current Job Before Changing Careers

The unknown is always going to be part of the equation. Mitigating the anxiety around the fear is the only way to move forward. Here’s how to manage financial uncertainties before pivoting:

Automate Savings

Set up automatic transfers to a separate savings account each payday. This ensures that a portion of your income goes directly into savings before you have a chance to spend it, making the process easier and more consistent.

Reduce Unnecessary Expenses

Evaluate your regular expenditures and identify non-essential items or services you can eliminate or reduce. This might include dining out less frequently, downgrading subscription services or finding more cost-effective alternatives for daily needs.

Maximize Employee Benefits

Take full advantage of any employee benefits your current job offers, such as retirement plans, health savings accounts or discounts. Understanding and utilizing these benefits can help reduce your overall expenses and increase savings.

Pay Off High-Interest Debt

Focus on paying down high-interest debt to free up more of your income for savings. Reducing debt liabilities can significantly lower financial stress and provide a more secure foundation for your career change.

Build An Emergency Fund

Aim to set aside three to six months’ worth of living expenses in an emergency fund. This financial safety net will give you greater confidence during your career transition, knowing that you have a buffer to cover unexpected costs.

By implementing these strategies, you can effectively save money while still employed, setting yourself up for a smoother and more secure transition as you venture into a new career.