Career transitions: how much should you save before quitting your job?
Original article published in news.com.au on 7 Sept 2020.
Thinking of quitting your job? It’s more important now than ever to get your finances in order before changing jobs, two experts share how to do it right.
If 2020 was going to be the year where you were finally going to change industries, careers or jobs, don’t worry, it can still happen.
Despite COVID-19 and the subsequent recession, companies and businesses are still looking for staff. However, it’s more important than ever for potential job seekers to have a realistic expectation of the market to prepare for what’s to come.
From sizing up your competition, making a plan and the all important step of preparing your finances, we spoke to career coach and creator of The Careers Academy, Jane Jackson and Head of Advice at the Dixon Advisory, Nerida Cole and asked them to share their advice.
FACING THE CURRENT JOB MARKET
Job ads might be on the rise month-on-month but the reality is you will be against a lot of competition.
According to Ms Jackson it statistically takes someone in a mid-management role three to four months to make a transition. Covering everything from “job exploration, launching your marketing campaign, going for interviews and second interviews, roles being put on hold”, this “rollercoaster” of a period could now be extended due to a lack of available jobs and an influx of job seekers.
“There’s been a lot of downsizing and chances are there will be a lot of competition,” says Ms Jackson.
“However if you’re thinking about quitting your job because you’re unhappy and it’s not tenable to be in it then you need to have a buffer in the bank so you can draw upon it monthly.”
HOW MUCH SHOULD YOU SAVE?
The exact figure will depend on factors like whether you have a mortgage, family and lifestyle expectations but Ms Jackson advises potential job seekers to have at least six months of expenses saved. As a financial adviser, Ms Cole stretches that figure to 12 months.
“As a minimum we’d like to say that someone who is employed should have three months of living expenses,” she says.
“If you’re actually out of work or are worried about that, that’s when you’d have up to even 12 months of living expenses,” says Ms Cole.
According to figures from Expatistan, the average monthly cost of living is $6130 for a family of four and $3253 for a single person, meaning you’d need around $19,500 for a six month savings reserve and $39,000 for 12 months.
CONSIDER YOUR FUTURE EARNING POTENTIAL
While having a healthy savings net is imperative, Ms Cole also encourages people to think about their superannuation and whether your new role will come with a salary cut. This is especially true if you’re transitioning from an industry you’re quite experienced in to one where you have less seniority.
“Having a reduced salary doesn’t just mean a cut back to your current expenses, it also means you’ll have less going into your superannuation and future savings,” she says.
Then there’s the issue of job security.
“Even if it is full-time position, most roles have a six-month probation period with a pretty short notice period, whereas your current role will hopefully have a four-week notice at least,” says Ms Cole.
“You might also be eligible for a voluntary redundancy if they’re going through a cutback or something like that.”
WHAT TO DO BEFORE YOU QUIT
While the employment market isn’t in ideal condition, it’s definitely not impossible to pivot your career. Just make sure you’re aware of the industry you want to go into and prepare appropriately.
1. Be clear on your hiring prospects
As Ms Jackson states: “Right now it’s an employer’s market”.
“When you’re going for any advertised role, you’ve got to think of the statistics and how to improve your chances of your success.”
Some of the questions to ask yourself include: What is going on with that industry right now? How many companies are there that might need this kind of job in the next month? And how many candidates might there be for that role?
2. Know what salary you want
As Ms Cole says: Be forward thinking and if you are taking a pay cut think about how that can impact your financial condition beyond your monthly expenses, such as your superannuation.
“If you know you’ll be on a lower salary long-term, think about how you can build up your super through something like a salary sacrifice program,” she adds.
3. Prepare your cash reserve
The larger your safety net, the more time you have to job hunt. Ensure your money is readily available to withdraw in something like an online savings account, versus a long-term investment like stocks, superannuation and property.
If you’ve already made the switch, Ms Jackson advises her clients to withdraw from their safety account on a weekly basis – “either the same amount or a little bit less than what you’d normally spend,” she says.
“This way you know it’ll last you that entire time.
“If you get a job within a month than fantastic, the rest can go to savings, but you won’t have to panic until you get to the fourth month. Then you might need to look at getting a job instead of the dream job.”
4. Talk to people in the industry
Not only will this help you understand which areas have the best growth prospects, it also minimises the chances of you not enjoying your new role after making the transition.
“As we know, an industry is often very different from the outside,” says Ms Cole.
5. Have a plan
From what skills you need to transition into another industry to your finances and more, having a plan can be a key part of relieving career stress.
“Even if it takes you five years to build up the skills to get into the area you want, it lets you take back control,” says Ms Cole.
“Often people feel a lot more comfortable in their current job when they have a plan and know they’re working towards something which is helping them.”
This article was created in partnership with SEEK.
For affordable career transition support The Careers Academy provides you instant access to How to Write a Resumé and LinkedIn for Career Success online programs as well as a 30 minute one-on-one coaching session with Jane Jackson and monthly Group Career Coaching calls.