You’ve been thinking about it for months, or maybe even years.  Your current job is OK, but there is something missing.  Maybe there is no opportunity for advancement or the work no longer excites you.  Or maybe you’ve had several jobs within this industry and a string of bad experiences with bosses and assignments.

Whatever the case may be, you’ve identified an alternate career path that you’re excited to go pursue.  However, you realize that either because you need to go back to school, or will be new in the field, your current income is likely to take a hit for a few years.

If this is the case, here are 3 things to do NOW with your finances if you’re considering a career change.

Establish a Financial Security Fund

This is a core building block of anyone’s personal finances.  It’s a pool of cash set aside in a separate account to handle personal emergencies or other short-term cash flow issues.  Many people refer to this as an Emergency Fund; however, I like to call it a Financial Security Fund because it can cover both unplanned (emergency) and planned (income loss due to career change) cash flow needs.

If you are the primary breadwinner, consider having at least six months of living expenses stashed away in this Financial Security Fund.  If you contribute 50% or less of the total income in your household, you can probably get away with three months of living expenses in this account.

It’s very important that you have this money tucked away in a separate account so that it’s not too easy to spend.  My favorite recommendation for my clients is to choose an online banker such as www.Ally.com for this account and then connect it electronically to your primary checking account.  You’ll then be able to transfer money back and forth easily should you need it as you transition to your new career.

Apply for a Home Equity Line of Credit

If you own your home and have more than 20% equity, strongly consider establishing a Home Equity Line of Credit.  If you have a prolonged period of reduced income, this is a great, low cost source of cash for you to tap and is a much better option than maxing out your credit cards to get by.

Consider applying to two or three different banks within a 30 day period.  As long as you cluster your applications together within a single month, your credit score will not be penalized by reaching out to multiple financial institutions.

Tops on your list for banks to consider should be your current mortgage provider – after all they already like you because you faithfully send them a check each month!

You can also reach out to any local banks that you have accounts with and take advantage of this already established relationship.

Stash Cash Into an HSA

More and more corporate employers are offering High Deductible Health Plans (HDHP’s).  If you’re currently in an HDHP at work, you are eligible to participate in a Health Savings Account (HSA).

Consider contributing the maximum amount to this plan, which is $3,350 for individuals and $6,650 for families in 2015.  And if you’re over 55, you can tack on an extra $1,000 for maximum contributions of $4,350 and $7,650 for individuals and families.

HSA’s are great for a number of reasons:

• They take a bite out of your current tax bill because they are 100% tax deductible from gross income.
• Unused balances can be used in subsequent years. There is no “use it or lose it provision.”
• They are portable and can be taken with you if you leave your employer.

Take advantage of this opportunity if you have it to set aside money for future medical expenses while you’re transitioning to your new career.

Your Assignment

Take stock of your current financial situation as you consider this career change.  Set up that Financial Security Fund in a separate account as a first step.  Then, if you’re eligible, think about a HELOC and HSA to improve your future cash flow should your income dip during the transition.

Doing these things will improve your ability to weather a short-term loss of income and enable you to confidently pursue that new, exciting career that’s out there waiting for you!