So you’ve decided it’s time for a new challenge and you can’t wait to open that new boutique, earn your master’s degree in physical therapy or raise honeybees. Ready? Set? Whoa. Every transformation has a price—one that many people underestimate, says Pamela Mitchell, CEO of the Reinvention Institute. “They forget all the extra costs, like buying health insurance, upgrading computer equipment or renting storage space. Then those bills hit and they freak out.” Here’s what to do now so your reinvention can go smoothly later. 

Save a year of living expenses

If you’re even thinking about a reinvention, you should start stockpiling cash. Unless you know you’ll immediately generate a decent salary, aim for at least 12 months of living expenses (which should include rent or mortgage, utilities, food, car payment and any other essentials). How do you accumulate this much money? If you’re in a two-income family, see if you can live on one salary and bank the other. Tally up all your expenses from the past two or three months; you might be surprised to find out where you’re spending too much and can cut back, by eating out less or wearing a shirt more than once before getting it dry cleaned. Another strategy: Find out how much your post-transformation paycheck will likely be, and begin living on that amount now. For an up-to-date salary estimate, check the Occupational Outlook Handbook on the Bureau of Labor Statistics’ Web site (bls.gov/oco). 

Correct your credit report

You’ll need pristine credit to qualify for the best terms on a small business loan or be able to put any emergency expenses on plastic. First: Obtain a copy of your three reports—one from each of the major credit bureaus, Experian, TransUnion and Equifax—by downloading them all for no fee at annualcreditreport.com. (Note: You’ll need to provide your Social Security number.) If you find errors, go to the site of the bureau that issued the flawed data and follow instructions to dispute it electronically. The company should get back to you within 45 days.

Slow down on the way to school

If you’re planning to earn a new degree, don’t assume it will automati- cally pay off. For example, someonewith a PhD might earn only a few thousand dollars more annually, on average, than someone with a master’s degree—but she has to spend several years longer in school. Again, check the Occupational Outlook Handbook (bls.gov/oco), then cross-reference with the time you’d need to complete coursework.

Next, evaluate your finances: Can you afford to go full-time, or would part- time be more practical? How much student debt are you comfortable taking on? Keep in mind that the interest on school loans may be tax-deductible. Also, students of any age qualify for the Federal Lifetime Learning Credit of 20 percent—up to $2,000—of what they spend on education annually. (This is available for individuals with an income of less than $58,000, or $116,000 if married and filing jointly.)

Calculate your start-up costs

Besides your initial inventory, you’ll have to shell out for essentials such as incorporation fees, technology, business cards, advertising and, depending on your business, office space. The U.S. Small Business Administration (sba.gov) and SCORE “Counselors to America’s Small Business” (score.org) both provide online worksheets and links to calculators to help you figure out how much money you’ll need.

Don’t quit your day job

Following your passion doesn’t always mean higher pay. If you’re about to launch yourself as an entrepreneur, you should keep your current job “until you can afford to both produce your product and pay yourself,” says Nell Merlino, founder of the Make Mine a Million program, which helps women expand their businesses. In other words, moonlight until you’re sure you have a steady income.

Factor in your family

Do your elderly parents depend on the $1,000 you send them each month? Are your kids insured by your employer-based health care plan? If you’re spending money on others, ask yourself: Do I have siblings who could take turns sending money to Mom and Dad? Could the kids be listed on my spouse’s health plan? Which brings us to . . .

Find health insurance

If you’re leaving a job, it will likely be cheapest to be covered by your spouse’s plan. If that’s not an option, look into purchasing a policy individually or continuing your coverage through COBRA. To choose a personal policy, start at ehealthinsurance.com, the largest online health insurance market for individuals. If you are a small business shopping for yourself and employees, find a broker through the National Association of Health Underwriters at nahu.org. 

Borrow intelligently 

That means exhausting your lowest interest rate options first: student loans and loans authorized by the Small Business Administration. Steer clear of home equity loans and lines of credit, because if your new venture doesn’t make it, your home will be on the line. Do not even think about robbing your retirement accounts: The potential penalties aren’t worth it.

Chart your exit strategy

Before you dive into Plan A, make sure you have a Plan B. Your success with a new vocation will depend on the economy as well as the health of the particular industry you choose, and neither is within your control. So if the seas get rough, can you easily return to your old profession or scale back your original game plan? Understand that not everything will go as expected—regardless of whether you have all your funding lined up, a supportive family and a no-brainer proposition. On the other hand, if you do have all that, you’re further ahead than most people. Good luck! 

Jean Chatzky is More’s finance columnist and the author of several books. Read more of her advice here [3].