Many people change careers several times during their lifetimes. A career change can bring a higher salary, new benefits and more opportunities. There can also be costs associated with a change in jobs. Some of these costs are obvious, such as moving costs, while other costs might be less evident. Here are some financial tips to assist you in getting through any career change while minding your money.
1. Make Sure Your Health Coverage Continues
Health care costs can be expensive especially if you do not have health insurance. If you change jobs, you will most likely have to change your insurance plan. Your new plan is required to accept your previous plan as proof of continued coverage. Make sure you provide any necessary documentation to ensure that you do not experience a coverage gap. You should also confirm your end coverage date with your previous employer and the beginning coverage date with a new employer. If there is a period between these two dates, you can usually obtain interim coverage so that you do not have a lapse.
2. Plan for Your Retirement Accounts
Many people build up retirement accounts through an employer’s 401k or other employee savings program. Sometimes these accounts are forgotten when people change jobs. Up to $1.35 trillion in assets have been deserted by persons moving on to new employment. You should be sure not to leave your retirement money behind or unattended. There are several options for dealing with a retirement account held by a previous employer, including rolling the account into your new employer’s plan.
3. Review Your Accrued Benefits
Before you separate from your existing employer, make sure you understand what benefits you have accrued during your time of service. Benefits can include unpaid leave, savings in cafeteria plans and commissions or bonuses. You want to make sure that your employer pays all the benefits to you as they are required to under your employment agreement or handbook. You also want to use up any unspent balances in your cafeteria plans to the extent you are able, rather than leaving those savings behind.
4. Set Aside Extra Cash
Moving to a new employer will likely involve a new pay period. You need to be aware of when you will receive your final paycheck from your previous employer as compared to your first payday at your new job. A new employee should have enough cash set aside to meet necessary expenses if there is a period where you will not get a paycheck. In addition, there may be additional costs associated with your new job. These could include wardrobe needs for a new dress code or more expensive options for parking and food.
5. Update Your Tax Plan
It is essential for a person entering into a new salary agreement to review their tax plan. You want to make sure that your withholdings are appropriate for any salary increase. In addition, the benefit structure of your new employer may be different from your previous employer. The benefits from your previous employer may have been pre-tax, making your overall tax liability less. Your new benefits might be after tax. Your withholdings will need to be adjusted accordingly so that you do not owe a large tax bill at the end of the year.
6. Budget For Your New Benefits
Aside from a potential change in the tax structure of your benefits, you may have additional benefits added to your new job. Funds to cover these benefits will be removed from your paycheck as described by your employer. While most benefits are worth it, you will have to pay for them in a payroll deduction. Make sure you understand what you sign up for and how much will be taken from your gross wages.
Moving to a new job can be a great step forward. You need to make sure you have a good understanding of all the effects of your new salary and benefits package to protect your financial wellness. You also do not want to leave any retirement, savings or other payable benefits from your previous job behind.