Job Change? What to do financially
More job changes have happened worldwide in the last 12 months than at any other point in history, according to a McKinsey report. While many workers were laid off, many others were promoted or quit their jobs to start a new business. Job changes occurred in white collar, blue collar and lower income households. If you are one of these people who have changed jobs recently or are thinking about changing jobs, here are two points to consider to get your financial affairs in order.
First let's look at your new compensation package.
Salary: Is your salary less than before? If so, we need to really take a hard look at your budget. Did you get a promotion? Is your salary more in the new job than it was in the old job? If so, let's take a look at your increased saving capacity and put your dollars to work for you. Whether it's increasing your employee contributions to your 401k or saving even more in a taxable account, more salary does not always equate to more spending. Be thoughtful about your savings strategy!
Other compensation: Are you being compensated by stock options or fringe benefits? Read the fine print to really understand what these options are. Begin to think about how to manage these new benefits. Stock options can be complicated, but they don't have to be overwhelming.
Healthcare: Is your family situation changing in the new year? Are you getting married, having a child, getting divorced, or taking care of an aging parent? Is your own healthcare changing? If so, make sure you review your healthcare package to understand your benefits. Many employers have changed their healthcare benefits in the last year. Even if you are staying with your current employer, be sure to dig into those packages and see what benefits you have at your disposal.
Next let's look at your old finances.
Did you have a 401k, SEP or employer sponsored plan at your previous employer? Just because you are leaving an employer does not always mean that you have to take your old plan with you. However, sometimes it does. Be sure to stay in contact with your former HR department to understand what your options are.
Should you roll over your old plan into another account? Many financial advisors will tell you "YES", but the truth is that you should do your own research. You want to keep your old plan with an institution that is low cost and offers you many investment options. Sometimes you have to really read the fine print to determine which is the best solution. If you decide to roll over your old plan, make sure you take a look at the IRS rules to see what is and isn't allowed. You may be surprised at your options.
Healthcare is very important. If your old employer has more than 20 employees, they must offer you the ability to pay your own healthcare premiums through COBRA for up to 18 months.
Check out all other benefits from your old employer. You may have unused vacation time that needs to be paid out, overtime pay, severance pay, or even pension benefits.
This is just a quick checklist of the things that should be on your radar, should you change jobs, whether due to a promotion, a layoff, or a change of heart. Make sure you don't neglect these items, as they can stay on the backburner for a long time if left unaddressed and lead to bigger problems down the road.
Contact me at cgamache@audaxwealth.com if you have any questions or need to update your financial plan. I'm here to help you navigate these waters.
Until next time, be well.
