Yahoo Finance 10 Things You Must Do To Secure Your Finances Before Changing Jobs
Deciding it’s time to switch to a new job or career can be exciting, but it’s not without its challenges. This type of decision can affect several aspects of your life, including your finances, which is why it’s important to be prepared. After all, there could be several hidden costs that you haven’t thought about.
See: 10 Top Ways To Become Rich by Only Working on Weekends
Find Out: What To Do If You Owe Back Taxes to the IRS
Here are the top 10 financial moves you should consider making before changing jobs, according to experts.
Have an Emergency Savings Fund
Having an emergency savings fund is a good idea even if you aren’t changing jobs, but it’s especially helpful if there’s going to be a gap between now and your next paycheck.
“As a general rule of thumb, you should have six months of savings in your emergency fund,” said Brittany Pederson, a director at Georgia’s Own Credit Union. “This can help as you transition to a new job or career, and gives you a cushion should an unexpected expense arise.”
Negotiate a Severance Package
If it makes sense to do so, negotiate a severance package before leaving your current workplace.
“If you’re leaving your current job voluntarily, consider negotiating a severance package,” suggested Seth Diener, private wealth manager at Diener Money Management LLC. “This may include benefits such as extended healthcare coverage or a continuation of salary for a specified period, providing additional financial security.”
More: How To Generate Passive Income With Just $500
Set Up Direct Deposit
If you’ve already committed to the new job, make sure you have direct deposit set up.
“Set up direct deposit with your new employer and review your bills and payments,” suggested Pederson. “If there is lag time between when you leave your current job and start your new job, make sure that you have enough money in designated autopay accounts to cover your bills.”
Plan for Healthcare Insurance Coverage Gaps
Even if both your current and new job offer healthcare, you might experience a gap in coverage when switching to a new company or career. Depending on your circumstances, you might want to get supplemental or temporary coverage during this transitioning period.
“If there is a period that you are not receiving healthcare coverage while you start your new job, make sure you get supplemental health insurance. While it can be very expensive, COBRA can help you avoid these lapses as a last resort,” said Pederson.
Evaluate Your Current and New Employee Benefits
Many people switch careers or positions for a higher salary, but a job isn’t just about the paycheck. Before making the change, make sure your new job offers competitive benefits or nonmonetary compensation to your current one.
“Ensure that your benefits meet your needs. While you could be making a higher salary, consider the cost of healthcare, tuition reimbursement, paid time off, 401(k) reimbursement and other benefits you may be receiving from your current job,” said Pederson.
“Understand your current employee benefits, including retirement accounts, health insurance, and any stock options,” added Diener. “Before accepting a new job, thoroughly review the benefits package. This includes health insurance, retirement plans, and any other perks. Understanding these offerings helps you make informed decisions about your financial well-being.”
Look Over Your Current Retirement Plan
Some companies offer a 401(k) or pension plan to their employees. If you have one with your current employer, make sure you have a plan for what to do with it once you leave.
“If you are leaving behind a pension or 401(k), see if you can roll that over into a new plan,” said Pederson. “Speak with your HR representative, as well as a trusted professional, to make sure you don’t leave any money on the table.”
Check if your new company offers a retirement plan, too. If it doesn’t, or if it takes time for it to kick in, you might want to consider an alternative solution.
“If your new job doesn’t offer a retirement plan immediately, consider contributing to an individual retirement account (IRA),” said Diener. “This allows you to continue saving for retirement even during the job transition.”
Make a Long-Term Financial Plan
Having a financial plan is key to ensuring financial success and stability — regardless of your employment situation.
“If you are working and are not at risk of losing your job, you don’t have to do anything except create a plan and implement it to find your next job. However, if you are not working or at risk of losing your job, capital conservation gives you financial staying power to last for a job search that will probably take longer than you think it will,” said Jeff Altman, career coach at The Big Game Hunter, Inc.
“Start by asking yourself, ‘If I were out of work three months from now, what would I do to reduce spending?’ Then, implement that plan now. Make plans for what you would do after 6 months, no months or a year NOW before you feel any stress and not when you might feel anxious about your circumstances.”
Review Your Personal Financial Statement (PFS) and Liquidate Some Assets
Vijay Marolia, CIO at Regal Point Capital Solutions and co-founder of The Cash Square, suggested creating or reviewing your PFS before leaving your current job.
“Start with a simple income statement, but don’t forget to include your balance sheet. Whereas the former shows you what you earned over time, the latter gives you a financial snapshot of your net worth,” said Marolia.
While you’re at it, evaluate your stock options and any other perks that come with your current job. To further secure your financial future, you might also want to liquidate some of your assets.
“Make sure you understand any vesting schedule regarding your stock options and any other perks,” said Marolia. “Also, dial up your liquidity — in other words, make sure you have not just enough for a rainy day — but for the storm of change that is a significant career change.”
Consider Hidden Expenses
“Job seekers focus too much on the salary differential when looking for a new job and often overlook the hidden cost that comes with switching jobs or careers,” said Nathan Brunner, CEO at Salarship. “A job is not just a paycheck but a whole ecosystem.”
Having a higher salary is great, but you should still consider the other costs that come with the change. Say, for example, you need to relocate to a new area or have a longer commute. Account for things like housing costs, gasoline, and car maintenance when making the decision to switch jobs.
Consider Tax Implications
“Be aware of the tax implications of your job change, such as potential changes in income tax brackets,” said Diener. “Consult with a tax professional to optimize your financial strategy and minimize tax liabilities.”
More From GOBankingRates
This article originally appeared on GOBankingRates.com: 10 Things You Must Do To Secure Your Finances Before Changing Jobs
