This is the time of year when companies open up their budgets and there are suddenly a whole lot more jobs available. Changing jobs can have a lasting impact (for better or worse!) on your financial life so it pays to do your homework ahead of time to evaluate the financial consequences. Here are some areas you may want to consider:
Before you go
Understand your current benefits and financial situation
- Retirement – does your employer offer a retirement plan with matching contributions? What is the vesting schedule, i.e. would waiting a few months make a significant difference to your balance? Do you have any retirement plan loans that become due in full at separation of service?
- Health insurance – understand your current plan. Does it make sense to take care of any health issues now or wait? Might be a good time to visit the dentist or the eye doctor. Will you need to replace coverage for your entire family or move to a spouse’s plan?
- Life insurance/Disability Coverage – are you enrolled in this coverage? Can you take it with you or will you need to replace it?
- Current compensation package – do you have any deferred compensation coming in the near future, bonus payouts, or stock option vesting? Think about waiting for these events to occur.
- Get finances in order – do you have emergency savings? Will changing jobs impact your expenses? Do you need to move your home as well?
During the transition
- Current Benefits - When do current benefits end? Some companies cover you until the end of the month, while others stop on your last day with them. Will there be a gap you need to cover with COBRA, are you joining your spouse’s plan, or will you need to purchase insurance on the open market?
- Compensation - When is your last paycheck? If you are taking time off between jobs, know when your new checks will start and plan for that. Save paystub information and update employer on your new address if moving.
- Extra Income - Will you be paid for unused vacation, sick, or personal days? Consider using this money to increase your emergency savings if you don’t need it to cover your transition.
- Moving - If you are moving homes, visit http://www.irs.gov/publications/p521/ to see if expenses are tax-deductible.
- Negotiate - Know your worth and negotiate your salary, sign-on bonus, and/or ask for more vacation. This is the best time to ask and a higher salary now will pay multiples into the future! If you are giving up deferred compensation benefits your previous position offered, ask your new employer if they will compensate you.
- Benefits - Evaluate all benefits to understand if there is a gap between what you had before, and what you will have going forward.
- Relocation - If your new employer is offering relocation, understand the tax implications, and payback triggers.
After you Start
- Income - If you are making more money, set up your direct deposit so that some goes directly into a savings account. Plan what you are going to do with bonuses, commissions, or other variable income plans.
- Benefits - Enroll in new benefits such as health, disability, life insurance, and retirement plan. Also consider enrolling if your new employer offers additional benefits such as pet insurance, pre-tax commuter accounts, or a legal plan.
- Retirement - Understand your new plan, enrollment timelines, and match provisions.
- Simplify - Decide what to do with old 401k or retirement plans.
- Expenses - Review expenses to see if you need to adjust your budget – commuting, dry cleaning, travel, etc.
- Taxes - Review tax withholding to avoid surprises at tax time (http://www.irs.gov/Individuals/IRS-Withholding- Calculator).