Chances are that you will likely have many jobs throughout your career. According to the latest Bureau of Labor Statistics study, people have an average of 12 jobs over the course of their lives. Whether you’re in your first role or your fifth, adjusting to a new company has its challenges. While it may become an easier transition the more times you go through it, here are some areas everyone should focus on to keep their finances on track when switching jobs.
Understand Company Benefits
You may have many questions as you prepare for your first day of a new job. Will you fit in? Will you work well with your boss and co-workers? Will you find the work fulfilling?
Though these are important things to consider, you should also focus on adjusting your finances. The first place to start is to review the benefits your new company has to offer. These benefits typically include:
1. Health insurance. This may be the most confusing benefit due to different plan options, deductibles and coverage. Your human resources representative can help walk you through your options so you can make an informed decision. Check out this blog post for more on selecting the right plan for you.
2. A 401(k) plan. This is where you can save for retirement. Account options may include a traditional tax-deferred option as well as a 401(k) Roth. The higher tax bracket you are in, the more valuable tax deferral can be. You should always check with your tax preparer or speak to a CFP® professional to understand which option is best for you. Find more on 401(k) retirement plans here.
3. A health savings account (HSA). In concert with your health insurance, an HSA allows you to deposit money on a tax-deferred basis. If used for qualified medical expenses, these funds remain tax-free. More on HSAs can be found here.
4. Life and disability insurance. Many companies offer lower-cost access to life insurance and disability insurance. Here are some guides for understanding what coverage makes the most sense for you:
Other Financially Savvy Steps You Can Take:
1. An emergency fund. You should plan to allocate a portion of your new salary to an emergency fund, so you have extra cash when it’s needed. Read 3 Practical Strategies to Help Establish an Emergency Fund from my fellow CFP® professional on how to build emergency savings.
2. Work-related expenses. There are other important expenses to plan for as you prepare for your new role. While your new job may not require an actual uniform (although some surely do), there is likely proper attire for your new role, and this can be costly to acquire. Tools, equipment or other supplies may also be required. Being on time is critical, so reliable transportation is key. Make sure you plan for your commute and the expenses you will incur, such as car maintenance or public transportation passes.
3. Establish goals for your next role. After you start your new role, you can begin preparing for opportunities for future promotions. Focus on the next target and understand what it takes to reach it. For six ways to prepare for your next promotion, read this article.
4. The Big Picture. We spend so much time working that it is important to find work that is fulfilling to you. While gaining financial security from your job is important, finding purpose and meaning in your role matters, too. Read this insightful article for more.
Considering each of the above points is a great start to adjusting your finances each time you begin a new role. For more financial support throughout your career, consult with a CFP® professional.