Changing careers can be a super exciting time, with new role, new colleagues, maybe even a new wardrobe! But with all this excitement, it can be easy to forget about the financial considerations you’ll want to make along the way. To keep your finances climbing alongside that career ladder, below are five money moves you’ll need when making the switch.
1. Negotiate your offer
Just because you’ve been looking for a change, doesn’t mean you should accept your first offer. A 2019 Jobvite study found that 83 percent of those that asked for a raise or increased salary received it. Yet, only 33 percent negotiated for their current position. Don’t be afraid to play those odds!
Want some tips to negotiate like a boss? To increase your chances of getting a “yes,” make sure to do your research and come prepared. Look to websites like Glassdoor.com to compare the salaries of similar positions, outline your achievements from previous roles, and practice your pitch before going to HR. If you’ve received multiple offers, use them as leverage. This may also be an indicator of which company is willing to invest in you more as an employee over time.
While you’re in the negotiating mindset, you may also ask whether your employer is willing to help cover some or all of your moving expenses. Depending on how far you’re relocating, this can get pricey quick. Luckily, many employers are prepared to help (but only if you’re willing to ask).
2. Consider the full package
If you’re transitioning careers, chances are you’re looking for something new and exciting. Whether it’s the ideal role or starting a business of your own, you’re probably eager to make the switch! But before you accept what may seem like your dream job, make sure to consider the benefits, too.
As more companies work to recruit a younger workforce, there may be some new perks available to you that your old employer didn’t offer. Benefits can play a huge role in improving your mental and financial health over time, so make sure to consider their value before deciding your next move. Some of the most sought-after benefits for millennials right now include student loan repayment assistance, pet insurance, and flexible work schedules. You may also be willing to take a pay cut for more paid time off or an increased employer match, for example.
Jealous of those unlimited vacation plans? Make a list of the type of benefits that are most important to you, and keep them in mind during your search and negotiations.
3. Don’t cash out your old 401(k)
There are several options you can take when deciding what to do with your old 401(k), but whatever you do, don’t cash it out. Retirement accounts like a 401(k) or 403(b) give you more bang for your buck than a standard investment account by reducing the amount you pay in taxes. If it’s a traditional 401(k) or 403(b), you contribute with pre-tax income, leaving more money in that account to grow. If your employer offers a Roth 401(k), you’ll contribute with post-tax money now, but won’t pay taxes on those contributions or earnings (!) when withdrawing after age 59.5.
So while cashing out your 401(k) might be tempting, try not to do it. Either keep your 401(k) where it is or roll it over to another tax-advantaged account, such as your new employer’s plan or an individual retirement account (IRA).
4. Update your budget and financial plan
Switching careers often means a change in income, and hopefully a good one! This makes it the perfect time to revisit your budget. Consider how your take-home pay, retirement contributions, and commuting costs may change. Will your cost of living go up or down? If you’re taking a pay cut, you may want to test out your budget in advance of the new job or move to make sure you’ll be comfortable when things get real.
Longer-term, you’ll want to think about how your new income will impact your financial goals. Can you reach a savings goal more quickly? Will it help you save for a down payment on your first home? Are there stock options or maybe a pension to consider?
Lastly, if your income is flying high, try to resist lifestyle inflation, where you end up spending more just because you can. Consider what you can save or invest in to make your money work harder for you. “More money, more problems,” isn’t really a thing. Having more income is all about options, so choose yours based on your goals and lifestyle.
5. Starting your own business? Whip the planner out (and the Excel sheets)
If starting your own business or going freelance, you’ll want to create a separate budget and financial plan to account for any investments in the business, income, and expenses. Often, this will be tied to a separate bank account. You should estimate your tax payments and build up a business emergency fund to help prepare for the unexpected. If you’re self-funding your business, you’ll also want to account for this as a line item in your personal budget as well. How much do you plan to invest in your business each month, or over the year? Thinking ahead will help ensure your finances and cash flows stay in CEO-level shape.
Being your own boss has a lot of perks, including making your own schedule and vision for your company. The downside is that the safety nets you’ll want to build your empire require some thought (and a good chunk of change). Will you go with a Roth or SEP IRA to save for retirement? What insurances do you need, including health, disability, and liability insurance to protect yourself and your assets? What may seem like an extra or unnecessary expense now is something that could save you thousands in the long run as your own CEO.
By taking the time to think ahead when it comes to your finances, you’ll be that much more prepared to knock your new role out of the park. While it may take a little planning, reducing financial stress in your life will keep you focused on the task at hand, so you and your finances can level all the way up.
Source: http://theeverygirl.com/category/career-finance/life-work-skills/feed
