Changing jobs is a life change we will most likely all navigate at least once over the course of our careers. Today, young professionals make many more job changes than previous generations, where it was commonplace to stay at the same company for all or most of their career.
Choosing to make career transitions are significant life events. New beginnings can present an exciting time of growth and development, but can also be a change that presents challenges – personally, professionally and financially. Trying to navigate this time of change can cause stress, anxiety, excitement, or even fear, especially when coupled with ensuring you make all the right financial steps to ensure a successful transition.
When it comes to changing jobs there are ways to maximize this transition, and preparation and planning are key to helping make each transition easier. There is much that will be out of your control, but empowering yourself with knowledge and awareness will help you focus on what you can control.
The Emotional Side of a Job Change
Your transition may be to bigger and better things, or it may be the result of a forced decision such as downsizing. Changing jobs is not always a move that you had planned or anticipated, and this can be very upsetting. Even if it is planned, the move can still be an extremely emotional time, filled with uncertainty.
I have had two pretty significant job changes. The first saw me leave my job at age 27 as an early childhood special education teacher to take an administrative job at a wealth management firm. Fast forward 10 years later, and I left that firm to launch my company, Abeona Wealth.
Both were scary but also incredibly fulfilling, and the right choice for me. In each of these phases of my career, I have put in place a few best practices that can be applied when changing jobs, no matter your age bracket.
So You’re Preparing to Change Jobs. What Now?
Preparation and planning are key to an easier job change (to the degree that you can prepare). The first step in preparation is to have your financial house in order before you do anything, especially having enough savings and understanding your cash flow.
Savings will help with the transition, and knowing your cash flow will help you understand what compensation you need and how to negotiate. If you don’t know what you’re spending and what your cash flow needs truly are, it will be difficult to look for and negotiate the salary that you need.
Prepare Your Mind, As Well As Your Money
This time of transition can be an ideal opportunity to review your goals and priorities. What you deemed an essential must-have at one stage, may now become less important or urgent. Taking the time to self reflect and reflect as a couple or family is an essential aspect of this transition.
Negotiate Your Salary and Benefits
Research shows that men almost always negotiate a salary offer and women often do not. Research what you can about the industry and the firm. Try not to tell the company what you’ve made in prior roles – this is where women can get hurt over the long term. If you’re making subpar wages at one job and go to another job, you may get a bump in salary, but you might still be below the target.
Benefits and the quality of benefits vary widely from company to company and can be a dealbreaker when reviewing employment opportunities. You need to understand the benefits at your new job and how they differ from the old one – healthcare, vision, dental, 401k availability and match or profit sharing, health savings accounts, PTO, child care assistance, life and disability insurance, etc.
Take the time to consider both the monetary benefits and the quality of life benefits. Not all benefits are purely monetary, are you able to work remotely in case of emergency, what educational benefits are available, how will your work-life balance be affected? How does your benefits package compare to your spouse’s both in terms of cost and coverage options?
Maximize Your Retirement Plan at Your Former Employer
If you change jobs or have changed jobs often, make sure not to forget about your retirement account. This is especially important for women, with studies showing that 19% of women have not saved anything for retirement.
The first place to start is educating yourself on the key features of your retirement plan and how to take full advantage of this. This will give you a better understanding of your current benefits, as well as any potential benefits when evaluating new job opportunities.
There are a few options, subject to individual retirement plan guidelines:
- Can leave it in your old employer’s plan
- Can roll it over to your new job
- Can roll it to an IRA or Roth IRA
- Definitely don’t forget about it!
All of these points cover a more traditional, salaried job with benefits. You may move to or from a 1099 contractor position or go self-employed. These are bigger changes that would be helpful to talk through and plan with an advisor. Going from salary to either option brings different tax implications and the need for separate benefits like health insurance and retirement savings accounts.
Understanding the Different Types of Compensation
- Base Salary: We all think about salary when taking on any job. Ensure you are going to be paid fairly and equally. Don’t be afraid to address the wage gap and push for what you are worth.
- Bonus: How is it determined? Is it discretionary based on company performance or a formula based on your personal performance? Is it guaranteed?
- Stock Options: Options can be a great way to build wealth in a company in which you are pouring your human capital. But, you will be building a concentrated holding in a single investment, so you need to understand the risk. These will be subject to a vesting period. If you leave before the vesting period is up (like 3 years), you may forfeit your benefits.
- Employee Stock Purchase Plan (ESPP): This plan gives you the ability to purchase company stock at a discounted price, earning an immediate gain.
Make the Move with Confidence
A new job means a fresh start. Maximize the energy and enthusiasm that comes with the ‘newness’ and start checking off your financial to-do list. Changing jobs is a great opportunity to start reviewing your financial position – a good habit to build whether you are changing jobs or not.
Revisit your cash flow; are there new opportunities to save and invest? How are you positioned in terms of debt management? Does your family have proper insurance coverage in case of an emergency?
We can help streamline this process by overseeing your progress towards your goals and helping to make your dreams a reality. If you are approaching a career transition and would like to schedule a time to discuss the next steps, please get in touch. We understand what it’s like to be starting over, and can offer both expert guidance and an empathetic ear as you begin this new chapter.
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A note from Mary Meadows: This post is the first in a series on navigating life changes, in which I will cover important things to consider during different major life events that can all too often upend a financial plan. Future posts will cover getting married, getting divorced, and dealing with the death of a loved one.