6 Tips To Help You Prepare Financially For Changing Jobs

While changing jobs can be exciting — a new role is an opportunity to advance your skills, be part of a new company and potentially earn more money — as with any other major life change, you’ll want to think about how to prepare for the switch financially.

Below, Select offers some tips to follow if you need to prep your finances for an upcoming job change.

An emergency fund is essentially a lump sum of savings that’s reserved for unexpected expenses — having to pay your rent in the event of a job loss, for instance, or cover surprise medical bills.

Select ranked the Marcus by Goldman Sachs High Yield Online Savings account as best for those looking for a no-fee option. There’s no minimum deposit needed to open the account and users can start earning interest with just a $1 minimum balance in their account.

If your new job requires you to move to a new city and you weren’t able to negotiate a relocation stipend that would cover all of your moving costs, it’s time to start saving. Relocating to a new city can cost thousands of dollars when you consider the fact that you’ll need to put down a deposit for your new apartment, pay the first month’s rent, and cover the cost of movers and travel to your new city.

While every little bit you save can help, if you still need help paying to relocate, consider taking out a personal loan. These can provide a source of flexible funding since they can be used for just about anything (including moving) and the interest rates are typically lower than those of credit cards. Select ranked LightStream Personal Loans as the best personal loan lender overall because of its low interest rates and flexible terms. If you need funding as soon as the next day, though, Select recommends going with Discover Personal Loans.

According to the popular resource website Ask A Manager, if you received advance compensation from your employer, such as a sign-on bonus, and it had a repayment agreement that mentions a specified timeframe, you essentially agreed to stay at the company for that timeframe — otherwise, you’ll have to pay that money back.

For example, let’s say you accept a job that’s giving you a relocation bonus so you can move to the city where your new employer is based. If the payback agreement states you must work there for at least one year but you try to leave before your year is up, you’ll have to pay back that bonus immediately.

These kinds of perks are usually referred to as “golden handcuffs” because while it’s nice to receive extra compensation, they often come with strings attached to encourage you to stay at your company longer. If you’re not careful, though, you can end up having to dig into your savings to repay a benefit if you choose to leave the company early. That’s not to say that you have no choice but to stay at your current company, but you should at least make sure you have the money on hand to repay what’s necessary if you have to.

Besides a sign-on bonus or relocation bonus, another form of compensation this can apply to is tuition reimbursement or assistance. Also keep in mind that while you may not have received a separate agreement to sign in cases like these, the guidelines may be outlined in your employee handbook.

If you received these types of compensation but aren’t sure if you’re subject to these types of stipulations, double-check with your benefits provider, especially if you can’t find any mention of this in your offer letter or employee handbook.

If you contributed money to any employer-sponsored accounts, such as a 401(k) or Health Savings Account, make sure you update your login information and keep it in a safe place before you leave. That’s because you’ll want to have access to these accounts after you leave the company so you can make rollovers and, eventually, withdrawals.

A 2021 study from Capitalize, a platform that specializes in helping people save for retirement, showed that Americans left behind a total of $1.35 trillion worth of 401(k) accounts they forgot about after they switched jobs.

Even if you accidentally leave your balance behind, you’ll need to find another way to make up for it or simply make other adjustments so you can still reach your desired retirement goals. That could mean staying in the workforce longer than you’d like to, taking on side hustles or downsizing your lifestyle expectations later on in retirement.

If you’ve already secured your new job and accepted the salary offer, it might be a good time to start figuring out what your new level of income means in relation to your monthly expenses. For instance, if you’re switching industries and will be taking a slightly lower salary because you have less experience, you should take a look at which monthly expenses are still doable and which ones aren’t.

Start by getting a clearer picture of what your current spending habits are like, if you haven’t done so already. Using a budgeting app such as Mint or YNAB (You Need A Budget) can help you to be more conscious of your expenses. That way, you’ll be one step closer to figuring out what your new salary can accommodate.

While switching jobs can be extremely exciting — especially if you’re going through it for the first time — it’s important to do your financial due diligence so you don’t get hit with any surprises.

For starters, it’s prudent to save up for any expenses that may be associated with starting your new job, such as relocating to a new city. You’ll also want to make sure you won’t be on the hook for repaying any advanced compensation you might have received. Most importantly, don’t forget to keep your 401(k) account information safe so you don’t accidentally leave your balance behind.

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