Although it doesn’t top the list of things we hope to do this year, 16 percent of us have placed “finding a new job” on our 2017 resolutions list. One of the driving factors is that we’re recognizing opportunities for better pay in a more robust job market (statistics are predicting a high demand for experienced mid to senior-level workers). While your first agenda is, of course, to land a new job with better pay and benefits, what you do after you’ve been hired could make or break its potential to change your financial outlook.
Once you’ve achieved that new job, here are four financial steps you’ll want to take as soon as possible.
#1: Update your financial tracking
Obviously, a loss of income has us rushing to adjust our budget faster than when we gain income, but it’s still important to track any changes. Plugging those numbers in will show you exactly how far ahead you are once taxes and other changes are figured in. Having a specific rather than a general idea of how much you’re adding to your bottom line ensures getting the most financial advantages out of your raise. It also decreases the chance of your extra income getting absorbed into discretionary spending without realizing it (some call it lifestyle inflation).
#2: Put the difference in your salary to work
In most cases, you lived comfortably on your old salary. Maybe it was tight, but you made ends meet. Instead of inflating your expenses to meet your income, use the difference to accomplish a financial goal. If you’re not sure which goal you want to funnel it into right away, just make a point to increase your automated savings or open a new high-yield savings account until you decide. Here are a few great ideas. You could use it to:
- Pay off debt
- Start or add to an emergency fund
- Contribute to a retirement savings account
- Save for your child’s college tuition (perhaps with a 529 Plan)
- Invest in stocks, bonds, money market accounts, etc.
#3: Take advantage of employer-sponsored retirement and insurance benefits
A Wells Fargo survey suggests that less than half of employees enroll in their company’s retirement savings plan, even though many employers offer to match any funds you contribute. Tax-deferred income growth with the advantage of compounding can make a huge difference in living comfortable when you’re ready to retire, so don’t pass up this opportunity.
Along with your new job, you’ll likely have new insurance benefits. Become familiar with your options for disability, life, and medical insurance (especially if it includes newer concepts like health savings accounts or flex spending accounts).
#4: Roll over, rather than cash out, your old 401K
It’s possible your old employer will let you keep your retirement account as is, but it’s not common. In most cases, if you fail to transfer it to another retirement plan within a certain period, you’ll get a check in the mail – minus tax on the full amount and a 10 percent early withdrawal penalty if you’re under 59 and a half or don’t meet other exceptions.
If you’re not sure how to rollover your 401K to an IRA or other retirement savings account, contact the company that holds your funds for very simple instructions (you can usually do it over the phone).
Landing a new job this year will lead to more possibilities – and more responsibility. The better you handle your raise, the faster you’ll achieve other financial goals for the new year, as well.
Editor's Note: I've begun tracking my assets through Personal Capital. I'm only using the free service so far and I no longer have to log into all the different accounts just to pull the numbers. And with a single screen showing all my assets, it's much easier to figure out when I need to rebalance or where I stand on the path to financial independence.
They developed this pretty nifty 401K Fee Analyzer that will show you whether you are paying too much in fees, as well as an Investment Checkup tool to help determine whether your asset allocation fits your risk profile. The platform literally takes a few minutes to sign up and it's free to use by following this link here. For those trying to build wealth, Personal Capital is worth a look.
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Great post! When you get a job, prioritize in eliminating your debt as much as possible then start creating more savings. All of these factors are very helpful!
These are all very important steps when it comes to finding a new job! We definitely agree with #2! If you were making ends meet with your old salary, use all your extra money you get from your new salary to pay off student loans or save money for your emergency fund! Happy job hunting to everyone out there!
And thank you for being an employer that gives Americans more opportunity!
Save save save and your finances will improve over time. I promise!