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Personal finance

Your financial checklist for starting a new job

9 minute read
May 22, 2024
Personal finance
Financial wellness
Health care
Investor goals

A change in employment comes with a host of emotions and to-do lists. During the transition, it's especially important to make sure you're financially prepared. In this article, we'll talk about how to keep your money on track during a career transition and important considerations to help inform your overall financial picture.

Planned vs. unplanned transitions

While the following items are important to consider during a career transition, it's important to note that not everyone's path looks the same. Someone who's had time to plan may be in a different place emotionally and financially than someone who was unexpectedly laid off. 

"For planned transitions, I may talk to a client about how we can optimize their financial plan to either boost their savings or maximize their income. Are they taking advantage of all the benefits they can at their current job? In contrast, if they're going through an unplanned transition, we may discuss how they can absorb the financial impact of not receiving income in the interim."

—John Scott, CFP®

Your path to getting a new job—whether planned or unplanned—is important to consider because of the effect it may have on your finances. Once you've started your career transition, the following financial checklist can help you kick off your new job with confidence.

Set up direct deposit

Ensure your salary is conveniently and securely deposited into your bank account so you always have easy access to your earnings. Contact your new employer's HR department to provide your bank details. 

Understand your employee benefits

Existing benefits: When you're transitioning to a new job, it's important to take note of the benefits that do and don't carry over. If you have any benefits you can't take with you when you leave your employer—like unused time off or savings from your flexible spending account (FSA)—use them to the best of your ability before you leave.

Retirement benefits: Many employers offer an employer-sponsored retirement plan such as a 401(k), which can be a valuable retirement savings tool. They may also match a portion of your contributions, so ensure you contribute enough to take full advantage of your company's match program. If you don't choose what to invest in, your new plan's sponsor may select a default option—like a target-date fund—for you. So, review your investments and make sure they align with your retirement goals and risk tolerance.

If you have an existing retirement plan from your previous employer, you can keep it with them or roll it over into your new employer's plan. You also have the option of rolling it into a Vanguard IRA® or an IRA at another broker. Remember to keep track of where those savings are so you don't leave them behind when planning for retirement.

Before you decide what to do with your old retirement plan, carefully consider the fees, investment options, and your long-term financial goals. You should also take time to review your vesting schedule, stock options, and deadlines for making taxable elections to accounts held with both your former and new employers. If you're not sure where to begin, you may find it beneficial to work with an advisor who can help you weigh your options, understand the impact of different choices, and choose the one that's best for you.

Health benefits: Enrolling in your new employer's health insurance plan is crucial for safeguarding your health and finances. Compare the available plans, considering factors such as coverage, deductibles, copays, and network providers. Select the plan that best suits your health needs and budget. If you currently have a health savings account (HSA), understand its transfer options, plan details, and overall tax benefits.

If you're not yet employed and are under age 65, you may be eligible to continue your employer-based health coverage—usually for 18 months—under COBRA. Keep in mind that extending your health care plan through COBRA is often more expensive than the cost of your current coverage because you may have to pay both the premium and any insurance subsidy your employer previously paid.

Insurance benefits: Your employer may also offer life insurance, disability insurance, and long-term care insurance. These benefits can help provide financial protection for you and your loved ones in case of unexpected events. Assess your needs, explore out-of-pocket costs, and consider enrolling in the appropriate insurance plans to ensure you have the right coverage.

Lastly, update your beneficiaries as necessary for retirement, insurance, and estate purposes. Reviewing this information and ensuring it matches your current life circumstances can set you up for success during any life transition. 

"It's always a good time to make sure your beneficiary designations are correct, especially if you've had a major life change."

– John Scott, CFP®

Manage your goals

Reviewing your personal budget will help you see how much you earn, spend, and save, and may provide opportunities to reduce your expenses and boost your savings. If your new job comes with a higher salary, you might be tempted to splurge. However, it's important to continue living within your means and avoid taking on any unnecessary debt. Consider allocating part of your increased income to get closer to your financial goals. If your salary doesn't change much, you can still benefit from reviewing and updating your budget and ensuring your expenses don't exceed your income.

In addition to creating or reviewing your budget, it's also important to revisit your emergency fund. An emergency fund is a savings account you can tap into in case of unexpected financial events, such as a job loss or medical emergency. The size of your emergency fund depends on your individual financial situation. However, a good rule of thumb is to save enough money to cover at least 3 to 6 months of living expenses. If you don't have an emergency fund already, or if your fund is low, make it a priority to contribute to it regularly until you reach your goal.

Finally, it's important to assess how an increase or decrease in income affects planning for competing goals like saving for education or a home and caring for aging parents. This may differ based on the stage of life you're in when you change jobs. Typically, those who are younger have a higher risk tolerance, whereas those nearing retirement age may be focused on conserving their existing savings.

Consider consolidating your investments

When you roll over your retirement savings to one provider, you can get a more holistic view of your investment portfolio and make informed decisions based on your asset mix, diversification, and other applicable factors. You can easily monitor investment performance, identify opportunities, and rebalance as necessary. A centralized platform can also help you track your IRA contributions and calculate your required minimum distributions (RMDs) accurately.

Consolidating your assets also reduces the need to juggle multiple statements and accounts from different providers. In addition to receiving fewer and more streamlined tax forms, you can easily track your income, expenses, and investments—making tax preparation and reporting less tedious. You may also benefit from lower costs and other benefits, including access to financial advisors who can assess your financial situation, risk tolerance, and goals to help you make more informed investment decisions.

Personalized advice can be especially valuable during significant life changes. Our advisors can help you understand the impact a career change can have on your finances and offer support and guidance to help you stay on track toward your long-term financial goals.

Interested in talking to an advisor to help keep your finances on track?

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Investments in target-date funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the work force. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in target-date funds is not guaranteed at any time, including on or after the target date.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP® and Certified Financial Planner™ in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.