Strategies for Making Sound Financial Decisions During Every Career Move
Reginald A.T. Armstrong • Financial Wellness
Long gone are the days when a person would spend their entire career with one employer. The nature of work has evolved, and professionals nowadays are more inclined to explore diverse career avenues, embracing mobility and flexibility. Switching jobs has become quite the norm, and while it's an exciting phase, it's also one filled with important decisions. Amid the excitement of embracing new roles and challenges, there’s a risk of neglecting key financial aspects that could significantly impact your long-term financial well-being.
So, how do you ensure you’re making smart, strategic financial decisions as you embrace a new opportunity? It doesn’t matter if your next step is a lateral move, an upward climb, or a leap into a completely new field; the choices you make today are pivotal.
As you turn the page on a new chapter, follow these three steps to set the stage for a bright financial future.
Step 1: Tie Up Loose Ends
Before embarking on this next career adventure, take a glance in the rearview mirror. Don't leave any loose ends with your previous employer or leave money on the table. Confirm your last paycheck's payment date and amount to avoid any hiccups in your cash flow during the transition. Make sure you've received all the compensation you’re entitled to, such as bonuses, overtime, and cash value for unused PTO. And you will need to make decisions regarding your 401k.
When transitioning to a new job, making informed decisions about your retirement savings is essential. Your 401(k) options are:
Leave the money in the former employer’s plan, if permitted;
Roll over the assets to the new employer’s plan, if one is available and rollovers are permitted;
Roll over to an IRA; or
Cash out the account value.
If you have both pre-tax and Roth contributions, speak with a financial advisor or accountant to understand the tax implications.
It’s important to give these decisions the attention they warrant. You may want to avoid cashing out your 401(k) prematurely, which can lead to hefty taxes and penalties. And while you’re at it, track down any old 401(k) accounts from previous jobs that you may have left untouched when you started your last position.
Step 2: Set a Strong Foundation
Your new job is a fresh start and prime chance to establish solid financial foundations. How has your financial situation changed? Did you get a boost in salary or higher bonus prospects? Did a tight job market or career change mean you had to settle for a lesser offer? Even small differences in income can make it necessary to adjust your tax withholding. Touch base with your accountant or conduct thorough research to ensure you select the appropriate tax withholding to optimize your new financial standing.
Your new job may come with a new benefits package; don't overlook the value of these perks. Employers often invest in valuable benefits to attract top talent as a substantial part of your overall compensation, so ensure you’re making the most of them. Take the time to understand the ins and outs, including important details like vesting schedules. They might be substantially better than what you’ve grown accustomed to at your last employer, or you could be lacking something, such as insurance coverage for a particular medication. Take the time to familiarize yourself with what’s available.
One often overlooked benefit is an employer’s 401(k) plan. If you’ve participated before, now could be the time to revisit and possibly increase your contributions. If offered, consider contributing at least enough to receive your employer's full 401(k) match to increase your retirement savings. It's essentially free money – your employer is providing a valuable contribution to your retirement fund.
As you get settled into your new job, you're optimizing your current financial situation for a confident financial outlook for the future.
Step 3: Prepare For Your Financial Future
Accepting the job offer is just the beginning – don't get too comfortable with your initial compensation. As a success-oriented professional, it’s up to you to take charge of your career from day one. Start by documenting your achievements and building a record of accomplishments that you can leverage during future salary negotiations or bonus discussions. Supported by concrete evidence, provide reasons for your employer to pay you more. By being proactive and confident, you'll be better positioned to represent your value and progress in your new capacity.
Think of this as an opportunity to reevaluate your financial landscape and lay the foundation for the next stage in your financial life. Begin by revisiting your emergency fund, aiming to bolster it to cover at least six months of expenses. If you've already maximized your employer's 401(k) match, consider redirecting some of your income toward savings. Manage your resources wisely and establish new purposeful objectives.
Are you on an upward trajectory, making strides in your career? Perhaps it’s time to consider partnering with a financial services firm like Armstrong Wealth Management Group to devise a wealth-building strategy. You’ve come this far; now enlist help to work towards a more confident and abundant financial future.
Working Toward Financial Prosperity
As you embrace the changes that come with each new job, remember that your financial journey is a dynamic and evolving process. The steps we've explored here are not just one-time actions but part of an ongoing commitment to your financial well-being. With each transition, you're not just changing jobs but stepping closer to your dreams. So, stay the course, keep learning, growing, and making smart financial choices.