When considering the financial implications of a new job or career path, most professionals immediately focus on salary.
Yet while salary is important, it’s not the whole picture.
Your next career move presents a much greater opportunity: to get your financial house in order and to make that sure your new job aligns with your financial - and life - goals.
This week, I sat down with my good friend, Emily Zeigler, CFP and Co-Founder of How Green Is Your Money. I love her simple, actionable financial advice and wanted to share some top takeaways for career shifters here.
This is an issue I’m personally passionate about (I'm not being paid to 'market' these insights), because I’ve seen too many professionals - myself included - hesitate to dig into the numbers because they lack the confidence, guidance or the time to do so.
But I’ve also seen for myself and my clients how owning your financial health powers stronger career decisions and happiness.
So here are the must-do’s I’d advise keeping in mind as you prepare for your next transition:
1. Know your Spending
Knowing where your money goes is one of the most powerful steps that you can take to improve your financial health -- regardless of whether you’re changing jobs.
Emily doesn’t put her clients “on a budget”, because it can turn financial planning into a chore that’s harder to stick to. Rather, she encourages you to understand where your hard-earned dollars escape to each month so that you can prioritize your spending and look for areas where you can save.
And with an understanding of what you need to earn each month, you gain a much clearer view of how potential career choices will impact your finances.
2. Understand the Total Compensation Package
Base salary is important, but you need to understand the full composition of your next job’s pay structure.
Can you expect commission or a bonus in addition to base salary? Are you entitled to stock options, a signing bonus, moving stipend, or alternative extras?
Other important items to consider are your group benefits (long term disability, life insurance, vision, dental, etc.) and health insurance options. If you have a significant other, figure out which person’s benefits option provides more coverage and at what cost. Many employers offer a 401k match that you should take advantage of – if not, you’ll be leaving free money on the table.
Only then can you calculate the monthly take-home coming your way as compared to your current gig or path.
3. Identify the Financial Costs of Your Transition
When moving to a new job, you'll want to identify the financial costs you may incur - beyond salary.
For instance, many offers include a waiting period before you can participate in your new employer’s benefits, like health insurance.
If your previous employer offered healthcare, likely you can qualify for a continuation of coverage through COBRA. And, COBRA allows you to retroactively enact coverage if you need it, meaning you don’t pay premiums unless you have a medical need during that time. But be careful, you only have 60 days to activate it. So if your gap is longer, be conscious of the timeline.
Also important is to look at the benefits of your current role you may be sacrificing, like end-of-year bonuses or 401k benefits (most 401k’s have a vesting schedule).
4. Plan for Changes in Take-Home Pay
If your take-home pay will increase, now is a great time to revisit the savings aspect of your financial plan.
Ask yourself what your salary was ten years ago compared to today, and then ask yourself “Where did the difference go?” Are you saving the extra income that you have received from raises, bonuses, etc.? If it’s not in savings, chances are that your lifestyle spending has increased (most people tend to increase lifestyle spending as they make more money).
Take a hard look at your spending and determine whether and how you’d use your increased salary to save more.
If your take-home pay will decrease (perhaps for more flexibility, more meaning, etc.), then ask yourself how the change will affect your spending and savings.
Will you still be able to meet your financial obligations month to month? Can you factor in any savings coming from your transition, e.g. reduced commuting expenses and/or child care? Make sure you give the overall change consideration.
5. Negotiate for the Best Offer for You
Many of the aspects of your offer are up for negotiation (84% of companies expect you to negotiate). So before accepting any offer, be sure to compare it to industry standards, and be ready to negotiate for the best possible terms.
Also important are the non-financial parts of your package that could be more valuable to you than additional pay (e.g. vacation time, remote work flexibility, educational opportunities, parental leave, more meaningful or enjoyable responsibilities, etc.).
As you’re negotiating, keep in mind that you’re advocating for the best offer for you - and that finances are just one component of the total package.
6. Roll Over Orphaned 401(k)s
After changing jobs a few times, it’s easy to lose track of your hard-earned retirement savings and end up with 401(k)s all over the place.
Emily recommends rolling over old 401(k)s to an individual retirement account (IRA) that you own rather than your employer. That way, you can keep track of all of your investments and allocations, and make sure you are still on track to meet your financial goals.
7. Build An Emergency Fund
Emily recommends not leaving your current job without an emergency fund or strategy that covers six months’ worth of living expenses, if you can.
You can do all the due diligence in the world, but you never know exactly what will happen once you transition to a new organization. It can be tremendously helpful to minimize the risk of financial uncertainty -- just in case your new job doesn’t work out as anticipated.
Quick Gut Check: How do you feel reading these tips?
If this feels like old news, you're likely more on top of your financial health than most professionals.
If this makes you feel a bit queasy and you're hesitant to lean into the numbers, that's okay -- but resist the urge to look away.
As with any other skill, this is something you can learn, and something that gets easier every step you take.
If you want help and support navigating this process, you can reach out to Emily and her team or your own financial advisor to get expert guidance.
But either way, trust that you are capable of overcoming financial uncertainty and that once you do, you’ll feel that much more empowered and confident in taking the best next career step for you.