Changing careers can be an exciting, but sometimes stressful time. My first post-military job was a learning experience for me. I went from wearing a standard military uniform every day of the week to wearing a suit and tie and commuting twice the distance. The change provided an opportunity for professional growth, but it wasn't without its trials.
One thing it taught me was that it's always best to prepare for the changes before they happen. Here are some financial considerations to take into account before starting a new job.
1. Pay Lag
When you start a new position, you generally have to wait a full pay cycle for your first paycheck to be distributed. You'll need to take this into consideration when leaving your previous position. Save some money on the side to cover expenses for the weeks you will be without pay until you can catch up.
2. Going the Distance
Your new job may require changes in your budget for transportation. If you are going from a short commute to a long commute, you'll have to budget in the expense of gas and vehicle maintenance. If you will rely on public transportation, you will have to factor in the distance of the new job and plan out your strategy for traveling by bus or train on a daily basis.
3. Dressing the Part
Depending on the change in your job status, you may be required to wear a specific type of clothing or have to upgrade your wardrobe to a different style. The difference between business casual and business dress can require a new wardrobe to meet job requirements. Budget that expense into your transition plan and look for ways to build a professional wardrobe on a budget.
One of my favorite tips is to purchase versatile outfits that are cost effective and aren't prone to going out of style. The same thing applies to purchasing uniforms or other specialized clothing and accessories.
4. Equipment Needs
Depending on your job type, you may have to budget in expenses for additional supplies or equipment necessary to get the job done. Consult with your new employer about which costs will be relegated to you and what the company will reimburse. This may relate to job-specific equipment or supplies, transportation costs, protective equipment, electronics, cell phones, etc.
Be sure to meet with the new employer's human resource department to go over the benefits you will be receiving and budget for any additional expenses you will incur for company-sponsored benefits. If your new employer pays a lower amount than your old employer, it can affect your cash flow and quality of life.
6. Rolling with Retirement Funds
If you have previously invested your cash into an employer-sponsored retirement fund, you'll need to coordinate with both the new and old employer about rolling over your 401(k) or 403(b) accounts into the new employer's plan. Alternatively, you can roll your 401(k) into an IRA. Whichever you choose, it is almost always better to roll your old 401(k) plan into a new retirement account because it will usually reduce costs, give you more control over your investments and be easier to track.
7. Don't Forget the Small Stuff
A new job will entail living and working in a new environment. Don't forget to account for expenses of daily living. In your old position, you may have brown-bagged your lunch each day because the rest of the office did. In your new position, you may be more apt to socialize at lunch and therefore, will need to budget for lunches outside of the office and other incidental expenses you will incur each day in the new environment.
Switching jobs is not a decision to be made lightly. Be sure you can afford the transition and avoid these 6 Lousy Reasons for Changing Careers.
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