Leaving Your Job? Make Sure Your Wallet is Ready
If you’re planning to switch jobs along with many during the so-called Great Resignation, it’s important to make sure your finances are in order first. That’s why we’ve outlined some important steps to take before leaving your job.
Review your savings
Before giving up your steady paycheck, make sure you have enough savings to tide you over until you find new employment. Ideally, you should have an emergency fund with 3-6 months’ worth of living expenses to help you survive periods of unemployment.
Check your benefits
Here are different options to consider for common employee benefits:
- Health insurance. Work-sponsored health coverage generally ends on an employee’s last day of work, though it sometimes will continue until the end of the month. Similarly, some companies start covering new employees on their first day, while others have a waiting period of up to 90 days. If you’ll have a gap in coverage, try negotiating for early coverage with your new employer.
- Pension. If your previous place of employment came with a pension, you may be able to keep it or take out the money when you leave. This depends on whether or not your contributions are vested and any other rules of the pension plan.
- 401(k). If your old job came with a 401(k), you’ll need to decide what to do with the funds. You can keep the account as it is without making any additional contributions, roll over the funds to a new 401(k), roll the money into an IRA or cash it out.
Assess your risk tolerance
Many jobs will present new employees with the possibility of better pay in the future, while initially only offering a starting salary. How comfortable are you taking a risk with a new job that doesn’t guarantee as much financial security?
Adjust your budget
If your new job comes with better pay or you’ll be bringing home a smaller paycheck for now, adjust your budget accordingly. You may want to increase the contributions you make toward your investments or find a new place to park your cash, such as a Health Care Family Savings Account, for some extra income in the interim. On the flip side, if you’ll be earning less money now, look for ways to trim your budget so your paycheck can cover all your expenses.