After mass layoffs and the resignations of millions, workers across the country are looking for jobs, accepting new offers and adapting to new roles.
This adjustment period should involve more than just getting to know your co-workers and getting used to your new responsibilities. A career transition often has an impact on your financial life, and there are many things every new employee must do to ensure the impact is positive.
If you’ve recently started—or are about to start—a new job, here are some smart financial moves to make.
5 Movements of Money When Starting a New Business
1. Roll over your old 401(k)
If your new employer offers a 401(k) plan with a matching company, you are sure to take advantage of this free money. While enrolling in your new 401(k) plan, don’t forget to transfer money from your previous employer.
With your retirement money pooled, you won’t have to worry about managing separate retirement accounts or losing track of money in the old account.
Other options for what to do with your old 401(k) include converting it to a traditional IRA or Roth IRA. Check out this article on how to renew your old 401(k) account when you leave a job.
2. Evaluate your new employer’s health insurance plans
During your setup process, you may feel overwhelmed by the many options for health insurance, but it’s important to take some time and figure out the plan that’s best for you and your family.
There are four important costs to consider when evaluating plans: monthly premium, co-pays/coinsurance, deductible and maximum out-of-pocket limits. Generally, plans with lower premiums will have higher co-pays or higher deductibles.
This calculator helps you compare the costs of two health insurance plans.
When comparing plans, consider how often you tend to see the doctor, and if you have any anticipated medical costs, such as whether you plan to have a baby or need to have surgery soon.
If you choose to go with a high-deductible health plan, you may be eligible to open a Health Savings Account (or HSA), which has multiple tax-saving benefits. Your HSA may also offer the option to invest your savings for greater potential growth.
3. Consider other employee benefits
Signing up for health insurance and a retirement plan are obvious advantages for a business owner, but you should also be aware of other perks your business offers so that you don’t end up leaving money on the table.
Review your new employer’s policy on paid time off. Will your unused days expire or will you lose vacation days if you don’t use them by the end of the year?
Does your employer offer tuition reimbursement, student loan repayment, or stipends for further education? Will your employer cover the cost of your cell phone bill if you use your phone for business purposes? Will they pay for home office equipment if you work remotely?
Some employers offer benefits like childcare vouchers, gym memberships, public transportation discounts, pet insurance, statutory insurance and more.
4. Avoid lifestyle inflation
If your new job comes with a bigger salary, it’s tempting to get in the habit of spending more money than you’re used to. Maybe you can finally buy that luxury car or high-rise apartment now, but that doesn’t necessarily mean you should give in to showing off.
If you can stave off lifestyle inflation, you will have more money to direct toward your financial goals, such as building an emergency fund or paying off debt. To trick yourself into ignoring your salary increase, set up your direct deposit so that a portion of your salary goes directly to your savings account before you can even consider spending that extra money.
5. Adjust your budget
When you start a new job, it’s the perfect time to reset your budget (or start a budget if you don’t already have one).
A higher salary means you can set aside more money for savings, paying off debts, or other important expenses you’ve been putting off. On the other hand, if you are now earning less, you may have to clamp down on your spending.
It is also important to note that your expenses may change with your new job. You’ll need to budget more for fuel if you now have a longer trip. Moving from a casual to a formal work environment may require upgrading your wardrobe.
You may find that you can cut costs out of your budget after starting a new job. If your company provides free lunches, you can spend less on groceries and eating out. If they offer financial help to pay off student loans, you can budget less for debt repayment.
Adjust your budget to take into account changes in your income And expenses.
Nicole Dow is a senior writer for The Penny Hoarder.