New Year, New You, New Job?

3 Financial Considerations Before You Make The Leap

Whether you’re starting your own business, changing careers or , you may be presented with a bump in pay or the tough choice of taking a step back in salary. Before you take a leap of faith I want to give you 3 financial considerations because hindsight can be 20/20. Don’t worry, I got your back!

Monthly Cash Flow

The first thing to consider is the pay increase or pay cut you’ll be taking. I often hear people say they'll save more money when they're making more money. But more often than not when you start making more money, you find ways to spend it- I'm totally guilty of this! Here are some examples, you move into a nicer place or get the new car you’ve been waiting for so, the list goes on! Any time you have a change in income, it’s a great practice to pause and look at your monthly spending and set guidelines on what you’ll do with this extra income. Click here to find out more about spending guidelines.

It’s not uncommon for people to shift careers to find new satisfaction or explore areas of fulfillment. If you’ve decided on a career shift that will require you to take a step back in income, even if temporarily, make sure you have a cash buffer. Once you figure out what you typically spend each month, set aside 3 to 6 months worth of your expenses in cash. That way, when you run into unexpected expenses you have cash to pull from and won’t need to rely on credit cards to hold you over.

Industry trends

We are still in the middle of a global pandemic and while certain industries are growing, these are unprecedented times. While a pay raise or a fulfilling job is enticing you should ask detailed questions before you take a new gig. Do your due diligence on industry trends and specifically on this new company. Here are some questions to consider:

-Why is this position open? Did someone leave? How long has this position been around? Is this a newly created position in response to the pandemic?

-What is the 1,3,5 year trend for this position, for example, is this job positioned for growth?

-Is there room for advancement and what’s a realistic time frame?

-What is the average tenure of people in this department or area of the company?

I would also explore industry challenges your new company will face and if they’re poised to excel from what you can tell. Will you be on the ‘expense’ side of the company and potentially on the chopping block if profitability is down for 2 quarters in a row? A new job is exciting but this is time to keep it real. It’s easy to get swayed by bright and shiny objects, am I right?!  

Benefits package – insurance, retirement, paid time off

You know you’re adulting when you perk up at the sound of good company benefits. If you’re getting a pay raise, you want to compare the benefits package. For example, let’s say your new potential employer offers higher pay but limited benefits. You may have to pay more out of pocket for health insurance or not have the benefit of a matching 401(k). You want to do an apples to apples comparison because after you pay for these benefits, you may be losing money on the new gig.

At the end of the day, if it’s the right job this could be a great move. You just want to know all of this going into it so you’re not catching any surprises by month 2. If you’re going out on your own and won’t have access to a benefits package, you may want to create a buffer for healthcare expenses before you take the leap into entrepreneurship. For example, if healthcare premiums will run you $500 a month, set aside $6,000 ahead of time so this isn’t added stress or pressure each month.

My final thought, there’s only so much research you can do before you have to just live life. So do your due diligence, prepare for the unexpected and trust your gut. As long as you run through these considerations, you’ll be able to walk into the new gig with a swagger you didn’t know you had! And yes, if it’s a virtual first day, you can totally do a slow walk from the back of the room to the camera. It’ll be a hit. Or be really awkward. Either way, people will be talking about you from day 1!