New Job? Here are the Top 10 ways to get your financial plan in order.

Congratulations! You’ve applied, interviewed, maybe negotiated a few details on your contract, and have finally signed the dotted line on your offer letter.

And then it hits you – changing jobs isn’t easy. Sure, it’s exciting – and certainly worth celebrating! – but it also can be a very overwhelming experience.

Studies suggest that between your mid-20’s to mid-50’s, you’re likely to experience as many as half a dozen job changes throughout your career. And with each new opportunity comes a series of questions: How am I going to be compensated? What benefits does this company offer? How does this impact my long-term goals? How does this impact my family? In a vacuum, you may be able to answer each of these questions without a great degree of difficulty. Where it becomes complicated is when you step back and think about all the different ways your life may change because of this opportunity, and how that may impact your overall financial plan.

If you are starting a new job or considering a career change, this checklist can be a great way to strengthen your finances as you begin your new journey.


Every Dollar Counts

1. Don’t Leave Anything on the Table

One of the most overlooked aspects of changing job is individuals leaving money on the table with their former employer. Make sure when you leave your employer that you have identified the following:

– Your final paycheck;

– Any outstanding bonuses, commissions, or incentives;

– Accrued compensation through unused sick or vacation pay;

– Vested stock options available to you.

2. Set a Budget

It may sound simple, but every job change will come with a number of different benefits options that will impact the net pay you actually receive. After accounting for deductions such as taxes, health insurance, retirement benefits, and more, it is not uncommon for one to see their paycheck look radically different than what they expected. Once you start a new position, it’s important to “recalibrate” your monthly budget to help you stay on track toward your goals.


Understand Your Benefits

3. Cover the Gap

When you change employers, one common mistake is to assume that you’ll be eligible for benefits right away. Many companies require employees to meet certain waiting periods before they become eligible, which can leave you vulnerable to a “gap in coverage.” It’s important to iron out these details before transitioning from one job to the next to ensure you have the right insurance coverage(s) in place.

4. Select a Health Insurance Plan

An “under-the-radar,” but very important decision for any new job is picking the right health insurance plan. Whether you choose to stay on your previous employer’s plan through COBRA, switch to your spouse’s plan at work, enroll in your new workplace plan, or purchase private insurance, it can be really overwhelming to pick the “right” plan for yourself and your family. The reality is that each of these options have several pros and cons, so it’s important to be working with a professional to ensure you pick the plan that is best for you and your loved ones.

– Tip: If you are going to go with either your new employer’s plan or your spouses, keep an eye out for plans that allow you to save in an HSA. More on this in “Planning Ahead.”

5. Understand Your “Other” Benefits

You’ve worked hard and want to protect your income, so it’s wise to evaluate your family’s insurance needs when you change jobs and determine if you are adequately covered. Many employers offer a combination of either life and/or disability insurance, which are often vital pieces in a family’s financial plan.

– Life Insurance: If you are young and have a growing family, it is often the best time to increase the amount of your life insurance. On the other hand, if your net worth has grown and your children have become independent, it may be the right time to reduce the amount of your life insurance. Before pulling the trigger on buying the minimum or maximum amount of insurance available, be sure to speak with a professional who can help determine how much coverage is right for you.

– Disability Insurance: Ask yourself this, “if I were to lose my job today and be unable to go back to work, how would my family pay the bills?” For many of us, it doesn’t take long to realize in that moment how important disability insurance is to an overall financial plan. Make sure to capitalize on any disability benefits your employer offers but know that supplemental coverage may be needed if those options are insufficient.

It’s important to understand that when selecting insurance, albeit life or disability, you are doing so in light of your overall financial plan. Insurance can be a great tool to protect your wealth and hard-earned savings, so be sure to discuss this information with your financial advisor as you are enrolling your new benefits.


Plan Ahead

6. Take the Free Money

If your company offers a retirement plan, consider signing up as soon as possible and taking advantage of any company match that is available to you. As a rule of thumb, it is important to be saving 10-15% of your income for retirement (including company match). For example, if your company matches your contributions by 3%, you should at least be contributing 3%, but it would be wise to contribute 7% in order to bring your total savings to 10% of your income.

Another great savings strategy to consider is the Employee Stock Purchase Plan (ESPP) where you may be eligible to purchase company stock at a discount as high as 15%. Depending on the company and how buying a concentrated stock position fits into the rest of your investment portfolio, this could be a great benefit to utilize. An additional benefit of the ESPP plan is that, unlike a retirement account where you are typically not able to access the funds until later in life, you can access the funds within a few years after purchasing them through your company’s plan.

7. Update Your Investment Strategy

If you decided to enroll in your company’s retirement or ESPP plan, it’s important to consider how those accounts and the underlying investments fit into your overall investment portfolio. For example, if you begin saving all of your money in your 401(k) into the S&P 500 and your company’s stock, it may be prudent to change the investments in your other accounts to international equities or fixed income to add diversification to your portfolio.

– Another terrific savings vehicle that is often forgotten about is a Health Savings Account (HSA). These accounts allow you to save pre-tax dollars into an account and, if used for qualified medical expenses, withdraw the money tax free. If unused, however, companies like Fidelity and the HSA Authority will allow you to invest your money in a manner very similar to your other investment account(s).

8. Take Control of Your Old 401(k)

When you change jobs, it’s important to come up with a plan for what to do with your old 401(k). This account makes up the lion’s share of many people’s retirement savings, so you should always weigh the pros and cons of your options and find the one that makes sense for you. Here are the four choices to consider:

– Keep your 401(k) with your former employer (if possible);

– Rollover the money into an IRA;

– Rollover the money into your new 401(k) plan; or

– Cash out.

There can be arguments made for/against each one of these options. What you ultimately have to decide is how this account is going to fit into the rest of your investment portfolio and get you closer to accomplishing your financial goals.


Know Your Tax Bill

9. Tax Impact of Your New Job

Whether you’ve accepted your dream job or are in the midst of a career change, leaving a job and starting a new one can create a number of implications for your personal taxes. If you are fortunate enough to be “climbing the ladder” and increasing your household income, be mindful of how this change in compensation will affect your tax bracket moving forward. Alternatively, if you have experienced a gap in employment, you may be able to capitalize on temporarily being in a much lower tax bracket. Tax planning may not be as exciting as talking about one’s investment portfolio, but if properly managed, it can make a significant impact on your financial situation.

10. Withholding Elections

It’s a fact: Most American’s take out too much of our paychecks. On average, the IRS send out an estimated 100 million tax refunds per year, but why give them more than you need to? This change offers you a fresh start to get your tax withholding details in order moving forward. When you begin your new job, you will have the opportunity to complete a new Form W-4, which allows you to select your withholding amounts. Our recommendation is to work closely with your financial planner or tax professional to ensure you are not over/under paying your taxes in your new role.

If you have questions or want to understand all of your options, it is our recommendation that you work with a financial professional to help get the answers you need. Our team at Mills Wealth Advisors is dedicated to serving individuals and families as they gain financial independence and welcome you to meet with us if you would like to learn more.

Jim Davis, CFP® | Financial Planner | Mills Wealth Advisors, LLC | 817.416.7300