Financial Considerations When Changing Jobs

Changing jobs is a significant life event that often comes with excitement, new opportunities and challenges. Whether you’re looking for better opportunities for growth, work-life balance, or a new industry, it’s important to make informed financial decisions during this transition. This article covers some of the financial considerations you should keep in mind when changing jobs to set yourself up for success in your next chapter, plus some other general tips.

Optimize Your Finances

Before making a change, it’s important to assess how this change will impact your current financial health. Below are a few helpful tips for this:

  • Assess your overall financial situation. You may be quitting your job for a myriad of reasons, but it’s important to know where you stand before determining where you should or can go. Take a look at your retirement accounts, savings accounts and budget to make sure you’re prepared before making any big decisions.
  • Consider your 401(k)
    1. Max out your 401(k). There may be a few months or longer when you can’t contribute to a 401(k) since you may not be able to enroll in your new employer’s plan right away (the maximum waiting period is 12 months). If you have excess cash flow, you can increase your 401(k) contributions in your last months of work in order to hit the contribution limit and lower your taxable income, or more importantly capturing more of your employer match (if applicable).
    2. Check your vesting schedule. If some of the money your employer has contributed to your 401(k) hasn’t vested yet, it may make sense to wait it out a bit longer to capture those extra dollars.
    3. Compare employer match options. If you’re changing jobs for a higher salary, how does the new employer match structure compare to your current one? Does this offset any of the pay increase if that is your primary goal?
  • Consider other monetary benefits.
    1. Employee stock options or grants. Timing can be important here since you may have vesting schedules for these benefits that may make sense to wait out.
    2. Timing is also important when considering bonuses. Are you giving up a large sum of money by quitting too early?
    3. Understanding compensation. Make sure you are accounting for ALL of these benefits when you are comparing compensation packages.
    4. Use up PTO. Do you have leftover paid time off that you should either use up or get paid out for?
  • Think about cost of living. Will you be relocating somewhere where your cost of living will be higher or lower? This is particularly important when thinking about higher or lower paying opportunities.
  • Secure loans for big purchases. When getting approved for a loan, banks want to see proof of your income. If there might be a gap or drop in income, it makes sense to get preapproved for a loan before that happens. The only time this doesn’t make sense is if you are about to receive a big pay bump.
  • Make sure you have login credentials to your company-sponsored financial accounts. If your company uses a VPN or password manager, you may lose access to some of these accounts. Make sure you store your credentials somewhere so you can still log in after you leave.

Optimize Your Healthcare

Another important consideration when changing jobs is healthcare. How much do you pay under your current job? Will you be immediately switching to another job that offers healthcare? How will your costs change? If you’re going to be self-employed or take time off from working, have you looked into what your options are and if you can afford them? These are all important questions to be asking yourself, along with a few helpful tips:

  1. Quit in the first few days of the month. At most companies, healthcare benefits stay active through your last month of employment, even if you quit on the second day of the month.
  2. Get the most out of your existing healthcare. Scheduling your annual physical, getting your flu shot, having your teeth cleaned, etc. You essentially already paid for all of these things with your premiums, so make sure you’re getting your money’s worth.

Optimize Your Life

  1. If you use a work computer, make sure you get copies of any personal data or files you may have on there and delete anything you don’t want other people to see before giving it back.
  2. Copy any important emails to your personal email. You may have some personal things on your work email you want to keep before you leave. If you’re leaving your employer on bad terms, you may want to keep documentation on tensions or conflicts to protect yourself in the future. Of course, make sure you’re not sending any information you’re not allowed to take with you when you leave your current job.
  3. Change account logins that you’ll be keeping that use your work email address.
  4. If taking time off between jobs, it may make sense to quit in January so that there aren’t obvious employment gaps on your resume.

Regardless of why you are leaving a job, it’s important to cover all your bases to make sure you’re making the best decision for you and setting yourself up for success in your next chapter. You should understand where you stand financially, how leaving your job could change this, and strategize to get some benefits before you go. While this is not an exhaustive list, as financial planners, we want to help our clients make the best decisions. Don’t hesitate to reach out if you have any questions about this article and feel free to pass this along to someone you know who may be considering a job change.


Presented by Elizabeth Schleifer, CFP®