So your dream job didn’t work out.
Maybe you had a change of heart. Maybe your life circumstances changed. Or maybe you never even got the job. Indeed.com estimates that between the ages of 18 to 24, the average American changes jobs about 5.7 times, and they change jobs an average of 2.4 times between 25 to 34 years old. So if you’re in the middle of a job transition, you’re in good company.
Still, transitioning from one job to another can be a stressful time no matter the reason, especially for those who may be transitioning from the public to private sector, or vice versa. No matter if you’re about to start the transition from one job to another or if you’re still looking for your next career move, there are a few things you can check off your financial to-do list in the meantime to make sure your job transition doesn’t wreak havoc on your financial life.
How to Financially Manage a Job Transition
1. Build an Emergency Fund
Building an emergency fund is a great first step when you’re transitioning from one job to another. Doing so can give you a better idea of your financial situation and if you have enough savings to cover an emergency (such as your job transition taking longer than expected). Most experts advise you have at least six months’ worth of expenses saved up.
2. Use Vacation and Sick Days
According to Expedia’s 2021 Vacation Deprivation Survey , Americans took the fewest vacation days (eight, on average) out of 16 countries surveyed. So if you’ve accumulated any vacation or sick days, check with your HR department to see if you can cash them in. Many companies pay exiting employees a preset rate for unused vacation and sick days, as outlined in their contracts.
3. Take an Honest Look at Your Finances
Is buying locally important to you? Does your gym membership help you feel healthier, both mentally and physically? You’ve heard the adage that nothing is free, so take a deep dive into what you’re spending your money on and ensure that discretionary spending matches up with your values, life goals, and your budget.
4. Look for Easy Spending Cuts
When was the last time you actually read that knitting magazine? Are you ordering food delivery for every other meal? Take a look at your credit and debit card charges and pick off the easy things that you don’t need to be spending money on. This could be a quick way to build a cushion in your budget during your job transition.
5. Fend off Lifestyle Creep
If you’re still getting a coffee every morning even if you’re not going to work, you may have fallen victim to lifestyle creep. You can look for easy fixes, such as buying a coffee maker, to hedge against it and build better financial habits even after your transition from one job to another is complete.
6. Don’t “Orphan” Your Retirement Fund
Many people abandon their 401(k) after they leave a job. That is, they assume the account is owned by their ex-employer, and by quitting they’ve forfeited their funds. However, the money that you contribute to a 401(k) stays with you even after changing jobs. So you may want to check into your current or former employer’s 401(k) policy for insight on how you might claim these funds or roll them over into a new retirement account.
7. Combine Your Retirement Accounts
Do you have multiple retirement accounts? Now may be a good time to review your account details and decide whether it makes sense for you to consolidate your retirement accounts.
8. Create a ‘Career Change’ Budget
Once you have a better idea of what your expenses will look like as you transition from one job to another, it may be time to create a career change budget. This can be a temporary budget that’s adjusted for the period of time between now and when you start your next job. If you don’t currently have your new job lined up, you can still use a temporary career change budget as a starting point to test out potential permanent budget changes, such as cutting streaming services.
9. Do Your Homework
No matter if you’re just started a new career or if you’re still looking for one, now may be an ideal time to delve into your new industry’s average salary expectations. Being armed with this information could help you know your worth and provide data points to help you negotiate your starting salary, bonuses and reach your financial and career goals.
10. Make Money off Your Passions
Do you love gaming? Or maybe you have a passion for making candles or pottery. You may be able to make some side cash streaming on Twitch or selling goods on Etsy. Doing so may help you relieve stress since you’re doing something you love while also bringing in a few extra bucks.
11. Check Your Health Insurance Options
In the U.S., most health insurance options are tied to your jobs. As such, a job transition may be a good time to see what your insurance covers or even if you need less or additional insurance. Researching what type of insurance options are generally offered in your new career may also be beneficial.
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12. Keep Extra Cash in Your Bank Account
Do you usually only keep a couple hundred bucks in your checking or savings account? Having extra money in your bank account during a job transition may be wise. If you have a new job lined up, you may have to go longer than usual to get your next check, such as getting paid monthly instead of bi-weekly. And if you don’t have a job quite yet, keeping more cash in your account than usual can save you from hefty overdraft fees.
13. Cash in on Networking
Most people don’t have a Rolodex anymore, but they do have a network of professionals they’ve accumulated throughout their career. Now may be a good time to log into LinkedIn and send some messages to people who may be able to help you get a job. You could also invest in online courses on sites like LinkedIn and Coursera that are related to your new career, especially if you don’t have much experience in the career you’re transitioning into.
14. Invest in Networking Events
Even during COVID-19, you can find a plethora of networking opportunities both in person and online. While some of these won’t be free, they still may be a wise investment to not only help you learn about your new industry, but also to meet new people who could open doors for your career. As such, networking can be a great financial move while you transition from one job to another.
15. Keep Track of Work-Related Expenses
If you do attend networking events or pay for industry-specific training or webinars, you may want to keep track of these expenses. You may be able to write off work-related training and other expenses during your job transition, especially if you’re a freelancer or contract employee.
16. Use Extra Time To Learn about Investing
Do you not know what a blue chip stock is? Or maybe you’re confused about the differences between stocks and bonds. Leveraging your time during a career transition to decode investing could help you learn how to make smart investment moves that your future self may thank you for.
17. Re-evaluate Your Savings Accounts
You may be surprised at the number of savings accounts you actually have, be them health savings accounts, high-yield savings accounts, money market accounts, CDs and yes, even your 401(k). Before transitioning from one job to another, you may want to ensure you have a handle on your current savings accounts and how they may be affected by a career change, especially if your income level is likely to change.
18. Purchase or Update Your Life Insurance Policy
Because different industries have different levels of risk and danger, your life insurance offerings may change during a job transition. Knowing what your life insurance needs are and how they may change in a new career could help you save money if you start researching and comparing insurance options now.
19. Set Up Automatic Payments & Transfers
Got a late fee because you forgot that credit card bill was due last Thursday? You can avoid these fees by setting up automatic payments. You can also set up your bank account to automatically transfer funds to another account, such as a savings account, on pay day. Of course, you only avoid a fee, though, if you don’t overdraw your account, so you may want to make sure you’ll have the funds available before setting up automatic payments or transfers.
20. Deal with Debt
Student loans, credit card balances, medical bills, car loans, mortgages: It’s easy to build up debt, but it’s not-so-easy to tear it down. If your student loan interest rates are soaring higher than your income, it may be worth checking into student loan refinancing options. Debt consolidation may also be worthwhile if a budget overhaul isn’t enough to put a dent into your debt. Having less debt going into your new career could relieve some of your financial stress as you wait for that first check to come in.
21. Consider Getting a New Credit Card
While it may not seem like an obvious option, applying for a new credit card during a job transition could make sense for you. Having more lines of credit could help you build your credit score (as long as you pay your bill, of course!) It could also help you make ends meet in the short-term, especially if you take advantage of cashback bonuses or other credit card rewards.
22. Re-Evaluate Your Financial Goals
Don’t like the idea of having a furry friend anymore after hearing about that big vet bill your friend just paid? Maybe you want to move that pet fund into a travel budget or prioritize paying off your student loans instead. You may want to use your time now to reevaluate your financial goals so you know what you’re saving for once you start your new career.
23. Evaluate Your Housing Situation
Many early career professionals are eager to stake down their roots and buy into that American dream of a white picket fence and a big backyard. But a big backyard doesn’t come cheap (and neither do white picket fences). If you’re living in a big city studio apartment but your job transition could mean you work remotely or in another market, it may be worth the savings to break out your moving checklist and head for cheaper horizons. And if you’re not ready to give up your expensive apartment just yet, you may want to consider roommates or even renting out your cool pad on Airbnb when you’re away.
24. Check in with Financial Mentors
Nothing in this world is free … or is it? Maybe you have an investment-savvy uncle or a friend who works in accounting. Asking a trusted financial mentor or friend for advice may be the closest thing to free financial guidance you can get; however, you may want to be sure you really trust this individual with details about your financial life and take their advice with a grain of salt.
25. Consult an Expert or Two
While your friends and family could be a good place to start, a financial advisor could help you make the most out of your finances during a career transition. An advisor could help you learn more about how to adjust your financial situations if your new career path changes your income, be it lowering or raising your expected income. Being prepared for a change in income before it happens could help you create a budget ahead of time so you’re not scrambling to adjust after that first paycheck clears.
Transitioning from one job to another can be stressful, especially if you’re unsure of when your net paycheck will be. However, there are several money moves you can make during a job transition to help yourself both now and in the future. A major life event like transitioning to another job is a good time to take stock of your financial situation and reevaluate your budgets and money goals.
If you need a tighter grip on your funds during a career transition, signing up for a new bank account with SoFi Checking and Savings could be part of your financial checklist. Its mobile interface literally puts cash management at your fingertips and there are zero account fees. Plus, SoFi Checking and Savings holders get access to free one-on-one career services to help with career transitions.
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