Congratulations! You got a new job -- and in a pretty bad economy at that. Whether you were unemployed like millions of other Americans and just got a job or you moved from one position into a new one, a new job will be a transition.
These transitions are happening more and more now. Once upon a time, a worker commonly stayed with a company for decades. Not anymore. According to a 2010 report from the Bureau of Labor and Statistics, younger Baby Boomers -- those born from 1957 to 1964 -- changed jobs an average of 12 times between ages 18 and 44. And that trend seems likely to continue, or even intensify.
Ideally, your new job will come with a higher salary than your previous one. However, once you've negotiated a salary and nailed down the job, there are still many more money moves to make. Help make a positive financial transition by following these four steps when you get a new job.
Take Full Advantage of Company Benefits
If your company offers matching 401(k) contributions and you don't contribute to the maximum level, you are turning away free money. Get the full details of the health plan, as the details can make a huge difference. Do they offer dental or vision plans, contribute to a health savings account (HSA) or flexible spending account (FSA) plan or offer gym benefits? What percentage of the health plan do they pay for, and how much will you end up paying a month?
Do they make contributions to pay off student loan payments or offer to pay for continuing education such as graduate school? Do they have free food or drinks in the kitchen? All of this adds value, even if it requires a little work on the side, and it is a free investment in you -- paid for by your employer.
Roll Over Your 401(k)
You might not know it, but leaving your 401(k) with an old employer can subject them to record keeping and management fees that take a significant bite out of the investment returns. Your best bet is to roll the 401(k) over into an IRA or the employee-sponsored 401(k) at your new job.
An IRA can be a good choice if your new employer doesn't have good investment options. However, rolling over into the 401(k) streamlines the process so you don’t have investments in multiple different places. The rollover is tax-free, and you can learn more about in our article, 'Rolling Over Your 401(k) Plan in 5 Easy Steps.'
There's a lot of debate about withholdings. Some people like getting a tax refund. Others see that refund amount as nothing more than an interest-free loan to the government and choose to adjust their withholdings to where they neither owe nor are owed much money when tax time comes.
Whichever one you choose, it's important to make sure that your withholdings are adjusted properly at the new job. There are few things more terrifying than filing your taxes to find out you unexpectedly owe the government money, especially when you expected to get a refund.
TurboTax has a great primer on how to estimate federal withholding. Essentially, when you get a new job, you need to fill out a W-4 form. At that time, you can also fill out a personal allowances worksheet and a deductions and adjustments worksheet, and then estimate withholding using the IRS wage-bracket method. This is a sensible way to make sure you don't withhold too much or too little from each paycheck.
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Revisit Your Budget
When you get a raise, it can be tempting to treat the extra money as a monthly bonus that you can frivolously spend. That isn’t a smart move. A new job is an ideal time to analyze your budget and strategically use the added income.
If you are like most people, you could probably stand to invest some of your extra income on retirement. Perhaps you have other savings goals to work for. Whatever your goals are, you can serve them well by taking a look at a budget and taking control of your spending rather than allowing it to control you.
The Investing Answer: A new job is an opportunity to advance your career, earn more money and even reevaluate financial goals. Don't let the busyness of a new job distract you from making the right financial choices. Make more money, take advantage of company benefits, roll over your 401(k), withhold enough money from your taxes, and don't overspend.