The 5 Most Costly Mistakes People Make When Changing Jobs
Did you know that the average person will change jobs as many as 5 to 7 times in the course of their working life? Some experts even saying that 30% of the United States workforce will switch to a new career every 12 months. With that said, are you aware of the most expensive mistakes people make when changing employment? Let’s take a look at five of the most common financial faux pas.
1. Overlooking the tax implications of your new station
Taxes – the subject we all love to hate. Nothing is as complex as our U.S. tax system and worse yet if you’re considering changing a job or you’re in between jobs, or have recently started your own company. Navigating your way around the tax implications that apply to your new station in life can be an uphill battle. If you’re planning a career move do take time to evaluate what a salary reduction or increase will do to your tax situation.
2. Leaving your pension with your ex-employers pension provider
Your pension is your safety net in retirement. It’s the evidence of your hard work throughout your working years. Regardless of when you decide to retire, you want to know that you will be able to maintain your lifestyle. This will only be possible if your pension is actively accruing enough interest to beat year-on-year inflation. When you change jobs, you need to also move your pension from your former employer’s pension to a place where you’ll get better interest rates and overall service including tailored advice on growing your pension. Don’t make the costly mistake of leaving your pension where it is.
3. Failing to plan in advance for unexpected life changes
Listen, life can be hard. Recessions come and go. Unexpected pandemics like the coronavirus happen and people lose their jobs – in this case – 26 million Americans and counting since the onset of the pandemic. This is the nature of life. Knowing this, knowing that life can be unexpected should be the biggest reason to plan financially and start working on an emergency fund. Failing to plan is simply setting yourself up for a challenging time when hard times hit.
4. Refusing to claim unemployment income benefits
The average American has $38,000 in debt. Without a job, the bills can become crippling. Don’t let pride get in the way of you claiming unemployment income benefits. It’s meant as a cushion to keep you afloat while looking for new employment. There is nothing shameful about claiming these benefits – in fact you would be making a very costly mistake to let go of ‘free money’ that your former employer has been contributing to the state scheme for just such moments. Take it and use it to pay off your bills – mortgages, student loans, credit cards – whatever is draining you financially.
5. Failing to negotiate a favorable severance pay
The shock of being let go can numb and disorient a person. When presented with your severance package, do not rush to sign any papers before you’ve had a chance to carefully read the fine print. Ask for the weekend to go over all the paperwork before you agree to any severance pay. Discuss your severance offer with a financial expert to get a better understanding of what you should ask for. Remember, the first offer isn’t always the best. So take your time in negotiating a severance package that’s in your favor. Failing to do negotiate your severance payout is definitely a costly mistake you’ll regret later on.
Discuss your exit strategy with a financial expert
It is said forewarned is forearmed. We’re living in volatile times with no job security and where you may need to change jobs in the blink of an eye. Don’t wait until you’re faced with a difficult situation before seeking expert financial help. Our team here at Reed Financial Group is dedicated to helping you with your career financial transition process and helping to avoid costly mistakes. With over 20 years of experience guiding investment portfolios and providing advice on retirement decisions, we’re more than happy to consult with you and offer tailored exit strategies.
Contact us for more information.