Whether you’ve just accepted your first job out of college or are a workforce veteran changing from one line of work to another, career moves can have a big impact on your finances. But first take a moment to celebrate, of course. You done good! Next, make sure you are financially prepared to make the transition. Carefully review what your new job offers in terms of salary and benefits. You also need to be realistic about your spending plans.
For example, Harinee Ravishankar, CPA, who recently left her job in audit at an accounting firm to become a senior analyst at an asset management firm, anticipated spending more money. With her new role being much busier, she plans to “outsource tasks I have less time for,such as grocery delivery, hiring cleaners, and eating out more–basically paying more to buy time for myself,” she says.
To ensure a smooth job switch, consider the following questions as you financially navigate a career change:
1. Where will you be working?
Are you staying in the same city, town or neighbourhood, or do you have to relocate to be closer to your new job? Will you be working remotely or needing to commute? Are there considerations due to the coronavirus pandemic that could affect how much you spend? You may save money on transportation if you no longer need to commute to the office, however, you may need to spend some money on a home workspace, such as a desk, chair, computer, or monitor to make it more conducive to a day of work.
2. Will you have to update your skills?
You may feel the need to take some online courses to bridge any potential knowledge gaps moving into a different job in a different industry. Online learning is both flexible and cost-effective and can help you gain the skills and insights needed in a competitive job market. Coursera, for example, a world-wide online learning platform, has seen an eight fold increase in enrollments for certain courses since the start of the pandemic.
3. What impact will the new job have on your current lifestyle?
Does your employer have a different dress code, requiring you to add to your wardrobe, or will you just need a “Zoom shirt”? Will you be going out more for dinner or after-work drinks, taking into account current social distancing restrictions? Now is a good time to review and update both the essential and non-essential items in your budget. If you don’t expect your lifestyle to change and your new job pays more, you should be able to save more.
4. What are your goals and have they changed with your new job?
Revisit your goals and consider increasing the amount, if any, that’s going towards paying down debt. If you’re saving for retirement or for a home, consider increasing the amount of your savings. And, if you haven’t set up an automatic transfer for your savings account, do so to ensure you stay on track. You don’t have to cover for everything in your life—you’ll have different priorities as time goes on—just try to strike a balance.
5. Should I save up an emergency cash cushion?
Economic instability as well as personal, unexpected events drive home the importance of having an emergency fund, which are liquid savings that typically cover three- to six- months of expenses. One-third of Canadians don’t have an emergency fund, so if you fall into that category, consider making it a priority. “When you take a new job, and even more so during a pandemic, there’s a lot of uncertainty, especially if the role is different from what you’ve done before,” says Ravishankar. Right now, her emergency fund has six months of her previous income, which wouldn’t cover the cost of her new lifestyle, “including the higher rent to live downtown,” she adds. “My current short-term financial goal is having an emergency fund set up with six months of the new income to keep up with the ‘lifestyle creep,’ ” says Ravishankar.
6. What does your new job offer in terms of benefits?
If your new employer’s benefits package is more generous and covers things like prescription eyeglasses, dental visits, or gym memberships, adjust your budget accordingly. If it covers less, your out-of-pocket expenses for health and wellness may go up. So try to look for other ways to save, like working out online at home. If you have to drive your car for work, ask if you can get a mileage allowance.
Finally, don’t leave money on the table. If your new employer offers a pension plan or a RRSP (Registered Retirement Savings Plan) matching program, try to take advantage of this opportunity to boost your savings. If you need a little help, try a free budgeting tool like the Take Charge Money Manager™, which can help you set up monthly budgets. A quick chat with a financial expert can also set you on the right track.
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Coast Capital® Savings Credit Union provides service and advice related to deposit, loan and mortgage products. Coast Capital Financial Management Ltd. provides service and advice related to insurance, segregated funds and annuities. Worldsource Financial Management Inc. provides service and advice related to mutual funds. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the Fund Facts before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation (CDIC) or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently and past performance may not be repeated.