Common Mistakes To Avoid When Starting A New Job
July 10, 2018This month marks my 2-year anniversary of joining Financial Finesse. Prior to making the move, I was with my previous employer for 17 years. It was my first change in employer since college. While I am a seasoned veteran at my job, I was a rookie at changing companies.
Transitioning from one company to another can be an exciting time but it also presents many opportunities for costly financial mistakes. Here are some areas you will want to focus on if you recently made a change of employer.
Common mistake: lack of budgeting for new cash flow
There is nothing more fundamental to your finances than your cash flow. Understanding the method in which you are paid is essential to your budgeting habits. While most job changes are made to increase cash flow, you have to plan for how it may differ from the previous employer.
You may be switching from a company that paid biweekly to now getting paid bimonthly. Or there may be a lag between your starting date and your first paycheck. In my case I went from a job that was primarily salary based compensation to a job that had a larger performance based component.
We had to readjust our monthly budget to accommodate for those changes. We adjusted to using the performance based compensation to save for our “big wants” like vacations, which freed up the regular compensation for our week-to-week needs.
How to avoid it
If you’re fortunate enough to receive a signing bonus, don’t “pre-spend” it, but instead keep it on hand for the first couple months in case you need to adjust to a change in cash flow. If you don’t receive a signing bonus, try to cut back on spending for a few weeks leading up to your job switch so that you’ll have an extra cushion.
Common mistake: choosing the wrong health insurance
When changing jobs mid-year, you have an opportunity to re-enroll for health care. Even if the coverages are administered by the same provider, the coverage options can still differ greatly. In our case the insurance company remained the same so there were a lot of similarities all the way down to the insurance cards looking the same, but when we looked under the hood the coverage was different.
How to avoid it
Be sure to download your coverage details from your former employer and compare it to your new company’s offerings. Get the information from your new plan options to make sure your preferred doctors and hospitals are available in the plan you are choosing, even if you are staying with the same insurance company.
Common mistake: keeping your retirement planning on auto-pilot
Not all retirement planning benefits are equal, so it is not safe to assume you should contribute to your retirement plan the same anywhere you go. Before you just go with the default at your new company, take some time to understand how the new retirement plan works.
How to avoid it
Get the match – At the most fundamental level, you need to understand if your new employer offers a match and when you are eligible to start receiving that match. This ensures you are not leaving free money on the table.
Pick your investment – Next up review your investment options and choose one. I have seen cases where no investment choice was made and the default option wasn’t the best fit. If you are unsure which investment is the best fit, many plans offer several hands-off investment options.
Pre-tax or Roth – Your new plan may also offer options that may not have been available at your previous employer like Roth 401k and after-tax savings. There are resources that can help you determine which option may work best.
Common mistake: missing out on unique benefits
Perform a deep dive into your benefits beyond the basics. Sometimes you can find hundreds of dollars of savings in your employee benefits, but you have to take some time to read up and maybe do some digging.
Here are some examples of unique benefits you may want to explore:
Student loan assistance – Some employers aid with managing your student loans. Some programs offer to pay a portion of your loan after a reaching a certain level of tenure. Other companies offer student loan experts to help you refinance.
Legal benefits – If getting a solid estate plan in place is one of your goals, investigate your new company’s Employee Assistance Program or EAP. These programs sometimes offer free legal document preparation software. They also may offer discounts on local attorney services.
Your company may also offer a pre-paid legal program that will allow you to have the cost of will or a trust covered by you making small monthly payments. In many cases you can enroll in the program with a single year’s commitment and have a large amount of legal work done at a significant discount than you would pay otherwise.
Financial wellness benefits – Last but certainly not least, your company may offer financial wellness benefits. I spoke to someone recently who said they were having a hard time finding a financial advisor that would help them with their plan to pay off debt but had just learned that their company added a Financial Wellness benefit. She was excited because her family has likely saved hundreds of dollars because of her company’s benefit.
How to avoid it:
Take some time in your first 60 days or so to peruse your company’s benefits website and/or brochure. Ask around to see what benefits your colleagues value the most. Finally, when the annual enrollment period rolls around, don’t just go on auto-pilot — it’s a great chance to assess whether you made the best choices and to switch things up as necessary. Your employee benefits are a valuable part of your compensation, so make the most of them.