There are a lot of words that can be used to describe 2020. One word that jumps to mind is pivot.
Through conversations with friends and clients, I’ve found a common theme of people pivoting during this pandemic in a new direction. Planned or unplanned, I have seen and heard some really powerful stories of how people have pivoted and are thriving as a result. My personal favorite example is that my parents up and bought a vacation home down South fulfilling a life-long financial goal of theirs. I have another friend who is in the fitness world and is on the cusp of taking her fitness program full-time as a result of the increased demand for at home workout solutions.
I get that not every pivot story has a happy ending but for those of you who know me, know that I am always looking for the silver lining. I recognize that many have been forced to pivot due to job loss, lack of childcare options, the need to care for family members and many more reasons. Being one that likes to focus on those silver linings, I have enjoyed seeing the outpouring of support for these families across communities.
In my town, we put on a Community Meal that provided dinners for families in the community every Thursday. Our town was one of many across the Chicagoland area to host these meals and I was humbled to be part of a team that served thousands of families in need in any given week. Looking to the online community, I have been amazed by individuals creating and sharing resources to help those displaced from work. There are a few people in network that have really stepped up to the plate offering to review resumes, make connections within their workplace or hosting mock interviews. One person that comes to mind, Kelly Nash, over at the Lipstick and Ink has created this tremendous resource for folks on the job hunt. She and others in the online community, are sharing their incredible gifts to help those who have pivoted this year and it’s inspiring.
While I don’t have those same gifts, I literally had a conversation with my brother on his career and he ended up quitting his job the next day (not the desired result), I can help with the personal finance aspects of the pivot. This guide has been designed, at a high level, to walk you through the personal finance considerations of starting a new job, beginning with the exit from your old employer.
Have an Emergency Fund
Another word that could be used to describe 2020 is uncertainty. While yes, it has been amplified this year, I would argue that life always contains uncertainty and that people should plan accordingly. One way to be proactive with your personal finances is to set up an emergency fund. An emergency fund is there to cover unexpected expenses or unsupported expenses that can come from job loss or during a time of transition.
To Roll or Not to Roll
One of the first decisions you will be faced with after leaving a job will be how to handle your old employer 401(k). There are a handful of options to consider and this post will walk you through the pros and cons of each option. The most important note here is to understand all your options before making a decision.
New Employer Benefits
Fast forward to the first day at your new job, you should be prepared to make some decisions on your new employer benefits. These benefits range from health care to life insurance and in some cases, a retirement plan. If you are fortunate enough to have access to a 401(k) retirement plan, be sure to check out this post that walks through the important terms you should know. You’ll need to decide if you want your contributions to be pre-tax or post-tax and how much you’d like to contribute. If the plan is to “max out” your contributions, you can check out this post to determine how much to set aside each paycheck.
Crunch the Numbers
A new job often translates into a new paycheck. Regardless if this number goes up or down, a new job is the perfect time to revisit your cash management plan a.k.a budgeting. If you were fortunate enough to get a raise, consider using the additional cash flow to:
- Increase 401(k) contribution
- Increase H.S.A contributions (if applicable)
- Contribute to a Roth or Backdoor Roth IRA
- Top-off Emergency Fund
- Revisit Sinking Funds
- Open a Taxable Account and Invest
Pivots, planned or unplanned, can be exciting and overwhelming at the same time. If your most recent pivot is a new job, I hope these posts serves as a trail map for this new journey. If you have questions specific to your situation, feel free to reach out.