Leaving a job? You probably need to revisit your finances to put yourself in the best financial situation possible. People leave jobs for different reasons. Some leave for new roles, ready to seek fresh opportunities. Some leave to start their own businesses. Others leave to take time off (either temporarily or indefinitely). Sometimes it isn’t your decision. Anytime you leave a job, you should consider how it will impact your finances for the foreseeable future. Here are some helpful financial tips when leaving a job to help you develop a basic game plan as you consider your next steps.
When you’re leaving for a new role
The US Bureau of Labor and Statistics estimates that workers now change jobs an average of 12 times during their careers. With job-switching more common than in previous generations, it’s important to ensure a smooth transition and maintain your financial balance.
When leaving one company for another, keep track of your retirement accounts from the company you are leaving to make sure these accounts stay on your financial radar. Some people like to consolidate their savings and retirement plans after each job by rolling them over into a single account (like a rollover IRA) to make things easier to track.
When considering benefits at your new company, take advantage of what is offered. Then, double check that you have enough life insurance and disability coverage to protect your family in case of emergency. Many companies only provide a small amount of life insurance coverage that may not be enough to cover all of your family’s needs. It can be wise to get additional individual coverage to ensure you have the financial safety net you need. This additional coverage can also stay with you wherever you go, whereas life insurance through an employer terminates when you leave that company. This can put your family at risk if something happens unexpectedly.
When you’re taking some time off from the working world
If you’re taking a break to just “be”, make sure you have enough money saved to be fiscally self-sufficient, especially if you will be reliant on only your own savings and not a partner’s income. It’s also wise to consider health insurance and life insurance coverage so you and your family are protected during this time when you are not contributing income.
When you’ve been laid off
Going through a layoff is never fun, but in some industries, it’s almost a rite of passage. Some financial tips when leaving a job due to getting laid off are to file for unemployment benefits, review your health insurance options, and outline your expenses for the coming months.
Requirements for unemployment vary by state but you can contact your state’s unemployment office to determine eligibility and find out what records you need to provide to apply for benefits.
Next, check on your health insurance options. The HR department of your company should have information on grace periods, COBRA and potentially state health care options like Medicaid or coverage available on the Affordable Care Act marketplace. Do you have a spouse who is employed full time? You can also check to see if there is a special enrollment period where you can be added as an insured.
Finally, outline what your expenses are for the next 3 to 6 months and see if you have enough money saved up to cover them. Then, see if there are sources of income you can identify that will fund your living expenses and make a budget to keep your spending within reason until you can find a new job. If you need to cut expenses, consider what is essential versus a “nice to have” (subscriptions and memberships often fall into the latter category and can be reactivated when you have more income).
Getting a part time job or getting financial assistance from state programs are also options to consider as you get back on your feet financially.
Transition your benefits wisely
In closing, when leaving a job, consider the insurance, savings and retirement benefits you’ve had while at the company so you can figure out the best transition possible to optimize your financial plans.
Being without health insurance is a huge risk, especially if you have dependents. Consider taking advantage of COBRA. It allows you to pay to continue your health care coverage for a specified period of time after leaving a job.
(It’s important to note that COBRA is a health insurance coverage program and may help subsidize the costs of prescription drugs, dental treatments, and vision care. However, it does not include life insurance and disability insurance.)
While most employers provide some basic life insurance coverage, it usually terminates when you leave their employment. So, if you were relying on your job for life insurance coverage, keep in mind that means you and your loved ones will no longer have life insurance coverage and may be at risk. You can get your own life insurance online to make sure you are financially protected.
Did you have retirement or savings benefits, like a 401k? It’s a good idea to note the provider, confirm how to access your latest info and decide if you want to roll the plan over or consolidate it with savings from previous jobs
While you may find yourself asking, “is life insurance worth it?” (and what’s the average life insurance payout?) taking a deep breath and considering these financial tips when leaving a job will help set you up for success as you consider what’s next in your journey.