Smart Financial Moves to Make When Starting a New Job
Starting a new job gives you the chance to build new habits and create a better future for yourself — professionally, personally, and financially. Beginning a new position can make you feel like you're on top of the world. You may be celebrating a higher paycheck or a better job title, or you may be happy that a stretch of unemployment has come to an end. If you harness your positive feelings about your new job and apply that energy to making some smart choices with your money, you can make strides toward financial wellness.
Take Care of Benefits
First, sign up for your employer's 401(k) plan, and review the investment options. Your employer may have selected a default fund for you, so you'll need to decide if you want to keep that or switch to one of the other choices. Find out how much you have to contribute to qualify for an employer match. Open either a traditional or Roth rollover IRA, but remember that if you open a Roth IRA, you'll owe taxes on the amount you put in. Request that your previous 401(k) transfers into your new rollover account, and then select your investments.
Sign up for any insurance benefits you're now eligible for, such as disability insurance, life insurance, dental insurance, and health insurance. Did you have COBRA coverage while you were between jobs? Cancel it once you have insurance through your new employer. If you've been enrolled in an individual plan through the HealthCare.gov Marketplace, you'll need to log into that account and notify the Marketplace that you're now covered through your new job. Remember that your eligibility for subsidies on the Marketplace ends once your employer offers you health insurance, so don't put off canceling your individual plan or you could be charged the full, unsubsidized premium.
Get Set with Savings
Create a budget with your new income. Make sure you include major expenses like rent, transportation, and utilities, and then plan to put some money each month toward your retirement account. Sticking to a budget is a bit easier when you have dedicated savings and checking accounts for different categories. For example, you could open a checking account for groceries and daily spending, and open a savings account to start preparing for a trip next summer. Sign up for direct deposit so that your money automatically goes into your accounts each pay period.
Replenishing or reestablishing an emergency fund should be the next order of business, particularly if you were out of work before you found this job. A typical unemployment spell lasts several months. According to the Federal Reserve Bank of St. Louis, the average amount of time it takes an unemployed person to find work was about 22 weeks, as of February 2019. It's hard to be unemployed that long without spending a portion of your emergency savings. Going forward, dedicate some of your earnings to savings each pay period, and make sure your emergency fund is in an account that pays a competitive interest rate. Consider moving savings into a money market savings account so that you can earn a higher return once you meet the eligible balance.
Check Your Credit
It's wise to check your credit report during major milestones such as starting a new job. This is especially important if you were unemployed before you took this job or if you've relocated; it's easy to miss some bills in the stress of a job search or move. Visit AnnualCreditReport.com to request a report, and make sure there aren't any unpaid items on your record. If you find anything that looks like a mistake, dispute it.
Have you put off getting a personal loan because you didn't have enough income?
Now that you have a new salary number, you may be in a better position to qualify for a good rate. It's also time to let credit card issuers know about your new salary by updating your income information in your online account or by giving them a call. Ask if your new income level entitles you to a credit line increase. Even if you don't plan to put purchases on a credit card right away, raising your credit limit improves your credit utilization ratio, which boosts your credit score and gives you a better chance of qualifying for loans in the future.
Starting a new job is, in some ways, an opportunity to wipe the slate clean and make new choices — but it's only the beginning. Maintaining financial wellness isn't a one-time task. Keep putting your healthy financial habits into practice by budgeting every month, regularly contributing to your new retirement plan and savings, and continuing to monitor your credit.