A shake up in your employment situation like getting laid off, changing companies or switching careers can be a stressful and scary event. So many questions surface. What are you going to do next? Where do you begin to find a new job? Is this even the field you want to work in? How are you going to pay your bills and what about health insurance?
Know this, you aren’t alone. Almost everyone has gone through an employment altering situation before. It is nothing to be embarrassed about and it doesn’t have to be something you work through alone.
Here are four steps that help ease employment transitions.
- Use your network
Your friends, family, and old colleagues will be your best assets during this transition. Reach out to your network to find connections at companies you may want to work for. Your network can help you learn about the company, guide you on whether it will be a good fit for your skill set, and possibly introduce you to a hiring manager. Start with your LinkedIn network and gather names of second and third connections you’d like to meet. Be clear about what you are looking for when meeting with these new connections over a coffee.
- Budget, Budget, Budget
You’ve always heard advisors like me talk about having a 3-6 month emergency fund; now’s the time to put this to use. Look back at your last three months of fixed expenses, items like your mortgage/rent, car payments, phone bills, electric and water bills and normal grocery spending to get real numbers on how much money you will need while you are managing your job search. Keep that money aside in your savings or checking to make sure you can at least keep yourself afloat. If you don’t have an emergency fund, knowing how much you need will allow you to plan your next step.
- Manage your retirement assets
If you don’t have an emergency fund, you may be looking at your retirement account as a source of funds to make the transition. While generally it’s not a great idea to take funds from your retirement accounts due to penalties and lost growth for your future, there are options. 401k plans may have the ability to take a loan against your account. You will have to put the money back in the plan, but the terms are generally much better than taking a loan from the bank. IRA money will carry an early withdrawal tax penalty of 10%, but this can be managed by placing the money back within 60 days. Consult with a professional to see if this is an option for you.
If you don’t need to use those funds to bridge the gap, you have some options to take the 401k with you. Transferring the funds into your new company 401k or into a personal IRA account you manage on your own or with an advisor are a few common strategies. Ask for help to weigh the pros and cons of each option.
- Insurance options
Health insurance coverage is always a confusing endeavor. Cobra coverage may be available through your previous employer, but can be expensive. Consider a short term option, but make sure to ask about any tax penalties if it is a non-qualified plan. These should be minimal and could still be the better option for you.
Any job change can be an opportunity to seek out what you truly enjoy doing and to put yourself in a better place for the future. Proper planning can help to ease the pressure and stress from one of life’s biggest transitions.
|Guest post by Cory Smith. Cory is the owner/advisor of Indy Wealth Solutions, LLC, an independent Registered Investment Advisor based in Indianapolis. His goal is to be a source of information, guidance, and support for the financial well-being of those in his community.
You can normally find Cory enjoying the Indianapolis restaurant scene while supporting his Boilermakers as a proud Purdue University alumni. Connect with Cory on Facebook and LinkedIn. Indy Wealth Solutions is here to help you survive your next job change.