Getting a new job can be exciting! It’s a chance to further your career, make new contacts, and improve your financial life. New jobs also come along with a lot of economic considerations that are easy to overlook in the excitement of starting with a new employer. After all, you have to ramp up in your new position, learn new systems, form new routines, and nurture new relationships with fellow professionals. So, before the first day of your new professional life starts, you should spend some time thinking about the financial decisions you’ll need to make upon starting.
The good news is that it’s relatively easy to change some of your initial choices if you make a mistake. Other decisions, like which health insurance plan you choose, can’t be changed so easily. It’s vital to consider your financial goals and current fiscal landscape as you weigh these decisions. And of course, while you’re planning ahead, don’t forget to bring two forms of identification and information about your checking account on your first day, so you can complete your onboarding paperwork and set up direct deposit without delay.
Understand All of Your Benefits
Discussions about employee benefits typically focus on health benefits, which makes sense, seeing as health care is such a major expense and concern for so many people. However, don’t become so laser-focused that you miss out on other available benefits. Tax-advantaged accounts for transportation, dependent care, and out-of-pocket health-care costs are now standard offerings for many employers. Remember, though, that health savings accounts (HSAs) are only available with certain health-care plans, and you aren’t allowed to have both an HSA and a flexible spending account (FSA).
Free or low-cost life and disability insurance are also common benefits offered to employees. Look for other, less-common benefits, too, like discounts on gym memberships or cell phones. Many employers also provide tuition assistance to employees who have worked for the company for a certain amount of time, so if you’re interested in finishing your degree or pursuing a new one, find out whether your employer will help you. You should receive either access to an employee-only website or a physical handbook that outlines which benefits you are immediately eligible for and which benefits are only available after a certain amount of time on the job. Usually, new employees have up to 30 days to sign up for benefits, so if you need time to read through the manual and ponder your choices, make sure you stay within your new employer’s eligibility window.
Choose Your Health Plan
Picking a health insurance plan is probably the most important decision you’ll make regarding your benefits. One thing to remember is that since the Affordable Care Act (Obamacare) went into effect, checkups are covered in full on all plans. Other visits and services, though, are typically subject to copayments, deductibles, or both. Depending on the plan and the type of visit or service, you may need to meet a deductible before your costs are partially covered. After the deductible, you’ll pay copays until you hit your annual out-of-pocket limit. This is all above and beyond what you contribute to the monthly premium. So you’ll need to think carefully about what kind of coverage you need. Do you need minimal health-care beyond an annual checkup, or are you managing a chronic condition that requires many specialist visits and expensive prescriptions? The state of your health and the health of your dependents will be important to consider as you pick the plan that makes the most sense for you, your budget, and your family.
Set Up Retirement Contributions
One important thing to look for in your onboarding information packet is how your new company handles retirement contributions. A lot of employers match your contributions to a company-sponsored 401(k) (or 403(b) if you are working for a nonprofit or government entity) plan. The amount of the match differs from company to company, but around 3% is average. However, some companies require you to work at the company for a certain amount of time before they start matching your contributions. If your company offers a match on day one, not contributing at least enough to the retirement plan to get the full match is leaving money on the table. You may also need to decide between a traditional or Roth 401(k). With traditional plans, you are contributing pre-tax money, and your eventual withdrawals will be taxed. Contributions to Roth plans are made with post-tax money.
Make Decisions About Your Previous Retirement Plan
Once you’ve decided what to do about retirement contributions at your new job, you need to circle back and decide what to do about the contributions you made at your previous job. Typically, you’ll have three options for what to do with your old 401(k). First, you can leave it alone. However, often, this will leave your account vulnerable to high fees (employers cover the administrative expenses for employees), and you won’t be able to add more money to the account. The second option is to roll the funds over into the 401(k) you set up at your new job. The upside to this decision is that all of your retirement money will be together and you can make investment decisions that affect all of it at once. The final option is to roll the 401(k) into an IRA you set up. Typically, you’ll need to reach out to your former employer’s plan administrator, and you might incur a one-time fee to complete the rollover.
Figure Out Your Tax Withholding
One task you’ll need to complete on your first day is filling out a W-4 for your new employer. They need this form to know how much of your paycheck they should withhold for taxes. The more allowances you claim, the less money will be withheld from your paycheck for taxes. If you claim too many allowances, you may end up with a significant tax bill. The flip side is that if you claim too few allowances, you could end up with a large refund, but paychecks that are smaller than they needed to be. Running numbers in the IRS’s Tax Withholding Estimator will give you a good idea of how you should fill out your W-4.
Decide on a New Budget
Starting a new job can have one immediate downside: It can mean missing paychecks. Your new employer might have a different pay schedule (biweekly instead of weekly, for instance). This can result in a missed paycheck but also will require you to adjust your budgeting and bill-paying to sync up with your new paydays. If you missed a paycheck, either because of a new schedule or time between the last day at your old job and the first day in your new role, you may need to dip into your emergency savings. If a financial emergency arises before you get your first paycheck, you may need to dip into your emergency fund. Alternative lending options, including personal loans or title secured loans, may also be an option, especially for those who may struggle with a less than perfect credit history.
Hopefully, your new job came with a new title and a new pay grade. If that’s the case, before the first bumped-up paycheck hits your account, make some budgeting decisions. It’s easy for higher pay to come with lifestyle creep. You’ve worked hard to get a higher-paying job, so you deserve that lunch, new phone, or nicer apartment, right? Giving yourself a small reward isn’t the end of the world, but fight the urge to squander all of that extra money you’ll be getting now. Consider your current budget, debts, and financial goals. Would capping your living expenses at the level of your present budget allow you to pay down debt or save for a major financial goal? Focusing your raise on achieving your financial priorities will allow your hard work to really pay off.