So you're starting a new adventure. You've found a new employer that recognizes your awesomeness, and you can't wait to begin slaying it at your new job. You're excited. They're excited.
You're probably laser focused on the actual job part of your new job, not to mention preoccupied by all those first-day jitters. But don't forget that a new job also represents a major financial transition (and a change in your salary is only one part of it). Mastering that transition—and making sure you don't leave money behind or on the table—could make a real difference to your finances (and your net worth).
Here are critical money moves to make at each step along the way of your new career adventure.
Step 1: During your first week
You're learning new names, new processes, and likely some new technology. On top of that onslaught of new, you're also probably facing a mountain of forms to complete. While you might be tempted to blow through those as quickly as possible (we get it, you're the newb, and you're raring to prove yourself), try to find some time and mental space when you can focus on the details.
Here are some of the main initial decisions you may need to make:
- Withholding allowances. The number of allowances you claim affects how much tax your employer withholds from each paycheck. Claiming too many allowances may mean your employer doesn't withhold enough (and you face a big bill at tax time). Claiming too few may mean your employer withholds too much (so you get a large refund at tax time, but you missed out on the chance to put that cash to a better use in the meantime, like by investing it).
- Health insurance. There's generally no one-size-fits-all best choice when it comes to health insurance. Whether you're better off with a higher- or lower-deductible plan, or HMO or PPO insurance, or a health savings account (HSA) may depend on how often you go to the doctor and what doctors you see. When in doubt, ask HR for more details on the different policies you can choose from, and seek guidance if you need it.
- 401(k) contributions. If your new employer offers a match, then try to contribute at least enough to capture the full amount. If you can afford to, aim to sock away 15% of your salary toward retirement, counting any employer match toward that figure. (Learn more about how much to save for retirement and how to choose between traditional and Roth accounts.)
- 401(k) investments. Contributing is only half the battle. You'll want to invest that money too, so it can potentially grow over time. Chances are your 401(k) offers a menu of mutual funds to pick from. Depending on your available choices and your preferences, you might be well-suited by a single fund, or by investing in a mix of funds. (Learn more about how to start investing.)
- Other benefit elections. Depending on what benefits your employer offers, you might also have life insurance, disability insurance, a flexible savings account (FSA) and more available to you.
It's a lot to process, particularly at a time when you have so much else going on. If it feels like too much for week 1, check with HR about more specific deadlines for each of these decisions, and ask when or how often you can adjust your choices. (For example, some employers let you tweak your 401(k) contributions as often as you like, while others limit how often you can make changes.)
Step 2: During your first month
Once you've had a chance to catch your breath, do a deeper dive into your benefits. Look into any extra perks that might be worth your while to sign up for, like commuter assistance, gym benefits, childcare assistance, tuition reimbursement for continuing education, or even student loan assistance.
This can also be a good time to tie up any loose financial ends from your last job. In addition to keeping track of your old 401(k) (see the box below for details), you'll want to make a plan for any money left in an old HSA, or vested balances from a stock compensation plan. Take some time to get organized or consolidate accounts if you need to, so you don't lose what's yours.
Don't lose track of your old 401(k)
- Leave it in your old employer's plan. Many (but not all) employers let you leave your money in their plan, even after you leave your job.
- Roll it into an IRA. You can roll your old 401(k) money into an IRA with a brokerage firm of your choosing.
- Roll it into your new employer's 401(k). Some employers let you roll money from your old plan into their plan. If you're self-employed, you may also have the option to roll over money into your own small business retirement plan, such as a SEP IRA or self-employed 401(k).
- Cash it out. If you withdraw the money, you'll typically face taxes, plus a penalty if you're under the age of 59½. For that reason, you should generally only consider cashing out if you're facing an urgent need and you don't have other options.
Starting a new job may also mean you need to tweak some seemingly unrelated aspects of your family's finances. For example, while you might be eligible for life insurance through your new job, it may not provide enough coverage (particularly if you're the family breadwinner). Set aside some time to run the numbers and consider whether you need to buy additional insurance on your own. (Learn more about the basics of life insurance.)
Step 3: During your first 3–4 months
Maybe you got a nice bump in pay when you started your new job. Or maybe you've switched to a role that offers more meaning and fulfillment (but less cold hard cash).
Either way, once you've ironed out your benefit elections you should start to get a feel for your new take-home pay number, and how much wiggle room it leaves you against your household expenses.
If you're making less than before, you may need to tighten up your budget. If you're making more, try to keep your spending the same and consider putting the extra cash toward your goals, such as paying down debt or investing. (If you have multiple goals, learn more about how to balance debt, saving, and investing.)
In addition to all these financial moves, this might be the time to mentally prepare for the end of the honeymoon period. If you start to notice that some aspects of your new job are less than perfect, take a breath and remember that's normal. Settling into a new job takes time, and almost always comes with both ups and downs. If you do hit a down—don't panic. Give it some more time while you get a better lay of the land.
Step 4: During (and after) your first year
Eventually, that new-job choppiness should give way to smoother sailing, and a more predictable rhythm and schedule. When it does, check in on your work-life balance, your overall morale, and whether you're getting to spend enough time doing what you love at work.
You might not want to rock the boat too much during your first year. But simple steps like volunteering for new projects, placing boundaries around work hours, or fostering good communication with your manager, may help you keep up the excitement (and avoid burnout).
As months turn to years—and you go from newb to trusted veteran—you might find yourself up for promotions and raises. Whenever you are, consider increasing your retirement contributions so you keep pace with that 15% total contribution target. If you can, try to hold your spending flat and put that extra money toward your goals and your family's financial future, whether retirement, college, or another financial goal.
And if one day you find yourself itching for a new fresh start? Go back to square one, and read about what to do if you're thinking of quitting your job.