How to Prepare Financially When Changing Jobs

how to prepare financially when changing jobs

Change often comes bearing a few hassles. It may multiply if you want to change your job. For the lure of better salary or position, most are tempted to jump on the deal without caring about the financial complications it brings along. Being married to someone who has changed his job twice in the last five years, I have witnessed the financial complexities. We were a little unprepared the first time and here are the lessons we learnt from our experience –

Calculate the Living Expenses

Changing job within a city is not very taxing. At the most, it affects your travel cost. In case you are relocating to another city or country – start by calculating the cost of living using ‘cost of living’ calculators online. Ask your friends who are living in the city you are relocating and add 20% to it to arrive at the living expenses. This gives you an estimate to work around your finances. Add this to your current debt or financial obligations. It’s the most important step to prepare yourself on the financial front. Never rush into a job offer before calculating the living expenses.

Maintain at least Three Months’ Liquidity

Even if there is no break between your jobs, maintaining liquidity is very crucial. Relocating cost, travel cost, security deposit for the apartment and the time between getting your paychecks can disturb your cash flow. Remember – you have to incur all the expenses first and reimbursement will come later. Sometimes it takes a month or two to get your claims credited to your account. To be on a safe side, I suggest having, at least, three months’ salary in cash. Plus, if you are relocating to another country, make proper arrangements in the local currency.

Manage your Debt and Commitments

Three things that I would recommended –

  1. Clear off all the payments on your credit card(s).
  2. Have sufficient bank balance to cover your running debts – home or car loan installment. Again, have money to pay off for a quarter at least.
  3. And most importantly, don’t commit to any investment if you want to switch job – a lesson we learnt when my husband changed his job for the first time after marriage. Postpone it till you are settled in your new job.

Create an Emergency Fund

In addition to the liquidity to meet your monthly expenses and obligations, it’s prudent to have an emergency fund. Set aside some money for emergencies. It’s wise to opt for an investment scheme rather than simply crediting money to your savings account. Invest in a SIP or try Flexible Recurring Deposits. Use Savings+ from MoneyView Green Account feature that helps to grow your money. It gives better returns and has no lock-in period. You can start with as low as INR 500.

With these financial measures, the transition between jobs is not only easy but also stress-free, giving you enough time and energy to concentrate on your new job. Plan ahead and step into the new chapter of your professional life with confidence.

If you have something to add here from your personal experience, please share in the comments below.

A Company Secretary by profession, Saru found her true calling in writing. She blogs at sarusinghal.com which she religiously updates every Monday for the last four years.