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Managing finances between job changes
A new job often brings exciting opportunities. Maybe it comes with a higher salary, a better work-life balance, or lets you follow your passion.
Whether you're changing roles for a bigger pay slip, taking a pay cut for flexibility, going freelance, relocating, or facing redundancy, you need to understand how that change could affect your finances.
Here’s what you need to know about career change finance, and how to stay financially confident, no matter your circumstances.
Understanding the financial impact of changing jobs
First thing’s first, try to get to grips with your money. Take a look at what’s coming in, what’s going out, what you’ve saved, and what you might owe. Think about the full benefits package you’re leaving behind, not just your salary. Do you benefit from employer pension contributions, private healthcare, or childcare vouchers via salary sacrifice? These can all make a big difference to your monthly budget.
Don’t forget perks like company car schemes, subsidised travel, or discounted gym memberships. These can carry real value, so it’s good to know exactly what’s included in your new job offer to prevent any surprises later on.
Identifying potential gaps in income
When switching jobs, don’t forget to plan for any gaps in income, especially the time between your last pay slip from your old job and your first one in the new role. Even if the transition is smooth, there can still be a short period where no money is coming in, which can be pretty stressful if you're not prepared.
If you’re taking time off between roles or waiting for benefits to kick in, try and have a plan to cover essentials like rent or mortgage payments, bills, and groceries. In some cases, a mortgage repayment holiday might be an option to manage some short-term relief, but it usually means paying more interest over time. It’s important to read your mortgage terms and conditions to understand what this could mean in the long term.
You might also want to check your eligibility for any government support while you’re between roles.
For more tips on taking control of your finances, discover how to spring clean your money habits.
Key steps to take before moving jobs
Review and adjust your budget
Try and spend some time giving your budget a quick refresh. Look at where your money’s going and see if there’s anything you can cut back on. Think streaming subscriptions you don’t use, regular takeaways, or those little impulse buys that can add up quickly.
Cover the essentials first, things like your rent or mortgage, energy bills, food, and any loan payments or credit card. You’ll feel a lot more in control once the basics are taken care of.
Find out how to save money on your household bills.
Create an emergency fund
If you haven’t started already, now’s a great time to build up a financial safety net. Try to save enough to cover three to six months of essential expenses, just in case life throws you a curveball during your career change.
Every little bit you can add to your financial safety net helps. It will give you some breathing space while you settle into your new role.
Understand the new benefits package
Your salary is important, but you need to make sure your new benefits package works for you. Is your new employer matching or even topping up your pension contributions? How about perks like healthcare, life insurance, extra holiday days, or flexible working options?
Tax considerations
Switching jobs can change your tax situation quite a bit depending on your circumstances. For example, you might get a bonus that bumps you into a higher tax bracket for a while. Or, if you’re going freelance or doing part-time work, you might even need to adjust your tax code.
A chat with HMRC or a qualified tax adviser will help you figure it all out. You can allow a friend or family member—a ‘trusted helper’—to deal with HMRC on your behalf. They can help with tasks like viewing your Income Tax estimate, speaking to HMRC, or assisting you with completing forms.
Managing finances during the job transition
How to handle a salary decrease or gap in employment
If your income’s taking a dip or you’re having a short break between jobs, make sure your spending reflects your new reality.
This doesn’t mean you have to give up on all your hobbies – you might just need to enjoy them in moderation for a little while. Getting savvy about where your money goes can make all the difference.
Building career stability
Once you’re settled into your new role, carve out some time to reassess your financial goals, especially now your income and job stability might have improved. Whether that means paying off your mortgage a bit quicker, topping up your pension, adding to your savings, or dipping your toes into the world of investing, having a plan helps you make the most of any opportunities.
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Handling job offers and negotiating salary
How to evaluate job offers financially
Remember, your salary is only one part of your remuneration package. It’s just as important to think about things like bonuses, pension contributions, extra holidays, and chances to grow in your career. These perks can really add up and improve your overall financial wellbeing.
And don’t be afraid to speak up if something doesn’t feel quite right. Having a chat about a small pay increase or better perks could really pay off down the line. Taking a good look at the whole package and negotiating when needed is a wise move.
Final thoughts on managing your finances during a job change
Changing jobs is a big life decision, and it pays to plan ahead when managing your finances. Here’s a quick recap to help you stay financially confident during your career move:
- Plan ahead: Changing jobs is a major decision, and being prepared can ease the transition.
- Review your budget: Make sure your spending aligns with your new income and financial situation.
- Set up an emergency fund: Having a financial cushion can help cover any unexpected costs or income gaps.
- Prepare for income gaps: Plan for any time where you will not receive a salary.
- Assess your new benefits: Look at the full package, including pension contributions, healthcare, and other perks.
- Adjust your lifestyle if needed: Temporary cutbacks can help you stay on track financially.
- Be proactive and strategic: Take charge of your finances before, during, and after the job move.
Stay motivated, stay informed, and stay confident. Your next role could be the start of not just a new career chapter, but a stronger financial future too.
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