How To Adjust Your Financial Plan After A Career Change

Changing careers is an exciting step, but it often brings significant shifts to your financial life. A new job can mean a different salary, new benefits and altered long-term goals. Navigating these changes requires a thoughtful update to your financial plan to stay on track. At Harvest Wealth Partners, our mission is to help you construct a financial plan that encourages you to unlock your full potential. We understand that life transitions, like a career change, require careful financial management. Here’s how you can start adjusting your finances:

• Assess your new financial situation: Understand changes in your income, expenses and benefits.
• Re-evaluate your budget: Create a new budget that reflects your current financial reality.
• Manage your old retirement accounts: Decide what to do with your 401(k) from your previous employer.
• Revise your long-term goals: Adjust your savings and investment strategies to match your new career path.

Why is adjusting my financial plan important after a career change?

A career change impacts nearly every aspect of your financial well-being. Your income might increase or decrease, your benefits package—including health insurance and retirement plans—will likely be different, and your new job may come with additional expenses like commuting or professional development costs.

Without adjusting your financial plan, you might find yourself falling behind on your savings goals or struggling to manage your new financial flow. A proactive approach allows you to maintain financial performance and continue working toward your long-term objectives, such as retirement or buying a home, with confidence.

How do I assess my current financial situation?

Before making any big decisions, it’s essential to get a clear picture of where you stand financially.

• Review income, expenses, savings and debts: Start by listing your new net income and all your monthly expenses. Don’t forget to account for any changes, like a higher or lower salary or new commuting costs. Take stock of your current savings, including your emergency fund, and any outstanding debts.
• Track your spending and create a budget: Monitor your spending for a month to see where your money is going. This enables you to establish a feasible budget based on your new income.
• Use the 50/30/20 rule as a guide: A simple way to structure your new budget is the 50/30/20 rule. Allocate 50% of your after-tax income to needs (housing, utilities, groceries), 30% to wants (dining out, entertainment), and 20% to savings and debt repayment.

What should I do with my old retirement accounts?

When you leave a job, you have a few options for your old 401(k). You can leave it with your previous employer, draw it out (which may incur taxes and penalties) or roll it over. A direct rollover, where the funds are transferred directly to a new account, is often a preferred choice as it is better positioned against tax implications. You can roll your old 401(k) into your new employer’s plan if they allow it, or into an Individual Retirement Account (IRA). Consulting a financial advisor can help you determine the right option for your situation.

How can I re-evaluate my budget and financial goals?

With a new career comes an opportunity to refresh your financial goals. Your previous targets might no longer be relevant or attainable. First, adjust your budget to account for your new income and expenses. Then, revise your short-term and long-term goals. Do you still want to retire at the same age? Are you planning to buy a house sooner? Adjust your contributions to savings and investments as needed to align with your new objectives.

What other financial considerations should I keep in mind?

During a career transition, it’s wise to be prepared. Consider whether your emergency fund is healthy, covering three to six months of necessary living expenses. This provides a buffer if your new role doesn’t work out or if unexpected costs arise. Also, take time to fully understand your new employer’s benefits package, including health insurance, life insurance and any waiting periods for eligibility.

Let Us Help You Plan for Your New Chapter

A career change is a significant life event that requires careful financial planning. At Harvest Wealth Partners, we believe in doing what’s right for the client. If you need help adjusting your financial plan or navigating your new financial landscape, our team is here to provide guidance and support. Reach out to a financial advisor at Harvest Wealth Partners today.