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The 30-Day New-Job Financial Roadmap

Apr 30, 2018 5 min read

 

Starting a new job can be anxiety-inducing: new people to impress, new routines to learn, new rules to follow, etc. All this stress can make it very difficult to figure out your finances. But because we can receive many financial opportunities through our jobs – such as insurance and retirement savings – smart decision-making during that first month is absolutely crucial to keeping your finances in order.

Most organizations give you 30 days from day one to figure out how to allocate your paycheck, select insurance, and determine which benefits you want to receive. In that spirit, we have developed a 30-day game plan to help make sure nothing gets missed when you’re figuring out your benefits.

 

Week one (days one through seven):

  • Set up direct deposit – First and foremost, when starting a new job, you’ll want to get paid for the work you do. The sooner direct deposit is set up, the better you can avoid delays in your income. This will also prevent you from missing any automatic deductions (home and car payments, for instance) from the same account that will receive your paycheck.
     
  • Set a budget based on your new role – Because we often move jobs in order to make more money, you should reset your budget so you know how much extra money you have to put toward savings each month. You’ll never enjoy budgeting more than when you’re doing it with more money at your disposal. If you have taken a pay cut in this job change, painful though it may be, you’ll want to take a hard look at your income versus expenses and prepare to make spending cuts as necessary.

 

Week two (days eight through 14):

  • Decide if you will use the health insurance – You’ll want to figure out if you’re going to use the company insurance plan, go through a spouse’s plan, or choose another option. To do so, determine the total costs of each plan by calculating how much it will run per pay period, plus the total deductible. If one plan is significantly higher, before you go with the cheaper option consider if there are any significant care restrictions. For instance, if one plan allows you to see doctors without a referral while the other doesn’t, you’ll have to determine whether the extra cost is worth the freedom to see the specialists you want.
     
  • Set up automatic retirement plan contributions – If your job allows you to set up your Internal Revenue Code section 401(k) or 403(b) plan, etc. right away, consider taking advantage of it. Automatic enrollment – in which your employer places you in the retirement savings plan as soon as you’re eligible – is now available at nearly 70% of companies. If you’re in that bucket, check on your plan right away, as it might be set up to withdraw only a very small percentage from your paycheck. You might want to take out enough to get the full employer match (if there is one). Also, most accounts will allow you to increase the savings rate each year by 1% or more. It might be worth selecting that option if it’s there, so you don’t have to think about it in the future. You may wish to speak to your tax advisor or accountant regarding the best strategy, given your individual circumstances.
     
  • Choose an investment strategy within your retirement plan – While your company may automatically enroll you in a 401(k), that doesn’t mean it’s investing your funds the way you want it to. Now is the time to figure out how you want to distribute your savings. You might consider target-date funds and lifestyle funds that can help simplify the process of choosing investments. For example, these type of funds can help minimize your workload by selecting the amount of stock exposure in your portfolio, based on your age, when you plan to retire, and your risk tolerance. Over the years, the stock exposure will slowly decrease, with the goal of helping to protect your accrued retirement savings.

 

Week three (days 15 through 21):

  • Decide about life and disability insurance benefits – Often, if there’s a cost to participate in your company’s life insurance plan, it’s very minimal. It’s usually worth opting into it, even if you have coverage outside of the office, as it will serve as a low-cost option to help further protect your beneficiaries. Also, review your company’s disability benefits. You shouldn’t have to do anything to opt-in, but you’ll want to know when you can use them and how to access your plan.
     
  • Determine if you should get a Health Savings Account (HSA) – If you decided on a high-deductible health insurance plan, you might qualify to open an HSA account so you can save a portion of your paycheck – tax-free! – to put toward health costs. If you’re single and your out-of-pocket maximum is $6,650 with a deductible greater than $1,350, or if you’re a family with an out-of-pocket maximum of $13,300 and a deductible larger than $2,700, then you can sign up for an HSA.

 

Week four (days 22 through 28):

  • Sign up for wellness options – Wellness perks have become the in-vogue offering, with nearly 50% of organizations providing some form of incentive for employees to keep fit. There’s no reason not to opt into these, because you get rewarded for making healthy choices (and it’s not as if you get punished for having the occasional Big Mac). Some of the options – like group walking activities – can provide effortless ways to meet your coworkers.
     
  • Decide what to do with your old retirement accounts – You can roll over your old retirement savings accounts into your new one, keep it in the old account or roll it over into an IRA. There are benefits to all three choices, including more control over investing options in an IRA, or potentially lower costs in an older 401(k). Try to avoid cashing out the old accounts, because that will increase your income for tax purposes; and you may be subject to a 10% tax penalty for withdrawing your funds early (under the age of 59.5). Speak to your tax advisor about the best option for you.

 

Days 29 and 30

  • Focus on your job – By day 30, you’re no longer the new person on the block. Your calendar has probably started to fill up, and you’ve adjusted to the newness of everything. Once you have your finances figured out, it’s time to show your value at work.

 

Bottom Line

There are many things you have to focus on when starting a job – and one of the most important is how to maximize your benefits to fit this changing time in your life. Following a clear checklist can help you make smart decisions during what can be a stressful time.

 

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