Financial mistakes to avoid when changing jobs
Being presented with new opportunities in your career can be exciting and, often, come with the promise of a higher salary. While navigating the transition period of switching jobs, it is important to ensure that you don’t find yourself making a financial blunder that may have a long-term impact on your financial wellbeing.
Here are 5 financial mistakes to avoid when switching jobs:
Not doing your research
It’s easy to get caught up in the excitement that comes with the new opportunity, but you need to do your research to ensure that you are fully aware of all the finer details that come with your new job. While you may be earning more in terms of salary, do you know
- how it will affect your taxes?
- whether you will be spending more on the commute to work?
- whether you will be switching to a different medical aid?
These are all things you need to be aware of as they affect your financial plans in the long run.
Cashing out your provident fund
The purpose of a provident fund is to help you save for the future, so don’t lose sight of that when you are presented with the opportunity to cash out today. Even if you may be cash strapped at the time, it is better to reinvest the money or transfer it into a preservation fund that’s designed to preserve your savings until you retire, which will leave your money untouched and help you avoid any penalties or taxes for cashing out early.
Applying for credit
It may be tempting to open new lines of credit when you know that you’ll be earning more money soon; however, creating more debt for yourself is not a decision to take lightly. Instead, draw up a budget based on your new salary, and see how much disposable income you will have to spend on the things you would have gotten on credit, such as clothes, entertainment or big-ticket items.
Not adjusting your insurance
If you’re earning a higher salary and you have life insurance outside of work, you need to update your existing policy to avoid a shortfall. Similarly, if you have income protection, disability or dread disease cover, you need to increase your cover to ensure you and your loved ones will remain adequately protected financially.
Get cover that keeps your family sound if something happens to you.
Spending recklessly and not saving for a rainy day
Don’t get caught up in thinking that just because you’re making more money, you’ll always have funds available for an emergency. Anything can happen at any given time, and to avoid having to resort to potentially getting yourself in debt, make sure you are regularly putting money away into an emergency fund. If you already had one before, consider increasing your monthly savings now that you are earning more.
Don’t have a savings account? Easily open one for your needs today.
Change can be both exciting and stressful, but if you plan accordingly, you can be empowered to make decisions that will benefit you in the long run.