Women have special considerations when we leave jobs. Whether you’ve just been laid off or have decided to switch jobs, these financial tips will help you end up in a better money situation than when you started.
There are two pieces to the puzzle of winning job transitions. First, you want to help your mindset and heart get ready to take on new challenges. This is important, and women focused on Getting Things Done often overlook it in stressful situations. It’s also particularly true when the decision to leave a job was not yours!
Second, there are some simple tasks that can really smooth your path. We’re going to cover the financial and introspective here, because they go hand-in-hand: how you feel about your finances will dictate whether you hide from them or tune them to your advantage.
1. Make sure you still have life insurance and long term disability insurance
Let’s start with an easy (if grim) one. Often when you join a company, life and long-term disability insurance is included in your benefits at little or no cost to you. Life insurance pays out a lump sum to your next of kin if you die, typically 1-2x salary. Long-term care or disability insurance replaces part of your income if you’re incapacitated and can’t work.
These two types of coverage are particularly important for women. We’re more likely than men to be sole providers for kids and elders, we live longer, and we accumulate less wealth over our working lives. Life and long term care insurance can make a real difference to your and your family’s quality of life if anything happens to you. Many advisors say you only need long-term care if you’re older, but I disagree. The cost of my long-term care Vs. the peace of mind it gives me makes it well worth it. Also, it’s unlikely you’ll need it, but in the rare case you do, it will make a huge difference.
How to get life and long-term care insurance?
You may be able to continue your policy from a previous employer and just pay the full premiums. Contact the company that carries your insurance as soon as you leave (or preferably beforehand) for details.
If that doesn’t work, look for discounts through your bank, credit card, any union or other group you’re a part of. Finally, you can buy direct. MetLife has been great for the 20 years I have been a customer, but shop around for the best rates and a name you recognize. For disability, you want long term coverage (rather than short term – your savings are for this). For life insurance, get term life, which is cheap and uncomplicated.
When you start a new job, make sure to take advantage of all insurance benefits, even if it costs. Getting it through them will be cheapest, since they have access to group discounts.
2. Transition your 401k into an IRA – it’s REALLY easy
A lot of women carry multiple 401ks from various previous jobs, locking the statements in a closet somewhere. If this is you, I love that you’re not day-trading in your retirement account, but this is an easy upgrade. First, employers tend to not get the best rates, so you could pay pretty high fees and keep less of your hard-earned moolah. Employer-managed 401ks also tend to have fewer investment options than IRAs. Then, there’s the reality that managing a random account from the 401k provider you worked for 10 years ago is a headache. A job transition is a great time to clean it up!
A private IRA is free to set up and you can choose low cost funds so your money is working for you efficiently. You can move assets from any number of 401ks into an IRA, then “set it and forget it.” My family has used Fidelity, ETrade and Schwab – all are good bets. Setting up an IRA with any of these online advisors is easy and free. I particularly like Fidelity, because they focus on low cost funds and automatic savings, but their website is a little kludgy. ETrade is easier to use and their customer service is excellent, but its harder to find low cost funds.
3. Secure your health insurance
Unexpected medical costs can be catastrophic. I really can’t overstate this enough: if you don’t have health insurance for your whole family, an illness or accident could torpedo your financial future. Stay covered!
If you were laid off or quit, you are entitled to continuation of your benefits under COBRA. You will have to pay the portion of the health-care premium your employer was paying, but the total cost may be lower than you would pay for the same plan if you buy directly. Make sure to get the details from your HR rep before you leave your job and call your health insurance company to make sure you’re satisfying all their requirements.
If COBRA isn’t an option for you, there are other options. If you’re under 26, you could be added to your parents’ policy. It will cost them more, so you might want to offer to pay the premium increase. Or you can sign up for new coverage through your State’s Insurance Marketplace. This might even allow you to switch to a lower-cost plan with fewer bells and whistles. Health care premiums are a big portion of many families’ budgets, so this is one area where shopping around is actually worth it.
4. Refresh your financial snapshot
This is a great time to refresh your financial snapshot, or set one up for the first time. Here’s a link to a free Financial Snapshot template you can use. It’s a mini-version of what our family uses. As you ponder this transition, consider a few things:
- Be honest and thorough about what is changing. This is not a time to hide from the numbers: new income? New expenses? New pay frequency? Will there be a period of time where there is no money coming in?
- Whether you’re making more money or less, consider whether you need to realign your spending and savings with your personal values and goals.
- If you’re getting unemployment or stimulus payments, do everything you can to make sure they will arrive? Make a mocha and dig in for that “right when they open at 7am” call to the Unemployment office. Being on hold for an hour or two will be worth it.
- What are you spending money on that you can kill off? Review a couple months’ worth of PayPal/Venmo and bank/credit card statements. Even just a manual look through can be enlightening.
This fresh new start might inspire or require you to make some cuts, or to make some changes. That’s not just ok – it’s great! – even if it’s scary. Rarely in life are we in transition, and this is a huge one, so use the perspective of this moment to get straight with yourself. Life will return to an endless cycle of commute, work, and Netflix soon enough.
5. Write a few development goals
Whether you’re leaving your job because of your choice or the company’s, this is a great moment to set new personal, professional and financial goals. These go hand-in-hand. For instance, you might need to invest $$$ to develop a skill, or you might have time to start a new side hustle in funemployment when you also need the cash.
Be ambitious – don’t say “I want to see if this works.” Say, “I want to see what it takes to make this work.”
Think about where you want to be a year from now, financially, professionally and personally. Stick those visions on a Post-It note and put it on your bathroom mirror where you will see them everyday. Discuss them with your partner and a friend to help keep you accountable with some backup and support. This will also help you prepare for when you want to share your goals with a new boss.
To wrap things up, these transitions can be scary and financially harrowing, particularly if you have dependents. In these moments, I often think of my mom, who found herself divorced with two kids at age 36. Although she had trained as a teacher, it was her retail experience (starting with the Payless fabric counter) that led her to a successful, 35-year career as a sales executive. It will require a lot of guts to take those first steps, and certainly be stressful, but now could be the start of a great adventure.
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