Considering a career switch? Think beyond whether there’s enough money in the bank to tide you over for a short break before you start your next assignment. Every company offers different benefits, and so switching jobs can have far-reaching effects on your personal finances.
Beyond just salary, here are the money questions you should ask before signing on the dotted line.
1. Is Your Emergency Fund Large Enough?
You’re probably familiar with the concept of an emergency fund, which is a pool of money you only dip into during an emergency or when unexpected circumstances arise. But what does this have to do with you changing jobs?
It sucks (and one may argue that it’s not even lawful), but companies do rescind their job offers from time to time. Worse, some corporations may find that your position is better served when it’s outsourced — after they’ve actually hired you, thus leaving you in a bind.
Your pot of funds should be big enough to encompass this unpleasant circumstance, as well as potential health crises and other emergencies that can arise with you or your loved ones. After all, when you make a career change, you’re risking a break in your cashflow. Should you be unlucky enough to lose your new job before you even start, you’ll be faced with the prospect of going the next few months without an income.
To make sure you’ll be okay, check that you have enough set aside to last you until you get back on your feet. A safe amount is around six months’ worth of your current expenses.
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2. Are There Regular Salary Reviews?
The dizzying prospect of working for the hottest start-up in your field may have you willing to forego this, but not having set salary reviews can hurt you more than you think. Even if the package being dangled in front of you is juicy enough, you’ll only be putting yourself at a disadvantage in future.
First, inflation is a fact of life, and salary increments are supposed to help address this. It’s not about wanting more money for doing the same work, it’s about getting equitable value because the value of money shrinks over time.
Second, even if you ignore inflation, you’ll be setting yourself back if you continue to accept the same pay, year after year. This is because employers here still base your package on your last drawn salary (why is this still a thing?). So let’s say you have been drawing the same salary for the past 5 years. When you switch jobs, you’ll be getting lower offers than your peers who have had yearly salary increments — even if you’re just as qualified as they are.