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Changing Jobs

Whether you're switching companies, getting promoted, being laid off, retiring, taking a step back in pay or trying out something new, a change in your career can be overwhelming, exciting and unsettling. No matter where you work or what you do, there are several financial factors you need to address. While we can't place you in the perfect job, we can offer a little guidance to insure your job is working just as hard as you to get to an early retirement.

Considering a Change
If you're still at your current job, but are contemplating a move, get your finances in order before you take any action. Remember it's easier to find a job when you already have one, so there's no need to be impulsive. As you start your search, first and foremost, make sure you have at least three months worth of your salary in savings. This should cover your living expenses and hopefully give you enough time to find a new job in case for some reason you are forced to leave your current one.

Second, take the time to review any health benefits you have set up with your current employer. When you do change jobs, keep in mind most companies have a waiting period before you are eligible to receive their benefits. If this is the case, you may want to investigate options to hold you over until your benefits kick in, especially if your family is on your plan. If you're married, one option is to join your spouse's company plan. If you're single, call your current insurance provider and ask what type of individual healthcare options are available to you. For many, a popular solution is signing up for COBRA.

COBRA contains provisions giving certain former employees, retirees, spouses and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available in specific instances. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer formerly paid a part of the premium. It is ordinarily less expensive, though, than individual health coverage. For more on COBRA insurance, visit www.cobrainsurance.com.

Important Tip: Many people are experiencing higher premiums and reduced coverage from their current employee health insurance plans. Take control of your health care costs with a Health Savings Account. An HSA is a medical savings account that affords you the opportunity to make your own health care decisions. It serves as an account you can put money into for future medical expenses and works like a checking account. It even comes with its own debit card! You may choose a single or family program based on your individual needs. And the best part, HSAs come with tax benefits. Visit www.irs.gov to learn more about HSAs.

Shameless Plug: Avadian Credit Union offers a Health Savings Account (HSA). To see if you're eligible to apply for one, click here.

In addition to health insurance, many employees have a life insurance plan with their employer. If this is your sole source for life insurance, you may want to look into applying for it elsewhere. You will probably receive better coverage and a better rate.

Shameless Plug: Enjoy discounts on auto, life and homeowner's insurance through Avadian's TruStage™ program, a discounted insurance program for credit union members.

Being In Between
If you are between jobs, hopefully you've taken the measures already listed above regarding a savings cushion and insurance coverage. While job hunting, you will need to re-evaluate your budget. You will probably need to tighten the ropes and may even need to seek out financial assistance. Some financial options to help you through your transition include a home equity line of credit, a debt consolidation loan and a low-rate credit card.

With a home equity line of credit, you can use the equity in your house to pay for expenses and consolidate debt. This may alleviate some financial stress and leave you with fewer bills. A debt consolidation loan can help you wrap your various debts into one simple monthly payment with a great low rate. Again this makes the bill paying process a little easier for you, saving time and hopefully money. Transferring your balances to a low-rate credit card will essentially do the same thing as a debt consolidation loan, except you may enjoy more perks depending on the type of credit card.

Important Tip: If you go any of the routes listed above, it would be best to apply for them prior to leaving your current job, if possible. Most financial institutions will not give you a loan if you can not show the ability to repay it, i.e. if you're unemployed.

Shameless Plug: Avadian offers several loan options and VISA® credit cards to accommodate your needs.

Cool Hookup: While you're debating on your next career move, you may want to consider which jobs are most rewarding "salary-wise" and which are not. Currently, the medical profession dominates the list of best paying jobs, while the food industry tops the list of worst paying jobs. For a complete list of America's top 25 best and worst paying jobs, click here.

Getting Promoted
It's probably a given that money matters are discussed when getting laid off or switching jobs. But, it's equally as important to discuss your finances when you get a raise or promotion. It's easy to get carried away spending your newfound wealth, when it might be wiser to use it toward paying down your debt or investing it in your retirement. Think of it this way...you've obviously been living off your current paycheck, so anything extra is a plus. Utilize those extra funds first for outstanding bills, second for investments and third for fun.

Cool Hookup: If you want to move up at work, but you're going nowhere while watching co-workers climb the corporate ladder, it's time to take a hard look at what you might be doing wrong. Learn what the Top 10 "Promotion Killers" are and if any of them are affecting your job.

Taking a Step Back
There comes a time when you may have to take one step back to take two steps forward. Taking a pay cut could be a result of your company downsizing, you being unhappy in your current career or your decision to learn and do something new. And if you have an entrepreneurial spirit, starting your own business usually requires a sacrifice in pay on your part. Whether it's by choice or by force, a pay cut changes everything. Determine first how much you are losing per paycheck. Then determine if you need to downsize and if so where you should start. For example, if your cut is significant, you may need to trade in your luxury car for something a little more economical. Or, you may need to adjust specifics areas in your budget, like gifts, donations and miscellaneous spending. You may even have to adjust your investment strategy.

Startling Statistic: Statistics show that workers between the ages of 18 and 38 change jobs an average of 10 times.

Important Tip: If you're a "job hopper" or unsure what you want to do with your career, pick up the book, WHAT COLOR IS YOUR PARACHUTE? It is the best-selling job-hunting book in the world. A favorite of job hunters and career changers for more than three decades, it continues to be a mainstay on best-seller lists, from Amazon.com to Business Week to the New York Times, where it has spent more than six years, and has been translated into 12 languages. With new examples, instructions, and cautionary advice, this book is, to quote Fortune magazine, "the gold standard of career guides".

Getting Laid Off
If you've ever been laid off, it can be a hardship and a blessing at the same time. With most layoffs, there is a severance package that comes into play. Typically, severance packages are based on your years of employment and your title. Some companies give very big severance packages, leaving their employees with a nice little bundle of cash. If you're one of the lucky ones, who already has a job lined up, getting laid off could be a blessing. Your severance can be considered extra money to invest for your future, put away in savings in case your new job doesn't work out, pay off any outstanding bills or debts or simply used to do or get something you've always wanted.

If you don't have a job lined up, then your severance is crucial to your budget as you job hunt. If it's all you have to live on until you get hired, then the reality is: once it's used up, it's gone. So, make the most of it. Since it will probably come to you in one lump sum, don't spend it at once. Talk to a financial advisor on ways to make it last longer and options of making it grow more, like with a short-term investment or placing it in a flexible interest-bearing account, like a money market.

Cool Hookup: For five tips on how to manage your finances if you've been laid off, click here.

Evaluating Your Retirement Funds
No matter what transition you are going through with your job, you will have to make some decisions about your retirement plan. Your vested balance in your employer's retirement plan is yours to keep. It is your responsibility to determine what to do with it. Luckily, you have several options to choose from:

Roll your qualified savings into an IRA (Individual Retirement Account). By consolidating your retirement plan assets into an IRA, your money will continue to grow, tax-deferred.

Leave your savings in a former employer's plan. This option is convenient, but your previous employer might not make the same choices for your savings as you would. In addition, you may also end up with several accounts to track in the future, especially if you are a "job hopper".

Transfer your savings to a new employer plan. This may limit your investment options. However, if your employer offers a match, you definitely want to contribute as close to the match as possible. No need to give away "free money". If you choose to indirectly roll funds into the new plan, you may likely be charged 20% income tax.

Take cash. Taking cash can subject your savings to large tax penalties, and can put your retirement security in jeopardy.

Startling Statistic: If you cash out your 401(k) when you leave your job, you risk the loss of substantial future earnings. In 20 years, $2,500, the average 401(k) cash-out, can grow to $11,652 (with an annual return of 8 percent). (Source: "Money Missteps that Matter", Real Simple Magazine, December 2008)

Shameless Plug: Our financial experts can help you understand your investment options, assist you in transferring stock and discuss tax ramifications. For more details on our Investment Planning Services, click here.

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