Dear Carrie, I'm considering switching jobs. I'd get a little bump in salary, but the bonus structure and benefits are different. How can I figure out which is the better deal overall? --A Reader
Dear Reader, Changing jobs can be exciting, but it also warrants a bit of caution. As your question implies, salary is only part of the equation. It's always a good idea to weigh the pros and cons of your current job against a new opportunity. Here's a way to approach it.
Put Dollar Amounts to Benefits
Benefits can represent a significant portion of your salary, so you want to be sure to compare them apples to apples, so to speak. Start by listing the benefits you have in your current job.
For example, you may have:
--A retirement plan
--Disability and life insurance
--Paid vacation and sick or family leave
--A company match for a 401(k)
--Flexible Spending or Health Savings Account (HSA) options
--Training and development
These benefits could mean considerable bottom-line savings. Try to put a dollar amount down for each benefit. Now do the same for the new job. Is there a significant difference? Give full credit to the value of these extras.
For example, it's generally very expensive to purchase health insurance as an individual. If the new job falls short on benefits, find out if there's room for negotiation.
Think about the Costs
Salary and benefits can be compared in hard dollars, but a job can also involve expenses such as commuting, child-care, clothing, etc.
Also ask yourself these questions:
--Will your new hours or location require paying for additional childcare?
--Will you need to purchase a new wardrobe or pay more for transportation?
These costs can add up, and eat up any salary bump, so be sure to include them in your analysis.
Be Realistic About a Bonus
You might be tempted to say that a more generous bonus structure would help cover any shortfall in benefits or additional everyday expenses. And it very well could. But a bonus is generally not guaranteed; a lot depends on how successful the business is in any given year, as well as on your own performance. I prefer to think of a bonus as a great extra, but you can't base your budget on it.
Consider Your Career Aspirations
Of course, your job isn't just about the money you make today. You will also want to think about long-term opportunities. If this new position offers you better experience or a chance to advance, the financial differences may be less important. Then, too, you have to consider your everyday work experience.
Perhaps the new job offers a better work environment -- both physically and in terms of colleagues. These are all important things to think about before you make a switch.
Keep Your Finances on Track
If you do decide to change jobs, there are a few things you can do to make it a smooth financial transition.
--Health insurance: Find out when your new health plan coverage begins and make sure you're covered during any gap. COBRA is a possible solution.
--Retirement plan: Sign up for a 401(k) or other retirement plan as soon as possible. If there's a company match, contribute at least enough to get the maximum.
--Rollover plans: Roll your old 401(k) into your new employer's plan or into an IRA. Otherwise, you can face substantial penalties and taxes, in addition to undermining your savings.
--Taxes: Estimate any change in federal or state taxes and adjust your withholding if necessary.
--Direct deposit: If available, sign up for direct deposit of your paycheck, and preferably automatic savings.
If you're required to relocate, look at the cost of living in your new area. You may need to make adjustments to your budget to cover any differences. And remember, relocation costs you incur may be tax deductible. Keep track of your expenses and check with your tax advisor.
You're fortunate in this job market to have a choice. If everything adds up in favor of the new position, congratulations, and best of luck in whatever you decide.
Carrie Schwab-Pomerantz, CERTIFIED FINANCIAL PLANNER(tm), is president of Charles Schwab Foundation and author of "It Pays to Talk." You can e-mail Carrie at email@example.com. This column is no substitute for an individualized recommendation, tax, legal or personalized investment advice. To find out more about Carrie Schwab-Pomerantz and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
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