Money Milestones: How to Manage Your Money at a New Job

Whether you’re brand new to the workforce or a seasoned veteran with decades of experience, starting a job with a new employer is a big adjustment. One of your biggest concerns should be how to manage your changing finances and respond to an adjusted income, new benefits, and different financial goals.

Negotiate Your Job Offer

Whenever you receive a job offer, verify if it’s a good one before you accept. Compare the offer with your knowledge of the industry and research salaries for comparable positions in your area. If the offer falls short, consider negotiating for a better salary.

Your ability to negotiate depends on the employer, the position, and your skills. While the company is motivated to hire you, some positions may have less flexibility. Beyond salary, you can also negotiate for extra paid time off, a better job title, and other perks.

Decide How Much to Withhold from Your Paycheck for Taxes

Your first-day paperwork will include a W-4 form, which tells your employer how much money to withhold from your paycheck for federal taxes. Withholding too much will result in smaller paychecks, while withholding too little may leave you owing the IRS at tax time.

Don’t assume you should keep your withholding the same as at your last job. A change in income can affect your tax bracket. If you need help, refer to the IRS withholding calculator.

Choose Your Health Benefits

For many, an employer’s health plan is the most affordable option due to negotiated group rates and employer subsidies. Get familiar with the different plan options:

• Health Maintenance Organizations (HMOs): Require referrals for specialists and have strict network guidelines.
• Exclusive Provider Organizations (EPOs): Have strict network guidelines but don’t require referrals.
• Preferred Provider Organizations (PPOs): Allow out-of-network care and don’t require referrals.

Also, ask about dental, vision, and prescription coverage, which may be included or offered separately. If you anticipate medical expenses, consider signing up for a tax-advantaged account like an FSA or HSA.

Start Saving for Retirement

Getting a new job is a great time to start or increase your retirement savings. Employer retirement plans like 401(k)s allow contributions directly from your paycheck into a tax-advantaged investment account. If your employer matches contributions, make sure to contribute enough to maximize this match.

For 2019, the annual contribution limit for 401(k)s is $19,000, with an additional $6,000 allowed if you’re over 50. For IRAs, the limit is $6,000, with an additional $1,000 allowed if you’re over 50.

Check for Other Financial Perks

Employers may offer other financial benefits, including:

• Dependent Care FSAs: Tax-free funds for eligible dependent care expenses.
• Commuter Benefits: Subsidies for public transportation or parking.
• Wellness Programs: Discounts on gym memberships or health insurance premiums.
• Professional Development: Employer-paid training or conference attendance.
• Tuition Assistance: Help with paying for education or student loans.

Adjust Your Budget

If your income has changed, adjust your monthly budget to reflect your new financial reality. If you’re getting a raise, don’t immediately increase spending. Instead, focus on financial goals like paying down debt or increasing retirement savings.

Start or Continue an Emergency Savings Fund

Everyone should have an emergency savings fund to cover unexpected expenses. Aim to save at least three to six months’ worth of income. If that seems out of reach, start by saving a small amount each month in a separate account.

Update Your Life Insurance Policy

Your life insurance policy should cover your family in the event of your death. If your employer offers life insurance, check if it meets your needs. If not, consider purchasing additional coverage to ensure your family is taken care of.

Check Your First Paycheck

Mistakes happen, so review your first paycheck to ensure accuracy. It will also tell you how much you can expect to take home after taxes and deductions, helping you finalize your budget.

Want more financial info? Check out our finance blogs.

Description: A person reviewing their finances and benefits after starting a new job, highlighting the importance of budgeting and saving.