According to a report by Forbes, job-hopping is “the new normal” for an increasing number of Americans. However, labor experts agree that switching employers is never a decision to be taken lightly. It can be a major risk.
While the lure of greater opportunity, better environment, increased compensation, and change for change’s sake are all compelling reasons to accept a new job, there are many variables to take into account before officially taking the plunge.
Whether you are currently fishing for available openings or are already reeling in what promises to be an excellent opportunity, ask yourself these five important questions before changing jobs:
1. How Is My Financial Footing?
While money (perhaps surprisingly) is not the main reason most career professionals seek a new job, it’s advantageous to gain a firm grip on your current financial footing before considering a change in employment. By analyzing your personal budget for a complete accounting of your necessary monthly expenditures — including how much you need to put away each month to achieve your savings and retirement goals — you can accurately assess needs in terms of salary requirements. So if you have been struggling to make ends meet at your current income level, you’ll know you need more, while someone with a healthy surplus could potentially accept a lesser salary in exchange for increased opportunity for advancement.
In addition to knowing your salary requirement and analyzing how it might change (based on various factors, such as if you have to relocate or take on a more expensive commute), it’s extremely beneficial to review a detailed personal credit report. While a strong credit score can provide the peace of mind of knowing that, if need be, you can access a line of credit, identifying negatives (including credit reporting errors) gives you the opportunity to fix your credit report so as to not turn off potential employers – nearly half of whom review reports, according to CBS Money Watch.
2. Are the Conditions Right to Thrive?
American workers always have and always will be swayed to change by the promise of new opportunities and challenges, improved work/life balance, and a more supportive and enjoyable environment. What many job seekers ultimately desire is a place they can fit into a defined role and get on a clear and attainable path to progress their career.
Take a long look at the job you are coming from, accounting for the things you find most and least attractive, so when you make a comparison you can be sure you are heading in something other than a lateral direction. It can help to make a priority list of everything you are looking for prior to a job search, be it friendly associates, competent management, the opportunity to travel, or the chance to acquire new skills. It’s also advisable to realistically size up challenges the positions you interview for present, having confidence in your abilities but avoiding what could amount to ugly consequences should you accept a job that’s beyond your level of experience and expertise.
3. Have I Performed Due Diligence?
For anyone who has sweated through round after round of one-on-one interviews and had to essentially hand over access to their personal and professional history, it’s painfully obvious how closely employers in the 21st century are scrutinizing new hires. Job hunters who are asked to take on the inherent risks of leaving a stable situation should be taking just as thorough a look at potential employers, including the background of the company and personality of its culture, as well as financial standing and prospectus if it is public.
You can learn a lot about a company by talking to the people who both currently work and had previously worked there, listening to what they have to say while also reading between the lines. Employers increasingly go online to check out candidates, and you should follow suit, taking a broad look at the information a Google search returns, such as customer reviews and criticism, recent news reports, or press releases. You should be able to confirm if it has a nurturing internal culture, positive industry reputation, and a sustainable plan for success.
4. Am I Prepared for Everything and Anything?
Few things in life are 100% certain – even LeBron James misses a slam-dunk once in a while. The act of changing jobs comes with a level of uncertainty that you have to be ready for, whether that means a gap in pay, increased expenses as you transition into your position, or new responsibilities while learning to fit in with coworkers. And no matter how carefully you choose your bedfellows or navigate a career change, rest assured that there are potential factors that can unexpectedly derail plans.
Financial experts recommend tucking away a minimum 10% of your earning for savings and retirement, while having enough available cash to cover your expenses for a minimum of six months without having to touch long-term accounts. Leading up to a job change, it’s advisable to ramp up that percentage – or to at least put away as much as possible – in order to be prepared for every perceivable outcome.
Just as importantly, job changers should also be ready for the mental, physical, and emotional hurdles that come with the terrain, from getting used to new hours or a longer commute, to learning new skills and successfully acclimating to office personalities and politics.
5. What’s the Real Bottom Line?
Whether you are chomping at the bit for change or hungry for higher pay, it’s wise to keep your emotions in check and take a comprehensive approach to confirm whether an opportunity makes good sense. Look deeper within the compensation package to calculate a total value, including (along with salary) everything from medical and dental benefits and employer-sponsored retirement plans, to travel or study reimbursement and paid vacation days. More difficult to assign a monetary value to, yet just as important, are intangible factors, such as relocation, extra work and stress, and whether you have a passion for what you will be doing.
Consulting a qualified financial advisor is strongly recommended in solving more complex factors in your decision. It can help you makes sense of when it’s right to leave a company-sponsored 401k before you are fully vested, and, if so, to provide guidance in rolling it over efficiently. In the event your salary will increase significantly, expert financial advice is in order to break down how your tax situation will be impacted (you may find the aforementioned increase far less significant), and help tailor a plan to counteract tax hits through write-offs and investments.
Working Americans are getting used to the idea that they are far more likely to hold a dozen jobs before they retire than they are to work for a single employer, as was so common not long ago. By answering the important questions pertaining to personal finances, career aspirations, the quality of the opportunity, and the effect a change will have on quality of life, when the time comes to decide to switch jobs you’ll know you made the right decision.
What other factors should be considered prior to making a job switch?
Russell Silva is a writer who discusses financial topics including personal finance, careers and jobs, retirement, and credit.