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Checklist for a Job Transition

Many companies handled the pandemic well, giving their employees a lot of leeway to work from home or do what’s best for them during uncertain times. Some companies are choosing to dramatically shift to a work-from-home environment permanently or to make other drastic changes to their business in light of lessons learned about productivity or organization structure in 2020. 

It seems inevitable that, with all of this change on the horizon, and as the 2020 coronavirus pandemic slowly starts to wind down in light of global vaccination efforts, employees will be equally ready to make lifestyle shifts. Experts expect that many employees in the post-COVID world will be more confident in finding a career path that meets their lifestyle expectations, whether that includes relocating, working flexible hours, or working remotely. 

Whether you are considering a move to a new company, breaking out and starting your own business or consulting firm, or you’re just ready to take a sabbatical after a year of unexpected ups and downs, it’s wise to have a financial “checklist” in place before moving forward. 

Moving to a New Company

Moving to a new company, especially in the tech sector, often means navigating a job offer that includes stock options. Start by evaluating any stock options or outstanding financial benefits you’re leaving behind at your old employer. Do you need to act on any options you’ve been granted, or are you owed any performance-specific bonuses that are defined in your contract? Work with your financial planner and HR department to ensure these items are buttoned up before your transition.  

Next, you can dig into benefits being offered as part of your compensation package at your new job. If you are offered stock options, take note of the following:

  • What type of option they are – RSUs, NQSOs/ISOs, or ESPPs
  • What their vesting schedule is
  • Whether the stock is given to you, or you have the right to purchase company stock at a discounted price (ESOs)

It’s also wise to consider how these new stock options will play into your tax situation. For example, if you’re granted stock as part of your employment, you may wish to exercise an 83(b) election to pay taxes on the fair market value of the stock at the time it was granted (rather than down the line, when it could be worth much more). 

You will also want to consider how your new position will impact your investing strategy, retirement timeline, and daily financial life. Speaking with a financial advisor can help you to navigate these questions. 

Starting Your Own Business or Consulting

Are you interested in capitalizing on the schedule and location freedom you had during the past year of work-from-home? If you’re thinking of launching your own startup business or venturing into consulting for companies like your previous employer, your financial “checklist” will look different than if you decided to simply move jobs. 

First and foremost, it’s wise to ensure that you have a hefty safety net or emergency fund saved before taking the leap to entrepreneurship. If you know your consulting or freelancing business is viable, you may need up to 6 months in cash emergency savings to live off of until your revenue increases. If you plan to launch a new startup company, the runway to profitability is often longer – be ready with 12+ months of living expenses saved up and set aside for your personal use. 

You will also need to consider how you’ll use your previous retirement accounts through your old employer. You have several options available to you for rolling these funds over into a new account, and speaking with your advisor about a strategy can help you maximize your savings both now and in the future. 

Finally, you’ll want to meet with your advisor to discuss whether entrepreneurship will impact your retirement plan and other financial goals. If being a business owner or consultant is something you value and want to pursue, you may need to adjust other goals, such as your retirement timeline. 

Taking a Sabbatical

Early retirement, or taking a year-long sabbatical, is common in the tech sector. However, to insulate yourself against future financial troubles, you need to have a gameplan for keeping expenses down while continuing to grow your savings either through investing or part-time income of some sort. Speaking with your advisor about what lifestyle changes may be necessary (such as downsizing, or even relocation to a lower cost of living area), and stress-testing your portfolio with your earlier-than-expected loss of income can help you make this decision with confidence. 

Remember: Don’t Go It Alone

Any type of career change indicates a significant financial shift in your life. Make time to speak with your advisor before taking the leap to ensure you’re set up for long-term success. Ultimately, your career and your finances should all contribute to a balanced, purposeful lifestyle. Any option is available to you so long as you’re willing to make adjustments as necessary to protect yourself and your family financially while pursuing these new, exciting goals.