Personal Finance

Three top things to consider before you leave your job for a new one

Key Points
  • Before you ditch your job for what seems like a better opportunity, look at the whole landscape.
  • A bigger salary is a small part of the overall finances.
  • Changing jobs too soon and too often can also impact your career.
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You're young, and the possibilities seem endless.

Yet before you jump ship for what seems like a better opportunity, look at the big picture.

Basically, you need to consider the finances and the impact on your career — especially if you leave a job you've been in for less than two years.

"Job hopping shows a lack of stability," said Francis Tapon, chief investment officer of robo-advisor Emperor Investments. "I would be wary of hiring someone who has a long sequence of jobs in which they never stayed [long]."

Changing jobs? Tips for a smooth switch

Make a list of the actual costs of both jobs, your current one and the new opportunity.

One company might mean a longer, more expensive commute. Some jobs could require a different, more formal wardrobe.

When you change employers, you'll need to make a decision about your current 401(k) plan. The new organization's plan may not allow rollovers.

Do a side-by-side comparison of the benefits both jobs offer — and the salaries are just a starting point. It's easy to brush aside retirement benefits, but if there's a skimpier match (or no match) that bigger salary may not be such a great deal.

Greener pastures

Younger workers, especially millennials, are more apt to switch jobs than older generations, says Rich Ramassini, a certified financial planner and director of strategy and sales performance with PNC Investments.

The improving economy is one reason. Workers who have been with an organization that was tightening the purse strings might find a better offer as companies start being more profitable.

When you contemplate leaving for a new position, you need to think critically and analytically about your motivation. Moving to a better opportunity is "fundamentally different from running away from something you don't like," Ramassini said.

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Money is, of course, a prime factor. Most people will take the opportunity to increase earnings.

The chance to acquire different skills might be a reason.

"Some people, who are doing one specific thing, want to expand and do something else," Ramassini said. "Or someone using multiple skills wants to be more of a specialist and cut down the number of skills being used."

A company's values can be a motivating factor. You might want to work for an organization that aligns more closely with your views on social responsibility or allows time off for volunteering.

Examine the financials

Don't miss out on saving for retirement when you switch. Continue investing in your IRA (or start an IRA if you don't already have one), since you will not be able to invest through the new company's 401(k) plan right away, Tapon says.

Depending on how your benefits are structured, you might have to walk away from some employer contributions to your retirement account.

If an otherwise ideal sounding job offers less generous benefits, Ramassini suggests comparing them to those of similar companies. "I'd be put off by benefits that are out-of-market in a corporate America job," he said. "But if it's a smaller, family owned business, it is not so unusual for them not to offer a retirement plan."

A smaller company may offer other forms of compensation, such as an equity stake or the chance of a partnership.

Is this good for your career?

Always consider the impact to your professional identity.

"The more times you change jobs, the more time you spend in a learning phase," Ramassini said. When you start a job, it's a time of minimal contribution. "You are doing yourself a disservice,″ he said.

Estimate how long it will take to get up to speed in the next position.

"There is a lot of value in performing at a high level, when you can make contributions above those of a new employee," Ramassini said.

What to do if you hate your job

Working at the top of your game because of your experience can be compared to a physical workout, Ramassini says.

"The more time you spend, the stronger you become," he said.

Before switching to a new job, you'll want to know what the future might look like in the next one. Ramassini recommends asking: "What's the runway for this position?" Be sure to show you fully appreciate and acknowledge the current position.