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By Fred Coon, CEO

SC&C Economics of a job transitionThe job market has improved dramatically as of late.  Granted, we’re not back to pre-2008 levels, but in many ways it has improved significantly; this is especially true in light of the fact that now we’re looking at a 5.5% unemployment rate instead of an 11% unemployment rate.

There’s a smaller pool of premium employees to select from.  If you’re talented, there is likely a demand for you and your skills, but that doesn’t mean you can stalk into your manager’s office and blow off all that pent-up frustration.  A change requires preparation.

Economic Considerations for a Job Transition

Emergency Fund

We’ve talked in this space before about having an emergency fund, equivalent to three to six months of income, to protect yourself if you should become suddenly unemployed.  If you’re clever enough to have built-up such a fund, congratulations, but I want you to reflect carefully on whether this is the time to utilize it.

Remember, everything you take out of your emergency fund has to be replaced.  If you behave as if the emergency fund doesn’t exist (in other words, normally) you’ll be much more careful with your money, and use it efficiently.

Changing jobs may not be an emergency.  You’re still employed; you’re still earning income. Nothing significant has changed except your desire to have a new career.  Leave the emergency fund alone and resist the temptation to quit and spend recklessly.

Moving Expenses

SC&C Moving costs with new jobAre you looking for a better opportunity with a greater income?  Are you looking for less employment so you can spend more time on your hobbies, family, or other interests?  There will be expenses in moving from Chicago to Denver, and they might not necessarily be picked up by the new employer.

Your current home might not sell as quickly as you would like, and you may need to pay two mortgages for a period of time.  Building up your financial reserve becomes even more important if you must bear these costs.

Cut back on luxuries

As a prophylactic measure, forestall the trip to the Bahamas with your family, and bank that money.  You can go later, after you’ve settled into your new career.  Keep your current car (or lease) for the time being.  Suspend your weekly housecleaning service and pull out the vacuum cleaner yourself once in awhile.

Obviously this doesn’t apply to everybody, but we all have some items we can cut back on.  A night out at the movies costs $100; whereas, sitting on the couch with a bowl of popcorn costs $1.39. Meals out can be even more formidable.

Equity-Based Line of Credit

SC&C Equity line of creditIf you don’t have an LOC, now might be a good time to establish one, while you are fully employed.  Most lending institutions are charging interest only one or two points above the prime rate for an equity-based line of credit, and the credit amounts can be significant, based on the value of your home or other assets.

A rate of 3% or 4% is far better than the usurious 19% to 25% charged by greedy credit card companies, and in most cases it can be connected directly to your bank debit card.

Financial Habits Now

Taking this time now to introduce economical habits might reveal a large amount of financial waste that you are completely unaware of.  And as we said at the beginning of this article, the market is not that tight.  You might find a suitable position within a week or two, but in the interim you may also discover a lot of seeming “choices” that have just sprouted on their own, like an invasive weed.

It’s never a bad time to do some financial gardening and get rid of those unwelcome intruders.  Using your current desire to change jobs might be just the impetus you need for a financial house-cleaning!

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