Unforeseen Job Change?

By Beth Allwood - September 12, 2017

Many people who experience a sudden job change may face some personal finance challenges. Monthly bills, discretionary spending and current debt are just a few of the items that may require attention with this life shift. It's important to understand that decisions made during this period can have a lasting impact on long-term financial health and should be carefully evaluated to avoid common mistakes.

A few best practices to keep in mind during these transitional periods include:

Plan First, Act Later

It may be tempting to make immediate decisions while emotions are high. Do your best to refrain from falling into this trap. Panicked or snap decisions can compound challenges, resulting in even higher stress and anxiety. Take time to carefully evaluate your situation, and create a plan for responding to short, intermediate and long-term decisions. You may have spent years positively positioning your finances—don't risk destroying it in a fraction of that time.

Prioritize Financial Considerations

Next, create a budget to evaluate your financial obligations and track your spending. This process will help establish financial priorities and identify opportunities for reducing expenses. For those who haven't done this before, there are typically a few immediate opportunities for reduced spending.

While this might seem painful at first, it's important to remember that these don't have to be permanent changes. Temporary adjustments in areas such as dining out and entertainment may be missed luxuries, but eliminating these for at least the short-term can have a big impact on your monthly budget.

Maintain Your Emergency Savings

It is critical to maintain an emergency savings plan for other unplanned expenses. Obtaining additional credit lines during a transitional period can be difficult, so it's extremely important to carefully managing your rainy day fund. Leverage the money saving opportunities identified in your budgeting process to help meet some of your bills. Reducing extra payments on credit cards, student loans, car loans or mortgages also will help extend your savings.

Re-Evaluate Your Risk Tolerance

When faced with a disruption in your income, it is important to re-evaluate your capacity for risk with your investments; you may need a more predictable secondary source of assets. Increasing the allocation of a portion of your investments to more conservative positions may be required.

Don't Touch Your Retirement Funds

It may be tempting to tap retirement plans for an immediate source of cash, but this should be avoided as long as possible. You can lose 20 to 40 percent off the top to federal and state taxes and may be subject to premature distribution penalties. In addition to these significant upfront costs, you will lose the tax-deferral and potential for future growth on these investments.

Experiencing an unforeseen job change is an extremely stressful and challenging life event. Minimize financial stress and worry by conducting a thorough and honest review of your budget or talking with a trusted advisor. Understanding your full financial picture will help strategically position you for today and tomorrow.

Beth Allwood
Beth Allwood

Discover Your Investing Profile

Discover your investing profile, find your risk tolerance and get personalized guidance with our Investment Planner tool.

Investment Planner
  • Related Articles
  • More From Author

3 Investment Risks and What to Do

Each type of investment plays a different role in your portfolio—and presents different risks.

Bonds and Income: How It Works

Many investors look to bonds as a steady income source. Here's why.

Stock Market Volatility: A Tale of Two Investors

Can two investors get the same returns and end up with different results? Here's how timing can impact your portfolio.

    Me: Time to Figure Out My Investments

    Setting goals is important, right? But does other "stuff" seem to take priority? Check out our tips for setting your goals in motion.

    Unforeseen Job Change?

    Experienced a recent job change? Understand how decisions you make can have a lasting impact on your finances and common mistakes to avoid.

    Say Bah Humbug to Holiday Spending Regret

    It's easy to get caught up in holiday spending. Finding that perfect gift can be expensive. Here are three ways to head off the bah humbugs.

      Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

      The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.