So you’ve gotten a new job offer. That’s pretty exciting, especially in today’s tough market. But is the job offer really a good job offer or could the new job actually end up costing you and your family money in the long run? How do you know? Here are a few financial considerations to make before you accept that new job.
1. Relocation: Does your new job require relocation to a new city? There are many things to consider if it does.
- Do you have to hire a moving company?
- Do you have to pay closing costs, usually 3-5% of the amount of your loan, and taxes accrued with the sale of your home?
Sometimes you can negotiate these items into your job offer, but more often than not many companies are no longer paying for these expenses. How long with your new salary will it take you to make up for those expenses if they do not?
- Then you need to consider the location of the job itself and the cost of living in that new location. Is it higher or lower than where you live now? How is that going to affect you?
Here are a few free cost of living calculators that you can use to compare. I recommend using several as they all offer different opinions.
- Sperling’s Best Places
- CNN Money
- Relocation Essentials
- Home Fair
Cost of Living Calculator Tip:I always go with worst case scenario to prepare for any surprises that may come along with a relocation.
2. Commute: Where I live the commute can range from zero, if you can work from home, to 45 minutes depending upon the time of day. Though many, many other cities either require much, much longer commutes or more expensive housing if you wish to remain closer to your place of employment. Because of the expenses of time, gas, and wear and tear on your car, you need to be sure to factor in all of those expenses when you are considering taking a new job.
3. Benefit Costs: Benefits include not just what you pay for but what is covered and how. If possible look at your co-pays, whether or not something hits a deductible or is included. At the very least look to see if you are you moving from a big company to small company. Small companies’ medical benefits are almost always more expensive to the insured than larger companies’ medical benefits. Also look at 401K benefits. Does your new company match? Sometimes losing a matching program by moving from one company to the next can equal a pretty huge expense.
4. Travel and Equipment Expenses: Some new jobs require extensive travel or new equipment. When looking at a new job that requires travel you should consider whether or not you are making enough more to outsource some of your current tasks that you may no longer have time to take care of such as lawn care, cleaning of your home, pet care, child care, etc. If your job requires new equipment, software, etc. does the new company cover these expenses?
5. New Credentials, trade association memberships, etc.: If your job requires new credentials, memberships to clubs, etc., is your new company going to be covering those expenses? If not does your new salary increase cover those expenses or will they actually cost you money in the long run?
6. Tax Consequences: In certain ranges of income it is possible that an increase in income will cause certain benefits that you may have received in the past such as the child tax credit or the amount of itemized deductions you can take out to phase out. So working a lot harder for more money may not be as much more as you think it might be on the surface. An increase in salary may not actually end up being an increase at all.
7. Longer Hours: In most careers every promotion equals more hours. It’s just a fact. And with more hours you need to consider the cost effect to child care, etc. But there also less obvious sacrifices that you might have to make. If you are working longer hours will you still have time to use those season tickets to your favorite sporting event? Will you still be able to coach your child’s soccer team? At some point more money may not be worth the sacrifices that you have to make to get it.
Every new job offer is exciting. It shows that you are doing something right either with your reputation, developing your skill set, networking, etc. However every new job offer is not necessarily a good fit, even if it means an increase in salary. Take the time to research every offer carefully to make the smartest financial decision for you and/or your family.