Congratulations! Your new job offer has a larger income and with it, more opportunity to pay off debts. However, new expenses may come into play that could challenge your nice, new income. Before you accept the offer, let’s answer three questions to find out if your budget will work for your new job.
Budgeting for a New Salary
In this exciting time, take a moment to consider your goals and the impact this new job may have on them. If you want to focus on debt reduction, you would want your new job and income to be larger than you currently have. However, there are other expenses that may neutralize the increase.
Is your overall income larger than before?
For salaried employees, this is an easy question to answer. You know exactly how much income you have to work with each month in your budget. This makes setting goals to eliminate debt much easier to manage. Employees paid by the hour have some additional questions to answer before knowing if they will be making more money.
1. Are you working the same amount of hours or more? If you are making more per hour, but have fewer hours, you will need to do the math to make sure you still end up ahead of where you were.
2. Are your hours guaranteed? A pay raise is great, but fluctuating hours can be difficult to work into a budget. Find out ahead of time if you are guaranteed a minimum number of hours or if there is any type of guarantee.
3. Did the PTO policy change from company to company? PTO (paid time off) can vary widely from company to company. If you lose five days of paid vacation, that is five days of lost income or that much more to save.
Will your transportation costs change?
Even though you haven’t relocated, you may need to travel farther than you do now. You may need to take public transportation or pay for a spot in a garage. All of these costs chip away at your new income and keep you from paying off debt faster than you thought you could have. Sometimes, being able to ditch your car completely means more money in your pocket. So depending on your personal and professional needs, your transportation costs can come into play.
Do you need a new wardrobe?
If you are transitioning into a manager’s role or a more professional office setting, chances are good that you will need a new wardrobe. This means everything: shoes, clothing, accessories, outerwear… Depending on your current closet, you could spend a few hundred dollars up front. While you may find some items at thrift or consignment stores, your timeline probably won’t allow you the luxury or sorting through the racks to find everything at a lower cost.
Steps to Budgeting and Paying off Debts
Once you have answered the questions above, you should also think through things like insurance and retirement benefits. Hopefully, you end up with more cash coming in than before. Remember, keep your goal in mind: paying off debts, not going out and spending extra money. If you don’t utilize your budget, your extra money will disappear. Visit ACCC’s Financial Education area for more budgeting resources.
To speak to a credit counselor today about budgeting and managing your finances, call 800-769-3571.