There are plenty of good reasons to switch jobs, and often, the decision to do so is financially motivated. In fact, in a study from ADP Research Institute, workers who switched jobs this year made 5.3% more than they did last year.
But while it's common practice to move from one job to another in an effort to boost your income, you never know what sort of financial hit you might take in other areas. And that's something to consider before offering up your two weeks' notice.
Don't focus on salary alone
You might get a job offer that comes with a generous bump in salary. But before you accept it, think about some of the ways you might lose money by moving to a new employer.
First, consider your health insurance plan. How generously does your current employer subsidize your premiums? If your new employer's health plan requires a much more substantial out-of-pocket contribution toward your premiums, that alone could negate some or all of your pay boost.
The same applies to your retirement plan. If your current employer offers a sizable 401(k) match, that's free money for your golden years right there. But if your new employer doesn't offer a match, or gives a smaller one, you'll either take a hit on your savings rate or otherwise feel compelled to make up the difference by contributing a larger percentage of your earnings. Either way, that's a loss.
And speaking of 401(k)s, if your current employer gives you a generous match, but you're not fully vested in it, you could wind up leaving money behind if you jump ship before you're entitled to keep that cash. It definitely pays to look at your plan's vesting schedule and see what it entails before making the decision to leave a job.
Also, think about career growth. Your new job might offer a better-sounding title and a salary boost at first, but is there room for upward mobility at that company? Or is it a smaller firm with limited upper-level positions? If the latter applies, then you might snag a raise initially, but then remain at more or less the same level for the next number of years -- whereas your current employer might offer more room for growth if you stay on board.
Finally, consider the demands of your new job versus your current one. If you expect the hours to be longer and the commute more tiring, you may have no choice but to outsource certain tasks you typically tackle right now, like cooking meals or cleaning your home. And the more services or conveniences you need to pay for due to time constraints, the more that higher salary erodes.
Should you follow the money?
It's not unheard of to accept a new job by virtue of its higher salary alone. But before you do, make sure you really stand to come out ahead financially. It could very well end up being the case that what you gain in your paycheck, you lose in terms of costlier health benefits, a hit on retirement money, limited mobility, and longer hours that lead to a whole new set of expenses and bills.