Leaving a Job?

Whether you are leaving a job voluntarily or face a job loss due to a weakened economy, use these tips to help make the most of the situation.

Understand your severance options.
If you are in a situation where you are offered a severance package, you'll need to decide whether to take the pay out over time or in a lump sum. If the company you worked for is unstable, you may want to consider taking the lump sum. If that's not the case, the lump sum option could put you in a higher tax bracket,* making it more appealing to take payments over time. Also be aware of any non-compete clauses in your package.
Draft a budget.
It's ideal to have a reserve of six to nine months of living expenses. Eliminate any unnecessary items, and sort your spending into needs versus wants.
Keep your health coverage.
You'll want to be sure you have health insurance for yourself and any dependents. A medical emergency that takes place during this time without coverage could be devastating to your finances. Coverage through COBRA is available for 18 months. Check with your employer to see if this is an option. You can also look into group coverage through a trade or membership organization. You'll also want to keep up with prescriptions—ask your doctor or pharmacist for generic alternatives.
Take care of your 401(k).
Consider rolling your 401(k) into an IRA, or into your 401(k) at your new job. This will make it easier to manage. Avoid the temptation to cash out the funds, as you will face tax-related penalties.*

*Consult your tax advisor for more information.

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