It’s a phenomenon widely being described as “the Great Resignation”.
With many countries now having removed the tight operating restrictions they imposed on businesses during the COVID-19 pandemic, there’s been a quick ramp-up in economic activity.
That ramp-up has spurred a surge in job vacancies around the world, and enticed record numbers of people to resign from their existing job to take up a new one, often with a better salary package.
Australia has lagged the global trend to date. But many employment experts expect the Great Resignation to accelerate here now that all states and territories are effectively fully open for business once again.
Considerations if changing roles
Probably one of the biggest considerations for anyone changing jobs, or contemplating a change, is financial security.
That’s because changing jobs can potentially place you in a financially vulnerable position.
Budget for any income gaps between when you leave your job and start the new one.
Also, when you switch jobs, consider that in most cases you’ll be on a probationary period with your new employer.
That period can last anywhere from three to six months, depending on the terms of your employment contract.
And, during this time, your new employer will generally have the right to terminate your contract at short notice.
So it’s important to prepare for that possibility and have a financial gameplan in place.
Here’s a few steps you can take:
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A good starting point is to take a financial stocktake so you have a clear picture of your net cash flow after ongoing living expenses, including regular commitments such as mortgage or rent payments.
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If you have some savings set aside, it’s good to retain them for the time being in the unlikely event that your new job doesn’t work out and you find yourself unemployed.
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Along the same lines, if you receive any form of payout when you leave your job, including accrued annual leave, it makes sense to put that money to one side until your new role is secure.
Another consideration is that, if you’re planning to borrow money in the near future, most lenders will want to see you have a stable employment history.
If you apply for a loan soon after you’ve switched roles, especially while you’re still completing a probationary period, they’ll most likely determine you’re a higher risk than someone who’s been in their role for longer.
Lenders will generally want to see that you’ve been in your role for at least 12 months to ensure you’re able to service the loan, although they’ll take other factors into account such as your total assets and liabilities, your salary package, and your longer-term employment history.
Maintain continuity and plan
Another key step when changing jobs is to ensure any investment strategies you have in place are not inadvertently disrupted by your move.
For example, if you’re already salary sacrificing some of your pay into superannuation, make sure you set that up with your new employer so your personal contributions continue.
There could also be new investment opportunities from changing jobs.
Review your long-term financial goals and the strategies you have for achieving them.
If you’re receiving more income in your new role, you may want to consider starting up an automated regular investment plan.
That will enable you to put money into different investments at set intervals, which can be used for specific savings goals such as saving for a house, your children’s education, or for other purposes.
If you need help with your investment strategy, speak to us on 02 4605 0350.
Source: Vanguard March 2022
Reproduced with permission of Vanguard Investments Australia Ltd
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