Changing Jobs

Transitioning to a new job isn't always smooth—or immediate. The gap in income from the time one job ends and the next one begins is one of the most important reasons to have an emergency savings fund. The fund should be able to cover at least three and ideally six months of your living expenses. Having an emergency fund to dip into can be the difference between falling into debt or barely getting by until your financial situation improves.

Savings as part of your journey.

If you're participating in a retirement savings plan, you'll need to decide what to do with the money in your account when you change jobs. Often, you will have several options for keeping the value of your retirement account even after you leave the employer who sponsored your plan.

You own the current value that comes from your contributions and any earnings on those contributions. Your employer will typically have a schedule, called vesting, that determines when you will also own the contributions your employer has made on your behalf. Once you are fully vested, which could take several years, all of the money in the account is entirely yours.

For example, you may be able to leave the assets in your former employer's plan, at least for the time being, and possibly for a longer period. Or your new employer may allow you to transfer, also called rolling over, the assets in your current plan to a comparable retirement plan the employer offers. Finally, you could roll over your account balance into an Individual Retirement Account (IRA) with a separate financial institution, such as a mutual fund company, brokerage firm, or bank.

If, like many people, you have health insurance through your employer, one of the most worrisome parts of losing a job is the simultaneous loss of medical insurance.

There are some options you can pursue to continue to be covered by insurance. In most of these cases, you will need to cover the full cost, as your employer will no longer be paying some or most of your premium. But paying for health insurance is almost always a better option for your long-term financial wellness than taking the chance of facing high medical bills—either routine or unexpected—without insurance coverage.

If you leave a job for any reason, you may qualify to continue receiving the health insurance your employer has provided. COBRA (short for the Consolidated Omnibus Budget Reconciliation Act) requires the insurer to offer you this coverage for up to 18 months, or 29 months if you're disabled. It is expensive, though. You will be responsible for the full cost of the coverage, plus up to 2% in administrative fees. But if you need or want to keep the same level of coverage, it may be cheaper than buying insurance on your own.

You can buy health insurance directly from an insurance company. Or, you can find a plan through the Affordable Care Act (ACA), at the federal insurance marketplace, at Healthcare.gov or a state marketplace in a state that offers one. While the premium you pay will be based on your age, location, number of covered family members, and type of plan, currently the ACA can often provide discounts that are based on your current situation.