Seven steps to follow

Changing jobs can be exciting, scary or just plain confusing. These steps can help you make more informed decisions that may help turn a new job into new financial opportunities.

Step 1: Add up the benefits you leave behind.

You likely have certain benefits in your current job such as health insurance, life insurance, a 401(k) match, stock options, paid vacation, sick or family leave, or child-care assistance. Try to determine what all of this is worth. As you compare your current benefits with those offered by another employer, you'll better understand the total compensation packages and the differences between them.

Step 2: Consider the benefits you take with you.

If you have stock options in your current company, you may have to make choices that involve complex tax issues. Talk with your tax or financial advisor and plan ahead. You usually only have a short period of time after you leave your job to exercise options.

Step 3: Decide what to do with your retirement plan.

Your employer-sponsored retirement plan—such as a 401(k) or 403(b)—is an important benefit; what you do with it when you change jobs can significantly impact your ultimate retirement security. You have several options: rolling over to a new employer's plan; rolling over to an IRA; leaving your money in your former employer's plan; or cashing out. Weigh the pros and cons carefully before you make a decision.

Don't cash out of your 401(k). Not only are you losing money in taxes and penalties, but you're raiding your retirement assets.

Step 4: Negotiate your pay.

There are several things to consider when talking about pay—your wages or base salary, bonus plan, relocation costs, a signing bonus or severance package. If you're relocating to a more expensive area, you might ask for a cost-of-living adjustment. Of course, things like signing bonuses and severance have a lot to do with the economy and the type of industry or company you're considering.

If you're having trouble agreeing on a salary or other terms, you might suggest alternatives such as extra vacation time or a work-at-home arrangement. It doesn't hurt to ask!

Step 5: Negotiate your benefits.

Benefits can include a retirement plan and health, disability and life insurance. Other perks could include education programs, legal services, training and development, commuter subsidies, discounts and financial counseling.

The value of these extras can represent a significant portion of your salary, meaning you'd have to spend a substantial amount of your own money to afford them on your own. So be sure to find out as much as you can about what's offered.

Generally, when a fringe benefit is provided as a requirement of employment or for the convenience of the employer (e.g., meals, lodging), the value of the benefit will not be included in the employee's taxable income. In addition, other benefits such as use of a fitness center or tuition may be excluded from your income provided they follow rules set by the IRS.

Step 6: Negotiate relocation costs.

Often a company will reimburse the costs of relocation so you're not overburdened with expenses when taking a new job. If you anticipate relocation costs, consider expenses such as help selling your old home, house-hunting costs, and interim housing and mortgage expenses, including closing costs, transaction fees and moving expenses.

If you pay for your own relocation, many of these costs may be tax-deductible provided you satisfy two tests. First, your new job must be at least 50 miles farther from your old home than your previous job. If you had no previous job, the new job must be at least 50 miles from your old home. Second, you must work full time for at least 39 weeks during the first 12 months after you move. Check with your tax advisor for more details.

Step 7: Review your new financial situation.

Your new situation may call for a new approach to saving and investing. Consider taking the following steps and discussing them with a financial advisor:

• Beginning contributions to your new retirement plan as soon as possible
• Reviewing your goals and revising your asset allocation
• Paying off debt
• Purchasing additional insurance, such as long-term care insurance if your new employer doesn't offer it
• Reviewing disability insurance needs
• Obtaining a mortgage if you're relocating
• Deciding between a flexible spending account and a health savings account, if both are offered
• Designating beneficiaries to any new or changed accounts
• Reviewing your wills, trusts and estate plan

If you're relocating to another state, take the time to research state and city tax laws. Income tax, property tax and even sales tax can affect your cost of living.