When you changed jobs, you may have increased your compensation—or decreased it. So make sure to adjust your spending and saving accordingly. The sooner you do, the more satisfied you’ll be with your new position.

Make the most of a higher pay

If you are making more money, you may have plans for it. What you don’t want to do is spend it as you make it, because then you will never become stronger financially over the long term.

One of the most important things to do with a higher compensation: Increase your retirement contributions. Studies show that most people are not saving enough money toward retirement. Increase your contribution right away before you start spending it. That way, you’ll never miss it.

You also might want to review your employer’s voluntary benefits, if they offer them. These provide increased financial protection for you and your loved ones in the future.

Important voluntary benefits to consider include life, long-term care, and disability insurance insurance.

The bottom line: have a definite plan for your increased pay.

Less money means more budgeting

Many people take jobs that pay less money for a variety of reasons. If you have a job that pays less than you used to earn, you have a good reason for doing it. Less pay, however, can mean financial hardship. To combat that, you may want to establish a budget.

Examine your financial goals
Before you establish a budget, you should examine your financial goals.

Start by making a list of your short-term goals (e.g., new car, vacation) and your long-term goals (e.g., your child's college education, retirement).

Next, ask yourself: How important is it for me to achieve this goal? How much will I need to save? Armed with a clear picture of your goals, you can work toward establishing a budget that can help you reach them.

Identify your current monthly income and expenses To develop a budget that is appropriate for your lifestyle, you'll need to identify your current monthly income and expenses.

You can jot the information down with a pen and paper, or you can use one of the many software programs available that are designed specifically for this purpose.

Start by adding up all of your income. In addition to your regular salary and wages, be sure to include other types of income, such as dividends, interest, and child support.

Next, add up all of your expenses. To see where you have a choice in your spending, it helps to divide them into two categories: fixed expenses (e.g., housing, food, clothing, transportation) and discretionary expenses (e.g., entertainment, vacations, hobbies). You'll also want to make sure that you have identified any out-of-pattern expenses, such as holiday gifts, car maintenance, home repair, and so on. To make sure that you're not forgetting anything, it may help to look through canceled checks, credit card bills, and other receipts from the past year.

Finally, as you list your expenses, it is important to remember your financial goals. Whenever possible, treat your goals as expenses and contribute toward them regularly.

Evaluate your budget
Once you've added up all of your income and expenses, compare the two totals. To get ahead, you should be spending less than you earn. If this is the case, you're on the right track, and you need to look at how well you use your extra income. If you find yourself spending more than you earn, you'll need to make some adjustments. Look at your expenses closely and cut down on your discretionary spending. And remember, if you do find yourself coming up short, don't worry! All it will take is some determination and a little self-discipline, and you'll eventually get it right.

Monitor your budget
You'll need to monitor your budget periodically and make changes when necessary. But keep in mind that you don't have to keep track of every penny that you spend. In fact, the less record keeping you have to do, the easier it will be to stick to your budget. Above all, be flexible. Any budget that is too rigid is likely to fail. So be prepared for the unexpected (e.g., leaky roof, failed car transmission).

Tips to help you stay on track

• Involve the entire family: Agree on a budget up front and meet regularly to check your progress.
• Stay disciplined: Try to make budgeting a part of your daily routine.
• Start your new budget at a time when it will be easy to follow and stick with the plan (e.g., the beginning of the year, as opposed to right before the holidays).
• Find a budgeting system that fits your needs (e.g., budgeting software).
• Distinguish between expenses that are "wants" (e.g., designer shoes) and expenses that are "needs" (e.g., groceries).
• Build rewards into your budget (e.g., eat out every other week).
• Avoid using credit cards to pay for everyday expenses: It may seem like you're spending less, but your credit card debt will continue to increase.

©2003 Forefield, Inc.