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Congratulations on your promotion! You've just made another step toward a successful future.
Still, this isn't the time to become complacent. A promotion comes along with new challenges and tasks. To help you make the very best out of your new job, here are the 10 money moves to make after a promotion.
1. Revisit Your Tax Withholding
Most promotions don't come with just a title upgrade, they come with a well-deserved raise. If that's your case, calculate whether or not you need to adjust your W-4 form and submit it to your HR department.
Let's assume that you file a joint return with your spouse and your combined taxable income was $90,000. Your tax due would be $18,293.75 ($5,156.25 + 25% of the amount over $37,450). After your promotion, your new combined taxable income is now $100,000. Your new tax bill is $21,071.25 ($18,481.25 + 28% of the amount over $90,750). Assuming no offsets to your salary bump and no changes to your W-4, you would be $2,777.50 short of your tax bill! (See also: Top Three Tax Facts to Know for 2016)
Use the IRS Withholding Calculator and determine if you need to update your W-4.
2. Calculate Vesting of Company Shares
Vested company shares are another way that your employer could reward you. Very often, these restricted stock units vest over time, meaning that you gain ownership of those shares the longer you stay. The idea is that your employer wants you to perform well and remain with the company. Contact your HR department to find out the vesting schedule of your company shares so that you know how much you would actually take with you if you were to part ways with your employer.
3. Time Profit Sharing and Bonus Checks
When your promotion includes a large bonus or profit sharing check, pay attention to the date that the payment will be issued on. An elective deferral contribution to your retirement accounts must be deposited by the tax filing due date (April 19, 2016 for Maine and Massachusetts residents and April 18, 2016 for everybody else). For 2015 and 2016, the contribution limit to 401K, 403B, and most 457 plans is $18,000, and to regular and Roth IRA plans it's $5,500. If you're age 50 or over, you can make an additional $6,000 in catch-up contributions. When you haven't met the applicable contribution limit, take advantage of that windfall to fatten up your retirement accounts.
4. Identify Additional Costs
With great power comes great responsibility, Peter Parker! Take stock of the responsibilities of your new position and determine how much additional time you may need to perform those tasks successfully. Having to stay a bit longer at work may increase several costs, including paying higher fees for babysitters or preschools, and dining out more often than before the promotion. Your first weeks in your new position will provide you an idea of how much your budget will need to adjust.
5. Determine New Tax Deductions
The good news is that some of those new-job-related costs may also be tax deductible.
- Keep track of mileage that you have to drive to off-site locations for job-related activities. You can deduct 54 cents per mile for business miles driven in 2016, down from 57.5 cents in 2015. Also, you may use that mileage to allocate a portion of your car expenses, such as insurance and maintenance.
- Being able to telecommute from home allows you to designate a portion of your home as a business office. Use the percentage from your total home space used used for business purposes to allocate allowable deductions using Form 8829.
- Having to dine and wine prospective clients may also be tax deductible.
Consult your accountant for more details on allowable deductions.
6. Prevent Burnout
Several human resources experts claim that the first 100 days on the job are critical, particularly after a promotion. To thrive in your new role — and to maximize your number of fully vested shares if applicable — take steps to mitigate additional stress related to your new job. Whether it's hitting the gym more often, signing up for a new class, or having "pizza day" with the kids once a week, you may have new costs to cope with stress. Make sure to include them in your new monthly budget.
7. Request a Credit Limit Increase
Now that you have a higher annual income, you may be eligible for a higher limit on your credit cards. If you've have been current in all of your payments for the last year, have an account in good standing, and haven't requested a limit increase in several months, contact the issuers of your credit cards to submit your request. Most financial institutions allow you to do this over an online portal, but some may request to contact them via phone.
With a higher credit limit, you can effectively improve your credit utilization ratio, which accounts for 30% of your FICO credit score.
8. Ask for Education and Licensing Subsidies
Most promotions are the result of hard work, and some of them are the result of an important investment that requires a recurrent annual expense.
For example, an architect needs to complete a series of hour requirements and exams to become licensed. Upon becoming licensed, an architect can choose to become a member of the American Institute of Architects (AIA), which has an initial cost of $442 per year and costs $600 each year thereafter to renew. Having the AIA in the title of a lead architect in a project bid makes a company more desirable to clients, so an architect could successfully argue that it's in the company's best interest to subsidize the annual cost of $600.
Similar scenarios take place in other industries, including accounting, engineering, and finance.
9. Inquire About Additional Company Benefits
Your promotion could unlock new or improved perks, including:
- Health plans;
- Flexible spending accounts (FSA);
- Telecommuting devices (laptops, smartphones);
- Fund options in retirement accounts;
- Industry conferences; and
- Parking options.
Find out what discretionary items are covered by your updated employment package.
10. Hire an Assistant
One time saving hack from the world's busiest people is to outsource non-critical tasks, such as researching travel options, transcribing audio, and scheduling meetings, to an assistant. If your new job doesn't include a personal assistant, then hire a virtual one for about $10 per hour through Upwork, Fancy Hands, or Zirtual.
You'll free up time to be able to focus on higher level priorities.
What are some other things that people should do after a promotion? Share with us in the comments!
