Financial Priorities During a Job Transition
Whatever the reasons for your job switch, the one certainty is that your income patterns will change going forward, and some of your expenditure patterns may do so as well.
So you do need to re-balance the two, and, given its criticality to your financial future, your loan payments are something you are going to need to look at very carefully.
Unquestionably, you ARE better off paying off your debt if your ability to continue doing so is likely to get worse. That, in turn, will depend on the future balance between your "ins" and "outs".
So start by asking yourself three questions about each "in" and "out" item:
- "Is it at a regular interval?"
- "Does each payment involve the same amount?"
- "How much future control will I have on the amount and on the timing?"
Meeting Loan payments:
Start with your loan payments. If you have a fixed APR over the life of the loan, then the answers to the first two are "Yes". And only you can answer the third, looking at how flexible your creditor companies are.
Unlike mortgage and vehicle loan payments, credit card debt APRs can be unpredictable. Consider making them more predictable by looking for "Life of balance" APR offers. These guarantee you a fixed APR till the entire amount is paid off.
If your credit card payments are likely to go up at anytime, then do some worst case planning in deciding whether to pay it off. Call and ask the company what is the highest APR they could charge. (The answer may shock you). Ask them what your resulting monthly payment may be and then see if you want to take the risk.
It is vital to protect your credit rating (or possibly to avoid making it worse) by never missing loan payments.
Reducing loan payments:
If you are switching to a better job, your improved credit rating may allow you to refinance your loans favorably down the road. Then you may not want to pay down your debts.
Earnings:
Will your earning be regular (as with a weekly paycheck) or intermittent (as with freelance writing)? What are the chances of delayed receipts?
Remember that loans require a monthly payment. You cannot pay in advance. (You can actually get into trouble doing so. The advance will not be applied to the future payment and you will "miss a payment").
If you risk missing a payment in future, make sure you pay off your debt now. This is not the place to be optimistic. You may be very talented at what you do, but that does not necessarily guarantee timely payment!
Windfalls:
If you have (very good!) reasons to assume that you will get large one time earnings in future (asset sales, stock options), you could wait to pay off your debts at that time, to ease the strain on your regular cash flow.
Opportunity costs:
What other uses do you have for the money that may pay down your debt? Do you know all of the expenses associated with your new work pattern? Otherwise you are better off keeping some reserve.
Could you benefit by having funds available to exploit future earnings opportunities instead of using them up now?
Conclusion:
Only you know, of course, what your actual incomings and outgoings will be. But by asking the three questions above, you will be much better prepared.