The COVID-19 pandemic has people questioning their careers, work/life balance, and what they really want out of life. In November, a record-high 4.5 million people quit their jobs, part of what economists are calling "the great resignation."
Many of the people leaving their jobs are in search of better pay, increased flexibility, greater fulfillment, and more happiness, but they don't have an immediate job offer or a plan B, and you know what? That's great!
Quitting something you don't like to make room for something better is really brave, but you want to do it in a way that sets you up for success. After all, if you don't make a financial plan before you quit, you may end up being in the exact same position as before, so you need to financially prepare to quit your job. That's why I put together this great resignation financial survival guide.
https://youtu.be/lIi27laZFaA
1) Pump up your emergency fund
Before you give up your paycheck, it's important to figure out how much money you need to live on, so start keeping a journal of your monthly expenses. Write down how much you spend on necessities like rent and food, how much you spend on wants, like tickets to the theater or eating out, and how much are you saving each month.
Based on that list, calculate how much money you need to get through each month. If you're quitting before you have a new job offer, then you want to build up an emergency fund that can sustain you for about six months. The last thing you want is to start charging things to a credit card and wind up with high-interest rate debt.
2) Set a budget and stick to it
If you don't have a steady paycheck coming in and you aren't sure when you'll be getting one, you need to make sure that you aren't overextending your savings.
Generally, we suggest people follow the 50/30/20 budget, meaning you spend 50% of your monthly income on needs, 30% on wants, and 20% on savings.
But if you don't have a monthly income, you probably need to rethink how much you're going to spend. You also might not be saving during this time off, and that's okay, as long as you have a plan to start saving once you find a job again.
If you followed my last tip, you've already calculated how much money you spend on necessities, and I'm not going to say that you can't spend any money on wants during this time, but it's probably smart to cut back for the time being. You might also want to try cutting back on necessities too -- consider getting a roommate or finding a cheaper phone plan. Remember, these things are only temporary until you have another source of income.
3) Figure out your health insurance options
If you had medical, dental, or optical insurance from your employer, then first of all, take full advantage of those before you quit. Get your yearly physical, get your teeth cleaned, do an eye exam, and then figure out an insurance plan for the time in between jobs.
If you're married, it could be as simple as getting on your spouse's plan, but if that isn't an option, evaluate the cost of COBRA through your old employer or purchase healthcare coverage on your own.
4) Decide how to handle your retirement account
Figuring out how to save for retirement is crucial when it's time to financially prepare to quit your job.
When you leave your job, you're going to make some key decisions about your retirement account. If you had an employer-sponsored retirement account, like a 401(k) or a 403(b), you'll want to open a rollover IRA account and transfer your retirement savings into it. If you're quitting to start your own business, you might wanna open a SEP IRA to put your self-employed retirement savings in.
5) Have a backup employment plan or consider a side hustle
If you're committed to finding the perfect job, it may take a while. It can't hurt to earn some extra money while you're searching for the right opportunity. As you financially prepare to leave your job, look into part-time for a little extra cushioning. In this day and age, there are a ton of opportunities to earn money working from home.
One last thing...
Congratulations! Quitting your job to pursue something that you're really passionate about is a scary thing to do, but you're doing it. And just as importantly, you're doing it the smart way. You're preparing, you're taking care of yourself so that you don't find yourself getting back into debt or really struggling to enjoy that time that you're not working. So we fully support you in quitting your job, just want to make sure that you financially prepare to quit your job.
All right. I want to hear about your dreams, so would you leave a comment telling me what it is that you want to do after you quit your job? I would love to know! Whatever it is, I hope that it brings you success, purpose, and happiness.
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