A report from the Bureau of Labor showed that 47.8 million Americans resigned from their jobs in 2021, in what is called the “great resignation” because of the Covid 19 pandemic. And many more are planning to quit the 9-5 work in the coming months.
You could also be contemplating making a move because of burnout, changing careers, or temporarily taking a break from your regular job.
Regardless of why you want to quit, it would help if you put your finances to handle life without your stable source of income.
This is especially vital with the uncertain economy, the rising cost of living, inflation, and skyrocketing prices of essential commodities.
If you are interested in starting your own business, I suggest you read this article: 15 Best Online Business Ideas for Beginners (And how to get started!)
When Should I Quit My Job?
The answer depends on several things. Your health and well-being far outweigh your job or your boss’ demands. If you got a better job with favorable terms, then quitting your current job could be a good idea. You can also leave your current position if it damages your physical, emotional, and mental health.
You can also quit your current job to pursue higher goals like starting a business. Starting a business may seem risky, but it allows you to grow and make more money.
Some also quit their jobs to have more time with family. After all, you work hard for your family, and they need more than the money.
However, how can you prepare for your resignation so that you land softly? This article provides you with practical things you should do to get ready.
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How To Get Your Finances In Order Before Quitting Your Current Job?
Whatever your reason for leaving your current employment, consider some practical steps you should keep in mind.
1- Evaluate Your Relationship With Money
How do you relate to money? Is your spending affected by your emotions? Do you get angry when you run out of cash or save less? Are you obsessed with saving and budgeting so your family lives a frugal life?
These questions will help you evaluate the effect of money on your mental health. Quitting your job will mean you spend more than you save, and if you are not ready for that reality, it may damage your well-being and your family.
You should have your financial plan in order. This will give you peace of mind and the clarity you need to tackle your next career path.
Therefore, assess if money issues cause you anxieties and prepare how to handle them before quitting. Remember, you can make the next move if you are mentally disoriented and drained by unending bills.
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2- Honestly, Examine Your Finances
If you want to quit your current job, ensure you stock take your finances. Do you know your fixed, variable, and discretionary expenses? What are your current savings?
If you don’t know how much you save and spend every month, you should track them to have an estimate. This information will help you if you have what it takes to quit or at least help you establish a path to get there.
You can use the standard business cash flow formulas (Beginning cash + expected income – expected outflow = expected closing cash) to establish how much money you will have every month when you decide to quit.
Expected income may come from side hustles or dividends from your previous investment. So, know your financial position to see when you can quit; otherwise, you could face severe financial woes.
3- Create a Budget And Stick To It
When you quit your regular 9-5 job, you may not have a steady stream of income immediately. Therefore, you should create a budget to guide your expenditure and help you achieve your goals.
Ensure you strictly stick to your budget and avoid impulse buying. A budget will also help you know where you spend your money so that you can make informed choices next time.
Religiously recording your expenditure may not be easy, but it will help you seal unnecessary spending. Budgeting will help your family to live within their means.
If you have been operating without a budget, ensure you incorporate it into your life at least four months before quitting. This period will help you and your family to adopt the culture and improve your savings.
Remember to include all discretionary and annual expenses in your budget. Furthermore, all your income should be recorded since it forms the baseline from which you spend.
4- Start Saving
Creating a saving culture when you have a regular steady income requires discipline. Many people make the mistake of starting to save too late or when they are near retirement.
If you are contemplating quitting your job in the future, make savings a priority. Financial experts advise saving between 20% and 40% of your monthly earnings for a rainy day (Source: Teachers Insurance and Annuity Association of America (TIAA))
If you find it challenging to maintain this saving habit, you can automate it from your salary account.
You could start by creating an emergency fund, which should be at least three months’ expenditure. The emergency fund will help you through your first months as you seek another job or establish a business.
Besides emergency funds, you can also have other saving accounts that generate interest. A strict budget will help you to achieve your saving goal, so stick to it.
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5- Pay Off Your Debt
Quitting your job with high-interest debt balances hanging on your account may not be a good idea unless you have another stable source of income to service the loan.
I advise you get on top of your debts before taking the big step. It may seem self-defeating to pay vast sums of money on debts while trying to save- it is not.
When you quit your job, you will not want the stress of debt collectors hanging around your shoulder. You should feel empowered when you quit your job, not crippled.
So, ensure you have paid off your debts while still employed. If the salary is insufficient to cater to your expenditure, savings, and debt repayment, you can get a side hustle or sell stuff to get out of debt.
If it is impossible to pay your credit card debts at once, you can apply for a balance transfer card. Between six months and two years, you will have a 0% APR offer on the transfer card, giving you adequate time to pay the principal and reduce the debt.
I don’t advise taking a credit card, but if you must downgrade those with high annual fees, go for those with zero annual fees. Confirm with your issuer if this option is available.
6- Prepare For a New Lifestyle
After you have chopped off part of your discretionary expenses and increased your emergency fund and saving plan, you may be concerned about whether you will afford finer things.
However, if you want to quit your job, you will need to change your lifestyle because you are jobless. Before your business picks up or you land another job, your family will have to make do with the basics.
One way to prepare for life after leaving your job is to adopt a simpler lifestyle for some months while you are still working. It is good to prepare your family and plan with less money.
Here are some things you can do:
- Automate your savings, bill payment, and retirement plans
- Shop at stores with reasonable prices
- Downsize your living space so that you spend less on rent or mortgage
7- Invest Your Money Beforehand
Saving money in a bank account when employed can be a good idea, but it may not be optimal. If you plan to quit work, you want to invest in ventures that will generate handsome interest or dividends.
Study stock markets and bonds to determine where you will likely earn more passive income.
A wise investment may also allow you to get a favorable loan to jump-start your business when you are jobless.
Investing in any venture may be challenging when you are jobless. However, you can do this when you are still working as you prepare for a new career path.
8- Find New Side Hustles To Earn Money
Before leaving your job to figure out your next step, I would advise you have a sustainable side hustle to help you supplement your budget. In America and other lands where people hold more than one job, it is easier to earn extra cash on the side.
Alternatively, you can ask for a raise or work overtime at your current employment and save the additional pay.
You may be surprised by how much you can earn through side gigs. Some good side hustles that work well for you include freelance video editing, content writing, book editing, tutoring, game coaching, etc.
See also: Is Freelancing Worth it Today? Here’s What You Need to Know.
Final Thoughts
You can quit your job and excel in your next career with proper planning. It is vital to plan for your life after the resignation to attain peace of mind that many jobless people don’t have.
Ensure your finances are in order before resigning because money is the number one cause of anxiety and mental problems.