5 ways to prepare financially before you quit your job
It’s hard to turn on the news or open your browser right now without hearing something about the Great Resignation or the Great Rethink. According to CNN, 4.4 million Americans quit their jobs last month, and “in February, US businesses had 11.3 million job openings to fill, slightly more than economists had predicted.”
According to the Harvard Business Review, “Unsettled by the pandemic, most people are considering our jobs with fresh perspective. Some are quitting, in what has been dubbed the Great Resignation. But, for many, it’s more of a Great Rethink. Do we really like our employers’ culture? Do we feel that we’re fairly treated and have the advancement opportunities we want? Most profoundly, does our work feel as meaningful as we’d like it to?… First, know your personal purpose and then evaluate whether you really need it on the job or can find it elsewhere. If you do, try job-crafting to align your responsibilities with that purpose and evaluate your boss and employer to make sure they can support you in that endeavor. If after all that you still cannot find meaning, it might be time to consider moving on.”
Many people don’t have the luxury financially to quit a job they’re unhappy with without a strong financial footing. If you find yourself in a position where you would like to find your next career move, here are 5 ways to prep your finances before you quit your job.
Find another job. The best way to make a job transition less stressful is to already have another job lined up. It is best practice to secure your next job before leaving your current job. That will reduce the financial impact.
Take a hard look at your emergency fund or cash reserves. Make sure you have enough cash to fund living expenses for three to six months. If your cash reserves are low consider stopping any monthly savings you are doing to build the cash up. This is one of the few times we recommend reducing savings.
During the transition, try to avoid pulling money out of retirement accounts before age 59.5 which can result in a 10% penalty plus taxes. Having liquidity and access to cash during a job transition is very important. Make sure you have a game plan.
Take advantage of all your employee benefits before you leave. Make all those health care appointments with your in-network doctors. If you have a flexible spending account or FSA, make sure you review the rules. It is oftentimes advantageous to use the funds before you leave employment.
Review your employer’s policy for vacation days and sick days. It is important to understand what days you will get paid for if you leave.
If you’re thinking of taking the leap to a new career soon, or you want to quit and don’t have the next step in mind, it’s the perfect time to examine your finances. Reviewing your financial situation can help you prepare for unexpected challenges, should they arise.
Contact our financial advisors if you need help creating a comprehensive financial plan. We use The Lifetime Financial Solution™ to provide financial planning for our clients. This is a comprehensive system designed to guide us as we work together to help you achieve what you want in life.