Most of us have daydreamed about quitting our jobs, especially if we’re not too fond of our boss. The COVID-19 pandemic has changed the way we view work, leading many to leave their jobs or consider a career shift. A 2021 survey by Microsoft found that over half of Generation Z workers (those aged 18 to 25) were contemplating quitting, and this sentiment was shared by 41% of the global workforce.
Quitting a bad job can be a game-changer, improving your mental health and happiness. But leaving without securing a new job can leave you exposed to financial difficulties. So, before you quit, it’s crucial to think through the financial implications to ensure it’s the right move for you.
If you’re thinking about quitting, you need to consider how much money you’ll need to cover your living expenses during your job search. This will depend on how long you expect to be unemployed.
To prepare for this, you should examine your budget. This will help you understand your monthly expenses and how much you’ll need to save. There are several budgeting apps available that can help you track your spending.
When reviewing your budget, identify which expenses are essential and which are luxuries. You might find that you can cut out some non-essential expenses, like a gym membership or streaming subscription, to reduce your monthly spending.
If you’re planning to switch careers, don’t forget to factor in any additional costs, such as education or training fees, professional attire, travel, and resume services.
If you’re considering remote work, you might need to invest in setting up a home office. And if you’re a parent, you’ll need to consider childcare costs.
Before quitting, it’s also important to have a fully funded emergency fund. This should cover three to six months’ worth of expenses.
When considering leaving your job, remember that you’ll also be losing any benefits you currently receive, such as health insurance, paid leave, and a flexible work schedule.
If you’re not financially ready to quit, you could start looking for a new job immediately, consider temporary work, negotiate with your current employer, or start a side hustle.
If you have a retirement account with your current employer, you’ll need to decide what to do with it when you leave. You could keep it with your current employer, roll it over into an IRA or a new employer’s retirement account, or withdraw the entire balance (though this last option could result in tax penalties).
Quitting your job is a big decision, so it’s important to ensure your financial life is in order before you take the leap. With careful planning, quitting your job before securing a new one can be the right choice, giving you peace of mind during your transition to a new job.
