Budgeting

How To Prepare Your Finances Before Quitting Your Job

Navigating your career post-pandemic can look incredibly different from how it looked before. If you are itching to leave your job, you are not the only one. Far from it. Many analysts have been labeling the significant amount of people quitting their jobs since the start of 2021 as “The Great Resignation.” There are many cultural and economic factors at play within this mass resignation as there also are with this new phenomenon of “quiet quitting” amongst Millennials and older Gen Z. Either way, if you are considering quitting your job, it is important to be financially prepared before you make any definitive moves.

Quitting your current job might be the exact right decision for you but if you go about it without any preparation, you could find yourself struggling financially while you conduct your job search. In this article, we will explore why the pandemic changed how so many people view their work and how you can quit your job in a responsible way with proper financial preparation.

How the Pandemic Changed How People View Work

The COVID-19 pandemic had an immeasurable impact on how people look at the whole of modern society and the lives they live within it. Lockdown, quarantine, and the economic crash were the perfect storm to bring about a collective existential crisis for Americans. 

The pandemic had its own unique impacts on how people view work and the expectations they have for their careers. Many employees are less tolerant of being overworked and more vocal about their needs, both financial and environmental. Some employers and corporations who are willing to hear their employees out and make the necessary changes are making positive improvements that keep their employees loyal to them. However, the other employers that are stubbornly stuck in their old ways are experiencing the real-life effects of that great resignation.

Working Remotely

With the lockdown, millions of workers switched to handling all their responsibilities 100% remotely. While it was not necessarily a smooth transition, it was possible and it was done. Once people discovered the ease with which their responsibilities could be done remotely, they were understandably reluctant, and in many cases unwilling, to return to working in-office. 

Many companies have made the shift permanent or had a flexible approach to working with their employees’ desires. However, if you have an employer who is insisting on returning to the office without considering your preferences, you might want to find a new employer who is more considerate of their employees’ opinions.

Treatment and Expectations

A full-time job is meant to be 40 hours a week, but there are a surprising number of corporations out there that attempt to get more work for the same pay. An employer might simply increase productivity expectations for their current employees so that they don’t have to spend more money on hiring a new employee. 

Many people experienced a fundamental shift in their way of thinking after living through lockdown. Employees are less willing to put up with any kind of mistreatment or unfair working conditions than ever before. Before 2020, it had become incredibly common for employees to overwork themself until they were completely burnt out simply to keep their employer happy. After such a life-changing global crisis, people are more interested in recovering from burnout rather than reliving it. 

Why Is It Important to Prepare Before Quitting?

It is incredibly important to financially prepare before you quit your job for many reasons. If you quit your job without another job lined up, you may need to account for wage loss and other challenges that could arise while you are unemployed. Most Americans who resign from their job do not qualify for unemployment benefits except under very specific circumstances so it is vital that you have enough money to cover your necessary expenses while you search for a new position that will improve your quality of life. 

You can’t always predict what life will throw your way in however many months or weeks it will take you to find a new job. Because of this, it is necessary to be prepared with an emergency fund to cover surprise expenses in addition to your typical bills. If you have health insurance with your current job, you might need to determine how you to handle a possible lapse in coverage while maintaining proper health care. 

Seven Steps To Prepare Your Finances For Resignation

Before you turn in your resignation letter, do the following seven steps to financially prepare for a break in your employment status:

1. Take Stock of Your Overall Finances

The first thing you will need to do to begin preparing to quit your job is to take stock of your financial situation as it stands now. Dedicate a day to pull out your bank statements to see how much you have in your checking and savings account. Analyze how much credit card debt you have and what your monthly payments amount to. Determine what your monthly expenses are in total and how much money you may need to sustain that lifestyle for several months while you search for a new job.

2. Pay Down High-Interest Debt

Before you even start writing your resignation letter, get to paying down your high-interest debt like personal loans, credit card debt, and cash advances. You do not want to have to manage high monthly payments while you are in between jobs. By paying down your costly debt before you quit, you are reducing the bills you will have to account for during your unemployment. 

3. Monitor Your Spending Habits

Cut down on how much money you spend both before and after you resign from your job. Reducing your unnecessary spending before you quit allows you to put more away into your savings account. If you often spend money online, consider going on an online shopping detox. Or cancel a few subscriptions or streaming services. Doing all of this before you even become unemployed will be good practice for the frugality that will be required of you when you stop working for a time. 

4. Save Money In High-yield Savings Accounts

Set up automatic savings to build up the money you will be living off of when you quit. Turning automatic deposits into a high-yield savings account while you are still at your current job will allow interest to build up, further cushioning your savings plan. Always save more than you anticipate to use so that you are ready to face unexpected expenses if they pop up. Redirect any money you have left at the end of the month or from expenses you cut to your savings account.

5. Come Up With a Budget For Your Living Expenses

Use your current monthly expenses to come up with a budget for your living expenses during your period of unemployment. Make the budget reasonable and flexible so you know how much money you will need to save. If you don’t believe you can make enough to survive off of during the length of time it will take to find a new job, you can take on a side hustle while you search to generate income for some extra cash flow.

6. Prepare Yourself to Live More Frugally for a Time

It is a good idea to mentally prepare yourself as much as you can to live as frugally as you can for a while. When you are in between one job and another, you are not going to be able to treat yourself to little luxuries as often as you may have been able to in the past. Once you find employment again, you will be able to return to the lifestyle you are accustomed to but it is important to be prepared to live differently for a time.

7. Overestimate How Long You May Be Unemployed

You want to make sure you have a considerable enough safety net in savings to cover all your expenses until you have a normal income again. The best way to get the most realistic estimate when it comes to your finances is to overestimate. If you think it could take you three to four months to find the perfect job for you, save up to six months worth of expenses instead of the exact amount. Life is always unpredictable, and you can never know exactly what could slow the process down. It is always advisable to be overprepared rather than accidentally underprepared. Put aside extra money for emergencies when they occur. You don’t want to end up without enough money to pay to have your car repaired when it breaks down.

Important Reminders For Job Searching

It can be incredibly easy to get overwhelmed by the job hunting process. Many individuals begin to experience imposter syndrome and feel extreme nerves when interviewing for a new position. The job market can be intimidating at times, so it is important to keep a few pieces of advice in mind moving forward in your career pursuits. 

Workers Have the Upper Hand

When it comes down to it, the employer needs the employee. Because of the great resignations, hosts of companies are in desperate need of employees to replace those they have lost. So even though you might feel nervous about convincing a company to hire you, you are the one who is really in charge because they require your services. They need workers to make their business run, so you are perfectly in your right to ask for what you need to thrive in a workplace.

Beware of Burn Out

Before taking a new job, ask for the new employer’s plan for preventing worker burn out or encouraging a healthy work/life balance. You don’t want to leave your current job only to end up just as miserable at the next one. Discuss the topic with your potential employer and gauge how they speak about it. You will likely be able to tell what kind of employer they are by how willing they are to talk about work/life balance and employee burn out. 

Interview the Interviewer

If you are serious about finding a work environment that you can thrive in for a long time to come, you have to get the most out of the interview process that you can. Many job-seekers think of the interview process as a way to impress the potential employer. However, it is them that need to impress you as well. It is not only the interviewer that should be asking the questions. 

You are meant to use this opportunity to find out how this potential employer will differ from your old employer. Ask as many questions as you can think of to determine whether this is really the company you wish to work for and if the compensation fits your needs. Find out all that you can about the benefits they offer, including health insurance and retirement savings. Learn about how they treat their employees and how they handle work/life balance. You want to find a day job that will enrich your life and make you much happier compared with your last position. 

References:
How To Get Your Finances In Order For The Great Resignation | Forbes
5 steps to financially prepare for quitting your job | Business Insider