As part of what’s been dubbed the Great Resignation, 95% of workers are thinking about quitting their jobs, with a third citing burnout as a primary factor, according to a recent survey. If this describes you, you’ll want to have a financial plan in place before you jump ship, especially if you aren’t leaving for another job. Here’s a look at a few must-dos if you’re going to quit without another gig waiting for you.
Look for alternatives to actually quitting your job
For the sake of financial security, you should ask yourself if you really need to quit in the first place. In most states you likely won’t qualify for unemployment benefits if you quit voluntarily, unless it’s for a “good cause” like unsafe working conditions, or to take a firm job offer that later falls through. Plus, quitting gives you less flexibility in finding a more desirable job, as you’ll be racing against the clock to mitigate dwindling savings.
If you feel like you can’t tough it out under you current working conditions, talk to your boss about what can be done to shift or lessen your workload—the worst they can do is say no, and if they truly value you as an employee, they might be willing to do what it takes to keep you. And by staying employed, your job search can last as long as you need it to, allowing you to jump when the right job comes along.
Make sure your debt is manageable
Reconsider quitting your job until you’ve paid off any high-interest debt from credit card balances or other loans, especially if there’s any chance that you might miss a payment once they regular paychecks stop rolling in. Otherwise, you’ll want to take stock of your expenses and see how your debt payments can be maintained while you’re unemployed. With student debt you’ll have more wiggle room right now, as the moratorium on payments and interest has been extended until Jan. 31, 2022.
Have six months worth of living expenses in the bank (if you can)
It’s a tall order to be sure, but financial planners commonly recommend having at least six months worth of expenses (rent, car, insurance—all of it) lined up before quitting a job, if not more. Of course, the labor market is thirsty for employees right now, but you should plan for uncertainty, too. A lot of people leave their jobs with plans to get a new job right away, but that doesn’t always happen, even if you have relevant, in-demand experience.
Reduce your fixed expenses
Just because you have money saved up doesn’t mean you necessarily want to spend it, either. Try to stretch every dollar by revisiting your expenses and reducing how much you spend off the top every month. As an example, could you save on rent by living with your parents? Do you really need more than one streaming TV service? Since you won’t have any income coming in, you’ll want to keep spending to a minimum.
Don’t let your insurance lapse if you can avoid it
Life, health, and disability insurance are often included as part of an employer’s benefits package, and if you’ll be giving up your coverage when you quit, you’ll want to already have a plan for how you’ll close the gap between coverage periods while you look for a new job. Also, avoid the temptation in cutting back or cancelling other insurance that’s important to have, like renter’s insurance or auto insurance (unless you don’t need a car anymore). For health insurance, at the very least consider enrolling in a cheaper bronze Obamacare plan to protect yourself from excessive healthcare costs that can ruin your finances should disaster strike.
Plan to roll over your 401K (if you have one)
It can be tempting to cash out of your 401(k) when you leave a job, but doing so comes with immediate penalties and severely hamstrings your ability to save for retirement. Consider leaving your existing 401(k) with your current employer (if it’s more than $5,000 in it) until you get a new job, after which time you can request a direct transfer to your new employer’s 401(k) plan. If the new employer doesn’t offer a 401(k), or you if you are starting a new business, consider rolling over your existing 401(k) into an Individual Retirement Account (IRA).