Ready to make a big change? If you’re thinking about stepping away from your job for a new opportunity, education, or caregiving, having a financial cushion is essential. "In today’s world, it’s vital to empower your dreams, but planning is key before taking that leap," says a financial expert.
Before you hand in your notice, ensure you have a strong financial strategy so you can land on your feet, regardless of where you land.
Create a Budget
Before leaving your job, establish a comprehensive budget to manage your finances during your time away, advises a consumer analyst. “If you’re taking a break, your budget will dictate how long you can stay out of work,” she notes. “If you’re leaving without another job lined up, budgeting helps you pinpoint when you need to secure a new position.”
Your budget should cover all major expenses such as housing, groceries, and utilities. Additionally, set up a separate document to assess your variable costs—both essential and discretionary. Be ready to make tough choices when your income stops.
“Be prepared to say no to social outings or shopping sprees,” advises the analyst. “If you expect to feel left out, plan some budget-friendly activities to enjoy time with friends without breaking the bank.” Planning ahead will ease these decisions.
Check Your Credit Score
Before quitting, it's wise to review your credit score, especially if you foresee needing a loan or credit card soon after leaving your job. “If your credit is lacking, now’s the time to improve it. Your job history might impact loan applications, so a better credit score will help improve your standing,” she explains. For instance, if you leave your job and plan to buy a home, your income will be zero, making loan approval dependent solely on your partner's income. Ensure this isn’t a concern prior to your departure.
Build Your Support Network
Don’t keep your plans to yourself. Share your intentions with your network to gain support. A business coach emphasizes the importance of discussing your career aspirations and seeking advice from friends and mentors. “We achieve more when we leverage our networks,” she adds. Consider reaching out to leaders in your desired field for potential networking opportunities.
Utilize Vacation Time and Address Healthcare
Before resigning, check how much vacation time you have left. Many employers will allow you to use your accrued paid time off before you leave, providing you with additional paid time to seek new employment. Also, don’t overlook your health insurance; there could be penalties for being uninsured. Contact your healthcare providers to understand your options, and consult with HR about COBRA options available after you leave. Sometimes you may still have coverage for a few weeks post-employment, so verify this information.
Consider starting a fund for healthcare expenses. “If needed, look into short-term insurance to cover you until your new plan starts, as unexpected health issues can arise,” she advises.
Manage Your Debt
Quitting doesn’t erase your obligations. Student loans, credit card bills, and other debts remain. It's crucial to develop a debt management plan. “Review your mortgage, student loans, credit cards, and car loans to assess interest rates. If you're facing high APRs, explore options to lower them,” she states. “If you’re unemployed for a while, you don’t want your debt to become a burden.”
Understand Your Future
If you plan to shift your career, remember that the grass may not always be greener. Research potential salaries for your next job and consult industry contacts about their earnings. Having mentors can also be beneficial for guidance on compensation, ensuring you enter this new phase with clarity.
