Quitting your job is no joke! It is a serious choice that many people have been making recently with the Great Resignation. I feel like everyone and their mama is quitting, but no one is showing how they are able to afford to do this.
I quit my job in October 2021 but I prepared for it for months and months before.
Here are 6 things you should do financially before you quit your job to ensure you are not setting yourself up for failure. I know there are some times where the situation at work is so bad that the only thing that seems feasible is leaving with no plan. If this is you, I get it. But if you can wait it out a bit…prepare before leaving.
The main question to ask yourself is this: Can I afford to be without my job? If so, for how long? If not, what will it take you to get there?
Build An Emergency fund
I’ve spoken about emergency funds many times before. If you’re thinking of quitting with no job lined up, you should prepare yourself financially to have no income coming in the next 3-6 months. You don’t know how long it will take to find a new job, and you don’t want to go into debt trying to fund your life.
To calculate how much you need to save in your emergency fund, calculate 3-6 months of living expenses.
This includes all the expenses you incur that you require to have a comfortable life. For me, this is food, mortgage, transportation, and therapy costs. For others, it may include childcare, medication and a gym membership. The amount you save is personal because only you know what you truly need.
Once you’ve calculated this amount, start saving it in a high yield savings account. My favourite is EQ Bank – they have one of the highest rates in Canada. I recorded this video comparing the different high-interest savings accounts in Canada if you’re interested in learning more.
Once you’ve built up your emergency fund, you’re one step closer to leaving!
Before I quit, I saved up $5,000 in an emergency fund and $25,000 in low-risk investments.
Plan To Live on Less
If you don’t already budget, before you quit your job is a good time to start. Budgeting allows you to understand what comes into your bank account and what goes out of your bank account each month. Once you have an understanding of your finances, you can control where each dollar goes and live on less if needed. When you have no clue about your finances, your money will disappear and you won’t know what happened to it. When you aren’t working, this just isn’t wise.
The benefit of a budget is that you can see which areas you can cut out on while you’re on a reduced income. This may include unnecessary subscriptions, an expensive phone plan, excessive online shopping habits and more.
You can also forecast into the year and see what big expenses may be coming your way. For example, I knew that my property taxes would be due after I quit my job, so I decided to pay it off before quitting as I knew my income reduced significantly.
Pay Off High Interest Debt
Quitting your job when you have high-interest debt piling up isn’t the wisest choice. Credit card debt for example can pile up and continue piling up to the point where it feels suffocating.
It becomes so much harder to pay down debt when you have no income coming in.
My suggestion is to pay off as much as you possibly can before you quit. It just makes financial sense.
Use Your Benefits & Work Resources
Before you leave, make sure you use all of your benefits. Every single last one.
Go and get a massage, get your eyes checked and your teeth cleaned. These things are expensive when you have to pay out of pocket, so if you can get someone else to cover them, why not?
In addition, take advantage of any work resources you have at your disposal. If you are looking to learn about a new industry and your workplace pays for training, courses, or certification programs, don’t leave until you’ve taken the course on their dime. Just make sure they don’t have a contract that says you’ll have to pay them back if you leave by a certain date.
When I planned to leave my job, I got acupuncture done weekly for 12 weeks straight LOL because, why not?
Find Another Source of Income
Keeping all your eggs in one basket is risky and we all know this. So why, when it comes to our sources of income, do we completely ignore that advice?
Having one source of income is too close to having none. If all your income is from your full-time job, what happens if your full-time job fires you, you quit or you are unable to work due to injury or illness? Don’t play with your life!
Before you quit, develop another stream or two of income so that you aren’t solely dependent on one. There are seven different streams of income available – I explained them here.
When I quit my job, I felt comfortable enough to quit because I had a number of other income streams such as my YouTube channel, capital gains from investing, dividend income, rental income and more. These could support me and I didn’t need to rush into finding a new job.
You can consider selling items, flipping items, driving Uber, starting investing and so much more.
Leave on Good Terms
While this may not seem financial in nature, it most definitely is. Attempt to leave on good terms with your coworkers and managers. The reason being is that maintaining your connections is important – your network is your net worth.
The world is small and people talk. Even if you never plan on working at that company, you don’t know who knows who. They can make or break your next opportunity.
Protect your bag by leaving on good terms.
I left my job in October 2021 and I left on good terms with all.
Want to learn more about how I did it? Check out this video.
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