The Great Resignation is breezing across the United States.
The global lockdown has forced a lot of people to reevaluate their lives and reset their priorities.
Young professionals have reached a crucial decision point. Rather than scale the career ladder in search of higher salaries, many people are now seeking work-life balance, giving priority to family time and personal life.
Others want a career that offers a work-life balance, while most have no desire to return to the office and want to continue working from home according to a poll carried out by financial services website, Personal Capital. The urge to resign is so much that some people are willing to take on debt to achieve this.
It is always good to have a financial plan in place before you quit your job, because you want to have some sense of stability and peace of mind to accomplish what you want to. Here’s how to ensure you have some financial stability in place.
If you are considering joining the resignation party, then one factor you have to consider carefully is the state of your finances. Unless you have another job lined up, make sure you have an emergency fund that will cover a minimum of six months of your living expenses.
You can set this money aside in a high-yield savings account so that it is easily accessible.
Building an emergency fund also prevents you from dipping into your retirement savings account which comes with potential penalties and would be tax charged.
Try to estimate the cost of your living expenses for a particular period, although it is advisable that you try to save well beyond what you would need as this gives a sense of reassurance.
If you’re planning to transition to another career, streamlining your expenses can help smooth the change.
The time frame and amount you save will determine how to reset your budget and your money goals. A budget helps you identify areas where you can manage your money better. Look for loopholes in your budget where you can plug expenses.
You can decide to cut down on areas like cable subscriptions or commuting to work. However, this does not mean you should live the life of a hermit or kill off other aspects of your life. Remember the goal of your resignation is to have a balanced quality of life!
Be sure to leave in some activities you enjoy, such as grabbing dinner with friends or going to cinemas, but this should be done in moderation.
Most people do not consider health expenses when they are making plans for resignation.
Having no plans on health-care coverage can put you in a financial hole. Depending on the ailment, while you may have to dip into your savings, to take care of your health, you may also not be able to be productive during the period of treatment which essentially means you are losing both ways.
Spending more with less income coming in. Additionally, you could become a financial burden to your partner.
As such, as you are building an emergency fund, also build a separate one for your health. The amount may not be much, but you should be consistent in your contribution. You can allocate 5-10% of your savings for health care purposes.
To increase your contributions, you can put this money into a fixed income account.
While you are set out an amount for health care expenses, also spend more on eating and living healthy. Prevention is always cheaper than cure. As such, make sure you make it a point to live healthier. Budgeting an extra amount each month is far better and cheaper than paying for treatment.
Try to have an estimate of the expenses (present and future) you would incur when you leave the job.
Determine how much you’ll need to save to feel comfortable stepping away from your full-time job. Calculating your take-home pay after taxes and scrutinizing your previous months’ expenses is a good step, but this does not give you the full picture.
You should also try to forecast your further expenses. Think in terms of responsibilities you would be adopting as you age and how they would have an impact on your expenses. For example, you may decide to marry, take a pet, buy a car, or a new house.
For every responsibility you take on, this adds an extra cost to your expenses. Thinking in such terms enables you to plan adequately and make such preparations to accommodate these milestones.
Since you may have to forgo some insurance benefits when you resign, you have to factor this into your equation when making financial calculations for your resignation.
Insurance may seem like an unnecessary expense until you run into trouble or have an emergency. Conduct thorough research on your health, life, and disability insurance options.
Knowing the budget for what it will cost to pay for these items on your own is an important consideration as it helps you avoid being blindsided by emergencies. You may need to replace employer-provided policies with individual plans during a gap in employment.
A lot of people focus on the amount they have saved up, without paying attention to the benefits and compensation that is due to them from their workplace. Go over your current job’s benefits with a fine-toothed comb.
Pay attention to your retirement plans and other benefits you might have through your current employer. Don’t leave anything on the table and make sure you have alternatives ready so you don’t lose out.
Some benefits are rollable, meaning you can still qualify for them after you leave your current employer, while others end upon your termination. Researching the different types of benefits can enable you to prepare better, especially if you have plans for your benefit or compensation.
Having a Plan B in this sense means having a backup if your initial plan does not work.
Having a plan B with adequate savings relieves you of pressure and anxiety, and ensures that you do not take a job you do not like just to make ends meet.
It is not in all cases that resignation can lead to a suspension of retirement contributions.
Many workers tend to leave jobs without thinking through what they'll do with their company-sponsored retirement plan. If your retirement plan can be rolled over, then you should consider rolling into an IRA and making your monthly contributions.
An IRA gives you control over your investment choices and tax withholding requirements should you withdraw funds. You can also dip into it to borrow to take advantage of opportunities or cater to an emergency. Thereafter when you get your dream job, you can roll over your retirement account to your new employer.
Leaving a job is usually a big decision but also requires proper financial planning.
If you have the urge to resign from your present job, first of all, make sure that your decision is not an emotional one. Zoom out and put things in proper perspective by looking at the big picture. Ask yourself if you have enough funds to sustain yourself for a minimum of 6 months, without any form of income coming in.
Also, factor in healthcare expenses and other emergencies which may affect you financially. Finally, do not neglect to save for your retirement.
Doing so means you are only short changing yourself. If your current expenses are not sufficient to make monthly contributions, you can make notes of the months you have missed, and then pay in arrears when you get another job.