Mohamed Hassan on Pixabay.
It is not uncommon to hear that people are leaving their jobs. Nearly 4.4 million Americans left their jobs in the month of September 2021. Are you too thinking of leaving your job? There are certain things that you should consider before leaving your job. Ensure that you do proper financial planning before leaving the job.
There may be many reasons for individuals leaving their job and opting for early retirement. Some may want to embrace early retirement due to the booming stock and property markets and their net worth may have multiplied. Many others may be overworked and working for long hours in their office before the pandemic and frustrated with the situation. Working from home for more than a year would have made them realize the importance of maintaining a work-life balance and spending more time with their family. Several others may be doing the job they hate due to the good paycheck they are getting and would be happy if their hobby becomes the main source of their income.
Even if you wish to work part-time or plan to start a business you must ensure that you don’t fall into bad days after leaving the job and have to borrow money in emergency situations. The financial planning to do before leaving the jobs and the things to take care of are:
1) Have a detailed outlook-
Don’t just go and tender your resignation letter to your boss. You may have plans to do business but it is always better to get insight from someone who has been through these circumstances. A relative or a friend may be able to give you good advice and you may learn from their mistakes without committing the same mistake yourself, thereby avoiding the resulting pain. Do you have the support of your family? If you have the support it will make your journey much easier.
2) Work on your monthly expenses-
Prepare a monthly budget and check the discretionary and non-discretionary spending. List all the expenses like your utility bills, fuel costs, groceries spending, house tax, and the other important expenses and observe for a few months. Non-discretionary expenses are the mandatory expenses like housing, groceries while the discretionary are the ones beyond what is necessary and that you can survive without; like vacations, restaurants, movies, electronics, alcohol, beverages, hobby, and sports-related expenses. Try to cut out on the discretionary expenses so that you will be able to manage on the budget when you don’t have a job.
3) Emergency Fund-
An emergency fund is of great financial help during difficult times in our life. The last two years have been very difficult for the world with plenty of job losses and pay cuts due to the Covid-19 pandemic. Many people lost their lives while so many others were hospitalized requiring a big amount of money for treatment. All the troubles came uninvited, so people should always be ready to tackle them.
During these times people have to keep running their homes and attend to their family; always requiring money. The emergency corpus should be such that it can take care of your family expenses for 6-9 months. It should be easily available so that you don’t have to run around. The place where you can keep emergency funds in your savings bank account. A part can be kept in a fixed deposit as the fixed deposit can be liquidated the same day when you require and if you have it online it can be liquidated on holidays also.
Some part of the money can be kept in liquid mutual funds as they have a higher return than the saving bank account. A small amount for 10 days can be kept at home in cash.
4) Retire high-interest rate loans-
Retiring the loans before leaving a job gives the person peace of mind and they can always prioritize their repayments if they have multiple loans. Home loans and auto loans are inexpensive as compared to other loans. The credit card interest rates range from 24-45% per annum depending on where you get the loan, the personal loans can be had for 10-15% and the auto loans for around 7.5%. The costlier loan should be retired first.
You should have term insurance as well as health insurance when you are not employed. When you leave the job you will not be covered under the group health insurance of the company. If your spouse is working you can get covered in their company’s group insurance policy and if not working then ensure that you have a health insurance cover.
6) Other ways to earn money-
When not having a job it might be difficult to make a living if your savings fall short due to inflation. Study the part-time jobs available or you may do a freelancing job from your house that is available on sites like Freelancer, Upwork, Fiverr, People Per Hour, Toptal, and Guru.
Financial planning is a must before a person decides to leave the job. Whether it is for pursuing a hobby or starting a business the finances must be in place to take care of the emergencies and lead a peaceful life without major worries. Besides this, the support of the family is also important if you wish to succeed in business. Discuss with your spouse and parents for their advice before taking the plunge.