No matter why you want to quit your job, your decision mustn’t be going to blow your finances. Almost everyone thinks of job transition. You may be looking forward to starting your own business, or you may be planning to switch to a new job because of higher remunerations.
It is a good idea that you have found a new job and just waiting for your notice period to come to an end. If you decide to serve your notice period entirely and then start looking for a job, it might be difficult to bear that unemployment phase. However, a large number of people go through this phase because they quit the job due to frustration.
Although loans for unemployed are always an option to tide over, financial instability can take a toll leaving you strapped. Regular expenses, debt repayments will not whittle down even though your income sources have shrunk. Before quitting your job, bear in mind these two situations that you can face:
- You may take a longer time than you expected to land a job as some employers would like to offer you lower than the current salary.
- If you start your own business, it will take a couple of months to generate profits, and in the beginning months, you will have to throw your savings at your business.
Here are some of the tips to prepare financially if you are planning to quit a job.
Have six-month worth savings
Quitting your job without financial safety is absolutely a reckless move. A good rule of thumb says that you should not step down unless you are confident you will not face any monetary issues. Six-month worth living expenses is a considerable amount to be on track. It seems a huge amount to set aside, but this is crucial. Just imagine if you keep wondering about getting a good job for at least three months, will you be able to keep up with your regular expenses without any money coming in. Of course, you will need savings.
It becomes essential if you are planning to start your own business. You will have to wait for a couple of months to reach the breakeven point, let alone profits. If you do not have any financial backup, you will be ruined. Budgeting can help you set aside six-month worth living costs. Make sure that you do not spend on unnecessary items and spend what your pocket allows.
Take care of your debts
Though short-term loans come with a small amount, it does not mean they are cheap. Each monthly instalment can take a large chunk out of your pocket that seems massive when you do not have cash coming in. Once you quit your job, you get in a situation where it may be challenging to be on top of repayments.
Of course, you will not like to dip into the emergency cushion that you may have built for meeting other expenses. It is better if you have settled all your outstanding accounts before stepping down. If you have been juggling with multiple debts, try to take out a consolidation loan so that you will pay one large monthly repayments without any fear of missing the repayment date. However, consolidation loans are generally suitable only for those borrowers who have a good credit rating.
However, it does not mean that you cannot take out a loan during the unemployment phase. If you come up with an emergency, you can take out loans for unemployed with bad credit, but make sure that you have a repayment plan. If you borrow more than you afford, you will end up falling in debt.
Introduce no-spend periods
If you want to build savings worth of six-month cost of living, you will have to be careful with your spending. Every month when you make a budget, you should introduce a no-spend period. It does not allow for cutting down on essential spending. Of course, you cannot avoid spending on food, travel, and the like.
However, there are various discretionary expenses that you incur to seek pleasure, for instance, eating out. It is not set in stone that you will go out for meals and entertainment every weekend. You do not need to cut it down completely, but you should put them on pause for a specific period. It will help you stay more organised.
To conclude, there is nothing wrong if you want to quit your job, but you should analyse your financial condition before setting your heart on it. The tips mentioned above can help you have a better financial situation. It is exciting to do what you want, but you should not ignore practicality.
Description: Before you quit a job, you should have savings worth six-month living costs, introduce no-spend periods, and pay off your debts.
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