Courtesy Chloe A. Moore
- If, like many Americans, you’re thinking of quitting your job, stop and consider your finances first.
- Ask yourself if you have enough savings to cover you while you look for new work.
- Think about what you’re giving up: benefits, 401(k) contributions, and bonuses could all be factors.
- Read more stories from Personal Finance Insider.
At some point in your career, you’ve probably transitioned from one job to another. A company may have offered you an opportunity that was too good to turn down, or you might have been unhappy with your current job and ready for a change.
As more Americans get COVID vaccines, the push to return to the office is causing some workers to quit in favor of jobs where they can work remotely. If you’re among those considering leaving work, consider these questions first to be financially prepared.
How does quitting affect your finances?
Generally, it’s best to wait until you have another job lined up before you quit your current one. If this doesn’t work for you, take a hard look at your finances before you leave. Do you have enough cash on hand to cover your living expenses while you find a new job? According to Indeed, the amount of time it takes to find a job can vary based on experience, demand, and timing, among other factors. Make sure you have at least three to six months of living expenses in your emergency fund as a cushion.
In addition to having money saved, consider what expenses you can temporarily cut until you’re able to secure a new job. Review your monthly expenses and categorize them as essential and non-essential. Look at easy ways to cut back on your spending while you transition. Pay off debts before you quit as a way to reduce your fixed expenses.
It’s essential to understand the timing and amounts of your final paycheck. When will you receive your last paycheck? Will it be a full or partial one? Is your unused vacation paid out? While unlimited paid time off (PTO) can be a great perk, it also has downsides. Since unlimited PTO does not accrue, there may be nothing to pay out when you leave your job.
What are you giving up?
If you’re leaving for a new opportunity, make sure you understand how the total compensation compares to your current compensation. Total compensation goes beyond your salary and includes the value of benefits you may receive. Consider your base salary and any potential for bonuses or commissions. You may also receive paid health insurance, contributions to your company’s retirement plan, employee assistance programs, and other financial perks or reimbursements.
Benefits are another important part of your compensation, so think about what you’re giving up. Compare your current health insurance benefits with the new company. If needed, sign up for COBRA and schedule any final doctor’s appointments under your current plan. Consider other benefits like PTO, flexible hours, and working from home. Don’t be afraid to negotiate both financial and non-financial benefits and consider whether a signing bonus can make up for the benefits you will lose.
What will you miss out on if you leave too soon?
Timing is of the utmost importance when it comes to leaving a job. Leaving when you’re financially prepared is just one part of the equation. Some company benefits are based on how long you work at the company.
For example, ask yourself if your company 401(k) match is subject to vesting. Do you receive equity compensation, such as restricted stock units or stock options? Consider the amount of time you have to stay at the company before you receive these benefits. If the anniversary date is approaching, it could make sense to stay through that date.
Other benefits, like bonuses, may be paid out at certain intervals. If you’re entitled to a bonus that will be paid out soon, be sure to stay long enough to receive the payout. Sometimes your new job opportunity requires you to start on a specific date, and the timing does not work in your favor. Consider these items and include them in your negotiations if possible.
Finally, focus on the big picture and don’t let your emotions take over. Are you just leaving your current job because you’re frustrated? Will a new opportunity help you further your career? Don’t make an impulsive decision that you may regret long in the term. In addition to planning ahead financially, having a clear vision for your career and life will help you make an informed decision that is right for you.
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