How to make a 6-month financial exit plan from a job you hate

• Whether you’re making a career change or planning to take a break from work, it’s smart to plan ahead.
• Six months before quitting a job you hate, pay down debts and build a six-month emergency fund.
• Also, get clarity on your health insurance coverage when you’re in between jobs.
• This article is part of a series focused on millennial financial empowerment called Master Your Money.

Unsatisfied with job conditions worsened by the pandemic, millions of Americans left their jobs this past year in a phenomenon economists called The Great Resignation.

Some people are leaving their jobs for different industries, while others are protesting the concept of work altogether in the anti-work movement. The Reddit r/antiwork thread has nearly 70,000 active members who feel that work under our current capitalistic society is exploitative and degrading. 

Whether you’re switching to a new career path, or stopping work completely, you’ll need a few months to build a sustainable financial exit plan to help you cover living expenses. We spoke with financial planner about creating that game plan.

“Before you say ‘Screw this, I’m out!’,” Jay Zigmont, Ph.D., CFP, tells Insider, “you should have some kind of landing pad or direction.” Zigmont, who also works as a career coach, explains that many people romanticize the idea of quitting their jobs without thinking about what they’ll actually do with that time.

Once you have some idea of what you want to do after leaving your job, you’ll have a better understanding of how much you need to save in order to sustain that new lifestyle. Here are five tips for making a six-month financial exit plan from a job that you hate.

1. Prepare to ‘build a savings bridge’ between jobs

If you know you want to leave your job in the next six months, Zigmont suggests “cutting back costs considerably” and to start building an emergency savings fund immediately. An emergency savings fund is a savings account that has three to six months worth of living expenses to be used in case of emergency.

If you’re interviewing for new jobs, get an understanding of how long it will take to transition from one job to the next so you can plan ahead. For example, if you leave your old job on a Friday, and start a new job immediately the following Monday, you might still need a two-week buffer of funds just in case your new job is on a different pay schedule.

If you have a bigger emergency savings fund, you can plan for a later start date and take a few weeks to recharge your mental and emotional batteries, which are probably depleted from your last job.

If you’re taking a self-funded leave from work, Zigmont suggests you start looking for a new job once you’ve gone through half of your emergency funds. He recommends having at least six months worth of living expenses saved up so you can “build a savings bridge” in between jobs.

2. Pay down your debts

In addition to having an emergency savings fund, Zigmont suggests paying down your debts if at all possible. “If you don’t have income and you can’t pay off those debts, they can easily triple depending on how long you are unemployed,” he warns.

No one is saying you need to pay off your entire mortgage, however — you might want to prioritize high-interest debt, like credit card and auto debt. When you’re living with less income, it can feel like a stretch to continue putting down even minimum payments on credit cards, or any other forms of debt.

If you can’t pay off debt before taking time off work, you might also consider building debt payments into your savings so you can keep balances from ballooning while you’re not working.

3. Get clarity on your health insurance coverage before making any decisions

Zigmont suggests looking into your company’s COBRA benefits. Short for The Consolidated Omnibus Reconciliation Act, COBRA allows workers and their families to stay on their employer’s health insurance plans after leaving. COBRA insurance plans are generally offered by employers with 20 or more employees, and the premiums will be much cheaper than getting health insurance independently.

“You’ll need to pay both your share, and what your employer normally covers out of pocket,” Zigmont says. Even though it’s cheaper than getting independent insurance, you could be paying much more for COBRA health insurance than what’s usually taken out of your paycheck each month.

Some people who quit their jobs may qualify for state insurance. To qualify, you will need to prove financial hardship for a few weeks or months, depending on the state you live in.

4. You don’t have to worry about your 401(k) right away

Zigmont says that your 401(k) doesn’t have to be “today’s worry” if you’re leaving a job that doesn’t feel right. When you’re in a tough situation, covering your basic living expenses should be higher priority than saving for retirement.

He does advise people to double-check that you have the appropriate setup to roll your 401(k) into an IRA, which is a common complicated snag in rolling over retirement benefits. Talk to your 401(k) providers before quitting your job to iron out the details.

5. Make a plan for your time in between jobs

Zigmont ‘s most important tip is to make a plan for how you want to spend your time in between jobs. Having this clarity can help you understand how much you really need to save before quitting. Will you need money to travel? Will your living expenses be the same, more, or less? Will you be bringing in money through any other income streams? How long do you need your savings to last?

Planning your great escape can make the savings journey more worthwhile and exciting.