How to Prepare Finance Before Quitting a Job

 How to Prepare Finance Before Quitting a Job

You ride on your income throughout your life to survive. You need to pay for housing, food, healthcare and many other things. Constant inflow of cash is extremely essential to meet all of your expenses. Nevertheless, you reach at a certain point of life when you plan to quit your job to pursue a business or simply take a break from challenging and hectic schedule. 

Whatever the reason you want to leave your job, you need to be careful with your finances. If you do not have enough savings, you will be screwed. Before you quit your job, ask yourself whether it makes financial sense to step down. You must have enough savings to survive without a full-time job. Here is what you need to do to prepare financially before quitting a job.

You should have savings

Quitting a job without having savings is an act of absurdity. You need money to live your life. Therefore, you must have another source of income. Even if you want to start your business, you must have savings worth at least six months of living expenses as it will not generate profits as immediately as you get it off the ground. Your savings ensure that you will be able to keep the wolf from the door. 

If you are about to resign because you want to take some rest. You can manage to survive even if your savings are worth three-month living expenses. However, make sure that you land a new job within those three months.

Emergency cushion

You might ignore the importance of having an emergency cushion separately from your savings account, but it is necessary if you do not want to be running out of money during emergency. Unexpected expenses can throw a curveball at any time. If you dip into your savings for unforeseen expenses, you will not be able to meet your regular expenses. 

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Financial experts suggest that you should try to build your savings and emergency fund separately. Unless you get a new job, your savings serve as your regular income. Make sure that you do not dip into it for unexpected expenses. In case, you fall short of cash, you can take out guaranteed loans forunemployed. To have these loans approved, you need to show your repayment capacity. You should have an income source such as unemployment benefits or a part-time job.

Skimp on your expenses

Even though you have enough savings unless you land a new job or your business begins to generate revenues, you need to be very careful with your regular expenses. Financial advisor always suggests that you should cut back on your expenses so that you do not run out of money. You should always be ready for any unforeseen expenses. 

The rule of thumb says that you should create a budget. Try to make a list of all of your expenses. Add in even a smaller expense. You must remember that you cannot be liberal with your spending as you were before quitting a job. Find out where you can whittle down. Avoid spending money on discretionary expenses. Make sure that you do not spend on impulsive purchases. Do not spend money as long as you can put off your money.

Never hesitate to take financial counselling

Surviving on savings for a particular time can be very challenging. From skimping on your needs to arranging funds for emergency, it takes a lot of efforts. You need to be very savvy to avoid running out of money. You are likely to reach a point when you get overwhelmed. It may become very difficult to keep your head above water. You should consider seek financial guidance. You will find several people on social media sharing their experiences. Contact them and try to know how they survived. Financial counsellors can also help you but they charge a bit amount as their fees.

Your current debt should be manageable

Are you sure that this is the right time to quit a job to pursue a business or take a break from your current monotonous job? No matter why you are leaving your job, you need to find out that your decision will not take a toll on your finances. Having savings worth six-months of living expenses does not guarantee that you will be able to keep your body and soul together. 

If you have some outstanding debts and credit card bills, make sure that you will have no problem to stay afloat. If you fall behind repayments, it will be difficult to hold your end up. Late payment fees and interest penalties will add up your debt quickly. This may throw you in a predatory debt cycle.

The bottom line

Quitting a job is not a bad idea, but you need to make sure that it is the right time to do it. When you stand down, make sure that you do it on good terms. If things do not work, for instance, your business fails or you do not get a new job, you may need to go back your previous employer. Chances are he hires you back if they have not found any replacement. Before you step down, you must analyse your financial condition. Financial experts suggest that you should be debt free so that you can easily manage your regular expenses out of your savings.

Description: To get prepared financially before quitting your job, you must have a savings account, emergency cushion, and a repayment plan in case you have debt.