Quitting your job on a whim is only possible if you’re Julia Roberts from Eat Pray Love or Anne Hathway from The Devil Wears Prada! However empowering and inspiring their characters might seem, the ‘following your passions’ approach works only if you have a serious financial plan. Unless, of course, your plan is to live life on the edge!
For those of you who still plan on living life as you would with a job, here is our 8 step guide to help you through the journey.
Know your financial situation
Figure how long you can afford to be out of work by calculating how much money you need every day and whether you’ll survive with the balance left in your account. Don’t assume that whatever is left in your account can be used, keep at least some amount for emergencies. Try saving up way before you even submit your resignation. After that see which expenses you could cut and which ones you could delay.
Create an emergency fund
An emergency fund is to support you financially once you quit. This fund should be equal to at least six to eight months of your expenses to pay off your rent, utility bills, and loan EMIs. Also, make sure you have cleared off all your financial obligations towards your company – Any pending bills, reimbursements, duties etc.
Figure the legal repercussions
This one is really important! Before quitting go through your employment contract and read up on the associated notice period, data security clauses, restrictions (if any) related to switching your job, etc. Any breach of the contract with the company can land you in big money trouble, making it difficult to find another job.
Clear up your debt mess
Try and clear off all your debts before you quit your job because the excessive debt could pressure you and make you feel anxious while you are unemployed. Not paying credit card or loan interests on time can seriously affect your credit score which affects your borrowing capacity in the future.
Supplement your Income
After you quit your job it is good to have some source of income to reduce your financial problems. Doing a part-time job or freelancing could help until you get another job. This will not only help you financially but also help build your resume. Read: Quick Ways To Make Money Online!
Timing is pretty important
You might be quitting your job for another job or to set up a business, whatever your plan is you need to put in some research before actually quitting. Sometimes the job market isn’t good because of bad economic conditions. Remember when people were getting fired in the U.S. after the great recession in 2008? If a situation like that occurs its best not to quit your job then.
Know why you’re quitting
Looking for a salary hike or change in profile? Then discuss it with your HR first. They might help and you may not have to change your job. Its good to probably consult a financial advisor/consultant to analyse the new salary structure and figure out the exact increase in your income while switching the job.
Claim your employee benefits
Before leaving check your savings and other benefits like employee provident fund, gratuity, bonuses, etc. After claiming them don’t blow it all up, instead invest this amount in a safe investment option like Mutual Funds.
Lastly, don’t be afraid to take the plunge if you’re financially confident you’re good to go!
Thumbnail illustration by Laura Greenan