Q. What I need to consider to ensure I am financially prepared to quit my current job?
A. It makes perfect sense to look at some hard numbers before quitting your current job. Here are 6 steps to follow:
1. Save at least six months’ expenses
Unless you have another source of income already in the bag (or you’re going to be relying on a partner’s income), quitting your job without a safety net is a bit reckless. Consider six months’ of living expenses a comfortable minimum to put in the bank before you quit.
This figure holds true especially for those going the entrepreneurial route in high tech, as you can’t expect angel funding the moment you get your bright idea for an app or startup.
Also, practically the average job search takes about four to six months, so it's best you prepare a plan of action, like in 2. below.
2. Plan to live on (much) less
If the planned career change is important, you simply can’t “afford” to hold it hostage because you’re resisting a lifestyle change. Financial scholars call this the “hedonic treadmill.” That is, human beings adapt quickly to the achievements and lifestyle advances they make, and happiness peaks as we level off to the new normal (or think of it as the fiscal equivalent of new car smell wearing off.)
But you don’t have to travel all the way back to Ramen Noodleland. Consider incremental changes: a cheaper apartment, a less expensive car, fewer nights and lunches eating out.
The more you can cut back, the further your savings will go; the same amount of money required for six months can last perhaps twice as long and give you more breathing room.
3. Ramp up to takeoff
Consider this - seasoned musicians in the studio don’t merely jump into a tune. They’ll play four or five bars in warm up mode so that when the song actually starts, they’re right on beat and in sync.
Likewise, a job shift isn't something you should approach abruptly. Start making your plans weeks or even months before you leave your current gig.
4. Seek counsel from others who have done it
Use your social network (especially LinkedIn) to get advice from others who’ve faced the same situation. Here you’ll find financial mentors especially helpful as you develop a checklist of moves to make. Some questions to ponder and ask:
5. Always leave on good terms
You may not love your job. Heck, you may hate it. But resist the urge to let your boss (or any of your coworkers) know that. If you were a good employee, your old employer may be your best safety net as you go out on your own. If things don’t work, you can always beg for your old job back.
To smooth over your departure, give plenty of notice. If you’re going out on your own, more than two weeks may be appropriate. And when your boss asks why you are leaving, emphasize the opportunities you want to pursue, not the job you’re trying to escape.
6. Ask yourself twice if it’s the right move
While it's exciting to pursue your passion, you should do so with financial wisdom. You can’t accomplish the transition otherwise, period. But properly prepared money-wise, you’re in the best position possible to go for it.
A. It makes perfect sense to look at some hard numbers before quitting your current job. Here are 6 steps to follow:
1. Save at least six months’ expenses
Unless you have another source of income already in the bag (or you’re going to be relying on a partner’s income), quitting your job without a safety net is a bit reckless. Consider six months’ of living expenses a comfortable minimum to put in the bank before you quit.
This figure holds true especially for those going the entrepreneurial route in high tech, as you can’t expect angel funding the moment you get your bright idea for an app or startup.
Also, practically the average job search takes about four to six months, so it's best you prepare a plan of action, like in 2. below.
2. Plan to live on (much) less
If the planned career change is important, you simply can’t “afford” to hold it hostage because you’re resisting a lifestyle change. Financial scholars call this the “hedonic treadmill.” That is, human beings adapt quickly to the achievements and lifestyle advances they make, and happiness peaks as we level off to the new normal (or think of it as the fiscal equivalent of new car smell wearing off.)
But you don’t have to travel all the way back to Ramen Noodleland. Consider incremental changes: a cheaper apartment, a less expensive car, fewer nights and lunches eating out.
The more you can cut back, the further your savings will go; the same amount of money required for six months can last perhaps twice as long and give you more breathing room.
3. Ramp up to takeoff
Consider this - seasoned musicians in the studio don’t merely jump into a tune. They’ll play four or five bars in warm up mode so that when the song actually starts, they’re right on beat and in sync.
Likewise, a job shift isn't something you should approach abruptly. Start making your plans weeks or even months before you leave your current gig.
4. Seek counsel from others who have done it
Use your social network (especially LinkedIn) to get advice from others who’ve faced the same situation. Here you’ll find financial mentors especially helpful as you develop a checklist of moves to make. Some questions to ponder and ask:
- How will you cover health insurance?
- If you’ve been making 401(k) contributions, will you roll it over? How will you continue to save for retirement?
- Will you need to apply for credit in the near future? (It’s harder to do without an active paystub nowadays.)
5. Always leave on good terms
You may not love your job. Heck, you may hate it. But resist the urge to let your boss (or any of your coworkers) know that. If you were a good employee, your old employer may be your best safety net as you go out on your own. If things don’t work, you can always beg for your old job back.
To smooth over your departure, give plenty of notice. If you’re going out on your own, more than two weeks may be appropriate. And when your boss asks why you are leaving, emphasize the opportunities you want to pursue, not the job you’re trying to escape.
6. Ask yourself twice if it’s the right move
While it's exciting to pursue your passion, you should do so with financial wisdom. You can’t accomplish the transition otherwise, period. But properly prepared money-wise, you’re in the best position possible to go for it.
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