Whether it’s a brewing business idea or disappointment with your current employer, it is wise to put your finances in order before quitting your job.
While some may quit their jobs impulsively with the dream of new prospects in their mind, some look at it as a solution to pressing circumstances. Whatever your reason may be, do not make this crucial decision without being financially prepared. Wondering how to go about it? Here’s how to be financially ready in the absence of any immediate income support, especially if you have dependents, loans, Credit Card bills, etc. to consider.
Understand Your Current Circumstances
Before you quit your job, ask yourself the following questions:
- Do you have another job or an alternative source of income to rely upon?
- How long can you survive without a job?
- Why is your current job unbearable?
If you cannot find an answer to any of the above questions, then it is a sign that you aren’t ready to quit your job and lose your monthly income just yet.
Additional Reading: Is Changing Jobs Frequently Financially Wise?
What’s The Status Of Your Emergency Fund?
You do have one, right? An emergency fund or contingency fund plays a crucial role in supporting you during financial emergencies. Ideally, a contingency fund worth six to eight months of your expenses is a must-have. Do you have that much money kept aside?
Additional Reading: 7 Important Questions To Ask Yourself Before Dipping Into Your Emergency Fund
Check The Legal Repercussions
You don’t want to fall into any legal trouble and cough up a whopping penalty amount as a result of your decision to quit at the wrong time. Before you make up your mind, go through the terms and conditions mentioned in your contract and the associated notice period, data security clauses, restrictions (if any) related to switching your job, etc.
Any breach of the contract with the company could land you in big trouble and make it difficult for you to find another job.
Stay Light On Debt
Try and clear off your debts before you quit your job if you don’t have an alternative source of income lined up. Here are two reasons why we are telling you this:
- Excessive debt and the pressure of repayment can make you feel anxious while you’re unemployed. The unnecessary stress will hamper your ability to think straight and it will be all the more difficult for you to find another job.
- Irregular loan EMI/Credit Card bill payments will not only bring down your Credit Score, it will also fetch you a bad reputation with banks. This will reduce your borrowing potential, making it difficult for you to get loans in the future.
Additional Reading: Stuck In Debt? Here’s How To Get Out Of It!
Be Ready With A New Job Or Business Plan
You might be quitting your job either to take up a new job or to set up a business, but whatever your plans, be sure about the viability of the option. If you do not find anything suitable right at the moment, try to get part-time/freelance work at least before you quit your current job.
In short, you must have a valid reason before you decide to quit your job. If you are looking for a salary hike or change in profile, then discussing the same with your current organisation’s HR may help and you may not have to change your job. If you still decide to quit, at least ensure that you’re financially prepped. Cool?
Psst… if you’re looking for Loans, Credit Cards or interested in investing, we have your back!