How Much Money Do I Need To Quit My Job

Anuj Nayar is the first financial health officer at LendingClub (NYSE: LC).

getty

In what is being called the "Great Resignation," millions of Americans are leaving their jobs. According to the fantastically named JOLTS report (Job Openings and Labor Turnover Survey) from the U.S. Bureau of Labor Statistics, 4 million people quit their jobs in July, and there were a staggering 10.9 million job openings at the end of July.

There are many reasons people are quitting their jobs or are considering it if they haven't taken the plunge yet. Covid-19 forced many people to prioritize what really matters, and there's been a realization that better options may exist elsewhere. As a result, the slew of employees who held onto their jobs because of the uncertainty of the pandemic are now resigning for more flexibility, more money and other reasons they deem important to their overall well-being.

Obviously, having a new opportunity lined up before taking the plunge is strongly recommended. Whatever the reason for leaving your current job, it can be a particularly daunting time if you don't have a new role lined up and need to get your finances in order. But if you're considering a change before lining up a new opportunity, here are three helpful money moves to make.

Make sure you have a nest egg.

Take a long, hard look at your savings and ask yourself, "How much money have I set aside for a rainy day?" Experts often recommend that you have at least six to 12 months' worth of living expenses saved in case there's a disruption in income. Since it's possible you won't have any income for a month or two (or perhaps longer) — calculate how much you need to live on for the time frame you expect a delay in income and ensure you have at least that amount saved.

Without savings, quitting your job to explore other opportunities might not be feasible. And the unfortunate reality is that most Americans don't have enough saved up for unexpected life occurrences, let alone a major life change. According to a June survey from our company and PYMNTS.com, 54% of respondents reported living from one paycheck to the next, even though nearly 40% of Americans making over $100,000 are living paycheck to paycheck. So take stock of your finances before making an impulse change.

Adjust your budget to account for the unknown.

If you need a reference for what six to 12 months' worth of living expenses look like for you, it's best to start with a bare-bones budget to precisely understand the essential expenses you need. Ask yourself if you really need six different streaming services. If not, cut down to save money. Your budget should be a reflection of your financial health and your goals, including your debts.

Give yourself financial breathing room and plan for the unknown. If 2020 taught us anything, it's that we are living in uncertain times, and a crisis can strike at any moment. Having your expenses and spending in check will help protect yourself from the unexpected as you look for a new job.

Don't leave any money on the table.

Lastly, as you're thinking about jumping ship, don't forget about your 401(k) plan, health savings account/flexible spending account (HSA/FSA) or any other tax withholding accounts. Make sure you have a plan for what you'll do with these accounts once you leave and start a new job. For example, you can roll your 401(k) plan into an individual retirement account (IRA), or choose to leave your retirement funds where they are — as long as you know who administers it and how to access it. The same goes for your HSA or FSA. Make sure you're aware of all the plan options available if you leave so you're ready to act when that new opportunity arrives.

Leaving a job can be exhilarating and terrifying at the same time. As you contemplate your next career move, these tips can help ensure more financial preparedness before you land your next gig.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?

Follow me onLinkedIn.Check outmy website.