Leaving your job? Make sure your wallet is ready.
If you’re planning to switch jobs along with many during the so-called Great Resignation, it’s essential to make sure your finances are in order first. That’s why we’ve outlined some critical steps to take before leaving your job.
Review your savings
Before giving up your steady paycheck, make sure you have enough savings to tide you over until you find new employment. Ideally, you should have an emergency fund with 3-6 months’ worth of living expenses to help you survive periods of unemployment.
Check your benefits
Here are different options to consider for common employee benefits:
- Health insurance. Work-sponsored health coverage generally ends on an employee’s last day of work, though it sometimes will continue until the end of the month. Similarly, some companies start covering new employees on their first day, while others have a waiting period of up to 90 days. If you have a coverage gap, try negotiating early coverage with your new employer.
- Pension. If your last place of employment came with a pension, you might be able to keep it or take out the money when you leave. This withdrawal depends on whether or not your contributions are vested, and any other pension plan rules.
- 401(k). If your old job came with a 401(k), you’d need to decide what to do with the funds. You can keep the account as it is without making any additional contributions, roll over the funds to a new 401(k), roll the money into an IRA, or cash it out.
Assess your risk tolerance
Many jobs will present new employees with the possibility of better pay in the future while initially only offering a starting salary. So how comfortable are you taking a risk with a new job that doesn’t guarantee as much financial security?
Adjust your budget
If your new job comes with better pay, or you’ll be bringing home a smaller paycheck, for now, adjust your budget accordingly. You may want to increase the contributions you make toward your investments or find a new place to park your cash, such as an Elevate Credit Union Savings Account, for some extra income in the interim. On the flip side, if you’ll be earning less money now, look for ways to trim your budget so your paycheck can cover all your expenses.
If you follow these tips, you will know if you are financially ready to leave your job, and become a member of the Great Resignation. And, if you like this post, check out our other MoneySmart Tips.
