If you’re feeling burnt out, or are otherwise looking for a change (maybe a career pivot?), giving your two-week notice and joining what experts have dubbed “the Great Resignation” may be in your near future. But, as with any financially significant decision, it shouldn’t be made in haste without forethought.
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You’ll want to review your finances to make sure that you can afford to quit your job and that you can support this move and time of transition. Here’s a helpful checklist of what you should look out for to help you plan your next steps.
While some of the same financial planning principles apply for when you’ve been laid off, here is specifically what to keep in mind.
Before you quit, take stock of your financial situation
Review the following:
- Average spending
- Necessary expenses you’ll need to cover month-to-month (rent, utilities, groceries, gas, phone, debt etc.)
Review any unnecessary expenses you can cut down or out entirely, and take those steps now.
Calculate how much you’ll need to hold you over until your next job
While getting laid off entitles you to Employment Insurance (EI), you leaving on your own terms means you’ll need to turn to your own savings to help bridge the gap between one job and the next.
Review your necessary expenses, and make a sample budget of what your average month would look like, should you be leaving, so you have an idea of the minimum you’ll need to sustain you.
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While, ideally, you should be putting away 20 per cent of each paycheque into your savings, the amount you have in there should be able to sustain your current lifestyle (or close to it, anyway), for at least six months.
NerdWallet has a handy calculator tool to help you figure out how much you may need to have saved in your emergency fund, but the tool is equally helpful for leaving a job on your own terms.
Then add in a buffer, in case you hit a snag and it takes you longer than expected to land where you want to.
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Be clear on what you’re walking away from
While it’s obvious that you’d be walking away from a steady paycheque should you choose to voluntarily leave your job, not everyone factors in the added benefits and incentives many employers provide.
Scan your benefits package (you likely received one when you first joined the employer), and note any of the following:
- Health benefits
- Vacation days / sick days the employer doesn’t pay out should you leave
- Any stocks, retirement contributions, investment incentives or employee savings plans
- Discounts on services you rely on
Tally the total value of what you’re walking away from, so you can compare any future offers with what you currently have.
If pay is your only grievance, you may want to consider asking for a raise.
Make a plan to use your benefits
Maximize what you have available to you while you’re still with the employer. Fill up on any prescriptions you’ll need (just note, many providers will only cover a set amount per drug per cycle, so you may need to spread out your requests over several months). If you have dental or optometry coverage, book appointments and any other services you’ll want to use.
Investigate how any unused vacation days and sick days are handled should you leave. Many employers don’t pay these out, so you’d be walking away from time you earned, effectively leaving money on the table. Book these periods in now.
Figure out what you need to do with any investments and so on.
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Start saving money now if you plan to quit
If your savings fall short of what you need to survive for several months without an income, start setting aside money with your next paycheque for this reason.
Keep your end-goal in mind to keep you motivated. You’re investing in your freedom to walk away from a situation that no longer serves you.
Find a side hustle to help offset some of the costs
To help you alleviate some of the financial pressures, look for a side hustle you can do relatively easily while you’re on the hunt for your next gig.
Even a little added income goes a long way to help you at least cover part of your necessary expenses, such as a phone bill and so on.
Look into potential health insurance coverage
While we’re fortunate that in Canada we have access to free healthcare, not everything is covered. You may want to sign up for added independent health insurance coverage for the time you’re unemployed (keep in mind that many companies have a three-month probationary period during which you aren’t yet qualified for benefits).
It may not be a bad idea to add this on, especially if you require ongoing prescriptions or care (just calculate what you would spend out of pocket on these versus paying for monthly coverage).
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Now that you have a clear picture of where you are in the moment, take time to plan out where you ultimately want to land.
Consider what’s compelling you to leave, and what you need to look for in the future to avoid similar circumstances.
Do you need to level up your skills? Now may be the time to do that (though going back to school requires additional budgeting considerations).
Identify your ideal employers and compensation, making sure you’re not being underpaid, and start sending out feelers know so you can get a sense of what job market you’re walking into.
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